1 00:00:05,090 --> 00:00:06,216 - Fakes. - (wacky music) 2 00:00:06,258 --> 00:00:07,760 - (camera clicks) - Phonies. 3 00:00:07,801 --> 00:00:09,553 - (register dings) - They're everywhere. 4 00:00:09,595 --> 00:00:10,929 Some are easy to spot. 5 00:00:10,971 --> 00:00:12,806 - (man screams) - (Nessie roars) 6 00:00:12,848 --> 00:00:14,767 Some took us a little longer to figure out. 7 00:00:14,808 --> 00:00:16,435 (bell dings) 8 00:00:16,477 --> 00:00:19,480 - From our currency. - This dude looks like me. 9 00:00:19,521 --> 00:00:22,441 - To our gadgets. - (drone whirs) 10 00:00:22,483 --> 00:00:23,984 From our medicine, 11 00:00:24,026 --> 00:00:26,528 to the logoed merchandise we wear, 12 00:00:26,570 --> 00:00:29,031 fakes siphon off billions of dollars a year 13 00:00:29,072 --> 00:00:30,783 from the global economy. 14 00:00:30,824 --> 00:00:32,201 (twitchy music) 15 00:00:32,242 --> 00:00:34,328 It's their uncanny ability 16 00:00:34,369 --> 00:00:36,663 to effectively imitate the real thing 17 00:00:36,705 --> 00:00:38,665 that gives them their power. 18 00:00:38,707 --> 00:00:41,752 They can undermine multi-million-dollar brands, 19 00:00:41,835 --> 00:00:44,129 destroy trust in governments, 20 00:00:44,171 --> 00:00:47,299 and pay for some really bad shit. 21 00:00:47,341 --> 00:00:50,177 - Terrorists can use counterfeits to fund their attack. 22 00:00:50,219 --> 00:00:52,054 - Holy shit. 23 00:00:52,095 --> 00:00:54,389 How do the fakers get away with it? 24 00:00:54,431 --> 00:00:57,059 We're about to find out. 25 00:00:57,100 --> 00:00:58,644 Yeah, this is counterfeit, 26 00:00:58,685 --> 00:01:00,437 just like your mom. 27 00:01:00,479 --> 00:01:01,772 What? 28 00:01:07,569 --> 00:01:09,571 (dramatic music) 29 00:01:09,613 --> 00:01:13,408 Whether you like it or not, we're all connected by money. 30 00:01:13,450 --> 00:01:17,287 I'm Kal Penn, exploring this giant beast 31 00:01:17,329 --> 00:01:20,833 that is the global economy. 32 00:01:20,874 --> 00:01:22,251 ♪ Gimme that money ♪ 33 00:01:22,292 --> 00:01:23,794 ♪ Gi-gi-gimme that money ♪ 34 00:01:23,836 --> 00:01:24,962 ♪ Gimme that money ♪ 35 00:01:25,003 --> 00:01:27,005 ♪ Gimme that that money ♪ 36 00:01:27,047 --> 00:01:29,466 - Money, we use it to pay our debts, 37 00:01:29,508 --> 00:01:31,343 spend it to buy good times, 38 00:01:31,385 --> 00:01:33,637 and save it for rainy days, 39 00:01:33,679 --> 00:01:36,640 but in the US, counterfeit money has been circulating 40 00:01:36,682 --> 00:01:39,351 almost as long as real money has. 41 00:01:39,393 --> 00:01:41,353 So, who protects our currency 42 00:01:41,395 --> 00:01:44,064 when counterfeiters are targeting our dead presidents? 43 00:01:44,106 --> 00:01:46,942 (cool jazz music) 44 00:01:49,278 --> 00:01:51,572 I'm in our nation's capital to find out. 45 00:01:55,367 --> 00:01:57,452 - [Trent] Welcome to Secret Service headquarters. - Thank you. 46 00:01:57,494 --> 00:01:59,746 - [Trent] This building has every major division 47 00:01:59,788 --> 00:02:01,331 the Secret Service operates in. 48 00:02:01,373 --> 00:02:03,125 - That would explain all the stairs. 49 00:02:03,166 --> 00:02:06,253 Meet Secret Service agent Trent Everett. 50 00:02:06,295 --> 00:02:08,922 This is what they look like without sunglasses and earpieces. 51 00:02:10,799 --> 00:02:12,718 A lot of people don't know 52 00:02:12,759 --> 00:02:14,469 that the Secret Service goes after counterfeit currency. 53 00:02:14,511 --> 00:02:16,138 Everybody always thinks of, 54 00:02:16,179 --> 00:02:17,222 well, you guys protect the president and the first family. 55 00:02:17,264 --> 00:02:19,474 (snappy parade drum music) 56 00:02:19,516 --> 00:02:22,060 - So, the reason the Secret Service came about was, 57 00:02:22,060 --> 00:02:24,313 at the end of the Civil War it was reported 58 00:02:24,354 --> 00:02:27,107 that about 1/3 to 1/2 of all currency out in circulation 59 00:02:27,149 --> 00:02:28,817 - was counterfeit. - Wow, that much? 60 00:02:28,859 --> 00:02:30,027 - That much. 61 00:02:30,068 --> 00:02:32,529 So, on April 14th, 1865, 62 00:02:32,571 --> 00:02:35,574 President Abraham Lincoln began drafting up the idea 63 00:02:35,616 --> 00:02:37,242 to create the Secret Service. 64 00:02:37,284 --> 00:02:39,620 So, later that evening, with the legislation 65 00:02:39,661 --> 00:02:42,664 drawn out on his desk to create the Secret Service 66 00:02:42,706 --> 00:02:45,125 is when Abraham Lincoln left the White House for Ford's Theater, 67 00:02:45,167 --> 00:02:47,753 where he ultimately was assassinated by John Wilkes Booth. 68 00:02:47,794 --> 00:02:49,713 - [Kal] Whoa. 69 00:02:49,755 --> 00:02:53,300 At the time of the Civil War, the US had no single currency. 70 00:02:53,342 --> 00:02:57,262 Banks could issue any dollar amount in any style. 71 00:02:57,304 --> 00:03:00,390 This made counterfeiting an easy game to play. 72 00:03:00,432 --> 00:03:03,185 A glut of fake bills quickly led to inflation. 73 00:03:03,226 --> 00:03:06,063 The price of a pound of tea ballooned to $35, 74 00:03:06,104 --> 00:03:09,524 while a barrel of flour could cost you 1,000. 75 00:03:09,566 --> 00:03:12,778 This led to the first real move by the US 76 00:03:12,819 --> 00:03:14,321 to take on counterfeiting. 77 00:03:17,407 --> 00:03:19,117 - [Trent] This next part I think you'll enjoy. 78 00:03:19,159 --> 00:03:20,786 I'm gonna have you meet one of my coworkers, Irina, 79 00:03:20,827 --> 00:03:23,413 who's one of our document analysts. 80 00:03:23,455 --> 00:03:25,582 - Welcome to Criminal Investigative Division. - Thank you. 81 00:03:25,624 --> 00:03:27,584 - I'm going to take you into the specimen library, 82 00:03:27,626 --> 00:03:30,045 and take a look at the actual counterfeit collection 83 00:03:30,087 --> 00:03:31,964 the Secret Service has here on site. 84 00:03:32,005 --> 00:03:34,424 - [Kal] We're looking at money. 85 00:03:34,466 --> 00:03:38,971 Irina Geiman's job is to make sure our nation's currency systems are protected. 86 00:03:39,012 --> 00:03:41,765 - [Irina] Secret Service sees about 2 1/2 million pieces 87 00:03:41,807 --> 00:03:43,892 of counterfeit currency a year. 88 00:03:43,934 --> 00:03:47,104 - [Kal] When it comes to money, Irina means business. 89 00:03:47,145 --> 00:03:50,524 - So, I have a couple of different counterfeits laid out, 90 00:03:50,565 --> 00:03:52,067 then also I have two genuines. 91 00:03:52,109 --> 00:03:53,652 So, for example, these are all real. 92 00:03:53,694 --> 00:03:55,278 - You're welcome to hold them. - Thank you. 93 00:03:55,320 --> 00:03:57,239 - Thank you so much. - No, no, no, no, buddy. 94 00:03:57,280 --> 00:03:59,825 - I appreciate, no? - I really cannot do that. 95 00:03:59,866 --> 00:04:01,618 - [Kal] Since the birth of the Secret Service, 96 00:04:01,660 --> 00:04:04,287 America has been in a race against counterfeiters, 97 00:04:04,329 --> 00:04:07,582 to protect our money and the trust Americans have in it. 98 00:04:07,624 --> 00:04:09,251 - So, here's some security features 99 00:04:09,292 --> 00:04:11,503 that's kind of really easy to remember. 100 00:04:11,545 --> 00:04:13,255 So, for example, if we take a look at it 101 00:04:13,296 --> 00:04:15,132 in transmitted light, we can actually see 102 00:04:15,173 --> 00:04:17,384 that there are images that's built into the paper. 103 00:04:17,426 --> 00:04:20,470 - There is an image of a large five right there. - Oh cool, yeah. 104 00:04:20,512 --> 00:04:23,348 - Yeah, and then three little fives to the left, and there's actually, 105 00:04:23,390 --> 00:04:25,684 there is a little skinny strip to the right of the portrait. 106 00:04:25,726 --> 00:04:27,394 - Yeah, that's cool. 107 00:04:27,436 --> 00:04:29,688 - [Irina] Our 100 also has an additional feature. 108 00:04:29,730 --> 00:04:31,481 We call it a 3D motion ribbon. 109 00:04:31,523 --> 00:04:34,026 If you tilt the note away from you and back, 110 00:04:34,067 --> 00:04:36,403 the images move up and down. 111 00:04:36,445 --> 00:04:39,197 - This is why, when you're a huge baller, 112 00:04:39,239 --> 00:04:41,199 and you go to the store, the person goes like this. 113 00:04:41,241 --> 00:04:42,659 - Oh yeah, yeah. - Before telling you 114 00:04:42,701 --> 00:04:44,161 that they don't accept hundreds anyway. 115 00:04:44,202 --> 00:04:45,620 (Irina laughs) 116 00:04:45,662 --> 00:04:47,247 - So here's some other counterfeits 117 00:04:47,330 --> 00:04:49,416 that we've been seeing quite a bit. 118 00:04:49,458 --> 00:04:51,918 Is there anything about them that catches your eye? 119 00:04:51,960 --> 00:04:54,796 - Okay. 120 00:04:54,838 --> 00:04:57,424 Even Ben Franklin looks unconvinced by this one. 121 00:04:57,466 --> 00:04:59,760 (Irina laughs) 122 00:04:59,801 --> 00:05:01,261 This one looks like Grant just found out 123 00:05:01,303 --> 00:05:02,304 how many Confederate statues there are. 124 00:05:02,345 --> 00:05:04,723 (Irina laughs) 125 00:05:04,765 --> 00:05:07,225 Wait a minute. This dude looks like me 126 00:05:07,267 --> 00:05:10,020 more than he looks like Abraham Lincoln. 127 00:05:10,062 --> 00:05:12,814 - A huge part of what Secret Service does is education. 128 00:05:12,856 --> 00:05:14,816 We do a lot of outreach, and really travel around the globe, 129 00:05:14,858 --> 00:05:17,360 and teach people, how do you recognize genuine currency? 130 00:05:17,402 --> 00:05:19,529 - [Kal] As counterfeiters get more high-tech, 131 00:05:19,571 --> 00:05:22,491 the US has had to innovate new security features 132 00:05:22,532 --> 00:05:26,203 to ensure its money is as counterfeit-proof as possible. 133 00:05:26,244 --> 00:05:28,371 Without their efforts, 134 00:05:28,413 --> 00:05:30,707 the country could be overrun by counterfeiting masterminds 135 00:05:30,749 --> 00:05:33,168 looking to destroy an economy. 136 00:05:33,210 --> 00:05:36,963 (suspenseful big band music) 137 00:05:38,256 --> 00:05:40,300 - Greetings, world citizens. 138 00:05:40,342 --> 00:05:42,886 I am The Counterfeiter. 139 00:05:42,928 --> 00:05:45,180 I destabilize world governments. 140 00:05:45,222 --> 00:05:47,390 Not with nuclear warheads, 141 00:05:47,432 --> 00:05:52,604 but with a simple copy machine. (laughs maniacally) 142 00:05:52,646 --> 00:05:55,232 I can cause inflation with the touch of button. 143 00:05:55,273 --> 00:05:57,901 Doubt me? Why don't you ask Yugoslavia? 144 00:05:57,943 --> 00:06:00,821 Oh, that's right: they no longer exist. 145 00:06:00,862 --> 00:06:03,782 Counterfeit bills crippled Yugoslavia's economy 146 00:06:03,824 --> 00:06:06,785 in the midst of civil war. 147 00:06:06,827 --> 00:06:10,413 You're no match for me, Milosevic. 148 00:06:10,455 --> 00:06:13,667 Villains with shrink rays are so small-minded. 149 00:06:13,708 --> 00:06:16,211 I shrink the value of the bills in your wallet 150 00:06:16,253 --> 00:06:18,255 simply by making my own. 151 00:06:18,296 --> 00:06:20,048 Bombs are so primitive. 152 00:06:20,090 --> 00:06:22,759 Dropping bills could do just as much damage. 153 00:06:22,801 --> 00:06:24,970 -(bill shooters whirring) -(laughs maniacally) 154 00:06:25,011 --> 00:06:27,764 If not, why did Hitler make fake British pounds 155 00:06:27,806 --> 00:06:29,641 during World War II? 156 00:06:29,683 --> 00:06:33,395 The Bank of England had to withdraw all notes over five pounds. 157 00:06:33,436 --> 00:06:35,272 -(bill shooter whirring) -(laughs gleefully) 158 00:06:35,313 --> 00:06:37,190 (sonar pings) 159 00:06:37,232 --> 00:06:40,026 I target cash-based economies, 160 00:06:40,068 --> 00:06:42,154 hurting the poorest people on Earth. 161 00:06:42,195 --> 00:06:44,197 If you can find someone worse than me, 162 00:06:44,239 --> 00:06:45,615 I'd like to meet them, 163 00:06:45,657 --> 00:06:48,034 so I can copy them for mass production. 164 00:06:48,076 --> 00:06:49,870 -(laughs maniacally) -(door slams) 165 00:06:49,911 --> 00:06:50,996 - Freeze, you counterfeiter. - (distant siren blares) 166 00:06:51,037 --> 00:06:53,290 - It's The Counterfeiter. 167 00:06:53,331 --> 00:06:54,833 (energetic rock 'n' roll music) 168 00:06:54,875 --> 00:06:56,501 Copy Cat, attack! 169 00:06:56,543 --> 00:06:58,545 (cat thuds) 170 00:06:58,587 --> 00:07:00,130 Oh, Copy Cat. 171 00:07:00,172 --> 00:07:02,174 Wish I'd never had you cloned. 172 00:07:02,215 --> 00:07:05,677 - Time for you to be brought to justice, The Counterfeiter. 173 00:07:05,719 --> 00:07:07,596 What? Where'd he go? 174 00:07:07,637 --> 00:07:09,014 -(energetic rock'n'roll music) -(light switch clicks) 175 00:07:09,055 --> 00:07:11,850 - You fool, I'm everywhere, 176 00:07:11,892 --> 00:07:14,311 especially cash-based economies. 177 00:07:20,233 --> 00:07:21,776 (car horns blaring) 178 00:07:21,818 --> 00:07:23,695 (pulsating music) 179 00:07:23,737 --> 00:07:27,324 - [Kal] India, it's a country of over 1.3 billion, 180 00:07:27,365 --> 00:07:30,535 and most of their financial transactions are done in cash, 181 00:07:30,577 --> 00:07:32,078 making it especially vulnerable 182 00:07:32,120 --> 00:07:34,998 to the destabilizing effects of counterfeiting. 183 00:07:35,040 --> 00:07:37,500 What can I do with these old currency notes? 184 00:07:37,542 --> 00:07:40,253 - Sir, you can't buy anything with that, it has no value. 185 00:07:40,295 --> 00:07:43,381 - No one will accept these? - No. Indian government has voided them. 186 00:07:43,423 --> 00:07:44,674 - What can I do with them? 187 00:07:44,716 --> 00:07:46,760 - You can tear them up. 188 00:07:49,679 --> 00:07:52,599 - You can't even buy anything worth a rupee with these, 189 00:07:52,641 --> 00:07:54,226 he says. 190 00:07:54,267 --> 00:07:57,062 Why did stacks and stacks of India's currency 191 00:07:57,103 --> 00:07:59,189 suddenly become worthless? 192 00:07:59,231 --> 00:08:03,026 In 2015, India experienced an alarming rise 193 00:08:03,068 --> 00:08:04,778 in counterfeit rupees, 194 00:08:04,819 --> 00:08:08,865 primarily the 500 and 1,000-rupee denominations. 195 00:08:08,907 --> 00:08:12,285 Much of it had been intentionally pumped in from Pakistan, 196 00:08:12,327 --> 00:08:14,996 looking to disrupt India's economy. 197 00:08:15,038 --> 00:08:18,833 So, in 2016, in a move that shocked the nation, 198 00:08:18,875 --> 00:08:20,460 the prime minister of the country 199 00:08:20,502 --> 00:08:23,505 took steps to protect India's currency. 200 00:08:23,546 --> 00:08:27,175 - Enemies from across the border 201 00:08:27,217 --> 00:08:30,262 have run their operations using fake currency notes. 202 00:08:30,303 --> 00:08:32,764 Fake currency, fake notes, 203 00:08:32,806 --> 00:08:34,432 and terrorism. 204 00:08:34,474 --> 00:08:39,354 To break the grip of corruption and black money, 205 00:08:39,396 --> 00:08:41,815 we have decided 206 00:08:41,856 --> 00:08:47,821 that the 500 rupee and 1000 rupee currency notes 207 00:08:47,862 --> 00:08:50,615 presently in use 208 00:08:50,657 --> 00:08:54,327 will no longer be legal tender 209 00:08:54,369 --> 00:08:56,079 from midnight tonight. 210 00:08:56,121 --> 00:09:00,292 - What the prime minister did is called demonetization. 211 00:09:00,333 --> 00:09:02,085 It isn't a new concept. 212 00:09:02,127 --> 00:09:03,878 In the past, countries used it 213 00:09:03,920 --> 00:09:07,090 specifically to fight inflation or tax dodgers, 214 00:09:07,132 --> 00:09:09,676 but not to battle counterfeiters. 215 00:09:09,718 --> 00:09:12,554 - And there is no need for panic. 216 00:09:12,595 --> 00:09:14,681 - [Kal] To help you understand how it works, 217 00:09:14,723 --> 00:09:17,309 imagine if, tonight, the US government told you 218 00:09:17,350 --> 00:09:20,020 your 20s, 50s, and $100 bills 219 00:09:20,061 --> 00:09:21,396 were no longer any good. 220 00:09:22,856 --> 00:09:24,566 That's exactly what happened 221 00:09:24,607 --> 00:09:27,652 to over 85% of the currency in India. 222 00:09:27,694 --> 00:09:29,612 (energetic rock music) 223 00:09:29,654 --> 00:09:32,115 The prime minister was looking to protect India's economy 224 00:09:32,157 --> 00:09:33,575 from the bogus bills 225 00:09:33,616 --> 00:09:36,036 by throwing out the good ones with the bad, 226 00:09:36,077 --> 00:09:37,996 but it led to unintended consequences. 227 00:09:39,456 --> 00:09:42,208 Gargi Bhattacharjee is a financial analyst 228 00:09:42,250 --> 00:09:46,087 who had a ringside seat for the 2016 demonetization, 229 00:09:46,129 --> 00:09:48,840 and the impact it had on the Indian people. 230 00:09:48,882 --> 00:09:51,301 How did demonetization affect all these guys? 231 00:09:51,343 --> 00:09:53,094 - I think hugely. 232 00:09:53,136 --> 00:09:55,847 All these guys you see around, they're all paid in cash. 233 00:09:55,889 --> 00:09:58,308 You probably will not be able to pay them in check 234 00:09:58,350 --> 00:10:00,643 because, end of the day, it holds no value to them. 235 00:10:03,271 --> 00:10:05,732 - So, how did you hear about demonetization? 236 00:10:05,774 --> 00:10:07,442 How did it first sort of take hold? 237 00:10:07,484 --> 00:10:08,902 - It was on TV. 238 00:10:08,943 --> 00:10:10,528 8 o'clock news. 239 00:10:10,570 --> 00:10:13,114 Suddenly, there was Narendra Modi speaking, 240 00:10:13,156 --> 00:10:14,074 the Prime Minister. 241 00:10:14,115 --> 00:10:16,785 And he was talking about 242 00:10:16,826 --> 00:10:19,371 some notes that are no more in existence 243 00:10:19,412 --> 00:10:21,206 from that point of time. 244 00:10:21,247 --> 00:10:22,707 The reason that was given 245 00:10:22,749 --> 00:10:24,918 was that counterfeit money needs to be stopped. 246 00:10:24,959 --> 00:10:27,796 And slowly after half an hour, 45 minutes, 247 00:10:27,837 --> 00:10:30,924 I saw a serpentine queuing up 248 00:10:30,965 --> 00:10:33,176 happening in all the ATMs. 249 00:10:33,218 --> 00:10:35,470 Because they were not understanding what was happening. 250 00:10:35,512 --> 00:10:36,805 It was a mayhem. 251 00:10:36,846 --> 00:10:38,431 (people yelling in foreign language) 252 00:10:38,473 --> 00:10:40,975 - [Kal] The country was not ready 253 00:10:41,017 --> 00:10:45,271 to take on the move the prime minister had mandated. 254 00:10:45,313 --> 00:10:49,984 Updated currency was printed, but the ATMs in India quickly ran out of the new bills, 255 00:10:50,026 --> 00:10:52,320 and some of them didn't even fit into the bank machines. 256 00:10:52,362 --> 00:10:55,115 - There were deaths which happened because of this, 257 00:10:55,156 --> 00:10:57,534 because suddenly a person in the middle of nowhere, 258 00:10:57,575 --> 00:10:59,244 he-- he was bankrupt. 259 00:10:59,285 --> 00:11:01,413 Farmers have died, laborers have died, 260 00:11:01,454 --> 00:11:03,164 because they did not have money 261 00:11:03,206 --> 00:11:05,208 to follow through. What do they eat? 262 00:11:05,250 --> 00:11:07,919 How do they feed their children? 263 00:11:07,961 --> 00:11:10,338 - So, people have died because of this. - Of course. 264 00:11:10,380 --> 00:11:13,633 Demonetization led into so many other things 265 00:11:13,675 --> 00:11:17,178 apart from putting the focus only on counterfeit money. 266 00:11:17,220 --> 00:11:20,932 - So why did this take place? 267 00:11:20,974 --> 00:11:24,018 I mean, India has incredibly talented economists. 268 00:11:24,060 --> 00:11:26,896 Who were the folks who were advising the prime minister? 269 00:11:26,938 --> 00:11:29,399 Why was this such a drastic measure? 270 00:11:29,441 --> 00:11:33,403 - It is said there were about eight to ten people who knew about demonetization, 271 00:11:33,445 --> 00:11:36,656 but this person named Mr. Anil Bokil, 272 00:11:36,698 --> 00:11:40,618 apparently he introduced this idea to the Prime Minister. 273 00:11:40,660 --> 00:11:44,289 But it did not go the way it was introduced. 274 00:11:44,330 --> 00:11:46,166 (music) 275 00:11:46,207 --> 00:11:51,004 - This is Anil Bokil, known locally as Guru Uncle. 276 00:11:51,045 --> 00:11:55,175 He claims to be on a mission to save the economy of India. 277 00:11:56,509 --> 00:11:58,219 He put together a theory 278 00:11:58,261 --> 00:12:00,138 that India's financial crisis could be solved 279 00:12:00,180 --> 00:12:02,307 by demonetization, 280 00:12:02,348 --> 00:12:04,809 and to lend credibility to his theory, 281 00:12:04,851 --> 00:12:08,688 he did what everyone else does: he built a PowerPoint. 282 00:12:08,730 --> 00:12:11,024 Guru Uncle presented this PowerPoint, 283 00:12:11,065 --> 00:12:14,777 pushing the benefits of demonetization across all of India. 284 00:12:14,819 --> 00:12:17,197 Eventually, he managed to secure himself 285 00:12:17,238 --> 00:12:21,242 a nine-minute meeting with soon-to-be Prime Minister Modi. 286 00:12:21,284 --> 00:12:23,495 Modi decided he liked what he heard, 287 00:12:23,536 --> 00:12:26,498 despite the fact that Guru Uncle isn't an economist, 288 00:12:26,539 --> 00:12:28,333 isn't a member of government, 289 00:12:28,374 --> 00:12:31,252 and has no background in policy-making whatsoever. 290 00:12:32,545 --> 00:12:33,671 Hey. 291 00:12:33,713 --> 00:12:35,798 I'm meeting with Guru Uncle 292 00:12:35,840 --> 00:12:39,093 and his think-tank-slash-entourage, known as ArthaKranti. 293 00:12:39,135 --> 00:12:41,471 His tiny group has managed to influence 294 00:12:41,513 --> 00:12:44,349 a great deal of India's economic thinking. 295 00:12:44,390 --> 00:12:45,600 Hi guys, how are you? 296 00:12:45,642 --> 00:12:47,685 - Hello. - Hello. 297 00:12:47,727 --> 00:12:51,606 - I've worked here before. I was not able to get to India 298 00:12:51,648 --> 00:12:54,234 - in the amount of time-- - [Anil] Ah, so you lost it. 299 00:12:54,275 --> 00:12:56,569 - (laughing) - Yeah, all of this. 300 00:12:56,611 --> 00:12:58,571 - It's worth almost $400 US dollars. - It is not. 301 00:12:58,613 --> 00:12:59,739 - It's, it's-- - It's worth nothing. 302 00:12:59,781 --> 00:13:02,909 It is not backed by any gold standard or anything. 303 00:13:02,951 --> 00:13:05,119 - So, I'm screwed. - [Anil] Yeah. 304 00:13:05,161 --> 00:13:08,831 - Okay, so the implementation of demonetization 305 00:13:08,873 --> 00:13:11,000 and this economic restructuring, 306 00:13:11,042 --> 00:13:14,587 how does this all tie into counterfeit currency? 307 00:13:14,629 --> 00:13:17,215 - Money in India is a very raw state. 308 00:13:17,257 --> 00:13:20,093 We are using more currency than digital money. 309 00:13:20,134 --> 00:13:21,970 Digital money is an advanced state of money, 310 00:13:22,011 --> 00:13:23,846 which is accountable. 311 00:13:23,888 --> 00:13:27,100 But when you follow the cash practice or currency practice, 312 00:13:27,141 --> 00:13:29,811 you'll not get any footprints behind 313 00:13:29,852 --> 00:13:31,396 after every transaction. 314 00:13:31,437 --> 00:13:33,982 So counterfeit was a major thing to be addressed. 315 00:13:34,023 --> 00:13:36,693 - And how was it addressed, and what was the difference 316 00:13:36,734 --> 00:13:39,320 between your proposal for demonetization 317 00:13:39,362 --> 00:13:41,864 and the reality in which it was implemented by the Modi government? 318 00:13:41,906 --> 00:13:45,159 - So we were never expecting 86% of our value, 319 00:13:45,201 --> 00:13:46,828 in one go, demonetized. 320 00:13:46,869 --> 00:13:50,999 What we proposed, you just withdraw 1000 rupees bill. 321 00:13:51,040 --> 00:13:54,210 After 6 months, you can go for 500 bills. 322 00:13:54,252 --> 00:13:58,214 But what happened actually was a complete cut off solution. 323 00:13:58,256 --> 00:14:01,426 So that created a lot of pain in our society. 324 00:14:01,467 --> 00:14:03,386 But the operation was required. 325 00:14:03,428 --> 00:14:05,680 - If a country has to go this far 326 00:14:05,722 --> 00:14:08,099 to battle counterfeit money and save its economy, 327 00:14:08,141 --> 00:14:09,934 the upside had better be substantial. 328 00:14:09,976 --> 00:14:11,728 It's a lot to absorb, 329 00:14:11,769 --> 00:14:14,439 so I'm meeting with a local business owner to find out more, 330 00:14:14,480 --> 00:14:17,275 and take a bit of the stress off. 331 00:14:18,443 --> 00:14:20,236 - Vikash. - Hi. 332 00:14:20,278 --> 00:14:23,323 - [Kal] Vikash Kapur runs an Indian production company 333 00:14:23,364 --> 00:14:27,452 that has experienced the effects of demonetization first-hand. 334 00:14:27,493 --> 00:14:30,455 And how does he feel about the prime minister's changes? 335 00:14:30,496 --> 00:14:31,873 - I think the way he did it was 336 00:14:31,914 --> 00:14:33,124 the way to do it. 337 00:14:33,166 --> 00:14:34,208 And it takes guts 338 00:14:34,250 --> 00:14:36,544 to tell 1.3 billion people 339 00:14:36,586 --> 00:14:39,339 that your money is useless. 340 00:14:39,380 --> 00:14:41,758 I mean, if I was in his place, I would have done the same thing, 341 00:14:41,799 --> 00:14:45,094 because I have encountered counterfeit notes. 342 00:14:45,136 --> 00:14:48,056 What happens is that when you deposit counterfeit currency 343 00:14:48,097 --> 00:14:50,308 into the bank, they have, I mean, you don't know, 344 00:14:50,350 --> 00:14:52,685 but when you're depositing it, they have the machines to check. 345 00:14:52,727 --> 00:14:55,813 And if they find a fake note, they just tell you that it's fake 346 00:14:55,855 --> 00:14:57,398 and you lose that money. 347 00:14:57,440 --> 00:14:58,900 - You do lose it. - You do lose that money, yes. 348 00:14:58,941 --> 00:15:00,985 So the whole demonetization and all of that, 349 00:15:01,027 --> 00:15:02,612 when all of that happened, 350 00:15:02,654 --> 00:15:04,822 there were just so many stories that unfolded. 351 00:15:04,864 --> 00:15:06,574 And that's when the real truth came out that 352 00:15:06,616 --> 00:15:09,619 there's actually so much counterfeit money, you know, 353 00:15:09,661 --> 00:15:12,455 which has made its way into the system, 354 00:15:12,497 --> 00:15:13,873 into the country. 355 00:15:13,915 --> 00:15:16,292 - What were some of the challenges that you saw 356 00:15:16,334 --> 00:15:19,128 below sort of that middle-class economic strata? 357 00:15:19,170 --> 00:15:20,755 - It was a painful period. 358 00:15:20,797 --> 00:15:23,424 We had to stand in line, we had to stand in queues. 359 00:15:23,466 --> 00:15:27,220 People had to take off from their jobs. 360 00:15:27,261 --> 00:15:30,932 It was tough. But then I look at the bigger picture. 361 00:15:30,973 --> 00:15:32,892 I mean, ever since this has happened, 362 00:15:32,934 --> 00:15:35,603 I know that the number of taxpayers has doubled. 363 00:15:35,645 --> 00:15:37,480 - Are you saying that the reason people are paying more taxes 364 00:15:37,522 --> 00:15:39,399 is because they were forced to open bank accounts, 365 00:15:39,440 --> 00:15:41,442 and there's now a track record of what they're making? 366 00:15:41,484 --> 00:15:43,945 - Exactly. Exactly. And it's been made simple. 367 00:15:43,986 --> 00:15:45,822 There are online, you know, payments. 368 00:15:45,863 --> 00:15:48,825 Opening bank accounts right down into the villages. 369 00:15:48,866 --> 00:15:52,286 And that also helps people understand 370 00:15:52,328 --> 00:15:54,455 the economy. It educates them. 371 00:15:54,497 --> 00:15:57,792 They get educated in how to, you know, really deal in the real world. 372 00:15:57,834 --> 00:16:01,087 - The hardship that people felt in different economic classes, 373 00:16:01,129 --> 00:16:02,755 you're acknowledging that it was tough, 374 00:16:02,797 --> 00:16:04,799 but you're also acknowledging it just had to happen 375 00:16:04,841 --> 00:16:08,177 - 'cause there's no other way to have gotten rid of-- - I am. 376 00:16:08,219 --> 00:16:10,012 Oh, yes, definitely am. I am acknowledging it. 377 00:16:10,054 --> 00:16:11,848 Because I think it was overdue. 378 00:16:11,889 --> 00:16:13,891 Because when all of that happens, 379 00:16:13,933 --> 00:16:15,935 it helps the government do more. 380 00:16:15,977 --> 00:16:17,854 You know, better medical benefits, 381 00:16:17,895 --> 00:16:19,397 you know, better infrastructure, 382 00:16:19,439 --> 00:16:21,983 better roadways, better schools. 383 00:16:22,024 --> 00:16:23,651 If the government has money, 384 00:16:23,693 --> 00:16:26,529 they can pay better wages, you get better teachers-- 385 00:16:26,571 --> 00:16:29,073 Kids start going to public schools. Everything grows. 386 00:16:29,115 --> 00:16:31,492 So all these things, they keep adding up, 387 00:16:31,534 --> 00:16:34,412 which I think is great, and which is what I think is required for the country. 388 00:16:34,454 --> 00:16:36,497 (electronic music) 389 00:16:36,539 --> 00:16:39,542 - So after all this effort, where is India now? 390 00:16:39,584 --> 00:16:43,254 Is counterfeiting no longer a problem? 391 00:16:43,296 --> 00:16:44,797 Well, not exactly. 392 00:16:46,340 --> 00:16:47,842 Turns out those new notes 393 00:16:47,884 --> 00:16:50,845 are already being successfully counterfeited. 394 00:16:54,098 --> 00:16:56,642 So, could India have handled the problem differently? 395 00:16:56,684 --> 00:16:59,812 (pulsating electronic music) 396 00:16:59,854 --> 00:17:02,231 Confronted with their own counterfeiting problem, 397 00:17:02,273 --> 00:17:04,692 the European Union took a different approach, 398 00:17:04,734 --> 00:17:06,319 and attempted to make fake bills 399 00:17:06,360 --> 00:17:08,321 easier for everyone to spot. 400 00:17:12,033 --> 00:17:15,578 This is cool. This is a neuroscientist's office. 401 00:17:15,620 --> 00:17:17,789 - Lair. Yeah, exactly, yeah. - Lair. 402 00:17:17,830 --> 00:17:20,583 - David Eagleman is a neuroscience professor 403 00:17:20,625 --> 00:17:23,920 at Stanford University, and his lab appears to be 404 00:17:23,961 --> 00:17:26,380 the secret headquarters of SkyMall. 405 00:17:26,422 --> 00:17:30,343 In 2013, he was recruited by the European Central Bank 406 00:17:30,384 --> 00:17:33,638 to design a bill resistant to counterfeiting, 407 00:17:33,679 --> 00:17:36,682 drawing on his knowledge of sensory substitution 408 00:17:36,724 --> 00:17:38,476 and brain plasticity. 409 00:17:38,518 --> 00:17:41,395 So, we're sure to have a lot in common. 410 00:17:41,437 --> 00:17:44,190 You're a neuroscientist. How the heck does a neuroscientist 411 00:17:44,232 --> 00:17:46,943 get involved in designing currency? 412 00:17:46,984 --> 00:17:48,736 - Well, a big part about understanding counterfeiting 413 00:17:48,778 --> 00:17:51,447 is understanding what people actually see 414 00:17:51,489 --> 00:17:52,824 and what they don't see. 415 00:17:52,865 --> 00:17:54,325 So, governments spend a lot of money 416 00:17:54,367 --> 00:17:56,410 putting in security features 417 00:17:56,452 --> 00:17:59,121 that we don't typically see unless we really attend to it. 418 00:17:59,163 --> 00:18:02,291 - Oh, interesting, okay. - Yeah, so what the European Central Bank did is 419 00:18:02,333 --> 00:18:05,545 they had a campaign where they tried to get people to look at money, 420 00:18:05,586 --> 00:18:08,506 where they said, hey, instead of just passing a bill along, 421 00:18:08,548 --> 00:18:11,008 stop, and look at it, and really pay attention to it. 422 00:18:11,050 --> 00:18:13,052 And it turns out that didn't work, 423 00:18:13,094 --> 00:18:15,972 because if someone passes me a counterfeit 50, 424 00:18:16,013 --> 00:18:17,557 I don't know if it's counterfeit, 425 00:18:17,598 --> 00:18:19,600 and if I pass it on, and it works, 426 00:18:19,642 --> 00:18:21,143 then it doesn't even matter to me, as a citizen. 427 00:18:21,185 --> 00:18:22,854 So, what they're trying to figure out is, 428 00:18:22,895 --> 00:18:24,522 how can we better design the bill? 429 00:18:24,564 --> 00:18:26,524 So, that's how they came to look at neuroscience. 430 00:18:26,566 --> 00:18:28,067 - Okay, and what were your recommendations? 431 00:18:28,109 --> 00:18:29,694 What did they end up doing? 432 00:18:29,735 --> 00:18:31,737 - So, I gave a few different recommendations. 433 00:18:31,779 --> 00:18:33,406 The first one was, 434 00:18:33,447 --> 00:18:36,284 all the money should be made the same size in Europe. 435 00:18:36,325 --> 00:18:38,119 - The reason being-- - Oh 'cause their bills are-- 436 00:18:38,160 --> 00:18:39,328 - Exactly, bills are different sizes, 437 00:18:39,370 --> 00:18:40,746 and if it's the same size, 438 00:18:40,788 --> 00:18:42,081 it forces you to actually look at it 439 00:18:42,123 --> 00:18:44,208 for a fraction of a second longer 440 00:18:44,250 --> 00:18:46,335 to detect obvious differences. 441 00:18:46,377 --> 00:18:47,795 Whereas, if it's different sizes, 442 00:18:47,837 --> 00:18:48,963 you already feel like you know what it is, 443 00:18:49,005 --> 00:18:50,256 and you're passing it on. 444 00:18:50,298 --> 00:18:52,049 The second thing was, 445 00:18:52,091 --> 00:18:55,928 what they have is the watermark on the bills is a building, 446 00:18:55,970 --> 00:18:57,471 and it turns out 447 00:18:57,513 --> 00:18:59,473 that we don't have too much neural real estate 448 00:18:59,515 --> 00:19:02,018 devoted to recognizing what's going on with buildings. 449 00:19:02,059 --> 00:19:04,687 We have a lot devoted to recognizing what's going on with faces, 450 00:19:04,729 --> 00:19:07,189 and it turns out that with watermarks, 451 00:19:07,231 --> 00:19:09,567 that's the hardest part of a bill to counterfeit. 452 00:19:09,609 --> 00:19:11,402 So, what they ended up doing 453 00:19:11,444 --> 00:19:15,656 was putting in a watermark of Europa, the mythical figure. 454 00:19:17,199 --> 00:19:19,201 My third recommendation was, 455 00:19:19,243 --> 00:19:22,163 there's so much on a bill that's distracting, 456 00:19:22,204 --> 00:19:25,625 that has nothing to do with the security features of a bill. 457 00:19:25,666 --> 00:19:27,710 So, here's what I'd like you to do. 458 00:19:27,752 --> 00:19:30,671 So, take this bill and look at it for five seconds. 459 00:19:30,713 --> 00:19:33,132 - [Kal] Okay, yup. 460 00:19:33,174 --> 00:19:34,967 - And then hand it back to me, 461 00:19:35,009 --> 00:19:36,469 and I'm gonna give you a new one, 462 00:19:36,510 --> 00:19:40,139 and you tell me what the difference is there. 463 00:19:40,181 --> 00:19:41,641 - I couldn't tell you the difference. 464 00:19:41,682 --> 00:19:43,476 - Okay, this illustrates the point 465 00:19:43,517 --> 00:19:45,895 that the more stuff that you're putting on a bill, 466 00:19:45,937 --> 00:19:49,357 the harder it is for you to detect obvious differences. 467 00:19:49,398 --> 00:19:51,484 These bills are actually quite different from one another. 468 00:19:51,525 --> 00:19:53,611 If you look at the hologram on them, 469 00:19:53,653 --> 00:19:55,363 which is the single security feature 470 00:19:55,404 --> 00:19:57,615 that the government is paying a lot of money for. 471 00:19:57,657 --> 00:19:59,867 - Oh wow, that's super-subtle. 472 00:19:59,909 --> 00:20:01,953 - It's super-subtle, and here's the thing, right, 473 00:20:01,994 --> 00:20:04,330 because of all this other stuff on there, 474 00:20:04,372 --> 00:20:05,998 it's hard for you to see that. 475 00:20:06,040 --> 00:20:07,500 - This is, yeah, wow. 476 00:20:07,541 --> 00:20:10,086 - So, I said, what you really want 477 00:20:10,127 --> 00:20:11,712 is just a completely blank bill 478 00:20:11,754 --> 00:20:13,547 with a single hologram in the middle, 479 00:20:13,589 --> 00:20:16,384 and get rid of all the other stuff that's a distraction. 480 00:20:16,425 --> 00:20:18,219 - I see what you're saying, 481 00:20:18,260 --> 00:20:20,012 where the simplicity is something 482 00:20:20,054 --> 00:20:22,306 that the consumer can be able to vet pretty quickly. 483 00:20:22,348 --> 00:20:24,016 - Exactly, so the European Union 484 00:20:24,058 --> 00:20:26,185 thought that was a very good suggestion, 485 00:20:26,227 --> 00:20:28,479 but they decided they just couldn't do that in the end, 486 00:20:28,521 --> 00:20:31,857 because countries look regal by having beautiful money, 487 00:20:31,899 --> 00:20:33,484 and they look important that way, 488 00:20:33,526 --> 00:20:35,861 and so you can't have, they decided, 489 00:20:35,903 --> 00:20:37,822 a bill that's just blank with a hologram in it, 490 00:20:37,863 --> 00:20:39,240 even though that would make more sense. 491 00:20:39,281 --> 00:20:41,033 - So, there's a little bit of vanity 492 00:20:41,075 --> 00:20:43,160 associated with what governments want on their currency. 493 00:20:43,202 --> 00:20:44,245 They want branding. 494 00:20:44,286 --> 00:20:46,205 - Yeah, exactly right. 495 00:20:46,247 --> 00:20:47,957 - [Kal] It's crazy to think that vanity 496 00:20:47,999 --> 00:20:50,042 helps put a nation's currency at risk, 497 00:20:50,084 --> 00:20:51,460 but I guess it makes sense. 498 00:20:51,502 --> 00:20:53,421 I mean, sure, we all wanna look good, 499 00:20:53,462 --> 00:20:56,340 but we don't all have the money to do it. 500 00:20:56,382 --> 00:20:58,384 That's where counterfeit brands come in. 501 00:20:58,426 --> 00:21:00,386 Those brands that we know, love, 502 00:21:00,428 --> 00:21:01,971 and even wear on our bodies, 503 00:21:02,013 --> 00:21:04,557 are being counterfeited all around the world. 504 00:21:04,598 --> 00:21:06,684 For example, a real Hermes bag 505 00:21:06,726 --> 00:21:10,438 could cost over $100,000, 506 00:21:10,479 --> 00:21:12,148 but you could snag a counterfeit version 507 00:21:12,189 --> 00:21:14,358 for a few hundred bucks. 508 00:21:14,400 --> 00:21:18,279 This is how counterfeits steal away $460 billion 509 00:21:18,320 --> 00:21:20,448 from legitimate companies every year. 510 00:21:21,741 --> 00:21:26,078 ( twangy rhythmic music) 511 00:21:26,120 --> 00:21:28,581 Hong Kong is a global financial hub, 512 00:21:28,622 --> 00:21:30,249 and due to its proximity to China, 513 00:21:30,291 --> 00:21:32,668 where copyright laws are rarely enforced, 514 00:21:32,710 --> 00:21:34,754 Hong Kong is the marketplace 515 00:21:34,795 --> 00:21:39,175 for nearly 25% of the world's counterfeit goods. 516 00:21:39,216 --> 00:21:41,802 So, what's real, and what's fake, 517 00:21:41,844 --> 00:21:43,596 and who's doing something about it? 518 00:21:43,637 --> 00:21:45,931 Those are the questions I'm here to get answered. 519 00:21:45,973 --> 00:21:49,226 - So, Kal, this is the ladies market in Hong Kong. 520 00:21:49,268 --> 00:21:51,604 We're gonna walk through, and we're gonna see a lot of people 521 00:21:51,645 --> 00:21:54,315 from all around the world who come here to buy a lot of fake product. 522 00:21:54,356 --> 00:21:56,776 All of this traffic is driven by demand, 523 00:21:56,817 --> 00:21:59,111 let's say from the US. 524 00:21:59,153 --> 00:22:01,447 - [Kal] Ted Kavowras, a former New York policeman, 525 00:22:01,489 --> 00:22:04,408 is now an international counterfeit crime-fighter. 526 00:22:04,450 --> 00:22:08,412 He's hired by global brands who suspect their products are being counterfeited. 527 00:22:10,998 --> 00:22:12,750 - If you're running an anti-counterfeiting effort, 528 00:22:12,792 --> 00:22:15,836 as a country, or as a police, or even as a company, 529 00:22:15,878 --> 00:22:18,255 you need to attack at all different stratas. 530 00:22:18,297 --> 00:22:19,965 So, attacking it at the point of sale 531 00:22:20,007 --> 00:22:22,968 is one of the policies to try to stop counterfeiting. 532 00:22:23,010 --> 00:22:26,097 - So these Paul Frank headphones, right? 533 00:22:26,138 --> 00:22:27,556 - 100% fake. 534 00:22:27,598 --> 00:22:29,725 - So, these are obviously fakes? - [Ted] Yeah. 535 00:22:29,767 --> 00:22:31,560 - [Kal] Here's Star Wars, and Spiderman, and-- 536 00:22:31,602 --> 00:22:33,521 - [Ted] Marvel, the comic books that are turned into movies. 537 00:22:33,562 --> 00:22:36,273 - [Kal] My Little Pony. 538 00:22:36,315 --> 00:22:38,901 - [Ted] This market is where a tourist would come 539 00:22:38,943 --> 00:22:40,945 to buy one or two products, 540 00:22:40,986 --> 00:22:43,030 but big buyers from overseas would go straight to the factory. 541 00:22:43,072 --> 00:22:44,990 - What do you mean by big buyers? 542 00:22:45,032 --> 00:22:46,909 - Big buyers buy container and sell it in their home market. 543 00:22:46,951 --> 00:22:48,911 - A shipping container. - Yeah, 20, 40-foot container. 544 00:22:48,953 --> 00:22:50,871 - Oh, so a big buyer 545 00:22:50,913 --> 00:22:53,707 is buying an entire shipping container worth of this stuff. 546 00:22:53,749 --> 00:22:55,459 - Lots of them. So, my focus is to 547 00:22:55,501 --> 00:22:57,378 - I see. - stop the factory 548 00:22:57,419 --> 00:22:59,755 from producing it so it ends up here. 549 00:22:59,797 --> 00:23:03,175 (mellow percussive music) 550 00:23:03,217 --> 00:23:05,302 - [Kal] Ted operates out of his Hong Kong office, 551 00:23:05,344 --> 00:23:07,638 chock-full of the counterfeits he's seized, 552 00:23:07,680 --> 00:23:12,518 mixed in with an international-man-of-mystery vibe. 553 00:23:12,560 --> 00:23:14,854 - Engaging them in getting evidence of their activities 554 00:23:14,895 --> 00:23:16,480 is exactly what we do, 555 00:23:16,522 --> 00:23:19,108 and we do that by posing as a foreign buyer, 556 00:23:20,943 --> 00:23:22,695 and that involves us going undercover 557 00:23:22,736 --> 00:23:24,530 and document what they're actually doing. 558 00:23:24,572 --> 00:23:26,323 - That is so cool. - You know, 559 00:23:26,365 --> 00:23:28,617 so I'll play an Arabian prince, or a Mexican drug dealer, 560 00:23:28,659 --> 00:23:30,661 or I'll just play a businessman, I mean-- 561 00:23:30,703 --> 00:23:32,788 - I'm now intrigued, 562 00:23:32,830 --> 00:23:34,665 'cause I feel like, once I have to retire from acting, 563 00:23:34,707 --> 00:23:36,083 - You do my kind of acting. - I can come here. 564 00:23:36,125 --> 00:23:38,961 You can hire me to go undercover. 565 00:23:39,003 --> 00:23:41,714 So, what's the most interesting thing you guys have seized? 566 00:23:41,755 --> 00:23:43,048 - Probably the most interesting 567 00:23:43,090 --> 00:23:45,217 would be the drug-testing kits. 568 00:23:46,468 --> 00:23:49,597 They have fake, you know, uh, 569 00:23:49,638 --> 00:23:51,515 anatomical part of you 570 00:23:51,557 --> 00:23:53,601 that will let you take a urine test. 571 00:23:53,642 --> 00:23:55,978 - So, like a fake dick that pees. 572 00:23:56,020 --> 00:23:58,105 - Yeah, and they were being counterfeited. 573 00:23:58,147 --> 00:24:00,065 - Wait-wait-wait-wait-wait, wait, 574 00:24:00,107 --> 00:24:02,776 so there's a real version of this, 575 00:24:02,818 --> 00:24:05,487 - Oh yeah. - [Kal] But this is a bootleg version. 576 00:24:05,529 --> 00:24:07,239 - [Ted] Yeah. 577 00:24:07,281 --> 00:24:09,783 - So the people who manufacture this, 578 00:24:09,825 --> 00:24:12,620 it was cutting into their profits enough? 579 00:24:12,661 --> 00:24:14,330 - Yeah. 580 00:24:14,371 --> 00:24:16,999 - (Kal laughs) Must be pretty embarrassing 581 00:24:17,041 --> 00:24:20,002 if someone finds out you have a fake fake penis, 582 00:24:20,044 --> 00:24:21,670 but there are counterfeit products 583 00:24:21,712 --> 00:24:24,256 -that pose an actual danger. -What are those? 584 00:24:24,298 --> 00:24:25,966 - [Ted] These are fake electrical switches. 585 00:24:26,008 --> 00:24:27,968 - [Kal] Oh, no way. Fake meaning they won't work, 586 00:24:28,010 --> 00:24:29,595 or they're just a lower quality? 587 00:24:29,637 --> 00:24:31,472 - No, there are factories that make fake ones, 588 00:24:31,513 --> 00:24:33,766 and they put less aluminum in the copper for conductivity, 589 00:24:33,807 --> 00:24:35,351 but the problem with that is, 590 00:24:35,392 --> 00:24:36,810 if there's less copper and more aluminum, 591 00:24:36,852 --> 00:24:38,395 it catches fire easily. 592 00:24:38,437 --> 00:24:40,314 - [Kal] Oh man. - So that's a big safety issue. 593 00:24:40,356 --> 00:24:42,441 - [Kal] Where do things like this end up? Who buys them? 594 00:24:42,483 --> 00:24:44,818 Let's say you're a contractor in construction. 595 00:24:44,860 --> 00:24:47,154 Would that person know they're buying dangerous fakes? 596 00:24:47,196 --> 00:24:50,449 - The consumer, or the end user would not know. 597 00:24:50,491 --> 00:24:53,869 - A switch like that, that could light a building on fire while a kid's sleeping, 598 00:24:53,911 --> 00:24:55,746 when you've talked to these people, 599 00:24:55,788 --> 00:24:57,331 is there an understanding of what they're doing 600 00:24:57,373 --> 00:24:59,124 and they just don't care, or do they-- 601 00:24:59,166 --> 00:25:00,376 - They don't care. - They don't care. 602 00:25:00,417 --> 00:25:02,503 - They know. How could you not know? 603 00:25:02,544 --> 00:25:05,422 They're willing to do this, and not care about other people. 604 00:25:05,464 --> 00:25:11,095 - Wow, this is getting pretty dark, and a little bit scary. 605 00:25:11,136 --> 00:25:13,430 Counterfeiters aren't just low-level thugs 606 00:25:13,472 --> 00:25:15,140 hanging out on the streets. 607 00:25:15,182 --> 00:25:18,852 Their operations are way more complex than I realized. 608 00:25:18,894 --> 00:25:20,729 If only I had an expert 609 00:25:20,771 --> 00:25:23,399 who could fill me in on just how dark this crime gets. 610 00:25:23,440 --> 00:25:25,484 Ah! 611 00:25:25,526 --> 00:25:28,946 Alastair Gray has been an intellectual property investigator 612 00:25:28,988 --> 00:25:30,406 for over a decade. 613 00:25:30,447 --> 00:25:32,992 He says the Internet is the next frontier 614 00:25:33,033 --> 00:25:34,910 for counterfeits and ripoffs. 615 00:25:36,829 --> 00:25:39,331 - What we're seeing on that street level 616 00:25:39,373 --> 00:25:41,583 is just one layer of where this all stops, 617 00:25:41,625 --> 00:25:43,460 and that's the very endpoint that consumers see, 618 00:25:43,502 --> 00:25:45,212 but it's shifted. 619 00:25:45,254 --> 00:25:48,340 I think more transactions are being done online now. 620 00:25:48,382 --> 00:25:50,259 The Internet is like a Wild West. 621 00:25:50,301 --> 00:25:54,930 - I never thought about the online component before. 622 00:25:54,972 --> 00:25:57,016 Is that how a lot of people get the stuff? 623 00:25:57,057 --> 00:25:59,476 - Yeah, it's almost an evolution of counterfeiting, 624 00:25:59,518 --> 00:26:01,979 where it's almost a shifting to brand abuse. 625 00:26:02,021 --> 00:26:05,274 So, if you're a brand, and you're selling popular products, 626 00:26:05,316 --> 00:26:08,819 counterfeiters now will spoof genuine sites, 627 00:26:08,861 --> 00:26:12,448 and they'll take imagery from an official company site 628 00:26:12,489 --> 00:26:15,200 and have all the logos and everything just feels legit, 629 00:26:15,242 --> 00:26:17,703 and so you'll have people looking for a bargain, 630 00:26:17,745 --> 00:26:20,581 and they'll be the ones that are actually tricked into buying counterfeit. 631 00:26:20,622 --> 00:26:23,208 - How many people involved in that crime 632 00:26:23,250 --> 00:26:24,877 know what they're doing? 633 00:26:24,918 --> 00:26:27,921 So, the web developers, the people who work there, 634 00:26:27,963 --> 00:26:29,715 do they think they're working for a legitimate company, 635 00:26:29,757 --> 00:26:31,425 or do they think they're, 636 00:26:31,467 --> 00:26:33,469 do they know they're working for this criminal? 637 00:26:33,510 --> 00:26:35,721 - It can be both. I mean, there was an amazing story 638 00:26:35,763 --> 00:26:38,307 where there was a whole Apple Store in China 639 00:26:38,349 --> 00:26:39,600 that wasn't an Apple Store. 640 00:26:39,641 --> 00:26:41,310 - Come on. - Yeah. Really? 641 00:26:41,352 --> 00:26:42,728 - [Alastair] And everyone was in Genius T-shirt, 642 00:26:42,770 --> 00:26:44,563 they're like fully branded. 643 00:26:44,605 --> 00:26:46,440 Employees of that store thought they were working for Apple. 644 00:26:46,482 --> 00:26:47,983 - That's crazy. - Yeah. 645 00:26:50,110 --> 00:26:53,822 Counterfeiting is affecting every different industry. 646 00:26:53,864 --> 00:26:56,617 There are 700,000 deaths per year 647 00:26:56,658 --> 00:26:58,827 attributed to counterfeit medicine. 648 00:26:58,869 --> 00:27:01,288 - Wow. - And that's where it gets really scary. 649 00:27:01,330 --> 00:27:02,748 You're playing with people's lives. 650 00:27:02,790 --> 00:27:04,750 If people are gonna buy that thinking it works, 651 00:27:04,792 --> 00:27:08,128 and it doesn't, then it's game over. 652 00:27:08,170 --> 00:27:10,672 - What are some others that impact public safety? 653 00:27:10,714 --> 00:27:14,760 - It's been proven that terrorists can use counterfeits 654 00:27:14,802 --> 00:27:17,513 - to fund their attacks. - Wow. 655 00:27:17,554 --> 00:27:20,891 - The Paris attacks in January 2015. 656 00:27:20,933 --> 00:27:25,062 Cherif Kouachi, he bought counterfeits online in China, 657 00:27:25,104 --> 00:27:27,272 and then was selling it on a market in Paris, 658 00:27:27,314 --> 00:27:30,901 and managed to make between 30 and 50,000 euros, 659 00:27:30,943 --> 00:27:34,655 which he then used to fund trips to Oman and Yemen 660 00:27:34,696 --> 00:27:36,365 to get training from al-Qaeda. 661 00:27:36,407 --> 00:27:39,159 - Holy shit, so the Paris attacks were directly funded 662 00:27:39,201 --> 00:27:41,995 by people buying counterfeit T-shirts and products. 663 00:27:42,037 --> 00:27:44,248 - Yeah. - That's bananas. 664 00:27:44,289 --> 00:27:47,459 - That's really sad. - The return on investment is amazing. 665 00:27:48,877 --> 00:27:52,214 If you produce a T-shirt for less than a dollar, 666 00:27:52,256 --> 00:27:54,800 and then you get a brand label, and you can put it on it, 667 00:27:54,842 --> 00:27:58,053 I mean, your markup can be huge if you can sell if for like 400 times that. 668 00:27:58,095 --> 00:28:01,515 - Yeah. - And very few counterfeiting crimes 669 00:28:01,557 --> 00:28:04,351 - end up in a prison sentence. - Yeah. 670 00:28:04,393 --> 00:28:06,395 - Most examples, you'll get a small fine, 671 00:28:06,437 --> 00:28:07,729 and then you're pretty much ready to set up 672 00:28:07,771 --> 00:28:09,106 and start doing it again, 673 00:28:09,148 --> 00:28:10,482 because, I mean, why wouldn't you, 674 00:28:10,524 --> 00:28:12,401 if you can make so much returns? 675 00:28:12,443 --> 00:28:14,820 - [Kal] I knew exploring counterfeiting 676 00:28:14,862 --> 00:28:17,114 might lead me into a criminal underworld, 677 00:28:17,156 --> 00:28:18,907 but I was hoping it would be 678 00:28:18,949 --> 00:28:22,077 like the fun Fast and Furious kind of criminal underworld, 679 00:28:22,119 --> 00:28:24,580 with fast machines, and cool nicknames, and shit. 680 00:28:26,248 --> 00:28:29,668 Oh wait, my next meeting's with a guy named... 681 00:28:29,710 --> 00:28:31,503 Trappy. 682 00:28:31,545 --> 00:28:33,172 That's not suspicious. 683 00:28:33,213 --> 00:28:35,299 And it's in this remote paper warehouse 684 00:28:35,340 --> 00:28:37,009 that looks like a haunted Dunder Mifflin. 685 00:28:38,594 --> 00:28:40,971 (drones whizzing) 686 00:28:41,013 --> 00:28:42,389 (frenzied percussive music) 687 00:28:57,446 --> 00:28:59,156 What is this place? 688 00:28:59,198 --> 00:29:01,742 Is it a drone-racing track, or is it a paper warehouse? 689 00:29:01,783 --> 00:29:03,160 - Well, - Both, I guess. 690 00:29:03,202 --> 00:29:04,828 - during the week it's a paper warehouse, 691 00:29:04,870 --> 00:29:07,706 and on the weekends we build our racetracks here. 692 00:29:07,748 --> 00:29:10,167 - (drone smacks) - Whoa! 693 00:29:10,209 --> 00:29:13,629 - We have video goggles, so we see through the perspective of the drone. 694 00:29:13,670 --> 00:29:15,506 The drone is an extension of yourself, 695 00:29:15,547 --> 00:29:18,425 and you're navigating through any kind of environment. 696 00:29:20,052 --> 00:29:21,470 - (drones smack) - Oh! 697 00:29:21,512 --> 00:29:22,846 - [Trappy] Oh, that was a mid-air. 698 00:29:22,888 --> 00:29:25,182 He's fine. (laughs) 699 00:29:25,224 --> 00:29:27,518 - Trappy doesn't just race drones 700 00:29:27,559 --> 00:29:29,811 at his buddy's warehouse on weekends. 701 00:29:29,853 --> 00:29:32,147 He's also the owner of Team BlackSheep, 702 00:29:32,189 --> 00:29:34,024 which produces a wide range 703 00:29:34,066 --> 00:29:38,070 of drone components and accessories for the hobbyist market. 704 00:29:38,111 --> 00:29:40,322 The problem is the drone industry 705 00:29:40,364 --> 00:29:43,200 is very susceptible to counterfeit. 706 00:29:43,242 --> 00:29:44,910 Trappy's company isn't big enough 707 00:29:44,952 --> 00:29:47,162 to hire someone like Ted Kavowras, 708 00:29:47,204 --> 00:29:49,206 so how does he stay ahead of the counterfeiters? 709 00:29:49,248 --> 00:29:51,041 (door slams) 710 00:29:51,083 --> 00:29:52,709 - Company of our size, 711 00:29:52,751 --> 00:29:54,127 especially in the market that we're in, 712 00:29:54,169 --> 00:29:56,255 there is just no business case 713 00:29:56,296 --> 00:29:58,465 of actually enforcing patents, or even having patents, 714 00:29:58,507 --> 00:30:00,509 because by the time you get granted a patent, 715 00:30:00,551 --> 00:30:02,886 the product is already out of date and off the shelves. 716 00:30:02,928 --> 00:30:04,638 - What are the different types of counterfeiting 717 00:30:04,680 --> 00:30:06,265 that you deal with? 718 00:30:06,306 --> 00:30:08,308 - We differentiate between three types of people. 719 00:30:08,350 --> 00:30:10,227 You'll have the straight-out counterfeiters, 720 00:30:10,269 --> 00:30:12,104 who'll produce something 721 00:30:12,145 --> 00:30:14,398 that looks exactly like your product with your brand on it. 722 00:30:14,439 --> 00:30:16,608 Then you will have the cloners. 723 00:30:16,650 --> 00:30:18,819 They will make something that looks like your product, 724 00:30:18,860 --> 00:30:20,779 but put their own brand on it. 725 00:30:20,821 --> 00:30:24,324 And then copycats basically re-engineer your product, 726 00:30:24,366 --> 00:30:26,201 so they will take apart your product, 727 00:30:26,243 --> 00:30:28,370 figure out the technology that went into it, 728 00:30:28,412 --> 00:30:31,123 the R and D, all of the innovations that we put into it, 729 00:30:31,164 --> 00:30:34,042 and apply that to their own product. 730 00:30:34,084 --> 00:30:36,253 Usually it takes maybe six months 731 00:30:36,295 --> 00:30:38,964 for a serious copy to be released to the market, 732 00:30:39,006 --> 00:30:42,301 but that time has been decreasing rapidly as well, 733 00:30:42,342 --> 00:30:44,344 so that they're catching up, 734 00:30:44,386 --> 00:30:45,429 - So it's-- - Hurt you? 735 00:30:45,470 --> 00:30:46,972 What are the parts of it that-- 736 00:30:47,014 --> 00:30:49,433 - The real damage comes from copycats, 737 00:30:49,474 --> 00:30:51,852 who take most of the innovation 738 00:30:51,893 --> 00:30:54,646 without actually having to pay for the R and D, 739 00:30:54,688 --> 00:30:58,066 and then they're at liberty to price it a lot lower, 740 00:30:58,108 --> 00:31:01,111 - and we have to follow suit. - How do you combat that? 741 00:31:01,153 --> 00:31:03,488 - We're very creative in the way that we combat the issues. 742 00:31:03,530 --> 00:31:05,657 - Okay. - When we do get copied, 743 00:31:05,699 --> 00:31:07,618 we try to bring out new innovations 744 00:31:07,659 --> 00:31:10,162 that then restart the whole cycle. 745 00:31:10,203 --> 00:31:11,455 For example, this product right here, 746 00:31:11,496 --> 00:31:13,373 this is a remote-control link, 747 00:31:13,415 --> 00:31:15,125 and it goes up to 100 kilometers. 748 00:31:15,167 --> 00:31:17,544 It's a highly innovative product that we developed. 749 00:31:17,586 --> 00:31:19,796 It's very R and D intensive. 750 00:31:19,838 --> 00:31:23,091 We had an RF specialist work on that for over two years, 751 00:31:23,133 --> 00:31:26,386 and the copy of that is now selling at cost. 752 00:31:26,428 --> 00:31:29,890 But two years ago we anticipated this move, 753 00:31:29,931 --> 00:31:32,726 and we have hidden features that are yet to be unlocked. 754 00:31:32,768 --> 00:31:36,521 - Cool. - So over time, we keep releasing new innovations 755 00:31:36,563 --> 00:31:38,607 that are already in the product, 756 00:31:38,649 --> 00:31:42,110 basically forcing all the people that went with the copycats to repurchase, 757 00:31:42,152 --> 00:31:44,279 which makes it more expensive for them in the long run, 758 00:31:44,321 --> 00:31:48,158 and then eventually they usually see the light 759 00:31:48,200 --> 00:31:49,826 and buy the real stuff. 760 00:31:49,868 --> 00:31:51,411 (drones whizzing) 761 00:31:51,453 --> 00:31:52,913 - [Kal] The drone market is flying forward 762 00:31:52,954 --> 00:31:54,539 with awesome new technology 763 00:31:54,581 --> 00:31:56,208 they wouldn't have had to innovate 764 00:31:56,249 --> 00:31:58,669 if it hadn't been for copycats. 765 00:31:58,710 --> 00:32:01,338 It's hard to believe that innovators and copycats 766 00:32:01,380 --> 00:32:03,048 are helping each other, 767 00:32:03,090 --> 00:32:05,676 but it's as much a part of the natural economy 768 00:32:05,717 --> 00:32:08,136 as, well, nature. 769 00:32:08,178 --> 00:32:10,889 (ethereal music) 770 00:32:10,931 --> 00:32:12,391 - [Narrator] The relationship of inventors and copycats 771 00:32:12,432 --> 00:32:14,476 is tantamount to to that of hunter and scavenger. 772 00:32:14,518 --> 00:32:16,186 - God, I'm strong. - (carcass plops) 773 00:32:16,228 --> 00:32:18,689 I'm the best at murdering your kind. 774 00:32:18,730 --> 00:32:20,023 - [Narrator] They have evolved 775 00:32:20,065 --> 00:32:21,233 to have a symbiotic relationship, 776 00:32:21,274 --> 00:32:23,193 even if sometimes contentious. 777 00:32:23,235 --> 00:32:24,569 - No way! 778 00:32:24,611 --> 00:32:26,279 Look at this thing. 779 00:32:26,321 --> 00:32:27,447 This looks awesome. 780 00:32:27,489 --> 00:32:28,699 You kidding me? 781 00:32:28,740 --> 00:32:31,368 - Whoa, whoa, fuck off, vulture. 782 00:32:31,410 --> 00:32:33,704 Fuck off. 783 00:32:33,745 --> 00:32:35,872 - [Narrator] This equilibrium is maintained in the economy 784 00:32:35,914 --> 00:32:39,501 by intellectual property protections known as patents. 785 00:32:39,543 --> 00:32:41,712 - I own the rights to this kill. 786 00:32:41,753 --> 00:32:43,755 I own 'em, so back off. 787 00:32:43,797 --> 00:32:45,465 - Okay, all right, I get it, I get it. 788 00:32:45,507 --> 00:32:47,342 So, I don't get any fresh meat. 789 00:32:47,384 --> 00:32:49,386 I gotta wait till it's rotten like a second-class citizen. 790 00:32:49,428 --> 00:32:51,388 - Yeah, that's exactly right. 791 00:32:51,430 --> 00:32:53,140 - Okay. 792 00:32:53,181 --> 00:32:54,975 - [Narrator] The hunter, like the inventor, 793 00:32:55,016 --> 00:32:57,144 - [Leopard] Oh, that's tender. - (grunts) 794 00:32:57,185 --> 00:32:58,437 - [Narrator] is rewarded for its hard work 795 00:32:58,478 --> 00:33:00,313 with a temporary monopoly. 796 00:33:00,355 --> 00:33:02,399 - Oh, oh yeah. 797 00:33:02,441 --> 00:33:03,984 Oh, that's the stuff. 798 00:33:04,025 --> 00:33:05,277 - [Narrator] When it can exclusively devour 799 00:33:05,318 --> 00:33:07,195 the spoils of its innovation. 800 00:33:07,237 --> 00:33:08,321 - Come on, man, time's up. 801 00:33:08,363 --> 00:33:09,489 It's my turn to have some. 802 00:33:09,531 --> 00:33:11,074 - No! 803 00:33:11,116 --> 00:33:14,453 - (repellent hisses) - (screaming) Oh, my eyes! 804 00:33:14,494 --> 00:33:16,663 - This right here is mine, this whole thing, 805 00:33:16,705 --> 00:33:18,498 and I'm gonna have some tomorrow, 806 00:33:18,540 --> 00:33:20,959 and then I'm gonna have some the day after that, 807 00:33:21,001 --> 00:33:23,170 thanks to my extra protection here. 808 00:33:23,211 --> 00:33:25,380 -Eh! -(screaming) Stop it! 809 00:33:25,422 --> 00:33:28,216 - I'm in no rush. - My beak! 810 00:33:28,258 --> 00:33:30,218 -(sobbing) - I might take a little nap, as a matter of fact. 811 00:33:30,260 --> 00:33:32,429 - [Narrator] This is how innovation is discouraged 812 00:33:32,471 --> 00:33:34,556 when patent protection is too strong. 813 00:33:34,598 --> 00:33:36,433 The inventor isn't as motivated 814 00:33:36,475 --> 00:33:39,853 to hunt for the next breakthrough. 815 00:33:39,895 --> 00:33:42,105 But if there were no protection at all, 816 00:33:42,147 --> 00:33:44,357 scavengers would move right in. 817 00:33:44,399 --> 00:33:45,484 - Get in there, guys. 818 00:33:45,525 --> 00:33:47,027 Feast upon the carcass. 819 00:33:47,068 --> 00:33:49,029 - Oh, what? 820 00:33:49,070 --> 00:33:50,530 - Come on. - Oh, yeah. 821 00:33:50,572 --> 00:33:52,115 - [Narrator] This is where scavenger 822 00:33:52,157 --> 00:33:54,409 moves from harmless mooch to deadly parasite. 823 00:33:54,451 --> 00:33:57,370 - It's vulture time. - [Narrator] If the hunter is not able 824 00:33:57,412 --> 00:33:59,164 to reap the benefits of its work-- 825 00:33:59,206 --> 00:34:00,874 - That's just so gross. 826 00:34:00,916 --> 00:34:02,417 - [Narrator] ...it does not have the resources 827 00:34:02,459 --> 00:34:04,461 to hunt the next beast, 828 00:34:04,503 --> 00:34:07,130 just like when inventors don't make money off their products 829 00:34:07,172 --> 00:34:09,591 they lack the funding for research and development 830 00:34:09,633 --> 00:34:11,802 of the next big innovation. 831 00:34:11,843 --> 00:34:14,930 - Do you know how long I was crouching in the bushes, 832 00:34:14,971 --> 00:34:16,681 stalking this thing? 833 00:34:16,723 --> 00:34:18,058 You deformed turkey. 834 00:34:18,099 --> 00:34:19,351 - Hey, whoa. - Hey, whoa. 835 00:34:19,392 --> 00:34:20,977 -(paws slapping) -(wings slapping) 836 00:34:21,019 --> 00:34:23,021 - [Narrator] Nature, like economics, can be harsh. 837 00:34:23,063 --> 00:34:25,023 - You know what? Ow, ow, I'm out. 838 00:34:25,065 --> 00:34:27,984 Good luck hunting antelope on your own from now on. 839 00:34:28,026 --> 00:34:29,611 - Fine. 840 00:34:29,653 --> 00:34:31,488 - [Narrator] In this scenario, without the hunter 841 00:34:31,530 --> 00:34:34,157 to provide the banquet that sustains the ecosystem, 842 00:34:34,199 --> 00:34:36,368 both of them will die. 843 00:34:36,409 --> 00:34:39,788 Their loose skin will be stripped off their emaciated carcasses, 844 00:34:39,830 --> 00:34:41,498 and if they're lucky turned into coats. 845 00:34:41,540 --> 00:34:43,250 - Whoa! - Yeah, we-- 846 00:34:43,291 --> 00:34:44,751 We can hear you. 847 00:34:44,793 --> 00:34:46,044 That is not cool. 848 00:34:46,086 --> 00:34:47,712 - [Narrator] Sorry. 849 00:34:47,754 --> 00:34:49,714 - You know, out of respect, I would never wear you. 850 00:34:49,756 --> 00:34:51,216 - Thank you, and I would never wear you. 851 00:34:51,258 --> 00:34:53,260 - Thank you. - Yeah. 852 00:34:53,301 --> 00:34:55,220 - Hope you've learned something. - Yeah, have a good one. 853 00:34:55,262 --> 00:34:56,847 - You too, man. See you later. 854 00:34:58,682 --> 00:35:00,308 (jaunty piano music) 855 00:35:07,148 --> 00:35:08,859 (energetic music) 856 00:35:08,900 --> 00:35:11,069 - [Kal] The freedom to copy other people's ideas 857 00:35:11,111 --> 00:35:13,446 is a necessary part of innovation. 858 00:35:13,488 --> 00:35:15,740 Some industries thrive in an environment 859 00:35:15,782 --> 00:35:18,535 where copycats and inventors live in harmony. 860 00:35:18,577 --> 00:35:20,245 The ones that really play it right 861 00:35:20,287 --> 00:35:23,707 could end up making money like it's going out of fashion. 862 00:35:23,748 --> 00:35:25,709 - The wonderful thing about knockoffs, 863 00:35:25,750 --> 00:35:27,544 for the luxury designer, 864 00:35:27,586 --> 00:35:29,421 is that it's kinda like a gateway drug. 865 00:35:29,462 --> 00:35:31,089 You know, you get a little puff, 866 00:35:31,131 --> 00:35:32,924 and you get excited about the brand. 867 00:35:32,966 --> 00:35:34,551 You wear the knockoff. You think, wow, 868 00:35:34,593 --> 00:35:37,095 I'd really like a real Gucci, 869 00:35:37,137 --> 00:35:40,015 and so that's the heroin of fashion addiction. 870 00:35:41,975 --> 00:35:44,811 - Johanna Blakley runs a media-focused think tank 871 00:35:44,853 --> 00:35:48,189 which has explored intellectual property laws in the US 872 00:35:48,231 --> 00:35:50,734 and their impact on innovation. 873 00:35:50,775 --> 00:35:53,778 What's the difference between a knockoff and a counterfeit? 874 00:35:53,820 --> 00:35:56,823 - Well, a knockoff is a perfectly legal thing 875 00:35:56,865 --> 00:35:58,533 in the fashion industry, 876 00:35:58,575 --> 00:36:02,495 and it means that somebody has based another design 877 00:36:02,537 --> 00:36:04,164 on somebody else's design, 878 00:36:04,205 --> 00:36:06,416 so nobody owns any of that stuff. 879 00:36:06,458 --> 00:36:08,627 What people do own in the fashion industry, 880 00:36:08,668 --> 00:36:10,879 and I think this is a really good thing for the business, 881 00:36:10,921 --> 00:36:12,464 is they own their name. 882 00:36:12,505 --> 00:36:15,342 They own the registered trademark, the brand. 883 00:36:15,383 --> 00:36:17,218 - Interesting. 884 00:36:17,260 --> 00:36:19,763 - One reason that you see these really expensive bags 885 00:36:19,804 --> 00:36:22,307 just laden with logos 886 00:36:22,349 --> 00:36:26,186 is because that's what knockoff artists cannot copy. 887 00:36:26,227 --> 00:36:28,229 - Okay, got it. - So, if the logo 888 00:36:28,271 --> 00:36:31,066 is intrinsic to the design of the dress, 889 00:36:31,107 --> 00:36:32,776 it's really hard to copy that, 890 00:36:32,817 --> 00:36:36,112 and so that allows consumers 891 00:36:36,154 --> 00:36:37,906 to understand what they're purchasing, 892 00:36:37,948 --> 00:36:39,449 which is a good thing. People should know. 893 00:36:39,491 --> 00:36:41,117 They're making an informed decision. 894 00:36:41,159 --> 00:36:43,161 - Okay, so I see what you're saying. 895 00:36:43,203 --> 00:36:46,206 So, if a high-end brand is selling a handbag for, 896 00:36:46,247 --> 00:36:47,332 I don't know, how much are handbags? 897 00:36:47,374 --> 00:36:49,793 - Ugh, obscene. - Okay. 898 00:36:49,834 --> 00:36:51,628 - Obscene prices. - Thousands? 899 00:36:51,670 --> 00:36:52,963 - Oh yeah. - All right, $10,000 900 00:36:53,004 --> 00:36:54,130 - for a bag? - Oh, yeah. 901 00:36:54,172 --> 00:36:55,423 - Is that? - Oh, more. 902 00:36:55,465 --> 00:36:56,508 - Really, that's normal? - Oh, yeah. 903 00:36:56,549 --> 00:36:57,884 - More? - Go to Barneys. 904 00:36:57,926 --> 00:36:59,469 - No. (laughs) - No, no, no. 905 00:36:59,511 --> 00:37:01,012 It'll take your breath away. 906 00:37:01,054 --> 00:37:03,932 - Okay, so let's say $10,000 for a bag, 907 00:37:03,974 --> 00:37:06,142 and then other people make a similar bag, 908 00:37:06,184 --> 00:37:08,979 but it's missing the logo. 909 00:37:09,020 --> 00:37:11,398 - That's totally okay. - Totally okay, 910 00:37:11,439 --> 00:37:15,276 and it's because fashion designs are utilitarian articles. 911 00:37:15,318 --> 00:37:19,572 - Okay. - And because they serve a utilitarian purpose, 912 00:37:19,614 --> 00:37:23,410 they are not qualified for copyright protection. 913 00:37:23,451 --> 00:37:25,286 - Okay. - Which is so ironic, 914 00:37:25,328 --> 00:37:27,956 because we think of fashion as being very fanciful, 915 00:37:27,998 --> 00:37:30,375 and fun, and totally unnecessary. 916 00:37:30,417 --> 00:37:32,836 We kind of forget that underlying purpose, 917 00:37:32,877 --> 00:37:34,838 which is to cover naked bodies. 918 00:37:34,879 --> 00:37:36,673 - Right, and what's the benefit of that? 919 00:37:36,715 --> 00:37:40,552 - That's precisely because there is no copyright protection 920 00:37:40,593 --> 00:37:44,472 that fashion has elevated itself to an art form. 921 00:37:44,514 --> 00:37:49,185 (throbbing dance music) 922 00:37:49,227 --> 00:37:52,022 There's a huge structure of incentives 923 00:37:52,063 --> 00:37:53,898 that get built into an industry 924 00:37:53,940 --> 00:37:56,234 where you can be ripped off at any moment. 925 00:37:56,276 --> 00:37:58,194 (camera clicking) 926 00:37:58,236 --> 00:38:01,698 It's become a science to rip off these luxury designers, 927 00:38:01,740 --> 00:38:03,575 and of course they complain about it, 928 00:38:03,616 --> 00:38:07,579 but ultimately, when a look is knocked off, 929 00:38:07,620 --> 00:38:09,414 that means you're a trendsetter. 930 00:38:09,456 --> 00:38:11,124 You've been knocked off. 931 00:38:11,166 --> 00:38:13,084 It means you tapped into the zeitgeist. 932 00:38:13,126 --> 00:38:14,961 You get it. Crown is yours. 933 00:38:15,003 --> 00:38:16,379 - Okay. (laughs) 934 00:38:16,421 --> 00:38:18,465 - But that means that trendsetters 935 00:38:18,506 --> 00:38:20,675 have got to get the hell out of there. 936 00:38:20,717 --> 00:38:23,136 - They've got to get the next new thing. - It's not cool anymore. 937 00:38:23,178 --> 00:38:24,804 - Oh, no, they want-- 938 00:38:24,846 --> 00:38:26,806 They cannot be part of the herd. 939 00:38:26,848 --> 00:38:28,641 -(laughs) -No, no, no. 940 00:38:28,683 --> 00:38:31,478 - Okay. - And what's really interesting 941 00:38:31,519 --> 00:38:34,314 is that there's quite a few other industries 942 00:38:34,355 --> 00:38:36,316 that cannot be copyright protected. 943 00:38:36,357 --> 00:38:39,652 Cuisine: chefs do not own their recipes. 944 00:38:39,694 --> 00:38:42,614 Furniture: because they're utilitarian objects, 945 00:38:42,655 --> 00:38:46,284 even the most famous designers don't own the design. 946 00:38:46,326 --> 00:38:47,619 Comedians, too. 947 00:38:47,660 --> 00:38:49,954 Comedians develop signature styles 948 00:38:49,996 --> 00:38:51,998 'cause they don't own their jokes. 949 00:38:52,040 --> 00:38:54,501 The ironic thing is that's just really good for business. 950 00:38:54,542 --> 00:38:56,961 When you're constantly creating 951 00:38:57,003 --> 00:39:00,131 this desire for new products, 952 00:39:00,173 --> 00:39:03,635 that's really good in a capitalist economy. 953 00:39:03,676 --> 00:39:07,430 - [Kal] Masterful innovation could mean a great new idea 954 00:39:07,472 --> 00:39:10,016 or an innovative way to steal someone else's, 955 00:39:12,769 --> 00:39:14,104 and if there's one town 956 00:39:14,145 --> 00:39:17,857 that is known for taking a single original idea 957 00:39:17,899 --> 00:39:21,986 and creatively spinning it off forever, it's Tinseltown. 958 00:39:22,028 --> 00:39:25,031 - Here we go, in the bowels of the asylum, so-- 959 00:39:25,073 --> 00:39:26,116 - Oh, wow. 960 00:39:26,157 --> 00:39:28,201 Welcome to Asylum Studios, 961 00:39:28,243 --> 00:39:32,705 celebrated for their most famous creation, Sharknado. 962 00:39:32,747 --> 00:39:34,666 - You might recognize this bad boy. 963 00:39:34,707 --> 00:39:37,752 He was the shark that burned up in Sharknado 3 964 00:39:37,794 --> 00:39:39,045 as it was entering orbit. 965 00:39:39,087 --> 00:39:40,588 'Course the shark didn't survive. 966 00:39:40,630 --> 00:39:42,298 - Poor guy. - But, um, tragedy. 967 00:39:42,340 --> 00:39:45,176 - While there are six Sharknadoes, 968 00:39:45,218 --> 00:39:47,762 David Latt and his partner Paul Bales actually built 969 00:39:47,804 --> 00:39:50,390 their empire on what are called mockbusters, 970 00:39:50,431 --> 00:39:52,976 with over 250 movies produced, 971 00:39:53,017 --> 00:39:56,771 these guys generate more than $30 million a year. 972 00:39:56,813 --> 00:39:59,607 - You did Thor? - Well, we did that version of Thor, 973 00:39:59,649 --> 00:40:02,026 - the public domain version of Thor. - Oh, interesting. 974 00:40:02,068 --> 00:40:04,487 I didn't realize. Yeah, I didn't realize Thor was... 975 00:40:04,529 --> 00:40:07,365 - Well, neither do they. Anyway, so over here... 976 00:40:07,407 --> 00:40:10,118 - In fact, the less you're sure what movie you're watching, 977 00:40:10,160 --> 00:40:12,495 the more successful they are. 978 00:40:12,537 --> 00:40:16,666 You guys are known for making mockbusters. 979 00:40:16,708 --> 00:40:19,252 Can you talk about what they are? 980 00:40:19,294 --> 00:40:20,545 I love that term. Is that the right term? 981 00:40:20,587 --> 00:40:22,255 - That's the right term. 982 00:40:22,297 --> 00:40:23,590 That's trademarked and everything, so, uh... 983 00:40:23,631 --> 00:40:26,092 - (Kal laughs) - [Paul] Which is true, 984 00:40:26,134 --> 00:40:28,720 so if anybody tries to steal it, you know... 985 00:40:28,761 --> 00:40:31,055 - Mockbusting is basically drafting 986 00:40:31,097 --> 00:40:33,725 off of what the studios are doing at any given time. 987 00:40:33,766 --> 00:40:35,560 So, if there's a film 988 00:40:35,602 --> 00:40:38,897 about giant transforming robots called Transformers, 989 00:40:38,938 --> 00:40:41,316 we're gonna probably make Transmorphers. 990 00:40:41,357 --> 00:40:42,317 - [Man] Move out! (thudding) 991 00:40:42,358 --> 00:40:43,526 (woman yelling) 992 00:40:43,568 --> 00:40:45,528 (weapons blasting) 993 00:40:45,570 --> 00:40:46,821 - [Man] Roll the team back down to the drop left corner. 994 00:40:46,863 --> 00:40:48,740 - Get the hell out of there. - No! 995 00:40:48,781 --> 00:40:51,951 - You mentioned drafting, that big studios do. 996 00:40:51,993 --> 00:40:53,578 What is drafting? 997 00:40:53,620 --> 00:40:56,873 - Drafting, it's a kinder, more gentle word 998 00:40:56,915 --> 00:40:59,250 that the studios have used for decades, 999 00:40:59,292 --> 00:41:01,127 that basically is the same thing as mockbusting. 1000 00:41:01,169 --> 00:41:02,712 They're looking to see what, if I'm Paramount, 1001 00:41:02,754 --> 00:41:04,589 they're looking at Warner Bros., Universal, 1002 00:41:04,631 --> 00:41:06,466 going wow, they're making a Star Wars movie coming out. 1003 00:41:06,507 --> 00:41:10,595 I better make another space movie in order to capitalize, 1004 00:41:10,637 --> 00:41:11,971 'cause there's gonna be so much publicity 1005 00:41:12,013 --> 00:41:13,514 and press around that. 1006 00:41:13,556 --> 00:41:15,934 - Many years ago, Da Vinci Code came out, 1007 00:41:15,975 --> 00:41:18,770 and we released a film called The Da Vinci Treasure. 1008 00:41:19,854 --> 00:41:21,356 - Did the studio have a problem 1009 00:41:21,397 --> 00:41:23,024 with either your version of the Da Vinci Code-- 1010 00:41:23,066 --> 00:41:24,192 - I don't think they liked their version of it. 1011 00:41:24,234 --> 00:41:25,985 (Paul laughs) 1012 00:41:26,027 --> 00:41:27,612 - Yes, but it really didn't have anything to do 1013 00:41:27,654 --> 00:41:29,030 with the content. 1014 00:41:29,072 --> 00:41:31,491 It was marketing. It was a studio saying, 1015 00:41:31,532 --> 00:41:35,119 the A in your font is too close to the A in our font, 1016 00:41:35,161 --> 00:41:36,955 and we'd simply change the font, 1017 00:41:36,996 --> 00:41:38,957 and the movie went out as planned. 1018 00:41:40,208 --> 00:41:41,626 - The film business 1019 00:41:41,668 --> 00:41:44,254 regularly sees remarkably similar stories 1020 00:41:44,295 --> 00:41:46,297 succeeding big in the marketplace. 1021 00:41:46,339 --> 00:41:47,632 (asteroid roaring) 1022 00:41:47,674 --> 00:41:49,550 In 1998, Earth was almost destroyed 1023 00:41:49,592 --> 00:41:52,136 by flying rocks from space. Twice. 1024 00:41:52,178 --> 00:41:55,473 First came Deep Impact, and two months later, Armageddon. 1025 00:41:55,515 --> 00:41:58,601 And for you younger nerds, just replace these two movies 1026 00:41:58,643 --> 00:42:01,020 with The Avengers and Justice League. 1027 00:42:03,856 --> 00:42:05,566 My interest in this is a little bit selfish, 1028 00:42:05,608 --> 00:42:07,068 'cause I'm an actor, right? 1029 00:42:07,110 --> 00:42:08,569 And I don't like people 1030 00:42:08,611 --> 00:42:10,655 who actually pirate our movies, right? 1031 00:42:10,697 --> 00:42:12,782 You know, the first DVD pressing 1032 00:42:12,824 --> 00:42:15,535 of Harold & Kumar Go to White Castle made like $50 million. 1033 00:42:15,576 --> 00:42:17,412 I think that's-- if I'm remembering that right, 1034 00:42:17,453 --> 00:42:20,540 but then people just download it for free illegally. 1035 00:42:20,581 --> 00:42:22,292 That was just money that was lost. 1036 00:42:22,333 --> 00:42:24,877 On the flip side, there's like a porn parody 1037 00:42:24,919 --> 00:42:26,713 Harold & Kumar Escape From Guantanamo Bay 1038 00:42:26,754 --> 00:42:28,631 that I think is fantastic, 1039 00:42:28,673 --> 00:42:30,508 because they changed just enough of it 1040 00:42:30,550 --> 00:42:32,552 that it was clear what they meant. 1041 00:42:32,593 --> 00:42:34,595 I think it's called Farold & Fubar or something. 1042 00:42:34,637 --> 00:42:36,472 (laughing) 1043 00:42:36,514 --> 00:42:38,558 Where is that line, in terms of intellectual property? 1044 00:42:38,599 --> 00:42:41,894 How do you make sure that you're not violating IP law, 1045 00:42:41,936 --> 00:42:43,980 but still managing to capitalize 1046 00:42:44,022 --> 00:42:46,316 on what you think the audience actually wants? 1047 00:42:46,357 --> 00:42:48,401 - I think you have to have an understanding 1048 00:42:48,443 --> 00:42:50,987 of what piracy is, as opposed to mockbusting or drafting. 1049 00:42:51,029 --> 00:42:54,115 If you're downloading Transformers, or Transmorphers, 1050 00:42:54,157 --> 00:42:57,535 illegally, without paying for the privilege of watching it, 1051 00:42:57,577 --> 00:42:59,120 then you are stealing. 1052 00:42:59,162 --> 00:43:00,663 The difference that we're doing is that 1053 00:43:00,705 --> 00:43:02,915 we're making a movie about robots, okay, 1054 00:43:02,957 --> 00:43:04,667 and we're not stealing the content. 1055 00:43:04,709 --> 00:43:06,336 We're not stealing the stars. 1056 00:43:06,377 --> 00:43:07,920 Mark Wahlberg is not in our movie. 1057 00:43:07,962 --> 00:43:10,465 We have, you know, Mark Stahlberg. 1058 00:43:10,506 --> 00:43:12,842 -(Kal laughs) -And-- 1059 00:43:12,884 --> 00:43:15,345 - No, that's the porn version. - That is the porn version. 1060 00:43:15,386 --> 00:43:17,889 - No one is going to nominate The Da Vinci Treasure 1061 00:43:17,930 --> 00:43:19,474 for an Oscar, 1062 00:43:19,515 --> 00:43:20,975 but there are examples of how copying 1063 00:43:21,017 --> 00:43:23,061 actually leads to innovations 1064 00:43:23,102 --> 00:43:25,355 that transmorph an industry forward, 1065 00:43:25,396 --> 00:43:27,482 instead of holding it back. 1066 00:43:27,523 --> 00:43:29,108 Think about prescription meds. 1067 00:43:29,150 --> 00:43:32,070 The FDA grants patents on new medicines 1068 00:43:32,111 --> 00:43:34,072 so companies can make money developing them. 1069 00:43:34,113 --> 00:43:37,116 But when the patent is up, generic versions arrive, 1070 00:43:37,158 --> 00:43:40,411 allowing more competition and much lower prices, 1071 00:43:40,453 --> 00:43:42,914 and generic brands at your supermarket 1072 00:43:42,955 --> 00:43:45,416 may have the exact same ingredients as name brands, 1073 00:43:45,458 --> 00:43:47,001 but cost much less 1074 00:43:47,043 --> 00:43:48,795 because of things like lack of promotion 1075 00:43:48,836 --> 00:43:51,089 and no flashy packaging. 1076 00:43:51,130 --> 00:43:54,759 If an economy can nail the balance between protecting IP 1077 00:43:54,801 --> 00:43:57,428 and allowing copycatters to drive innovation, 1078 00:43:57,470 --> 00:44:01,307 or simply being able to deliver goods at a better price, 1079 00:44:01,349 --> 00:44:03,726 then it seems counterfeiting does have a role to play, 1080 00:44:03,768 --> 00:44:05,269 even if it's not the hero. 1081 00:44:05,311 --> 00:44:07,146 Sometimes counterfeits lead to innovation, 1082 00:44:07,188 --> 00:44:08,731 sometimes they lead to some dark shit, 1083 00:44:08,773 --> 00:44:12,193 and sometimes they just lead to this. 1084 00:44:14,320 --> 00:44:17,031 But the cinematic geniuses who made this work of art 1085 00:44:17,073 --> 00:44:18,783 wouldn't let us show it to you, 1086 00:44:18,825 --> 00:44:20,535 so we respected their intellectual property 1087 00:44:20,576 --> 00:44:21,828 and made our own version. 1088 00:44:21,869 --> 00:44:24,497 (salacious big-band music) 1089 00:44:24,539 --> 00:44:28,251 - [All] Whoo! - (hot-tubbers chattering) 1090 00:44:39,929 --> 00:44:42,181 (laughing) 1091 00:44:57,196 --> 00:44:58,448 - Act-ing! 1092 00:44:59,907 --> 00:45:03,578 - (grunting) Yeah. 1093 00:45:03,619 --> 00:45:05,496 Yeah, fuck, oh, fuck. 1094 00:45:05,538 --> 00:45:07,832 I like to check out the meat before I eat. 1095 00:45:07,874 --> 00:45:09,625 Oh, this is-- 1096 00:45:09,667 --> 00:45:10,626 This is shitty meat. 1097 00:45:10,668 --> 00:45:12,170 (crew laughing) 1098 00:45:12,211 --> 00:45:13,880 This is unbelievable. 1099 00:45:13,921 --> 00:45:16,632 Do you know how long I was crouching in the bushes, 1100 00:45:16,674 --> 00:45:18,926 stalking this thing like a pervert? 1101 00:45:18,968 --> 00:45:20,887 - Yeah, well you're certainly dressed like one. 1102 00:45:20,928 --> 00:45:22,889 - (crew laughing) - How dare you? 1103 00:45:25,975 --> 00:45:27,643 (whip cracking)