1. In Praise of Copycats
Far from killing creativity, imitation spurs innovation in industries from
fashion to finance to footbal
 August 10, 2012, 7:20 p.m. ET
By KAL RAUSTIALA and CHRIS SPRIGMAN
Critics called it "Bogle's folly." In 1976, John Bogle introduced the first index fund through his
new company, the Vanguard Group. The idea was based on research for his senior thesis in
economics at Princeton, in which he showed that, on average, professional money managers
failed to beat the rate of return of the overall market. (The thesis, written in 1950, earned him an
Wall Street veterans initially scoffed at the fund, which tracked the Standard & Poor's 500 Index.
Who would be content with hitting the market average? But the critics were quickly proven
wrong. Vanguard grew explosively, and it is now the largest mutual fund company in the nation.
Mr. Bogle's ideas have been widely copied by rival firms. Until recently, competitors were free
to copy financial innovations—and as a result, index funds are now a huge business for Wall
The conventional wisdom today is that copying is bad for creativity. If we allow people to copy
new inventions, the thinking goes, no one will create them in the first place. Copycats do none of
the work of developing new ideas but capture much of the benefit. That is the reason behind
patents and copyrights: Copying destroys the incentive to innovate.
Except when it doesn't. There are many creative industries, like finance, that lack protection
against copying (or did for a long time). A closer look at these fields shows that plenty of
innovation takes place even when others are free to copy. There are many examples of successful
industries that survive despite extensive copying. In fact, some even thrive because they are so
open to copying.
Consider the fashion industry, which is virtually synonymous with the word "knockoff."
Faviana, a New York fashion firm, makes its business model clear on its website. Faviana
cheerfully replicates the work of major designers, providing what it calls "bling on a budget." As
CEO Omid Moradi says on the site, "Ten minutes after any big awards telecast, the Faviana
design team is already working on our newest 'celebrity look-alike gowns.' "
Faviana isn't alone. Anyone who has spent time in a Forever 21 store, or who reads fashion
magazines, knows that the industry is full of knockoffs. And all this copying is completely legal,
2. because copyright law doesn't cover apparel design. Yet far from killing creativity and
destroying the market, the industry is prospering.
How is that possible? Because copying accelerates the fashion cycle, banishing old designs to the
dustbin of history (perhaps to be dusted off and reintroduced later) and sending the fashion-
conscious off in search of the new, new thing. Trends are the cornerstone of contemporary
fashion, and legal copying allows them to develop and spread. Fashion—and finance—show that
sometimes sharing an idea is more valuable than monopolizing it.
Copying can even serve as advertising. When an innovation is imitated, more people see it and
experience it, which helps to create "buzz"—the notion that a particular thing has status and is
especially worth having. Copies can also become trial versions of the original. A 2009 Harvard
Business School study found that many women who buy knockoff handbags soon move up to the
real thing. Copies act as a kind of gateway drug to the harder (or, at least, more expensive) stuff.
The world of cuisine is similar. As any frequent restaurant-goer knows, great dishes migrate
from place to place. (Ever had a molten chocolate cake?) And that is because no one can own a
recipe or monopolize a terrific dish. Recipes and food are, like fashion designs, simply outside
the scope of copyright. But that doesn't stop the most ambitious chefs from developing new
dishes. The food world is more creative today than ever before.
In cuisine, as in fashion, copying is a critical part of the creative process. Chefs sometimes get
annoyed when others copy their dishes without attribution. But many of the world's most talented
chefs, such as the French Laundry's Thomas Keller, are firm believers in an open approach to
innovation. Mr. Keller's salmon tartare cornets have been widely imitated. But that hasn't
changed his views on the merits of shared ideas. The freedom to copy, to tweak, and to improve
on a good idea is what makes it go from good to great. Along the way it provides inspiration to
others and serves to advertise, for those in the know, the prowess of the originator.
Even football illustrates the power of copying. With myriad possibilities for formations and
plays, football strategy is always changing—but none of it is protected against copycats. This
hardly discourages great coaches from innovating. Exhibit No. 1 is the West Coast Offense,
which relies on quick, short passes to control the ball and gain incremental yardage. The idea
was the brainchild of Bill Walsh, who in the 1960s coached the Cincinnati Bengals, then a
recently formed and hapless NFL expansion team. Cincinnati, he said, "was probably the worst-
stocked franchise in the history of the NFL. So in putting the team together, I personally was
trying to find a way we could compete."
His way was to develop a new style of offense. Later, when he was coach of the 49ers, Mr.
Walsh's ideas helped to lead the team to three Super Bowl wins. Traditionalists at first dismissed
his offense as a gimmick. But no one could dispute its success. Eventually, it was imitated by the
Green Bay Packers, the Philadelphia Eagles and many other teams.
Why do football coaches invest long hours in developing innovative strategies, even when they
know that their rivals will imitate them as soon as they prove successful?
3. The rewards of winning can be immense, especially at the highest levels of the game. Even a
temporary advantage, lasting a week or perhaps a whole season, is worth pursuing.
More important, in sports there are practical barriers to immediately copying a successful new
tactic. The first time a play, formation or strategy is used, it can create a big element of surprise.
After that, opponents can reverse engineer the idea relatively quickly. More difficult is the
process of rebuilding a team to take full advantage of the innovation. This takes time.
Economists refer to this window as the first-mover advantage.
In the case of Major League Baseball, as Michael Lewis showed in "Moneyball," the Oakland
A's won for a time with their number-crunching strategy, but the team faced a host of imitators
after a few seasons. This dynamic of innovation by competitive underdogs is by no means
limited to sports—from software to warfare, competition sparks creativity, even when copying is
sure to follow.
We live in a world in which copying is getting easier. It certainly can cause harm, and some rules
to protect creations are necessary. But copying has an upside too. Great innovations often build
on existing ones—and that requires the freedom to copy.
—Adapted from "The Knockoff Economy: How Imitation Sparks Innovation," available now as
an ebook and in hardcover on Sept. 12 by Oxford University Press.
A version of this article appeared August 11, 2012, on page C3 in the U.S. edition of The Wall
Street Journal, with the headline: In Praise of Copycats.