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Microsoft vs. open source is a classic compete-with contest; both sides, for the most part, play fair. World War II’s “Battle of the Beams” between German and British engineers trying to coordinate-and thwart-electronic navigation aids for nighttime bombing raids is a perfect example of a compete-against innovation marketplace. The compete-against dynamic is an escalating innovation arms race where the economic goal is less to create new value for customers than to defeat or hoodwink the enemy. The conflict is defined by “measure vs. countermeasure vs. counter-countermeasure.” The result? Deceit, deception, and misrepresentation are the mission-critical media for compete-against innovation.

Viruses, identity theft, performance-enhancing drugs, phishing, and other compete-against innovations succeed because they so effectively exploit both human virtues and human venality. They alternately appeal to the seven deadly sins-vanity, sloth, envy, gluttony, etc.-and to our compassion and curiosity. “Social engineering” matters as much as technical engineering.

Equally important, wicked innovators prey upon the fact that in most arenas of technology, security and authenticity are afterthoughts. The Internet, for example, was never designed with security in mind; the most important protections have all been retrofits. Neither the Olympics nor Major League Baseball evolved with the expectation that so many world-class athletes would choose to cheat chemically. Pathological innovation has moved cheating from the margins to the mainstream.

Should compete-with innovators fight fire with fire and use deception of their own to combat wicked innovators? Should they give their customers and clients better tools to battle pathological innovation? Or should we simply throw up our hands, declare wicked innovation a “public policy” issue, and count on the regulators, courts, and legislators to rescue us?

The correct answer, of course, is “all of the above.” Honesty compels us to admit that dishonesty is often a superb innovation strategy. Compete-with innovators have little choice but to grow a bit trickier and more deceptive in their own security investments, creating tools such as the online “honey pots” that use dummy credit card data to lure in and trace hackers. Wicked compete-against innovators, ironically and inevitably, will increasingly drive innovation in compete-with markets. The single most important lesson pathological innovation teaches is that the economics of cheating play as great a role in defining value as the economics of adoption. You’ve got to love that.

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