How Innovation Works
by Matt Ridley

  • Technology
  • Ashto = 8/10
  • Jonesy = 8/10
how innovation works

What You Will Learn from How Innovation Works

This week, Ashto and Jonesy redefine the reasoning and motivation behind innovation through How Innovation Works by Matt Ridley. In this book, Ridley argues that innovation is a process that turns existing inventions into practical and affordable solutions for other people.

Innovation happens when people are free to think, experiment and speculate. It happens when people trade with each other. It happens when people are relatively prosperous but not desperate. But do we understand the true core of innovation and the best way to encourage it? Do we set targets, rules, and standards along with direct research? Or do we deregulate from these expectations and set people free? The pivotal factor that usually kickstarts an innovation remains mysterious until today. No economist or social scientist can fully explain why and when innovation happens.

To explain the process of innovation, Ridley refers to a wide range of innovation examples, including jet engines, potatoes, coffee, vaccines, toilets, vacuum cleaners, social media, artificial intelligence, and more. Through these fascinating case studies, Ridley dissects how each innovation started and why it succeeded or failed.

The Essentials of Innovation

Innovation is gradual

The history of innovation reveals consistent patterns. Whether it happened yesterday or two centuries ago, whether the impact was disruptive or just helpful, a successful innovation usually follows roughly the same path. For a start, innovation requires a gradual process. Eureka moments are rare and possibly non-existent. Innovation happens with the help of big dollops of hindsight and long stretches of preparation (not to mention multiple wrong turns along the way!)

If innovation is a gradual and evolutionary process, why is it so often described in terms of revolutions, heroic breakthroughs and sudden enlightenment? Firstly, human nature. Secondly, the intellectual property system. It is too easy to forget about rivals and predecessors and ignore successors.

The existence of patents makes the problem of the heroic inventor worse. Again and again, innovators wrecked their lives battling to establish or defend patents on their innovations. In many cases establishing a patent that was too broadly drawn deters further innovation.

Innovation is different from invention

Invention = The specific product or idea
Innovation = Applying that idea to solve real-world problems

The invention is necessary, but the process doesn’t stop there. It takes an innovator to bring the invention to life. Fritz Haber’s discovery of how to fix nitrogen from the air using pressure and catalyst was a great invention. But it was Carl Bosch’s years of hard experiment, overcoming recurring problems and borrowing novel ideas from other industries that eventually led to the manufacturing of ammonia on a large scale and at a price that society could afford to pay. In the history of innovation, it’s always the people who find ways to drive down the costs and simplify the product who make the biggest difference.

Innovation is recombinant

Every technology is a combination of other technologies while every idea is a combination of other ideas. For instance, Google, Facebook and Instagram are simple combinations of existing technology. Recombination is the principal source of variation upon which natural selection draws when innovating biologically. Sex is the means by which most recombination happens. A male presents half his genes to an embryo and so does a female. That is a form of recombination, but what happens next is even more momentous. That embryo, when it comes to making sperm and egg cells, swaps bits of the father’s genome with bits of the mother’s in a process known as crossing over. It shuffles the genetic deck, creating new combinations to pass to the next generation.

The parallel with human innovation couldn’t be clearer. Innovation happens when ideas have sex. It occurs when people meet and exchange goods, services and thoughts. This explains why innovation happens in places where trade and exchange are frequent and not in isolated or underpopulated places.

Innovation involves trial and error

Most inventors find that they just need to keep trying things. Tolerance of error is therefore critical. It is notable that during the early years of the new technology, far more entrepreneurs went broke instead of making a fortune. Edison and his team trialled over 6,000 different materials to try to find something that would work as a filament for their lightbulb idea. An element of playfulness probably helps too. Innovators who just like playing around are more likely to find something unexpected,

Dick Fosbury was a young athlete at Oregon University who invented the Fosbury flop that won the high jump gold at the 1968 Olympics – much to the surprise of competitors and the delight of the crowd. He later described that he had used trial and error over many months to get his technique right.

Innovation is inexorable

Most inventions lead to priority disputes between competing claimants. People seem to stumble on the same idea at the same time. Six people invented or discovered the thermometer, five the electric telegraph, four decimal fractions and two natural selection. Likewise, there were scores of different search engines coming onto the market in the 1990s. It was impossible for search engines not to be invented in the 1990s, and it was impossible for light bulbs not to be in the 1870s. They were inevitable. This might seem a little harsh. But it is fairly undeniably true of every scientist and inventor who ever lived. The paradox is what makes the achievements remarkable. There was a race to discover an ultimate solution, and somebody won.

The second paradox of the inevitability of invention is that it makes innovation look predictable, yet it is not. In retrospect, it is blindingly obvious that search engines would be the biggest and most profitable fruit of the internet. But did anybody see it coming?

Innovation  means using fewer resources rather than more

This notion is a burgeoning trend today. The main engine of economic growth is not more resources, but using innovation to do more with less. More food from less land and less water, more miles for less fuel, more communication for less electricity and more buildings for less steel.

Innovation is a bottom-up phenomenon

It has recently become fashionable to argue a somewhat creationist view of innovation. Namely that it is a product of intelligent design by the government, and that government should therefore adopt an industrial policy of directed innovation. Some say that the main source of innovation has been government support of research and development with mission-oriented directionality.

This is not true. America became the most advanced and innovative country in the world in the early decades of the twentieth century without significant public subsidy for research and development before 1940. The few exceptions tend to confirm the rule. For example, the government heavily subsidised Samuel Langley’s spectacular failure to make a powered plane while wholly neglecting the Wright brothers’ spectacular success even after they proved their point.

In many cases, the government actually gets in the way of technology. Government regulations blocked the development of cellular phones for decades. Europe’s explicit adoption of an industrial policy for 2G networks trapped the continent in a standard that was soon overtaken by America. The argument for this always turns on the things that government supposedly invent and then spins out in the private sector. But if this were the case, would not governments apply them first within the government itself? There is nothing quite so lacking in innovation as the practices and premises of government.

Innovation is the mother of science as often as it is the daughter

There is a widely held view among politicians, journalists and the public that science leads to technology, which leads to innovation. This linear model holds sway amongst almost all policymakers and is used to justify public spending on science, as the ultimate fuel for innovation. While this can sometimes happen, it is just as often the case that invention is the parent of science. Techniques and processes have developed that work, but the understanding of them comes later. Steam engines led to the understanding of thermodynamics, not the other way around. Powered flight preceded almost all aerodynamics. Animal and plant breeding preceded genetics. Pigeon fancying laid the groundwork for Darwin’s understanding of natural selection. Metalworking helped give birth to chemistry. None of the pioneers of vaccination had the foggiest idea of how it worked. Understanding of the mode of action of antibiotics came long after their practical use.

Innovation doesn’t create unemployment

The fear that innovation destroys jobs has a long history. Dating back to general Ludd and Captain Swing in the 1800s. In 1812, the Luddites went about smashing stocking frames in protest at the introduction of new machinery into the textile industry; taking their inspiration and their name from an apocryphal story of Ned Ludd, who did the same in 1779. In 1830 in a protest at conditions in the farming industry, rioting labourers began burning hay ricks and smashing machines.

In short, the idea that innovation destroys jobs comes around in every generation. But so far, evidence has been showing otherwise. Over the past two centuries, productivity in agriculture dramatically increased, and farm workers moved to cities and got jobs in manufacturing. Then productivity in manufacturing rocketed upwards, freeing huge numbers of people to work in services. Candles were replaced by electric lights, but wick trimmers found other work. Millions of women joined the workforce, at least in part because of innovation in washing machines and vacuum cleaners, which freed them from household drudgery.

Conclusion of How Innovation Works

The main ingredient in the secret sauce that leads to innovation is freedom – the freedom to exchange, experiment, imagine, invest and fail.

Innovation is the child of freedom because it is a free, creative attempt to satisfy freely expressed human desires. Innovative societies are free societies where people are free to express their wishes and seek the satisfaction of those wishes, and where creative minds are free to experiment to find ways to supply those requests.

Innovation is the parent of prosperity. On balance, it becomes a very good thing, however, we tend to abandon it at our peril. The fact that many people think more about how to constrain rather than encourage is worrying. The fact that there’s no practical limit to the ways in which the species could arrange the atoms and electrons of the world into improbable structures in the centuries ahead is exciting. The future is thrilling and it is the improbability drive of innovation that will take us there.

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