Monday, October 10, 2011

Innovation Stagnation

With all talk about the need for some sort of massive "innovation" to rescue the economy, there's been a lot of writing recently about innovation stagnation. I'd like to highlight two commentaries.

The first is by David Brooks, entitled "Where are the Jobs". Brooks can be pedantic and myopic, but his column here is excellent:
http://www.nytimes.com/2011/10/07/opinion/brooks-where-are-the-jobs.html

Brooks briefly summarizes Tyler Cowen's arguments in The Great Stagnation, along with recent articles by billionaire sociopath Peter Thiel and science fiction author Neal Stephenson.

Let’s imagine that someone from the year 1970 miraculously traveled forward in time to today. You could show her one of the iPhones that Steve Jobs helped create, and she’d be thunderstruck. People back then imagined wireless communication (Dick Tracy, Star Trek), but they never imagined you could funnel an entire world’s worth of information through a pocket-sized device.

The time traveler would be vibrating with excitement. She’d want to know what other technological marvels had been invented in the past 41 years. She’d ask about space colonies on Mars, flying cars, superfast nuclear-powered airplanes, artificial organs. She’d want to know how doctors ended up curing cancer and senility.

You’d have to bring her down gently. We don’t have any of those things. Airplanes are pretty much the same now as they were then; so are cars, energy sources, appliances, houses and neighborhoods. A person born in 1900 began with horse-drawn buggies and died with men walking on the Moon, but the last few decades have seen nothing like that sort of technological advance.

Recently, a number of writers have grappled with this innovation slowdown. Michael Mandel wrote a BusinessWeek piece in 2009. Tyler Cowen wrote an influential book called “The Great Stagnation” in 2010. The science-Fiction writer Neal Stephenson has just published a piece called “Innovation Starvation” in World Policy Journal and Peter Thiel, who helped create PayPal and finance Facebook, had an essay called “The End of the Future” in National Review.

These writers concede that there has been incredible innovation in information technology. Robotics also seems to be humming along nicely, judging by how few workers are needed by manufacturing plants now. But the pace of change is slowing down in many other sectors.

As Thiel points out, we travel at the same speeds as we did a half-century ago, whether on the ground or in the air. We rely on the same basic energy sources. Warren Buffett made a $44 billion investment in 2009. It was in a railroad that carries coal.

And here's Kevin Drum with thought-provoking commentary on the same subject. It's interesting that near the end of the article, he probalby unkowingly breaks technological developments into the same phases that Lewis Mumford did in Technics and Society - the Paleotechnic, wiith its coal and steam power, and the neotechnic, with it's harnessing of electricity (Mumford also had the Eothechnic - early inventions that led to the Industrial Revolution):

http://motherjones.com/kevin-drum/2011/10/future-of-innovation

I've already gone on way too long, so I'll wrap it up here. Just keep in mind three things when you read about innovation droughts. First: The key to innovation is the exploitation of really big inventions. Computerization is as big as it gets, and it has a much longer tail than electrification. We're not even close to mining its full potential yet. Second: Above a certain level, the goal of productivity gains is to provide us with more fun. It doesn't matter whether that fun comes in physical or virtual form, or how it shows up in national accounts. Third: Don't exaggerate past innovations just because they were exciting or dramatic, and don't discount current innovations just because they've happened behind the scenes or seem sort of prosaic. Hip replacements may not be as big a mobility improvement as the automobile, but they're a bigger deal than you think—as you'll realize someday if you have to get one because you can't walk more than a hundred feet at a stretch with your original equipment.

We're going through a tough stretch right now. But my best guess is that there are two big culprits here, and neither one of them is a fundamental slowdown in innovation. The first is that, even after 30 years, we still haven't figured out how to effectively manage and regulate the post-union, post-globalization, post-Bretton Woods economy. This is a relatively short-term kind of problem, but there are still a lot of bumps left on that road. The other is that we're simply working on some really hard problems—much harder than we anticipated when we first dived into them. Artificial intelligence is really hard. Finding a source of energy that's cheaper per BTU than oil is really hard. Gene sequencing—along with a deep understanding of how human biology works—is really hard. But that doesn't mean innovation has been snuffed out. It just means we've set our sights really high. That's no bad thing.
Coincidentally, the BBC has a great series about inventions that could change the world:

http://www.bbc.co.uk/news/technology-14803871

They include robotics, using viruses to manufacture materials, graphene, reading and writing genetic codes, and thought-based controllers. Surpisingly not included is 3D printing, which some see as the biggest development since the assembly line:

http://www.bbc.co.uk/news/technology-15007018
http://boingboing.net/2011/09/23/3d-printed-nylon-bicycle-thats-as-strong-as-steel.html

Or the hydrogen economy:
http://www.bbc.co.uk/news/science-environment-14976893
http://www.bbc.co.uk/news/business-14979817

There's enough here for a dozen blog posts, so I post this as a way of introduction. But a brief point - the innovations of the past produced large amounts of jobs, which produced enough incomes for people to actually buy the new innovations. Many of the new innovations being touted actually reduce the amount of labor needed in our economy. This is a critical point. These technologies are actually anti-Fordian. Unless we change that, Capitalism will be more anti-innovation than pro.

As a final word, I'll link to this from Richard Heinberg discussing the work of Mats Larsson. This post ended up as chapter 4 in Heinberg's book, The End of Growth. I think Larsson and Heinberg make good points:

http://www.energybulletin.net/stories/2011-04-05/business-development-cavalry%E2%80%99s-way

A remarkable book appeared in 2004 to almost no fanfare and little critical notice. The author was Mats Larsson, a Swedish business consultant, and his book was titled The Limits of Business Development and Economic Growth. Unlike the thousands of business books published each year that promise to help managers become more effective, or that hint at new opportunities for profit, Larsson’s conveyed a sobering message—one that the business community evidently didn’t want to hear: Our human ability to invent genuinely new activities is probably limited, and most recent inventions have consisted merely of finding ways to speed up activities that humans have been performing for a very long time—communicating, transporting themselves and their goods, trading, and manufacturing. These processes can only be taken to the limits where things can be done at almost no time and at a very low cost, and we are fast approaching those limits.

“Through centuries and millennia,” Larsson writes, “humans have struggled to simplify production and make tools and products less expensive and easier to manufacture.” Possible examples are legion from virtually every industry—from telecommunications to air travel. “Now we are finally in a situation where many things can be done in close to no time and at a very low cost.” He goes on:

[A]t close scrutiny we do not seem to have done anything except gradually automate activities that human beings have been performing for a few hundred, and sometimes thousand, years already. The development of a large number of different technologies that help us to automate these tasks has driven economic development and business proliferation in the past. Now, technological progress is at the stage where a number of these technologies and products have been developed to a point where we cannot realistically expect them to develop much further. And, despite widespread belief of the opposite, we cannot be certain that there are enough new products or technologies left to be developed for companies to be able to make use of the resources that are going to be freed from existing industries.

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