I couldn’t disagree more. In the 1970s, people said the same thing about another type of intangible intellectual property: software. Back then, everyone in the computer industry believed that software was valuable only because it helped to sell mainframes or minicomputers and that you could never sell software by itself. As a result, software engineers worked for computer manufacturers or for companies that used computers. Very few independent software vendors existed, and those that did were barely profitable. As a business, software was hopeless. Everyone said so.

Everyone was wrong, of course. Over the next three decades, software became one of the most profitable businesses in history. I know because, as a manager and ultimately the chief technology officer at Microsoft, I had a ringside seat to this amazing success story.

Software owes its ascent largely to two crucial developments. First, software vendors gradually persuaded software users—through both education and lawsuits—to respect intellectual property rights and pay for something that they might otherwise simply copy. Then vendors liberated software from hardware by overcoming system incompatibilities and developing solutions that could work on many different brands of computer. When the PC revolution hit, software became an industry in its own right.

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