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Wednesday, July 10, 2013

Sticky Thoughts

The Market, Not Government, Gave Us Super Glue

My car had languished at the airport parking lot for a full week. The blazing sun did its work on my rearview mirror, weakening the adhesive on the window. As I got into the driver’s seat, the mirror was hanging as if from the gallows. Now I had to drive without being able to see behind me—and on some tricky highways no less. There was no obvious fix, so off I drove with a number of blind spots.

I stopped at the nearest gas station with full knowledge of what I needed to do. I bought a tiny tube of what’s commonly called “super glue”—that super-sticky potion that does magic on everything from broken plates to metal pipes to falling-off car parts. It cost about $2. I put on a few drops, held it in place for 60 seconds, and, like magic, all things were right with the world. The mirror re-adhered and I drove off as if this potential visual calamity had never happened. 

Then I got to thinking: What if that store hadn’t been there? My life would have been in danger. At the very least, I would have felt anxiety and probably endangered others. Thank goodness for the so-called convenience store. People have railed against them for years, because they tend to charge much higher prices for goods than the local grocery store—all to “exploit” people who are in a hurry or who need convenience. 

Well, exploit me, please. Grocery stores, similarly, charge higher prices than far-away farmer’s markets. It’s the consumer who determines what prices producers can charge, high or low. There is a simple solution if you don’t want to pay the premium: Don’t pay the premium. Just go somewhere else. Restricting existing opportunities accomplishes nothing for the social order. 

Even more impressive, however, was that tiny bottle of glue that I bought. I can vaguely recall a time when you couldn’t buy super glue just about anywhere. When I was a kid, I never knew such a thing existed. Indeed, I remember when it first came to market. Maybe it was the 1980s. Looking into it further—which anyone can do with anything thanks to the market-produced resources on the Internet—the chemical name of this glue is cyanoacrylate.

Three years ago, the man who invented it received an award from President Barack Obama. His name is Harry Wesley Coover, Jr.. and he was awarded the National Medal of Technology and Innovation for his role as the lead scientist in an Eastman-Kodak lab in 1942, when most corporations were forced to produce for the war. Cyanoacrylate came about in the course of trying to find ways to improve on guns as part of a government contract—or so the short version of the story goes. 

There are a number of problems with the story, which on the face of it seems false, because this compound only became available to average consumers in the 1980s. It turns out that in 1942, neither Dr. Coover (who died in 2011) nor any of his lab assistants did anything with the substance. It was a lab thing—people with microscopes and test tubes who obey no other metric—and that’s where it ended. They totally dismissed the discovery on grounds that this stuff was surely useless because, after all, it absolutely stuck to everything. 

In other words, super glue was “discovered” by the government in the same way that the government built the Internet. It was able to combine the elements but then didn’t do anything socially useful with the results. The technology died on the vine, as it were, until it was brought to life again by market participants with an eye to improving lives. 

And while there’s nothing wrong with abstract knowledge or invention for its own sake, a much more telling problem to solve is how to make things useful and distributed throughout the human population. That requires entrepreneurs who are attentive to human needs, as well as the realities of scarcity, to make production and consumption economical—meaning not wasteful and compatible with people’s actual priorities.

Knowledge alone does not serve society. Knowledge put to use in a market setting—science turned into the “practical arts”—is what serves the human population. Labs don’t provide those two crucial elements—entrepreneurial insight and marketing savvy—that turn ideas into socially relevant technologies. And getting ideas out of labs and into stores is no easy feat. It requires a competitive market order, unrelenting trial and error, a process of development over time, not to mention a price system that allows for cost accounting, among other institutions. 

Dr. Coover stumbled upon cyanoacrylate again years after it was initially discovered. This time, his mindset had changed: He was still working for Eastman-Kodak, but it was peacetime. Companies were profit-hungry and commerce was essential to the bottom line. Instead of working for preset government plans, he was working with a commercial motivation.

Clearly, then, this stuff had a commercial destination. The knowledge of a chemical compound that was previously too sticky to do anything useful became an actionable technology. To prove it, Dr. Coover went on a television game show called “I’ve Got a Secret” in 1958 to demonstrate his invention by bonding two pieces of metal and letting the bonding apparatus lift him up in the air. The audience was thrilled! 

Even so, it took many years before this glue was available on every street corner. In fact, it was not until the late 1970s when there was such a thing as “super glue” you could buy everywhere. 

My long research into patents suggested that this is the best place to look to discover why private markets slow down in distributing inventions. Sure enough, the lore is that Dr. Coover held the patents but never made a dime from them. The product didn’t become commercially successful until after the patents ran out. This little fact is typically reported as if it were some kind of injustice done to the scientist.

Actually, the causation likely runs the other way. So long as the patents were around—the first was issued in 1954—it could not achieve its fully commercial success because its marketing and distribution could not improve in a non-competitive environment. As the New York Times said in its obituary of Coover, “Kodak was never able to capitalize commercially on Dr. Coover’s discovery.”

Patents guarantee no success. In fact they often inhibit success precisely because people tend to believe that a patent generates some sort of human right to succeed. Just a quick glance at the patents surrounding cyanoacrylate shows results of 686,000—an astonishing thicket of monopoly central planning for a compound. From 1954 on, every iteration of it was repatented as much as possible (a high-point summary history is here). 

As just one example, when Kodak held the chemical as a proprietary product, it was called Eastman 910—not so catchy. I can’t say for sure, but it probably wasn’t packaged well, either. After 1980, when a frustrated Kodak company sold the product to National Starch, marketing and distribution improved to the point that I could find it in any convenient store. Now anyone can make the stuff and sell it, and dozens if not hundreds of companies are involved. They compete not on the basic glue but on the packaging, which turns out to be rather important with this glue, which dries out in minutes. 

There is another use to cyanoacrylate that we know well today. It fixes cuts and scrapes better than Band-Aids. Once you have used it for cuts, you wonder why you ever used anything else. It turns out that the government did use this on wounded soldiers in the Vietnam War and it was mighty successful. (One shudders to think how much good it might have done during World War II, but government was too busy looking for things to make guns, not repair wounds). 

The FDA didn’t give the go-ahead for regular consumer use until the 1990s, because the government feared that the stuff was somehow toxic. A few companies threw some antibiotics into the mix and the approval finally came through, which is why we have liquid bandages today. 

Given all of this, it’s no wonder that the product took so many decades to go from invention to market viability. It was the competitive market that finally gave the product life, but first it had to struggle through an incredible array of barriers, from disincentives to monopoly grants to regulatory restrictions. What might have helped people at daily life since the 1940s took a half a century. Part of that time passage is inherent in the market process, but much of the rest of it was due to intervention. 

It was not science as such that made the difference. It was science given flight by market forces. At each stage of its development, the market was there, encouraging, prodding, guiding, and leading to the light, despite all odds.

In the end, I’m the beneficiary. It all comes down to my $2 purchase, made on the fly, involving totally unexpected circumstances. I did not get in a wreck, and my rearview mirror is still holding solid. 

Of course, people will still complain about the prices at convenience stores and a lack of government funding for research and development, and suggest that we need some form of control to hold back the wiles of the competitive market order. Yet, this case illustrates that the “wiles” are not the problem; the problem is the artificial barriers.