How Innovation Works: And Why It Flourishes in Freedom

by Matt Ridley

In Alabama a manicurist must go through 750 hours of training and pass an exam before setting up in business.

(the best innovators are alert to the variety of human foibles).

it is simpler to profit from lobbying government to set the rules up in favour of an existing technology, then all the entrepreneurial energy will go into lobbying.

Peter Thiel started out as a philosopher,

Innovation is one of those things that everybody favours in general, and everybody finds a reason to be against in particular cases.

We wanted flying cars; instead we got 140 characters.

The main ingredient in the secret sauce that leads to innovation is freedom. Freedom to exchange, experiment, imagine, invest and fail; freedom from expropriation or restriction by chiefs, priests and thieves; freedom on the part of consumers to reward the innovations they like and reject the ones they do not.

Innovation is the child of freedom, because it is a free, creative attempt to satisfy freely expressed human desires.

This reliance on freedom explains why innovation cannot easily be planned, because neither human wishes nor the means of their satisfaction are easy to anticipate in the detail required;

why nobody really knows how to cause innovation, because no one can make people want something.

The Innovation Illusion: How So Little is Created by So Many Working So Hard, argue that the existential challenge of today’s capitalism is to break the habit of both companies’ and governments’ reluctance to encourage innovation, despite

Their bosses shy away from uncertainty, and instead make their companies increasingly bureaucratic.

Of course, many companies still pay lip service to innovation, appointing executives to jobs with the word in the title, and adopting slogans that use the term, but this is often meaningless blather disguising a deep attachment to the status quo.

Multinationals have absorbed the mentality of planners, rather than entrepreneurs.

Startup rates are falling in sixteen out of eighteen economies, according to an OECD study.

The days when China was a smart copier, catching up with the West by emulating its products and processes, are over.

with 600 million users managing not just their money but their insurance and other services, all through a single app.

That many people think more about how to constrain rather than encourage it worries me.