Do You Really Own that Digital Music or eBook?

that HBO doesn't care. In fact, HBO encourages it. That's just one of the lessons in the book Mine, How the Hidden Rules of Ownership Control Our Lives by Michael Heller and James Saltzman, and Professor Heller of Columbia Law School joins me, Now, why the title mind One of the first words babies. How does that relate to adults? Well,

let me give you an example. Actually was with my kids in the park and they were fighting over a little toy shovel and one of them said mine, I had it first, and the other said no, I'm holding onto it. And I realized that that little fight that they had is actually very revealing about ownership works, not just for kids, but for us grown ups as well. So when my daughter was saying I had it first, first in time, my son was saying, I'm holding onto it.

Possession is nine tenths of the law. They were using two of just six simple stories that everyone uses to claim everything in the world. Much remarkable is that businesses and governments use those exact same stories, the exact same mind and first to basically allocate all the resources that we all fight about. This is how we decide climate change, this is how we decide wealth inequality, and it's also how we get in line as adults for everything that

we all want. Let's start with the axiom possession is nine tenths of the law, and you say not really. There are hundreds of ownership disputes that we're involved in every day without realizing it. Part of why a maxim like possession is nine tenths of the law is so powerful that it feels natural and just and right. But once you understand it, it's just a maxim. What savvy businesses can do is turn those upside down. So let me give you an example. Say you click by now

on Amazon to download a book or a movie. When you click buy now, you have a little shopping cart you have a buy now button, it feels like you own that, And actually, studies are shown the pent of people believe that buying something online is the same as buying a physical copy of the book or the DVD, and that's just not true. So what Amazon, Apple and other online retailers realize that they can mobilize our deep, our childhood instincts about possession, but actually sell us something

quite different and much less. So it's the case today that Apple or Amazon can, and actually they have deleted content right off of people's devices, and they have the right to do so. But there's a big and growing gap between what you feel like you are and what you actually own online and the online retailers they get an extra unearned premium on every single one of our

downloads we leave. The customers are not always right. So in other words, you might buy a book for your iPad or your Kindle and later find out that the book has disappeared from your online library the book you thought you had purchased. Isn't that crazy? Doesn't happen very often, But actually some years ago Amazon deleted by George Orwell right off people's devices, which is actually kind of amazing.

If that was exactly what Big Brother would do. There was a licensing dispute, and don't turn up, they couldn't sell that version of the book. But there have been a number of cases where Apple and Amazon and the other retailers have essentially bricked your device. You still have the hardware, you still have the shell of your cell phone, but they can basically lock you out of your contact

in ways that people will be surprised. You feel like you own it, But the reality today is that possession is much more like one sense of the law when you're online. Amazon and Apple do they have provisions in their terms of agreement that allow them to do that. Those terms of agreement that no one ever reads. I imagine they do. I'm saying I imagine they did, because literally no one ever. I teach this stuff and I've

never read them. And what's amazing is in those terms of service that they call them, they can put a lot of stuff in there that you would just never No one ever knows, no one ever. They're designed to be unintelligible, and all everyone does is just click the little I agree button a quick the buy now button, and by doing so, the version of ownership that you get online is a very highly limited, non transferable license that gives them a lot of control over what you

can do with what you buy. What about subscription services like HBO and Netflix. It's become acceptable to borrow someone's log in and password and watch shows when you're not paying for them. So what are the ownership rules there? Isn't that crazy? Like when I ask people, like you know, people who share passwords with friends for Hbo, where I spend this throup for Netflix? All of my students, all of my friends say, sure, of course we do. That's

just standard practice. And you said, it's borrowing. It's not borrowing. It's actually illegal. It's actually a federal crime. It's not even close to legal. But here's the thing. HBO knows that you're borrowing these passwords. They can track you down, and they choose not to. They don't just tolerate, they actually encourage best of their core content. How is that

even possibly the case? Possible? Because HBO and Netflix are some of the most stephisticated and savvy businesses about ownership design. We all know that rocket engineering puts people on the moon, but a few people realize how ownership engineering is us all day long every day. So what HBO is using in this contact the reason that they're actually encouraging people to share passwords, they're using an ownership strategy we call

tolerated staffs. Tolerated staffs work for them because what they are trying to do actually, in the words of HBOS president Richard Leppler, he said, what we're trying to do it was build video added so they could come after you, but instead they want you to think that you're stealing just a little. It actually profits them as part of

a long term customer acquisition strategy. They actually write about this in some detail strategy that savvy businesses are using in a Harvard Business Review article that's titled even Elon must doesn't care about patent should view. And the point there is that savvy businesses have strategies life tolerated stuff where they're re engineering your experience of ownership for their profits. You right that the meek shall inherit very little, and

you point to South Dakota as the new Switzerland. Howls South Dakota become the go to money haven for the super rich. What a wild place. I mean when I think of South Dakota, I think of like the sturgist motorcycle raality, or maybe like Mount Rushmore. But if you're super rich, South Dakota is a very special place. It's where the wealthiest people, not the one per centers, but the one percent of the one percenters go to hide

their money. It's a place that has cre aided essentially legal system that makes payment of taxation essentially optional for many kinds of taxes. It also makes facility or responsibilities, for examples, to pay former spouses or provide child support, or payoff people use injured in all practice cases, or business partners use defrauded. It makes all that payments and

all that responsibility largely optional. And because it's so attractive for avoiding responsibility and taxes, it's become in recent years the world leading money caymer. It actually crushes Switzerland and the payments. This is where the world super wealthy go to hide their money. And most Americans don't realize that we now have in this country is too actually separate systems for wealth transmission, the super concentration of wealth in the very small handful of families, the fact that today

sixty of wealth in America has inherited. It's inherited not earned, and only one percent of families have fort of total wealth that doesn't happen through market cources. It isn't a factive nature. It is results from a deliberate set of choices by fas like South Dakota to create this basically optional taxation and responsibility system. They've created a way to create actually a new aristocracy in America. And I don't even mean that metaphorically. The name of the trust that

avoid stay taxes in particular are called dynasty trusts. They're meant to create modern dynasties. For most of us, we actually have to pay our taxes and fulfill our responsibilities. And if you drive a Honda and hit somebody, they can garnish your wages to pay off the claim. But if you have a trust set up in South Dakota and you're wealthy enough to hystem with your Lamborghini, you never have to pay. It's really something that the founders

would have been appalled by. It's not something that's consistent with either a progressive vision of America, and it isn't consistent with a conservative vision of America equal either. It's been consistent with a vision based on responsibility and uh you know, opportunity and working hard. But we've done and what we've done in this country is to create an alternate legal system UH through which people can basically create

aristocratic dynasties. Actually very much in mentioned with the founding principles of this country and the ownership. Reason for this is that property in America is not defined by federal law. It's not defined by the Constitution. It's defined by individual states. So states like South Dakota can basically impoverish um states where people actually want to live, States like California and

New York EXAs of Florida, where wealthy people live. The chief Justice of that state Supreme Court said, well, many people may find a way to fly over South Dakota. Somehow their dollars find a way to land. Here is the money helping the people of the state. What's so galling about what South Dakota has done is that no one in South Dakota benefits. There isn't one road in Sathakota that gets paid by their ability to decrease the

taxation pays to the states where people actually live. That one road get pays now, one school book gets brought. The only people in South Dakota. Who benefits are the tiny handful of trust administration lawyers and bankers who wrote these laws, who updates them every year, and who get fees for administering them. One legislature says, there probably aren't a hundred people in the states who realize that they're creating a studel aristocracy in America. But because of South

Dakota is taking the lead. Other states, Nevada in particular, Alaska, a handful of others are racing to catch up with giveaways to the super wealthy. So we now have what's called a race to the bottom. It's actually competing with each other forever more elaborate giveaways that are sort of under the table, hidden in this parallel legal system for the super rich. That's fascinating. Let's go on to another rule,

which is your home is your castle. You say your home is really not your castle, right, So what we're what we're going through here is um uh. Some of the ownership stories has said at the beginning there are only six of them, and we turns out that possession is one tense of the law. You're a savvy business owner, and it turns out that the meekshell not inherit very much. If you're in the world of stu upakotas Um dynasty truck and now we're going to uh, your home is

your cassitle. It turns out that your home, that's a very powerful feeling we have, that's my space peep out. But that notion of ownership is so powerful that it becomes a tool that's available for all sorts of governments and business businesses to sort of redefine what it means to have home in ways that may surprise some of your listeners. UM. So one of the so when you

stay my home ismand castle. If you own a home but you have as a sheet of paper, it's a two dimensional deeds um, which doesn't necessarily mean anything that is attached to your home, like how much airspace above is attached, what resources below are attached, how much out from the side do you have? All of those questions

are very much up for grasped. A hundred years ago, when we first had air flights, UM, landowners would send bills to the plane companies and say, hey, you're your trust passing over my land by flying up over overhead, and early on in America, we desired that at the flight of that's the level of airplanes that wasn't part of it was attached to your land. That attachment only worked a certain ways up. But today we have the question about drone. So, for example, can symbody fly a

drone above your land? And that's very much a line question because potentially they have cameras a book down on you, and potentially they also serve, you know, to deliver pizza or Amazon boxes. So we're at a moment where, like any new resource, ownership of it is up for wraps. The ownership of the airspace above your house at the drone level, the so called drone away is very much contected today and there's no natural or correct or right answer. All that you have is the six simple stories of

ownerships that everyone uses to fight about everything. And it's not just the airspace above, it's also all the resources below your lands of water, the oil, the gap, um do those belong to you? What if your neighbor puts a drools a zeper well, it's puts in a more powerful pump and sucks the water away from your well? Can do that? And the answer is again up prograbed. Uh. The specific answer for the well is much in much of America, absolutely they can do You have all these

wild examples in the book what's your favorite? But my favorite example actually is I motivated us to write the books. Was flying on an airplane working in my laptop and the person in front of me leaned back and squished my laptop, and I realized that that wedge of space behind the seat was an ownership story isn't governed by law, but it's very much up programs. Does that space belong to the person in front? Do you have a right to recline? Is a space attached to the seat because

the button controls the space? Or does the space belong to the person and back for their needs? And from my laptop? So my story is possession. I possessed the space or first. I was there first, And what I realized was that that wedge of space was outside the law, but it was a compliment each of us go through all the time whenever we fly. If we and what

happens is we all try to work it out. We try to be politely, try to use good manners, and the hidden ownership story there is that what we're experiencing a personal conflict. But I was experiencing to someone leaning into my lap. Turns out to be a highly engineered form of ownership that the airlines are using for their profits.

In the same way that HBO was using tolerated sets to build customers, airlines use a different, very advanced tools of ownership design, which we call strategic ambiguity str Teachic ambiguity is present much more often in your life than you realize. And the way the airlines use ambiguity in that context is they deliberately keep it unclear who owns who controls that wedge of space. They know that we're going to all fall back on politeness and good manners

to story it out and one when that happens. But it does is it left them sell that relegis space twice on every seat on every flight for you to recline and for my needs. So it's extremely profitable for the airline. And the reason that these the complicts are breaking out today over that wedge of space, the stories of planes getting grounded, the viral video, some of your listeners may have seen a fight on up in the air.

So what the airlines are done is they squeeze the pitch, the distance between seats down from thirty five inches down to just on some planes today, they've made that wedge of space a more valuable resource. And whenever any resource becomes more valuable, ownership is up for wrapped and they realize that you by using ambiguity, they could sell that space twice and they can make the business class these up front more valuable. They create a market for business

class by making economy economy of space officially unpleasant. So for me, it was that experience of flying that made me realize how powerful these ownership stories are in shaping every minute of our lives. Every day, all day long, we're engaging in these ownership battles and we just don't see it. So for me, the AHA moment was seeing that that process I was having on the airplane was

actually an ownership battle. And it turns out of actually the simple solution actually news you can use for your listeners, which is if you try to pay the person in front of you twenty bucks that usually not to recline. That often won't work, And if you say just please don't recline, that won't work either. But what works three quarters of the time, according to one study, is if you offer to buy them a snack or a drink, they won't recline because then you guys are in it together.

You're part of a community, and neither of you are realizing if the airlines are basically property from that deal. But that is actually a practical way to solve the problem. From your book, we see that your ownership rules seem to be changing at different times. Is there any advice you can give to the average person about how to make ownership rules work for them? Absolutely? So the key first is to understand that it's that ownership is not

something distant and fancy and something to a lawyer. This is such an important piece of what I actually try to tell my law students as well. And I said this earlier in our conversation. Law is overrated. Ownership is up for grabs in your life all day long. It's the stories that kids are telling on the playground when they're playing over the swing. It's nothing fancier for you

as a grown up. And this is true not just for really big issues like climate change, which we haven't talked about, which is an ownership battle, or wealth inequality, which more transparently is, but it's very true on sort of the employment on what control you have over your jobs. So, for example, a lot of people have nondisclosure and noncompete agreements in their in their in their contracts people don't

realize are not enforceable. But once you start to examine, like every piece of your life, like, how is it that, um, you know people walk around you to the front of the Starbucks line, uh to pick up their drinks? Well, they have the app. So Starbucks is engineered line waiting to basically two different visions of whose first in time people simply line up and wait people who use the app, and that engineering of lines was on all around you.

Next time you're standing in line, but it's a long line. Um, this may well be an entrepreneur who is actually being paid to wait in front of you. So free every day, every minute as you go through your day. Once you start to notice that, it's very hard, you'll see, um, the world in a very different way. And once you see it, it's hard to un see it. Once you

see how ownership really works. My hope is that your listeners is that that's part of what empowers them to have the tools to be more effective advocates, as as parents, but as and as consumers, and also I think that citizens Okay works at all those levels. Thanks Michael. That's Professor Michael Heller of Columbia Law School. The book is Mine, How the Hidden rules of Ownership control our lives. And that's it for this edition of the Bloomberg Law Show.

I'm June Grosso. Thanks so much for listen and eight. Please tune into The Bloomberg Long Show every week night at ten pm Stern right here on Bloomberg Radio