Tuesday, September 15, 2009

Is rapid innovation still possible in the US?

Ever since The Streetsweeper posted a link to an article by Richard Florida, I've been pretty consumed with the question of whether or not the United States has, at this moment, the capacity to experience rapid innovation.  There are times in an ordinary day where I see a new application of an existing technology and marvel at how innovative that is.  For example, yesterday I ordered and paid for a customized burrito for lunch on my iPhone and picked it up after a 5 minutes walk!  Are you kidding me?!  Think about that.  I didn't talk to anyone.  I didn't even sit down at a computer and pick out my toppings on an expensively made e-commerce website.  I hit 7 or 8 buttons on a TELEPHONE and had a hot burrito in my hands 5 minutes later.  It was so easy, so practical and effortless, that it was suddenly possible to envision a world where a great deal of transactions are carried out this way.
Though, to be fair, the true paradigm shifting innovation that allowed my moment of awe occured 20 years ago with the emergence of the internet as a commercial utility.  Everything since has been an evolution of that technology.  It is that type of innovation that I'm talking about, the earth-shattering kind that leads to the creative destruction of an entire sector of jobs, while creating a new industry and jobs to go with it.
I'm not sure that our government, knowingly or otherwise, is interested in fostering that type of innovation anymore.  The policies and actions taken aren't so much against innovation, so much as they are protectionist of the industries that are dying at the hands of creative destruction.  Those actions slow the advancement of emerging technology.  The government places a value on certain industries and sectors of the economy, and then ignores others.
The bailouts of the automobile industry are the most glaring example of our government stifling the creation of more efficient alternatives.  Then they turn around and ignore the death of the print media at the hands of a more nimble online media.    In one instance, creative destruction is a monster to be stopped, and in another it is deemed okay. 
The innovation of the internal combustion engine was a true paradigm shifting moment in history, one in which we made the decision, tacit or implicit via policy, to let the professions associated with horse travel go by the wayside, yet 100 years later we can't return the favor to the creators and refiners of the fuel cell, electric, gasoline hybrid or hydrogen powered engines.  Why do we place the jobs of the relative few ahead of raising the standard of living for the entire world?
If you compare the rate of change in the computer industry, to that of the automobile industry you really begin to see the effects of protectionist policies, and how consumers in the aggregate lose.  Our computers have experienced exponential gains in efficiency coupled with reduced costs to attain them.  While our vehicles have only experienced gains in those areas where the goverment demands them, fuel efficiency (modest gains at that) and safety (significant gains).
There has been little to no intervention in the emerging computer market.  5.25" floppy drive and media makers died out, replaced by CD makers that have since disappeared in favor of flash media and solid state hard drives.  Consumers win, jobs come and go and come again but at least we've had the innovation that has presumably bettered our lives as a result.  I wish I could say that over 20 years my automobiles have offered that level of satisfaction.  
All of this is coming around, I suppose, to an opinion on whether or not the US is capable of rapid innovation.  I believe that we are, under the right conditions:
  • the emerging technology must not be in direct competition with an existing titan of industry, otherwise the full force of the goverment will act to stifle it to protect jobs or special interests.
  • the emerging technology must evolve in marketability/profitablity quickly, there is no help of the government to see it through it's infancy.
That is not a long list.  Any innovation that threatens the status quo in a major job sector will face an uphill battle as the goverment acts to subsidize the now obsolete technology in the name of job preservation.  In the long run, even the job market is hurt by these policies.  Look no further than the computer industry to see how many job sectors have been created by the innovation of the personal computer.  Luckily, that emerging market wansn't destroying anything huge.
I won't say that I never support helping an ailing industry, but when there is a new technology waiting in the wings that needs some assistance in lowering it's costs and getting into the mainstream, I sincerely wish we'd refrain the "Too Big to Fail" mentality of supporting the old guard.  Those instances are truly few and far between.

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