How Innovation Works: And Why It Flourishes in Freedom

by Matt Ridley

‘I’ve not failed,’ he once said. ‘I’ve just found 10,000 ways that won’t work.’

Using examples like this, Edward Wasserman of the University of Iowa has made the case that most human innovations evolve through a process that looks awfully like natural selection, rather than are created by intelligent design.

The myth of the lonely inventor, the solitary genius, is hard to shake. Innovation always requires collaboration and sharing, as exemplified by the fact that even the simplest object or process is beyond the capacity of any one human being to understand.

finding that six different people invented or discovered the thermometer, five the electric telegraph, four decimal fractions, three the hypodermic needle, two natural selection.

Simultaneous invention is more the rule than the exception.

First, the individual is strangely dispensable. If a carriage runs Swan or Edison over in their youth, or a car runs Page and Brin over, the world does not end up lacking light bulbs or search engines. Maybe things take longer, have a slightly different look and get different names.

Individuals do not matter much in the long run, but that makes them all the more extraordinary in the short run.

In retrospect, it is blindingly obvious that search engines would be the biggest and most profitable fruit of the internet. But did anybody see them coming? No.

Technology is absurdly predictable in retrospect, wholly unpredictable in prospect. Thus predictions of technological change nearly always look very foolish. They either prove wildly overblown, or equally wildly underblown.

Sometimes, as the Swedish author Hjalmar Söderberg put it, you have to be an expert in order not to understand certain things.

One of the peculiar features of history is that empires are bad at innovation.

Much ‘growth’ is actually shrinkage.

In other words, innovation was itself a product of increased specialization, not a separate thing.

This is not altogether a bad thing – we make it hard to disrupt traditional ways of making laws for good reason

techniques and processes are developed that work, but the understanding of them comes later.

None of the pioneers of vaccination had the foggiest idea how or why it worked.

Yet in the 1990s Edwin Mansfield, surveying companies to identify the sources of their innovations, found that nearly all originated in house or within the industry.

Universities contributed little to ideas about industrial organization, for instance.

the work that led to the invention of CRISPR gene editing was driven partly by a desire to solve practical problems in the yogurt industry.

we make a mistake if we insist that science is always upstream of technology.

Britons to lament the country’s modern inability to translate research strength into competitive innovation success.

This seems to me a pity, not just because it misreads history, but because it devalues science.

In recent years there has been a tendency to demand of academic scientists that they justify their financial support from the taxpayer by showing that their work generates applied spin-offs.

Innovation cannot be forced upon unwilling consumers

it must be useful to individuals, and it must save time, energy or money in the accomplishment of some task.

The grand theme of human history, I have argued, is the increasing specialization of production combined with the increasing diversification of consumption.

much of the inequality that exists – though not all – is about luxuries, rather than necessities;

What is software, or a call centre, or a flight attendant?

As Tim Worstall observes: ‘Do you or does anyone else have absolutely everything you can even dream of desiring which requires human work to deliver to you? No? Still short of a back rub, the peeled grape? Then there’s still a task or two for humans to do.’

Innovation often comes from outsiders.

Kodak did invent digital photography but had too big a vested interest in hoping it would go away, rather than exploring

He tried to interest executives in his invention, but they protested that it was expensive, impractical and poor quality.

The general view investors, directors, clients and commentators adopted was that somebody else must have checked out that her innovations worked, otherwise she could not possibly have been so successful in raising funds:

Google’s ‘X’ team, which specializes in crazy ‘moonshot’ innovation schemes, calls this the ‘monkey first’: if your project aims to have a monkey recite Shakespeare while on a pedestal, it’s a mistake to invent the pedestal first and leave till later the hard problem of training the monkey to speak.

‘hyping your product to get funding while concealing your true progress and hoping that reality will eventually catch up to the hype continues to be tolerated in the tech industry.’

Consultants have polished PowerPoint presentations for gullible investors

‘Our success at Amazon is a function of how many experiments we do per year, per month, per week. Being wrong might hurt you a bit, but being slow will kill you,’

Bezos’s management style was specially designed, he hoped, to avoid the institutionalized middle-management complacency that soon stifled innovation at large firms,

reverse-veto policy, whereby a new idea has to be referred upwards by managers even if all but one of them thinks it is rubbish.

In his book Non-Bullshit Innovation,

The anti-GM movement caught on amongst wealthy people with plentiful, cheap food. It was not pressing and relevant to their lives to increase crop yields. Those who paid the opportunity cost of the prohibition were the sick and starving who had no voice.

The whole purpose of new ideas is to share them and allow them to be copied. More than one person can enjoy an idea without exhausting or diminishing it, whereas the same is not true of physical property.

Launching the Innovation Renaissance that the American patent system, far from encouraging innovation, is now discouraging it.

The Semiconductor Chip Protection Act of 1984 resulted in more patenting but less innovation in the United States, as semiconductor firms effectively set about stocking ‘war chests’ of patents to deploy in disputes with each other.

Inventing something gives you a first-mover advantage, which is usually quite enough to get you a substantial reward.

Another problem is that there is just no evidence from geography and history that patents are helpful, let alone necessary, in encouraging innovation.

further problem is that patents undoubtedly raise the costs of goods. That is the point: to keep competition at bay while the innovator reaps a reward. This slows the development and spread of the innovation.

Patent and Trademark Office has quintupled since 1983 to over 300,000 in 2013, at a time when economic growth has slowed: so it does not seem to have helped the economy to grow.

These are the ‘patent trolls’, whose activities cost America $29bn in 2011 alone.

tends to hinder entrepreneurial disruption. We are effectively reinventing the guilds