Tag Archives: Innovation

Hard Facts: Innovation

By Robin Hanson · March 11, 2010 1:00 am · Comments (19)

More wisdom from Hard Facts:

Harvard Business Review has published at least three articles on incentive pay and organizational performance in the past decade.  … Each makes a similar point: compensating people for only individual performance creates more problems than it solves, so rewards should emphasize organizational, not just individual, performance. … Not one of these articles refers to the prior article, because HBR precludes footnotes and … discourages references to prior work. (pp.43,44)

James March … put it “Most claims of originality are testimony to ignorance, and most claims of magic are testimony to hubris.” … Knowledge isn’t generated by lone geniuses who magically produce brilliant new ideas in their gigantic brains.  This is a dangerous fiction. … Hackman was troubled because he could only find published success stories about companies that had redesigned work to be more motivating and meaningful.  Yet in his experience most redesign efforts were failing. … a study found no significant performance differences between Peters and Waterman’s “excellent” companies and a representative sample of Fortune 1000 companies.  (pp.46-48)

Tagged as: ,

Reward Robustness

By Robin Hanson · January 30, 2010 5:25 pm · Comments (31)

Me in October:

In August I reported that economic disasters seem thin-tailed, and so are not existential risks.  Even so, [a new study suggests] we should still devote more attention to them.

What makes the global economy vulnerable to economic collapse, and what can we do about it?  Anders Sandberg explores one key issue:

If we want to increase the resiliency of our society we should work on increasing substitutability.  Devices and software should be able to use alternative infrastructures.  Knowledge of what can be substituted for what should be disseminated (so no time is lost when disaster strikes in trying to figure it out). This is particularly true in areas where many different kinds of inputs are needed.

Anders is right: our economy gets a bit more vulnerable to collapse each time a particular product or service uses a specialized input, available from only a few suppliers, rather than a general and widely available input.  For example, it is easier to replace a cell phone’s battery in a jam if that phone uses AA batteries, instead of a battery built especially for that phone.

Of course as the phone example illustrates, we wouldn’t want to arbitrarily require more general inputs to everything; much of our wealth comes from a division of labor, enabled by specialized inputs.  Regulatory agencies with discretion to declare which inputs must be general sound like a disaster.  Let us instead think like economists, and ask when market (or legal or state) failures may induce overly-specialized inputs:

  • Intellectual Property – many ideas for new products or services are not pursued because investors fear that if a first mover shows the product to be viable, it will be too easy for second movers to take over the market.  Investors prefer business plans centered on a specialized input that second movers cannot easily acquire, such as a key patent.  If we could create better incentives for innovating with general inputs, our economy would be less fragile.
  • Empire Bias – Firms are reluctant to buy specialized inputs, or to sell specialized products, or fear of being subject to extortion once two firms have become dependent on one another.  This fear makes firms either avoid specialized inputs, or merge such matched activities into a single firm.  Since manager empire-building already seems to make firms too large, ways to discourage this, such as enabling raiders, would also make our economy less fragile.
  • Crisis Metrics – Most contracts to buy inputs do not explicitly condition on collapse cues.  For example, the price we pay for electricity or phone service does not change when a collapse looms, even though we are willing to pay more to ensure continued service.  Such providers thus have insufficient incentives to ensure continued service in a crisis.  If we could publish independent metrics that flagged crisis situations, so that contracts could condition prices on such metrics, suppliers could have better incentives to avoid specialization that risked their reliability in a crisis.
  • Missing Standards – Firms often prefer incompatible standards in order to increase customer lock-in and reduce competition.  Policies that discourage incompatible standards would also reduce economic fragility.

While there are many ways to avoid specific disaster scenarios, the main general approaches I know are refuges, to directly protect against the worst case, and the robustness rewards above, which counter-act known problems that distort our world economy toward fragility.

Tagged as: , ,

Enable Raiders!

By Robin Hanson · January 28, 2010 12:25 am · Comments (52)

A robust, properly functioning market for corporate control is vital to the performance of a free-enterprise economy with public corporations. … Shareholders face an array of collective-action problems that prevent them from coalescing to deal with bad management. … The market for corporate control is the only known antidote for all of these collective-action problems.

More here.  It is hard to exaggerate how very important this is – we’d be so much richer now if it it had long been easier for raiders to take over public firms.  We now put many inexcusable obstacles (listed below) before such raiders, including disclosure, super-majority, poison pill, and merging delay rules.  In fact,

Gains to target shareholders average 40–50 percent above the prices at which target firms’ shares traded immediately prior to the takeover. … [But on] returns to bidders, … studies have shown negligible gains.

So raiders have to wait until they can boost a firm’s profits by ~50% before it is worth trying a takeover!  Imagine our progress if raiders could instead win by improving a firm by only 5% (or 0.5%).  Raiders would replace overpaid and out-of-touch CEOs, the new guys would clean house in upper management, and that would induce better incentives and organization all the way down the line.  It seems to me a complete no-brainer to seek to eliminate all takeover obstacles, and to seek even more ways to encourage raiders.

Amazingly, the main anti argument here is that takeovers might hurt other “stakeholders” such as employees, the environment, or civic pride.  Apparently we must protect over-paid CEOs because they are our heroic public-spirited defenders of the little guy against greedy shareholders.  Where oh where would little folks be if not for protection from CEOs? Continue Reading "Enable Raiders!" »

Tagged as: , ,

AI In Far And Near View

By Robin Hanson · January 15, 2010 8:00 pm · Comments (29)

Looking far into the distance, your eyes often see a sharp boundary between earth and sky. But if you were to travel to that furthest part of earth your eye can now see, you may not find a sharp boundary there.  Far mode simplifies, not only suppressing detail, but making you think detail is unimportant.  If you saw two ships battling on the horizon, you’d be too tempted to expect the bigger ship to win.

From a distance, future techs also seem overly simple and hence disruptive.  If in 1672 you had seen Verbiest’s steam-powered vehicle, you might have imagined that the first nation with cheap capable cars could conquer the world.  After all, they might build tanks and troop transports, and literally run circles around enemy troops.  But while having somewhat better cars did sometimes help some nations, it was far from an overwhelming advantage. Cars slowly gained in cost, ability, and number; there was no particular day when one nation had vastly more capable cars.

Similar scenarios have played out for a great many techs, like rockets, radios, lasers, or computers.  While one might imagine from afar that the difference between none of a tech and a “full” version would give a dramatic advantage, actual progress was more incremental, reducing team differences in tech levels.  Overall differences in wealth and tech capability were usually better explanations for the advantages some nations had over others.

The first far images of nanotech were also simple, stark, and disruptive.  They imagined one team could quickly and reliably assemble, from cheap plentiful feedstocks, large quantities of a large set of big atom arrangements, while other teams had near-current capabilities.  In this scenario, the first first team might well conquer the world, or accidentally destroy it via “grey goo.”

The nanotech transition seems less disruptive, however, if we see more detail, and imagine a series of incrementally more capable assemblers, able to build larger objects, faster, more reliably, from more types of feedstocks, using more kinds of local chemical bonds, at a wider range of assembler-assembled angles, and so on.  After all, we already have ribosome assemblers, with a very limited range of feeds, bonds, angles, etc.  Each new type of assembler would lower the cost of making a new class of objects.

Far images of artificial intelligence (AI) can also be overly stark.  If you saw minds as having a single relevant ”intelligence” parameter, with humans unable but machines able to change their parameter, you might well rue the day a machine whizzed past the human level.  Especially if you thought God-levels might follow a month later, and if you thought this parameter’s typical value was what determined a team’s power. Continue Reading "AI In Far And Near View" »

Tagged as: , , ,

Diffusion By Learning

By Robin Hanson · January 15, 2010 6:00 am · Comments (14)

Innovation is terribly important; it is why we are rich.  But how exactly does innovation happen?  An awful lot of innovation seems to happen via diffusion, i.e., spreading one at a time via a network of who knows who.  A recent AER paper considers three possible diffusion processes:

[Consider] situations where the [innovation diffusion] dynamics are driven from within; that is, there are internal feedback effects from prior to future adopters.  …
1. Contagion. People adopt when they come in contact with others who have already adopted; that is, innovations spread much like epidemics.
2. Social influence. People adopt when enough other people in the group have adopted; that is, innovations spread by a conformity motive.
3. Social learning. People adopt once they see enough empirical evidence to convince them that the innovation is worth adopting, where the evidence is generated by the outcomes among prior adopters. Individuals may adopt at different times due to differences in their prior beliefs, amount of information gathered, and idiosyncratic costs.

Social learning is consistent with the observed pattern of diffusion of hybrid corn, although we cannot say that it was the sole explanatory factor. We can also say with some confidence, however, that inertia and contagion were probably not the sole explanatory factors, and given Griliches’s findings neither was social influence.

I’ve been watching this innovation process up close for several years, as prediction markets slowly spread through the corporate world.  One might hope that we had central technology experts, and once they approved a new tech, everyone would adopt it.  No way.  People don’t believe something works until they’ve seen it work in something pretty close to their situation.  A media story about something far away just doesn’t say much.

Tagged as:

Innovation Levers

By Robin Hanson · January 14, 2010 6:00 am · Comments (20)

Innovation is terribly important; it is why we are rich.  We know innovation is caused by economic activity, but if we knew which activities more promoted innovation, we’d want to subsidize them.  Three recent papers suggests we should prefer many small industries each dominated by a few firms, and prefer private research in processes of capital intensive industries, especially chem/drug and comp/electronics.

First, a review article says R&D spending is more effective for process over product, private over public, and basic over applied:

A distinction is made between R&D directed toward invention of new methods of production (process R&D) and R&D directed towards the creation of new and improved goods (product R&D). … Most studies find a higher rate of return for process as compared to product R&D.  … A lower rate of return (or a less significant one) is reported by many authors to public rather than private R&D, both at the private and social level … A higher return is also generally reported on basic R&D as opposed to applied or development. … Social returns, these are almost always estimated to be substantially greater than the private returns.

Second, it seems that larger firms are just less efficient at research, especially in drugs and electronics:

While the empirical literature fails to generate a consensus view, a number of studies report that the patent yield from R&D expenditures falls with firm size.

Third, Shawn Miller, a student in my I/O class last semester, did a great paper predicting patents by industry.  He found more (patent) innovation in industries that are smaller, more capital intensive, and more concentrated among a few firms.  Chemical, computer, drug, and electronic industries were especially innovative.  Here is Miller’s main table:

RnD

Tagged as:

Hail The Unknown Explorer

By Robin Hanson · November 28, 2009 3:00 pm · Comments (20)

If you can make one heap of all your winnings
And risk it on one turn of pitch-and-toss,
And lose, and start again at your beginnings
And never breath a word about your loss; …
Yours is the Earth and everything that’s in it,
And – which is more – you’ll be a Man my son!
Kipling, If (or a damn fine woman)

This thanksgiving weekend, I give thanks and my sincerest admiration to the unknown explorer (of whatever space), over the unknown soldier or “successful” trail-follower.

Yesterday jorge commented:

We remember the flashy outliers. But most of those with “interesting” ideas also had fairly standard high-end resumes. For every independent thinker who wins the Nobel or makes a billion, there are hundreds who never got a top job or were denied tenure or had their projects rejected.

He’s right, I’m lucky.  For every luck-out like me who took an independent thinking strategy and achieved a bit of success, many others equally able have failed.  A hearty hail to them!!

Sure most unknown explorers weren’t focused on being altruists, any more than most unknown soldiers.  Many just couldn’t help themselves.  Nevertheless, we owe them gratitude, more than to unknown soldiers or grade-grubbing by-the-book intellectuals.  Soldiers, after all, help one side in a war at the expense of another side.

And when grade-grubbers compete to gain prestigious positions and then play it safe following current fashions, it is not clear what difference they make.  They waste vast resources in a grueling competition, but how different would things be had another grade-grubber beat them out to follow fashion in their stead?

In contrast, successful explorers of new intellectual ideas, business prospects, etc. displace few competitors and gain to themselves only a bit of the benefits we all get.  Let us be grateful to all explorers, both successful and not; even failures deserve honor for valiant attempts.

Tagged as: ,

Academia’s Function

By Robin Hanson · July 10, 2009 6:00 am · Comments (70)

Art fans often say art makes people more creative and peaceful, and sport fans often say sport makes people healthier and better at teamwork.  Some claim that these idealistic reasons are not only why art and sport should be subsidized, but why in fact donors actually give to art and sport charities.  I find it far more plausible that donors prefer to affiliate with other donors and with prestigious artists and athletes, and that citizens subsidize such things to make themselves look good as a group. The idea that cities build statues to mainly promote world peace and creativity, or that nations subsidize Olympic teams mainly to promote teamwork and exercise, seem a bit hard to swallow.

In a post titled “Another reason I’m glad I’m not an economist” Andrew Gelman took issue with my saying “academia is primarily an institution for credentialling folks as intellectually impressive”:

Granted, Robin is far from a typical economist. Nonetheless, that he would write such an extreme statement without even feeling the need to justify it (and, no, I don’t think it’s true, at least not in the “academia” that I know about) . . . that I see as a product of being in an economics department.

Now I have posted many times here on my view that academia functions mainly to signal, much like art and sport. (See here here here here here here here here here.).  But for Andrew’s sake, let’s lay out the argument more systematically. Continue Reading "Academia’s Function" »

Tagged as: , ,

Do The Smart Help More?

By Robin Hanson · July 6, 2009 6:00 am · Comments (30)

Each new person who exists either helps or hurts everyone else.  My best estimate is that new folks on average help, but I can’t be very sure.  Assuming that new folks help on average, we can wonder: who helps more?

A first guess is that helping is roughly proportional to productivity.  That is, we help by making the world economy more productive overall, so those who produce more help more.  (This roughly captures innovation externalities and global scale and scope economies.) If so, it would not help to subsidize some of our efforts if that came at the expense of taxing the efforts of similarly productive others.  But it might help to subsidize creating new people.

A simple correction to this first guess is to consider charity, under the assumption that charitable giving helps others more than random spending.  Since the poor seem to donate a larger fraction of their income to charity, this would suggest that the poor help others disproportionately, relative to their productivity.

We might also wonder: do smart folks tend to help others more, relative to their productivity?  Last week Linda Gottfredson and Garett Jones surprised me by claiming that this was so, saying that smart folks contribute disproportionately to innovation, and thinking this was obvious.

Gottfredson called the low IQ “dependents” and the high IQ “innovators”; Jones pointed me to smart folks’ disproportionate contributions to patents and startups.  I told Jones these are indicators of the high tail of innovation, not the median; his argument was like saying that rich folks tend give a larger proportion of income to charity because most charity foundations are started by rich folk.

One might argue that since dumb folk just follow routines devised by smart folk,  change must come from the routine makers.  But change also arises from mistakes in following routines, and the dumb may make more mistakes.

The smart may also on average do more wasteful arms racing and signaling, especially affiliative signaling.  The smart seem to dominate musicians, athletes, artists, writers, professors, doctors, lawyers, soldiers, fashion designers, and so on, out of proportion to their compensation.  If these activities tend to contribute proportionally less to overall world productivity, then smart folks would seem to help proportionally less.  They can’t exactly be blamed for filling a slot someone else would fill anyway, but they can’t exactly be praised either.

Added July 9: Garett Jones tells me he doesn’t emphasize the smart as innovators; he suggests the smart help mostly by promoting cooperative institutions; John Nye suggests to me that the smart hurt their local associates by being more worldly and cosmopolitan, and so less loyal to local concerns.

Tagged as: ,

Growth Mode Jump Example

By Robin Hanson · June 13, 2009 3:00 pm · Comments (13)

I’ve talked here before how history can be seen as a sequence of periods of steady exponential growth, separated by a few sudden jumps to new modes.  A new paper in Science offers a nice concrete model of how a new mode can be triggered by an old mode reaching a particular level.   In this case the new mode is humans using culture to share and improve complex behavior like art and tool construction.   The model says the new mode was not possible until humans were dense enough so that skill improvements from groups copying each other could overcome the tendency of a lone group’s skills to devolve.  From Science Daily:

“Our paper proposes a new model for why modern human behaviour started at different times in different regions of the world, why it disappeared in some places before coming back, and why in all cases it occurred more than 100,000 years after modern humans first appeared.  By modern human behaviour, we mean a radical jump in technological and cultural complexity, which makes our species unique. This includes symbolic behavior, such as abstract and realistic art, and body decoration using threaded shell beads, ochre or tattoo kits; musical instruments; bone, antler and ivory artefacts; stone blades; and more sophisticated hunting and trapping technology, like bows, boomerangs and nets.” …

[They] found that complex skills learnt across generations can only be maintained when there is a critical level of interaction between people. Using computer simulations of social learning, they showed that high and low-skilled groups could coexist over long periods of time and that the degree of skill they maintained depended on local population density or the degree of migration between them. Using genetic estimates of population size in the past, the team went on to show that density was similar in sub-Saharan Africa, Europe and the Middle-East when modern behaviour first appeared in each of these regions. Continue Reading "Growth Mode Jump Example" »

Tagged as: