Following is the final email from my friend who just spent a month in China with his wife and 11 year old daughter.  If you missed the first two entries, the first one is here and the second one is here.

Well we are leaving China after almost a month. Off to Rome then LA and maybe to Paris to hook up with you guys.

Some amazing sites in China – out of all of the cities we visited Shanghai was by far the most interesting. On the surface it is as cosmopolitan as any major western city – skyscrapers as far as the eye can see and shopping that can make any girl happy. Since it is so modern, full of life and more diverse with a large western expat community – it didn’t feel like the rest of the country.

We visited 7 major cities (5 million people or more) and a few smaller ones. Outside of Shanghai and Beijing people stared and smiled at us – especially our daughter – several even asked to take pictures with her. We thought that maybe she looked like some kid star – but it was more simple than that – for many Chinese Marlo was the first blond haired westerner they ever saw. For the most part the Chinese were very welcoming and tried hard to please us tourists – which was different than our initial observation after visiting just Beijing.

The Three Gorges Project is amazing and cruising through down the Yangtze and through the dam locks was a worthwhile experience. It is so hard to imagine the scope of this project as an American – I can’t remember any public works project of this scale in my lifetime. Some basic stats as I remembered from our trip: 16 years to build, $25B in costs, 1.13 million people resettled due to the change in the river height, 99 new bridges and almost 10 times the power generating capacity of the largest dam in the US. When you see wonderful cities like Shanghai and mind blowing public work efforts as the TGP you get a sense of why many assume that China’s economy will surpass the US.

That said the extremes still strike you everywhere you turn. Most business people are young and some are very rich – all the street sweepers are old and very poor. We had a full and tasty meal from a street vendor for 30 cents (10 dumplings a 3 loafs of bread) and the guy made a profit – this was 30 meters from the hotel front door where a meal inside for 3 would cost $60. It seems that the staff for any effort is 5 times what it needs to be – walk into a small shop selling cheap shirts and you’ll find 6 people working in 250 sq ft. On several occasions we just ask ourselves “How can these guys stay in business with so many employees?” On top of that most people we interacted with were under 35. Apparently the older generation did not have the same access to education as the 20 to 30 year olds. It’s no wonder everyone we talked to about life in China said generally the same thing – it can only get better.

There are lots of challenges that educated Chinese will freely talk about with you such as: the government may not be able to make the transition to a true market economy, widening economic gap may grow to the point of civil unrest, pollution, over crowding of the cities, inflation – just to name a few.

Overall it was a great trip – China seems more accessible to me for travel but I couldn’t tell you how to make a buck here if you weren’t Chinese. In that sense for the startup entrepreneur like me it’s closed for now.

As you probably know from prior rants on this blog, I think the U.S. Patent System is completely screwed up, especially with regards to software patents.  Since I’m in Paris right now, I was pondering French food when I remembered Eric von Hippel and Emmanuelle Fauchart’s brilliant paper titled Norms-Based Intellectual Property Systems: The Case of French Chefs.

Norms-based IP systems are an alternative (or a complement) to legal based IP systems.  The Case of French Chefs is a superb example of how this works.  If you care a lot about IP protection – especially if you think our current system has issues – this paper is definitely worth reading and pondering. 

* Stuff in italics below was taken directly from a presentation that von Hippel gave in April 2006. *

von Hippel and Fauchart studied 500 chefs including “1 and 2 star”, “those waiting for a star”, and “2 and 3 fork” dudes.  These folks – when asked about the “importance [your] customers place upon finding original recipes (your own creations) on your menu” responded with an average of 4.52 (std dev: 0.72) where 5 was very important.  So – originality is very important.

However, traditional IP law doesn’t work to protect recipes for the following reasons.

• Patents: Recipes almost never meet the novelty requirement for patent protection.
• Copyright: Chefs can copyright the graphics and text associated with presenting information about a recipe as in a cookbook – but not the recipe itself.
• Trade Secrecy: Chefs can protect secrets such as the ingredients used or the technical instructions to accomplish the recipe through contractual means such as confidentiality clauses in contracts with employees but chefs say they seldom do this, citing the reason that it’s too expensive to enforce this through the courts.

Given that originality is important in this domain, you’d think these guys would have come up with a way to protect their recipes.  Well – they have – using a “norm-based IP system.”

The concept of social norms to influence behavior have been floating around for a while years.  “Social norms are pervasive and powerful structural characteristics of groups that summarize and simplify group influence process.  They generally are developed only for behaviors which are viewed as important by most group members (Hackman 1976).”

From the research, von Hippel and Fauchart determined that French Chefs have three rules of “correct behavior” that follow:

1. Right to not be copied exactly: Chef’s expect that “honorable” chefs will not copy their recipes exactly even if the information needed to do so is public.
2. Right to selectively reveal: Chefs expect that those to whom they reveal a recipe in confidence will not “abuse their trust” by passing that information on to others.
3. Authorship right: Chefs expect to be credited as the authors of the recipes they develop.

These social normal work extremely well – in French Chef society, if you violate one of them, you are outcast.  For example:

• Functionaly similar to patent: “If another chef copies a recipe exactly we are very furious; we will not talk to this chef anymore, and we won’t communicate information to him in the future.”
• Functionaly similar to contracting regarding trade secrets: “If I give information to another chef I trust him to not pass it on.  I do not have to say this.”
• Functionaly similar to contracting regarding trade secrets: Said to a chef who didn’t credit another chef as the source of a recipe: “Sir: Your [TV] presentation has revealed a rare ingratitude … You should admit that presenting recipes that are mine and that I taught you without referring to my name constitutes an unacceptable indelicacy.”

In addition to anecdotal evidence, von Hippel and Fauchart’s paper has a series of statistical studies that substantiate their hypotheses and the conclusion that – while there is still a lot to learn about norms-based IP with regard to information sharing among French chefs – it’s clear that this is a powerful and effective approach to enforcing IP ownership in this domain.

Now – try substituting “software developer” for French Chef.  While there are definitely some things to work out, if we add a few simple lessons from open source software development communities, you can almost imagine a norms-based IP approach for software.

On my flight to Paris Sunday, I managed to finally finish Partnering With Microsoft and then proceeded to snarf down Who Moved My Blackberry?

I’ve been dragging around Partnering With Microsoft for the past few weeks as I crammed in a bunch of travel before my Paris trip.  I’ve “partnered with Microsoft” in various ways, shapes, and forms through numerous companies over the past 18 years.  While the history of this is interesting, it’s not nearly as important or relevant as the current reality.  Partnering With Microsoft does a superb job of describing how to partner with Microsoft – covering the broad spectrum of types of partnerships, giving lots of examples of what works and what doesn’t work – while immersing the reader in the acronyms and styles that are critical to being successful with working with Microsoft.  While this isn’t an exciting book, if you do anything with Microsoft, it is a must read. 

Who Moved My Blackberry? – on the other hand – was a fucking riot.  Unlike Company, which I also enjoyed,  Who Moved My Blackberry? requires zero suspension of disbelief.  While the main character – Martin Lukes – is British, he could be any typical corporate marketing executive trying to get along in today’s world.  Martin isn’t loveable, nor is he a particularly sympathetic character, but he is priceless.

It’s a cloudy day in Paris, but I had a great run down Boulevard Raspail and Boulevard Arago.  Of course, I was trying to find my way to the Seine, but I went the wrong way on Boulevard Raspail.  Oh well, I’ll try again tomorrow.  And – in case you are curious – Mission Impossible 3 (which is most definitely not as good as MI-2) is playing in English here with French subtitles.

On Friday, Microsoft announced that it had donated $1 million to the National Center for Women & Information Technology.  I was at Seattle University at the Future Potential in IT seminar where this was announced and got to say a few words on behalf of NCWIT to the 500 people (mostly students – about 25% women) that were there.

I’ve been chairman of NCWIT for the past 18 months and this marks a huge milestone for us.  A year ago Avaya partnered with NCWIT at the $1 million level, making them NCWIT’s first “investment partner.”  While we have a great workforce alliance, Microsoft has stepped up in a huge way and is showing real leadership with our organization as our most recent investment partner.

As I’ve mentioned in the past on the blog, NCWIT is addressing an issue much larger than simply the obvious gender imbalance in the field of information technology and computer science.  There is a growing demand / supply gap in the US and we are now entering a time where – as a country – we run the risk of becoming less competitive in this critical area because of a lack of qualified IT and computer science professionals.  There simply aren’t enough men interested in this area to fill demand – as a result, it behooves us to encourage women to enter this field.  In addition, as computers become increasingly pervasive throughout everything we do, it has always made intellectual sense to me that women be as involved in the creation and implementation of the technology as men.

Thank you Microsoft for showing real leadership in this area.  And – thank you to the many people at Microsoft that worked behind the scenes to make this happen.

As Jason and I close out our Letter of Intent series, we thought we’d cover one last item that has screwed many a seller – the case where a public company acquires a private company for unregistered stock.  Some buyers will try to ignore this – a good seller should work hard up front to get agreement on what type of stock and what kind of registration rights they will be receiving. Expectation setting is key in this situation.

One thing to consider here is the non-binding nature of a “promise” to register shares. The buyer will argue that they can’t guarantee to register the shares because they don’t control the SEC. The past history of the buyer with the SEC is crucial, including knowing the current status of SEC filings, any outstanding registration statements, and any promises that the buyer has made to shareholders of other companies it has acquired.

We’ve had several unfortunate situations where we’ve been “promised” a quick registration from a buyer, only to have them drag their feet on the filing after the deal, or get the filing hung up in the SEC. In today’s SOX environment, we’ve been amazed by the poor behavior of several of the big four accounting firms who “don’t have time” to work on merger accounting questioned by the SEC, especially in situations where the accounting firm is not going to be the merged company’s auditor going forward. Be very careful here as stock isn’t tradeable until it’s registered and the 12 month automatic waiting period for unregistered stock to become registered (in the absence of a registration statement filed with the SEC) can be a long time (and a lot of volatility) to have to wait for.

While I much prefer sex (as in “The Joy of …”), sometimes I have to settle for registration rights.  With this post, Jason and I end our Letter of Intent series.  We hope you’ve enjoyed it – feel free to comment and email me additional questions to address.

I read two great posts today.

• Ben Casnocha wrote a great post on the value of resilience.
• Tom Evslin wrote a great post on why a great programmer is worth fifty good ones.

Resilience underlies my desire to run a marathon in every state and I’m always on the quest for finding someone who is a 100x better programmer than everyone else in the room (I’ve been fortunate to work with a few of them over the years.)

Yum.

Glenn Hubbard, the Dean of Columbia University’s Graduate School of Business, is an absolute riot.  By way of Ezra Roizen, I saw Hubbard’s renovation of Every Breath Bernanke Takes and Dean, Dean Baby!, economic / finance spoofs performed to the tunes of Every Breath You Take and Ice Ice Baby.  Sheer brilliance – the dean of every business school could learn something from this.  Schmalensee, when are you doing a video?

Update: Several people have told me that the person in the video that looks like Glenn Hubbard is not actually Glenn Hubbard.  Having taken a number of economics courses in my life, I’ve simply decided to “assume Glenn Hubbard” which I’m sure is something that Dean Hubbard would understand and be comfortable with.

Bill Ritter – who is the democratic candidate for Governor of Colorado – just launched a blog to compliment his website.  Amy and I have become supporters after a very important (to us) conversation that we had with him about women’s rights issue.  Like all good political candidate websites, it’s even got a nice form for contributing to Ritter’s campaign.