The Talented Mr. Ridley – Part II

Last week I commented [1] on Matt Ridley’s incredible book, “The Rational Optimist [2],” and how it represents an entirely new paradigm re the probabilities for economic growth and prosperity worldwide in the coming years.

A particularly revelatory component of Ridley’s analysis revolves around what the real process of innovation is and what it is NOT. 

Ridley first points to what innovation is NOT. 

It is NOT Government Research.  One of the most cited examples of the importance of government research to commercial technology is America’s successful efforts to land a man on the moon in the 1960’s. It is often said that non-stick frying pans would simply not exist were it not for the Apollo program. 

Well, given that close to $200 billion in today’s dollars was spent on the moon effort, it is just a bit underwhelming, isn’t it?  Heck, even the Wikipedia entry re the program’s scientific and engineering legacy is a scant 3 sentences.

It is NOT University Research. Buzzwords from academia like “technology transfer” and “commercialization” are, in Ridley’s analysis, just that - buzzwords.
 
For the tens of billions of dollars in hard costs and the monumental diversion of top-grade intellectual talent from commercial activity that academia represents, no demonstrable commercial return-on-investment has ever been proven. 

A “Renaissance lifestyle” value for young people, sure.  Civic pride and relationship values of affiliation with top-notch colleges and universities - of course.
 
But actual hard dollars and cents wealth-creating returns, well it just isn’t there. Probably the best that can be said about the commercial value of the university R+D is that it is normally so stilted and misaligned that it drives away the best entrepreneurial and technical talent very quickly (see Gates, Ellison et al.)

So What Does Drive Real Innovation?  Building on the seminal work of Clayton Christensen in the Innovator’s Dilemma [3], Ridley describes the innovation process and its economic value-add in very prosaic terms.
 
He points to innovations like Amazon’s ongoing transformation of the ecommerce experience – none of which would be considered breakthrough technology, but which in their aggregate have brought unprecedented consumer productivity gains.

And to eBay, whose core innovation was NOT the idea of online auctions as much as it was that a robust exchange of buyers and sellers could be attracted via pay-per-click advertising (see Google above).

Ridley’s point is that the innovation that creates wealth - versus innovation that looks good on an academic’s or a politician’s whiteboard - is simply the abiding power of Adam Smith’s invisible hand made real. 

Namely individuals and small teams tweaking the way things are done only so slightly for one purpose and one purpose only – to make a buck. Or a yuan. Or a rupee. Or a few pesos. Period. End of story. 

And you know what else?  For the first time in human history, there are now billions of people thinking and working and collaborating in real time toward this basic human desire.

And that is why - and only why - as a species we just keep getting richer every day.

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