How Innovation Works (book review)

I read How Innovation Works by Matt Ridley in a few hours. It is a delicious book.

Ridley distinguishes invention from innovation. The inventor creates something new, the innovator applies the novelty to change the world. Jeff Bezos innovated with his Amazon site, but he may not be much of an inventor. Scientists often invent new “things” but they often fail to innovate.

Innovation is often quite positive and Ridley attributes much of the large gains in wealth and well-being that we have known. So what makes innovation possible, or what causes innovation?

Ridley does not know exactly. However, he identifies some conditions that favour innovation:

  • You need some freedom, the freedom to try new enterprises, the freedom to apply new ideas.
  • You need some wealth. Necessity does not reliably drive innovation according to Ridley.
  • You need the ability to make mistakes and learn quickly from them. Innovation does not happen overnight from the brain of a genius. It is a deeply iterative process.

Thus we get little innovation in the nuclear industry because it is difficult to get approval for a new nuclear power plant. And it is difficult to experiment. However, we get a lot of innovation on the Web where anyone can try to offer a new service and where it is easy to iterate quickly.

What is the role of government in innovation? It is often believed that government drives innovation. However, it does not match the historical record. Until sometime in the XXth century, governments did not have any idea that they could promote innovation. Yet innovation did occur. Furthermore, governments decided to adopt a laissez-faire policy with respect to the Web, which enables massive innovation.

When you look at how much difficulty the state has to even embrace innovation, you cannot believe that it is also the source of our innovation. Ridley, like myself, is pessimistic regarding government interventions like patent protections. We get more innovation when people are free to iterate and reuse ideas. Furthermore, focusing the innovators on patents takes time and money away from innovation.

I am also skeptical of the ability of research grants to spur innovation, even when said grants and tied to industry collaboration. I do think that governments can play a positive role, besides protecting free enterprise and free markets: governments can issue prizes and contracts. For example, NASA may not be able to innovate and get us in space cheaply. However, NASA can offer contracts to space companies. Governments could similarly encourage progress in medicine by giving prizes to the first innovators to reach certain milestones. For example, we could give 10 billion dollars to the first team to stop cognitive decline in Alzheimer’s patients, at a reasonable cost. I get the feeling that Ridley would agree.

Research grants tend to favour the incumbents. Research prizes are more likely to reward innovators.

It is true that the innovators are not rewarded for nearly all of the wealth that their innovation generate… but innovations are frequently a team sport. We may think that only the Wright brothers invented the aeroplane and made it work, leading to all the marvellous innovations… but many people had a hand in their work. They corresponded with enthusiast who were experimenting with planers. They had an employee design a very light and powerful engine. It is not clear that by trying to ensure that innovators get a larger share of the benefits, we get more innovation and this assumes that we innovators are always fairly identified. Is the first people to patent an idea the sole innovator?

Where will innovation happen in the near future? The answer that seems obvious today, and the one that Ridley goes to is China. China seems uniquely able to try new things as far as technology and industry goes. Ridley is not pleased by this likely outcome given that China lacks democracy. Instead, Ridley believes that we could renew our habit of creating innovation elsewhere if only we choose to.

Daniel Lemire, "How Innovation Works (book review)," in Daniel Lemire's blog, June 5, 2020.

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Daniel Lemire

A computer science professor at the University of Quebec (TELUQ).

4 thoughts on “How Innovation Works (book review)”

  1. I’d summarize the three conditions for innovation as 1. a problem, 2. resources, and 3. feedback.

    My favourite “recent” Canadian innovation includes both the “feedback” and “government contracts” ideas: Bill Gauley and MaP testing for toilets.

    I too am a fan of Matt Ridley. Unlike most biologists, he sees the parallels between Darwin’s Tangled Bank and Adam Smith’s Invisible Hand.

  2. Not sure if I agree with the interpretations of invent and innovate, I think scientists discover more than invent.

    Interesting is also the theme that innovation is competitive. Awarding a prize to only the first team to reach a milestone is probably unfair to those who came second. To encourage more innovation, perhaps they all should be supported and rewarded. Cue the basic living wage?

    If innovation it seems requires collaboration, why do we limit it to being a team sport? Would innovation be stifled if everything was opened and shared, as in a global team?

    Concerning identifying innovators by looking at patents, this is definitely not reliable. I have seen a company assign inventorship of patents to otherwise uninvolved employees in other parts of the world, so they can access R&D concessions from government innovation programs that exist in those other jurisdictions.

  3. I think scientists discover more than invent.

    Whether Maxwell’s laws were invented or discovered is an interesting philosophical consideration, but I don’t think it interacts with the issue of innovation.

    I take your general point to be about credit attribution. A few things about that:

    1. It is undeniably difficult to attribute credit and nothing is even the result of one person’s work.

    2. The folks getting credit only ever get a small compensation compared to the value of the innovation. Yet they often took large risks.

    3. A small number of people contribute a lot more to innovation. It is a power law. Most people play it is safe. Only a few outliers try new techniques.

    The latter point is important. You talk about fairness, but it cuts the other way. All medical experts knew or should have know about antibiotics by 1940. How many of them were working to deploy them at large? Very, very few. They just stood still while others where doing all of the work.

    It is true today. Take any field where innovation is occurring and you will find that the bulk of the people from this field are just busy reaping the immediate rewards of their work, and they do little to push innovations. Very often, they will openly oppose innovations because it threatens the profitable approach they have going right now. Yet when the innovations will have arrived, they or their children will benefit.

    It is definitively not the case that innovations are over-rewarded. If it was the case, then everyone would try to be an innovator… but these people are very uncommon.

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