Tag Archives: Innovation

The Up Side Of Down

In her new book, The Up Side of Down: Why Failing Well Is the Key to Success, Megan McArdle takes some time to discuss forager vs. farmer attitudes toward risk.

Forager food sources tended to be more risky and variable, while farmer food sources are more reliable. So foragers emphasized food sharing more, and a tolerate attitude toward failure to find food. In contrast, farmers shared food less and held individuals responsible more for getting their food. We’ve even seen the same people switch from one attitude to the other as they switched from foraging to farming. Today some people and places tend more toward farmer values of strict personal responsibility, while other people and places tend more toward forager forgiveness.

McArdle’s book is interesting throughout. For example, she talks about how felons on parole are dealt with much better via frequent reliable small punishments, relative to infrequent random big punishments. But when it comes to bankruptcy law, a situation where the law can’t help but wait a long time to respond to an accumulation of small failures, McArdle favors forager forgiveness. She points out that this tends to encourage folks who start new businesses, which encourages more innovation. And this does indeed seem to be a good thing.

Folks who start new businesses are pretty rare, however, and it is less obvious to me that more leniency is good overall. It is not obvious that ordinary people today face more risk than did most farmers during the farming era. The US apparently has the most lenient bankruptcy law in the world, and that is indeed some evidence for its value. However, it seems to me more likely that US forager forgiveness was caused by US wealth than vice versa. McArdle says the US got lenient bankruptcy in the late 1800s via lobbying by senators representing western farmers in debt to eastern banks. And it is even harder to see how farming in the US west then was more risky than has been farming throughout the whole farming era.

Most likely what changed was the wealth of US farmers, and their new uppity attitudes toward rich elites. This fits with debt-forgiveness being a common liberal theme, which fits with liberal attitudes being more forager-like, and becoming more common as rising wealth cut the fear that made farmers. If lenient bankrupts is actually better for growth in our world, this would be another example of Caplan’s idea trap, where rising wealth happens to create better attitudes toward good policy.

Overall I found it very hard to disagree with anything that McArdle said in her book. If you know me, that is quite some praise. :)

GD Star Rating
loading...
Tagged as: , , ,

The Future Of Intellectuals

Back in 1991, … [a reporter] described Andrew Ross, a doyen of American studies, strolling through the Modern Language Association conference … as admiring graduate students gawked and murmured, “That’s him!” That was academic stardom then. Today, we are more likely to bestow the aura and perks of stardom on speakers at “ideas” conferences like TED. …

Plenty of observers have argued that some of the new channels for distributing information simplify and flatten the world of ideas, that they valorize in particular a quick-hit, name-branded, business-friendly kind of self-helpish insight—or they force truly important ideas into that kind of template. (more)

Across time and space, societies have differed greatly in what they celebrated their intellectuals for. Five variations stand out:

  • Influence – They compete to privately teach and advise the most influential folks in society. The ones who teach or advised kings, CEOs, etc. are the best. In many nations today, the top intellectuals do little else but teach the next generation of elites.
  • Attention – They compete to make op-eds, books, talks, etc. that get attention from the intellectual-leaning public. The ones most discussed by the snooty public are the best. Think TED stars today, or french public intellectuals of a generation ago.
  • Scholarship – They compete to master stable classics in great detail. When disputes arise on those classics, the ones who other scholars say win those disputes are the best. Think scholars who oversaw the ancient Chinese civil service exams.
  • Fashion – They compete to be first to be visibly associated with new intellectual fads, and to avoid association with out-of-fashion topics, methods, and conclusions. The ones who fashionable people say have the best fashion sense are the best. Think architecture and design today.
  • Innovation – They compete to add new results, methods, and conclusions to an accumulation of such things that lasts and is stable over the long run. Think hard sciences and engineering today.

Over the last half century, in the most prestigious fields and in the world’s dominant nations, intellectuals have been celebrated most for their innovation. But other standards have applied through most of history, in most fields in most nations today, and in many fields today in our dominant nations. Thus innovation standards are hardly inevitable, and may not last into the indefinite future. Instead, the world may change to celebrating the other four features more.

A thousand years ago society changed very slowly, and there was little innovation to celebrate. So intellectuals were naturally celebrated for other things that they had in greater quantities. The celebration of innovation got a big push from World War II, as innovations from intellectuals were seen as crucial to winning that war. Funding went way up for innovation-oriented intellectuals. Today, however, tech and business startups, and innovative big firms like Apple, have grabbed a lot of innovation prestige from academics. Many parts of academia may plausibly respond to this by celebrating other things besides innovation where those competitors aren’t as good.

Thus the standards of intellectuals may change in the future if academics are seen as less responsible for important innovation, or if there is much less total innovation within the career of each intellectual. Or maybe if intellectuals who are better at doing other things besides innovation to win their political battles within intellectual or wider circles.

If intellectuals were the main source of innovation in society, such a change would be very bad news for economic and social growth. But in fact, intellectuals only contribute a small fraction of innovation, so growth could continue on nearly as fast, even if intellectuals care less about innovation.

(Based on today’s lunch with Tyler Cowen & John Nye.)

GD Star Rating
loading...
Tagged as: , ,

Rah Manic Monopolists?

The vast majority of economic growth is caused by innovation. So when it comes to long term policy, innovation is almost the entire game – whatever policy causes substantially more innovation is probably better, even if has many other big downsides.

One simple robust solution to the innovation problem would seem to be manic monopolists: one aggressively-profit-maximizing firm per industry. Such a firm would internalize the entire innovation problem within that industry, all the way from designers to suppliers to producers to customers – it would have full incentives to encourage all of those parties to put nearly the right amount and type of efforts into innovation.

Yes, even monopolists don’t have exactly the right incentives. They will tend to focus on what marginal customers want, at the expense of both lower-value customers pushed out by inflated monopolist prices, and higher-value infra-marginal customers. And when innovations can cross industry boundaries, industry monopolists may also fail to coordinate with monopolists from other industries. But still, this approach seems to get a lot closer to optimal that anything other simple policy. And if two industries had enough innovation interaction, one might just have a single firm cover both industries.

Ideally these monopolies would be global, but if not national ones might still be a big win over the status quo.

Admittedly, common intuitions don’t agree with this. For one thing we tend to think of monopolists as too lazy to innovate – it takes competition to push them out of their comfort zone. And I agree that this is a common situation for regulated utilities and government agencies. Often the employees of a monopolist tend to have enough political power to entrench themselves and resist change, at the expense of investors and customers. This is why I specified manic monopolists – we need investors to have enough power to impose their will, and we need to have  enough competition to fill these investor roles.

Yes, we also tend to be uncomfortable with the inequality and power concentration that manic monopolists would embody and require. It isn’t at all what foragers are prone to praise. But still, if innovation is important enough, shouldn’t we be willing to tolerate a lot more inequality to get it?

Added 8a 11Apr: In general, industries that are more concentrated, i.e., more in the direction of having a monopolist, have more patents, all else equal. This seems to be because they invest more in R&D. Data here, here.

GD Star Rating
loading...
Tagged as: ,

Let Re-Discovery Evade Patents

In this post I’m going to explain why patents can be a good idea, why they often go wrong today, and a way to fix that problem. And I’ll do that all in the context of a situation you should understand well: finding a shorter route to drive from home to work. (This post is ~1600 words, and so longer than usual.)

Imagine that you usually take a particular route from home to work, and some firm offers to find you a better route. You tell them your current route, and they tell you that they have found a different route that will save you thirty seconds a day, which over a year adds up to eight hours. You can inspect their route to verify their claim, but only if you agree that you can’t use that route (or anything close) unless you pay them a mutually agreeable fee. (Assume they can enforce that, by seeing your car’s driving path records. And assume you can verify their claim somehow.) You agree, inspect and verify, and then agree to pay them one hundred dollars, which is well below your value of saving eight hours of driving, and above their cost of finding the route.

This example contains an info property right: once you agree not to use their route unless you pay for it, then they own a right to your use of that route. Since the route is info, what they own is info. The prospect of owning that info right gives the firm an incentive to work to find that route. And because they must find a mutually agreeable price, their incentive to work is neither too much nor too little. An agreeable price must lie between their cost of finding the route and your added value from using it.

Now imagine that you are one of hundreds of drivers who go from the same initial home area to the same final work destination. Now this route-finding firm wants to sell a better route to all of you. But there is a problem. Once this firm sells the route to a few of of you, the others may learn of that route from these few buyers, either by being told or by following their cars. In this case the total price the firm could get from all the drivers might be much less than the sum of driver values for using the better route. Thus the firm’s incentive to work to find a better route could be too low. That is, this group of drivers could be better off it they joined together to paid the firm more to find a better route. But joining is too hard, so it doesn’t happen. Continue reading "Let Re-Discovery Evade Patents" »

GD Star Rating
loading...
Tagged as: ,

Drexler and I Again

Eric Drexler has responded to my last reply. Let me focus on one key issue. I wrote:

The main argument you gave for why a nanotech revolution could happen suddenly is that new nanotech designs could “unfold at the speed of new digital media”, i.e., we could sent such designs around fast as digital files. But if this were all that was needed for a technology to improve rapidly we should now see rapid gains in the design of novels, music, and software.

Drexler responds with quotes from his book:

Even partial upgrades of existing products that involve [merely] replacing structural components with materials that are lighter, stronger, and lower in cost can offer striking advantages. If a business today could deliver replacements for products already in use, but at lower cost and with superior performance by a few key metrics (vehicles with half the mass, electronic systems with ten thousand times greater capacity), one would expect to see rapid replacement of competing products along with the collapse of the supply chains behind them. …

Cycles of product improvement (and replacement) can be swift with an APM production infrastructure; the delays of prototyping, production engineering, and plant construction largely disappear, and production itself can be both fast and scalable. Further, for products adapted to decentralized APM-based production, distribution need not involve shipping and can more nearly resemble an Internet download.

Yes, if a broad mature nanotech ability were to drop out of the sky, then industry could use such an ability to rapidly to displace existing products with large efficiency gains. A sudden appearance of full nanotech would imply a big sudden social change. But the question here is exactly how fast would nanotech abilities appear!

Nanotech production lines take very small chemicals and incrementally bond them to each other, accumulating larger and larger assemblages, until they are big enough to be useful devices. Imagine that such production lines slowly became cheaper, faster, and more reliable, slowly adding to the menu of chemicals they could take in as basic building blocks, and slowly able to reliably create a wider range of chemical bonds at a wider range of relative block orientations. Slowly more of the steps in this production process became more fully automated, and less guided by human intervention. The slower that these improved abilities appeared, the slower would be the gains in performance and cost of the devices made this way.

Today the industries that create novels, music, and software all have the advantages Drexler foresees – they have little in the way of tech-induced delays of prototyping, production engineering, and plant construction. Production itself is both fast and scalable. Even so, those industries are not improving the efficiency of their products at rates much faster than when they suffered greatly from such delays. So the elimination of such delays is clearly not sufficient to imply much faster gains in final product value.

If there are reasons to expect nanotech abilities to improve rapidly, they must be additional reasons beyond those given above.

GD Star Rating
loading...
Tagged as: , ,

R&D Is Local, Global, But Not National

A recent Post article by Brad Plumer illustrates what is wrong with the usual research funding arguments:

One of the few things Republicans and Democrats have been able to agree on in recent years is that the government should be spending more on basic scientific research … Thanks to budget pressures and the looming sequester cuts, federal R&D spending is set to stagnate in the coming decade. …

As a result, scientists and other technology analysts are warning that the United States could soon lose its edge in scientific research — and that the private sector won’t necessarily be able to pick up the slack. “If you look at total R&D growth, including the corporate and government side, the U.S. is now at the low end … We’re seeing other countries, from Germany to Korea to China, make much bigger bets.” …

There’s a long, long list of world-changing innovations that can be traced back to federally funded R&D over the years. .. The key question here is how much of this innovation might have happened without government involvement. … Many economists agree that private companies tend to under-invest in very basic scientific research, since it’s hard for one firm to reap the full benefits from those discoveries. …

When the Congressional Budget Office reviewed the evidence in 2007, it concluded that government-funded basic research generated “substantially positive returns.” And it found that, on the whole, government R&D helped spur additional private-sector R&D rather than displace it. … The United States will soon spend less on all types of R&D as a percentage of its economy in the coming decade than countries like Australia and South Korea …

The sanguine view is that other countries are tossing more money at scientific research that will have positive spillover benefits for the entire world — including us. If China invents a cure for cancer, we all benefit. Others worry, however, that the U.S. economy could suffer from the fact that a greater share of research is happening elsewhere. (more)

Note the conflicting arguments: each small part of the world invests too little in R&D, because other parts gain without paying, but the US should fear falling behind nations that invest more. These two only makes sense together if the nation is the natural scale for innovation – innovations mostly leak away from their source within a nation, but mostly stay within each nation. The academic literature, however, suggests the natural scales are global and local – while there are gains to the world as a whole, gains are focused on related industries in the local area:

A recent body of empirical evidence clearly suggests that R&D and other sources of knowledge not only generate externalities, but such knowledge spillovers tend to be geographically bounded within the region where the new economic knowledge was created (Griliches 1992). That is, new economic knowledge may spill over, but the geographic extent of such knowledge spillovers is limited. … greater geographic concentration of production actually leads to more, and not less, dispersion of innovative activity. (more; see also and also)

While it would be great if the world could coordinate to promote R&D spending worldwide, there is little economic justification for forcing Wyoming and Louisiana, who spend 0.4% and 0.56% of GDP respectively on R&D, to pay for R&D spending in Massachusetts and New Mexico, where those figures are 5.49% and 7.65% (source), any more than the rest of the world pays for such spending. If the US government funds less R&D, it will be mainly states like Massachusetts and New Mexico that suffer, not states like Wyoming and Louisiana, relative to the rest of the world.

If R&D spending mostly helps the particular regions in which it happens, why do we pay for it at the national level? Probably because many see it as a national prestige good – people in Wyoming look good to foreigners by being in a nation where lots of impressive research happens in Massachusetts. Are they right, or is Massachusetts just getting a nice juicy transfer?

GD Star Rating
loading...
Tagged as: , ,

US laissez-faire serves a greater global good

Liberals across the developed world are very concerned by inequality within the United States, as demonstrated by global interest in the Occupy Wall Street movement. This is peculiar because poverty within the United States is less common, and less severe, than it is in most countries around the world. The US does have a high level of inequality for a developed country, but it is not extreme by global standards Unfortunately, this disproportionate concern for Americans leads to attempts to narrow income inequality that may increase poverty and inequality worldwide. [1] I’ll explain how.

The US has long been one of the most innovative countries in the world, and exports the technologies it develops everywhere it can. This is, at least in part, due to its relatively cut-throat culture and laissez-faire economic system. Low taxes and ungenerous welfare mean the benefits of working hard, taking risks and making it big, are higher in the US than most other developed countries. More importantly, weaker regulation in the US means incumbents are less protected from competition, and talented people can more easily start new firms and overturn the status quo. Conversely, daring entrepreneurs are less rewarded in countries which redistribute a great deal of wealth to the poor, or build thickets of regulation that unintentionally (or intentionally) slow down disruptive businesses and technologies. While tempering the ravages of the market may on balance improve the welfare of current Americans, doing so is likely to lead to less experimentation in science, equipment, software, art, business models and so on.

Such innovation generates enormous and enduring positive externalities because the successes are copied at low cost across the world and enrich everyone’s lives. Economic theory would predict that coordinating to stimulate more of these costly but invaluable innovations would be a major concern in international diplomacy. But for some reason it is not, and so it is up to individual countries and the people within them to take these risks on behalf of us all.

Miserly social security and weak regulation in America at most harm 0.3 billion people as long as such policies persist; any resulting innovation spillovers help the remaining, poorer 6.7 billion for centuries to come because improvements in technology persist and compound over time. We all continue to benefit from the hard work of those who developed the telephone and prompted the development of an ever-growing number of related products.

This is not to say that the Occupy movement does not have some important points; it is crucial to oppose the US’s many ‘crony capitalist’ policies which enrich the wealthy while also stifling competition and creative destruction. [2] Nor would the ideal necessarily be a minimal government; there is a prima facie case that government investment in education, R&D, natural-monopoly infrastructure, and so on, can spur technological change. Unfortunately, a higher and higher share of US government spending is going to the opposite: the military, Medicare, Medicaid, unemployment benefits and pensions. These programs are not investments in the future, and generate few if any positive spillovers for future Americans and the rest of the world. And because these programs are funded by taxes on the hard-working and successful, they blunt the incentives to invent things that help the whole of humanity.

Anyone who cares about lowering poverty and inequality, and doesn’t believe that American citizens are dramatically more important than everyone else, should think carefully before encouraging the US to follow the European economic model. If the US were go even further and slip into the sclerotic ‘extractive‘ economic model found in most of the developing world and some of southern Europe, it would be a global catastrophe. Resisting any movement in this direction is one way that heartless US conservatives are inadvertently more compassionate than they look.

Update: Turn out I’m I’m not the first person to notice this problem!

Update 2: Many people below doubt whether the US is more laissez-faire, and whether a laissez-faire model does as a general rule foster innovation. If you doubt these things, at least take away the point that whichever policies you think do stifle innovation, whichever countries they are found in, are much more harmful than they first seem. I will research and write up more on the topic of which broad economic settings lead to the most innovation in the future.

[1] The effect on wealth inequality is unclear, but the effect on ‘welfare inequality’ is likely to be negative.

[2] Though perversely, lousy healthcare policies have led to very high prices for medicine in the US, which has driven investments in new procedures and drugs, which have been borrowed by other countries. My guess is that effort probably would have been better directed at other industries.

GD Star Rating
loading...
Tagged as: , , ,

Ask Questions That Matter

I know a lot of people who think of themselves as intellectuals. That is, they spend a substantial fraction of their free time dealing in ideas. Most of these people are mainly consumers who take in ideas, but don’t seem to do much with them, at least as far as anyone else ever sees. But others are more outward facing, talking and writing about ideas, often quite eagerly.

Oddly however, most of these idea dealers seem to define themselves mostly in terms of the answers they want to promote, instead of the questions they want to answer. Most idea-oriented Facebook status updates seem like this – saying yay for some answer they agree with. The few that deal in questions also seem to be mainly promoting them, saying yay for the sort of people who like that question.

Now yes, in addition to question-answering the world also needs some answer indexing, aggregation, and yes, sometimes even promotion. And yes, sometimes the world needs people to generate and even promote good questions. But my guess is that most intellectual progress comes from people who focus on a question to which they do not currently know the answer, and then try to answer it. Yes, people doing other things sometimes stumble on a new answer, but in general it helps to be looking in order to find.

I also know lots of academics, and they all have one or more research topics. And if you ask them they can usually phrase these topics in terms of questions they want to answer. And this is a big part of what makes academics more intellectually productive. But alas, few academics are able to articulate in much detail why it is important to the world that their questions get answered. They usually just invoke some vague associations, apparently considering it sufficient that some journal is willing to publish their answers. They seem to think it is someone else’s job to decide what questions are important. Unfortunately, most academic journal articles are answering pretty uninteresting questions.

So the important intellectual progress comes down to the rather small fraction of intellectuals who both define their focus in terms of a question, rather than an answer, and who bother to think about what questions actually matter. To these, I salute, and bow. They are the sweet thirst-quenching fount of progress.

GD Star Rating
loading...
Tagged as: ,

A History Of Foom

I had occasion recently to review again the causes of the few known historical cases of sudden permanent increases in capacity growth rates in broadly capable systems: humans, farmers, and industry. For each of these transitions, a large number of changes appeared at roughly the same time. The problem is to distinguish the key change that enabled all the other changes.

For humans, it seems that the most proximate cause of faster human than non-human growth was culture – a strong ability to reliably copy the behavior of others allowed useful behaviors to accumulate via a non-genetic path. A strong ritual ability was clearly key. It also helped to have language, to live in large bands friendly with neighboring bands, to cook and travel widely, etc., but these may not have been essential. Chimps are pretty good at culture compared to most animals, just not good enough to support sustained cultural growth.

For farming, it seems to me that the key was the creation of long range trade routes along which domesticated seeds and animals could move. It was the accumulation of domestication innovations that most fundamentally caused the growth in farmers, and it was these long range trade routes that allowed innovations to accumulate so much faster than they had for foragers.

How did farming enable long range trade? Since farmers stay in one place, they are easier to find, and can make more use of heavy physical capital. Higher density living requires less travel distance for trade. But perhaps most important, transferable domesticated seeds and animals embodied innovations directly, without requiring detailed copying of behavior. They were also useful in a rather wide range of environments.

On industry, the first burst of productivity at the start of the industrial revolution was actually in the farming sector, and had little to do with machines. It appears to have come from ”amateur scientist” farmers doing lots of little local trials about what worked best, and then communicating them to farmers elsewhere who grew similar crops in similar environments, via “scientific society” like journals and meetings. These specialist networks could spread innovations much faster than could trade in seeds and animals.

Applied to machines, specialist networks could spread innovation even faster, because machine functioning depended even less on local context, and because innovations could be embodied directly in machines without the people who used those machines needing to learn them.

So far, it seems that the main causes of growth rate increases were better ways to share innovations. This suggests that when looking for what might cause future increases in growth rates, we also seek better ways to share innovations.

Whole brain emulations might be seen as allowing mental innovations to be moved more easily, by copying entire minds instead of having one mind train or teach another. Prediction and decision markets might also be seen as better ways to share info about which innovations are likely to be useful where. In what other ways might we dramatically increase our ability to share innovations?

GD Star Rating
loading...
Tagged as: , ,

Reasons To Reject

A common story hero in our society is the great innovator, opposed by villains who unthinkingly reject the hero’s proposed innovation, merely because it requires a change from the past. To avoid looking like such villains, most of us give lip service to innovation, and try not to reject proposals just because they require change.

On the other hand, our world is extremely complex, with lots of opaque moving parts. So most of us actually have little idea why most of those parts are they way they are. Thus we usually don’t know much about the effects of adopting any given proposal to change the status quo, other than that it will probably make things worse. Because of this, we need a substantial reason to endorse any such proposal; our default is rejection.

So we are stuck between a rock and a hard place – we want both to reject most proposals, and to avoid seeming to reject them just because they require change, even though we don’t specifically know why they would be bad ideas. Our usual solution: rationalization.

That is, we are in the habit of collecting reasons why things might be bad ideas. There might be inequality or manipulation, the rich might take control, it might lead to war, the environment might get polluted, mistakes might be made, regulators might be corrupted, etc. With a library of reasons to reject in hand, we can do simple pattern matching to find reasons to reject most anything. We can thus continue to pretend to be big fans of innovation, saying that unfortunately in this case there are serious problems.

I see (at least) two signs that suggest this is happening. The first sign is that my students are usually quick to name reasons why any given proposal is a bad idea, but it takes them lots of training to be able to elaborate in any detail why exactly a reason they name would make a proposal bad. For example, if they can identify anything about the proposal that would involve some people knowing secrets that others do not, they are quick to reject a proposal because of “asymmetric information.” But few are ever able to offer a remotely coherent explanation of the harm of any particular secret.

The other sign I see is when people consider the status quo as a proposal, but do not know that it actually is the status quo, they seem just as quick to find reasons why it cannot work, or is a bad idea. This is dramatically different from their eagerness to defend the status quo, when they know it is the status quo. When people don’t know that something actually works now, they assume that it can’t work.

This habit of pattern matching to find easy reasons to reject implies that would-be innovators shouldn’t try that hard to respond to objections. If you compose a solid argument to a particular objection, most people will then just move to one of their many other objections. If you offer solid arguments against 90% of the objections they could raise, they’ll just assume the other 10% holds the reason your proposal is a bad idea. Even having solid responses to all of their objections won’t get you that far, since most folks can’t be bothered to listen to them all, or even notice that you’ve covered them all.

Of course as a would be innovator, you should still listen to objections. But not so much to persuade skeptics, as to test your idea. You should honestly engage objections so that you can refine, or perhaps reject, your proposal. The main reason to listen to those with whom you disagree is: you might be wrong.

GD Star Rating
loading...
Tagged as: ,