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Book Notes: “How Innovation Works” by Matt Ridley

Summary

How Innovation Works by Matt Ridley (2020) offers a systematic examination of this incredibly important but poorly understood phenomenon. What is innovation? According to Ridley, it is much more than invention (something often mistaken for innovation). Invention is the act of discovering an idea; it is merely a beginning, an inception point. Innovation is much more, it is when the invention is taken into the world and made practical. Innovation is the creative reconfiguration of multiple inventions and ideas into something new. Innovation is the act of fully exploring the consequences of that new thing and disseminating and integrating it into society and general use.

How Innovation Works is effectively two books in one. The first part, chapters 1-7, is a history of innovation through detailed case studies. This part of the book lays the groundwork for the broader ideas on innovation that follow. Ridley describes important breakthroughs and the persistent individuals behind them. Key areas of innovation like energy, public health, transportation, food, communication and computers are explored chronologically. In the case of energy, the reader learns about the complicated evolution of steam power starting with the Newcomen engine (1712) and the continuous evolution of energy technologies into the present day with unexpected developments like hydraulic fracturing (aka “fracking”). Through these stories, the reader starts identifying repeating patterns of innovation. One important pattern: the recombinant nature of innovation and the under-appreciated role of antecedents and precursors.

In the second part, chapters 8-12, Ridley discusses important facets of innovation itself: core characteristics of the phenomenon, economic considerations, the impact of public policy decisions, ways to foster or hinder innovation, and the positive and negative repercussions of innovation. This part of the book, particularly chapter 8, contains the real “meat” of Ridley’s argument. Ridley’s decision to front-load the book, in the first part, with dense historical narrative pays off in these chapters. Armed with specific historical examples, the reader is better equipped to appreciate Ridley’s arguments about the characteristics, benefits, and purpose of innovation.

Innovation has led to an endless list of practical benefits for humanity, but our relationship with innovation is complicated. On one hand, we in the present-day enjoy the fruits of innovation: improved productivity, abundant and affordable goods and services, and longer lifespans. On the other hand, we sometimes respond with great hostility towards innovation. Consider the conflicted reception and history of GMOs, artificial intelligence, gene editing; innovation frequently upsets the status quo and precipitates unsettling and unexpected changes and trade-offs. It should come as no surprise that Ridley, who previously wrote The Rational Optimist, takes a decidedly benign, but not uncritical, view of capitalism, technology and human progress. Ridley sees innovation as the path to greater opportunity and equality, not less: “To the extent that incomes appear to be stagnating and opportunities for social mobility drying up, the cause is not too much innovation, but too little.”

This is a dense book; I say that as a compliment. Innovation is complex and that’s one of Ridley’s core points. The popular myth of the “great man” is largely that, a myth. The reality, which makes for less compelling narrative, is that innovation is messy, incremental, accidental, nonlinear, and largely a team sport. Yes, there are clear winners in the history of innovation—Thomas Edison, Alexander Fleming, Alexander Graham Bell—but Ridley encourages readers to look at the underlying dynamics and precursors that brought about these innovations. This perspective is both illuminating and educational and made me appreciate the incremental, experimental, creative, and collective nature of human progress all the more.

Pros: The historical chapters are wonderful and taught me a great deal of unknown history (e.g. Lady Mary Pierrepoint and Malcom McLean). Readers wanting an abbreviated version of this book could read chapters 8 and 9 and then select one or two of the historical chapters and still get tremendous value from this book.

Cons: I enjoyed the historical chapters, but they do run long, the core lessons are repetitive, and there’s a great deal of (interesting) detail that is unnecessary to appreciate Ridley’s arguments in the second half of the book.

Verdict: 8/10


Highlights

Introduction: The Infinite Improbability Drive

  • “Innovation, like evolution, is a process of constantly discovering ways of rearranging the world into forms that are unlikely to arise by chance—and that happen to be useful.”

  • “Innovation is potentially infinite because even if it runs out of new things to do, it can always find ways to do the same things more quickly or for less energy.”

  • Innovation is more than invention:

    • Innovation is when an invention “catches on” when it becomes practical, affordable, reliable, and ubiquitous.
    • Innovation is when invention becomes worth using.
    • Edmund Phelps (economist): “A new method or new product that becomes a new practice somewhere in the world.”
  • Innovation often involves a new combination of ideas.

  • Example: Sliced bread

    • This innovation required the confluence of several technologies/inventions.
    • Slicing of the bread was only part of the problem.
    • Bread needed to be packaged simultaneously to prevent the product from going stale.
    • Distribution: Traditional bakeries were not interested in this innovation, but large groceries were.
  • “Serendipity plays a big part in innovation, which is why liberal economies, with their free-roving experimental opportunities, do so well. They give luck a chance.”

  • Innovation is a “team sport.” It isn’t the result of a single person but of the efforts of different individuals, sometimes working in concert, sometimes working independently. In some cases a single person earns all the credit, but the real history of innovation is far more complex.

  • Innovation enables efficient exchange of services or work.

    • Example: Modern people can work for a fraction of a second to afford to turn on an electric light for an hour (generations ago, this same light would have required a day’s work or more).
  • Innovation is incremental and gradual. Ridley believes the notion of rapid “disruptive” innovation is misleading.

  • The Amara hype cycle: “We underestimate the impact of innovation in the long run but overestimate it in the short run.”

  • Innovation is often stymied by the status quo. Vested interests in tradition generate friction that slows down and even thwarts innovation.

Chapter 1: Energy

  • “The first controlled conversion of heat to work” is a key breakthrough that fueled the Industrial Revolution.

  • “The purpose of a power station is to turn the heat of combustion into the pressure of water expanding into steam and thence into the movement of the blades of the turbine, which moves inside an electromagnet to create the movement of electrons in wires.”

  • Before 1700 people used two kinds of energy:

    • Heat (burning of wood, coal).
    • Work (muscle powers, beast of burden, water wheels and windmills).
    • The two types of energy were separate: Heat did not perform work and work did not generate usable heat.
  • The story of modern energy innovation is a story of iterative, incremental breakthroughs:

    • Newcomen engine: The first practical device for harnessing steam heat into work. Developed by Thomas Newcomen. This was an accidental breakthrough: Injection of cold water into the cylinder.

    • James Watt developed a method of converting the up-and-down motion of the piston into a circular motion (e.g. turn a shaft or crank).

    • Thomas Edison and the lesson of persistence and experimentation.

      • His innovation was the business of innovation (though he gets too much credit for singular innovations).
      • Tested over 6000 plant materials to uncover the optimal lighting filament.
    • Charles Parsons: Important figure in the development of the steam turbine, a device that spins on its axis. Used to power naval vessels.

    • “Parsons was just one of many people along the path who incrementally devised and improved the machines that made electricity and power. It was an evolution, not a series of revolutions. The key inventions along the way each built upon the previous one and made the next one possible.”

    • Example of some of interconnected inventions:

      • 1800: Alessandro Volta made the first battery.
      • 1808: Humphrey Davy made the first arc lamp.
      • 1820: Hans Christian Oersted made the connection between electricity and magnetism.
      • 1831: Michael Faraday and Joseph Henry made the first electric motor and the first generator.
      • 1832: Hippolyte Pixii made the first dynamo.
      • 1867: Samuel Varley, Werner von Siemens and Charles Wheatstone made the full dynamo-electric generator.
      • 1870: Zenobe Gramme made a direct-current generator.
  • Nuclear power as a cautionary tale.

    • The only innovative energy source of the 20th c. with significant scale (wind and solar still supply less than 2% of global energy).
    • Ridley posits that nuclear energy failed because of a lack of opportunities to experiment.
    • “The problem is cost inflation. Nuclear plants have seen their costs relentlessly rising for decades, mostly because of increasing caution about safety.”
    • “The industry remains insulated almost entirely from the one known human process that reliably pulls down costs: trial and error.” In part, this is because nuclear errors are cataclysmic.
  • Natural gas as an example of innovation turning conventional wisdom on its head.

    • Experts believed inexpensive natural gas would be exhausted in the early 2000s.
    • Serendipitous discovery led to slick-water hydraulic fracturing in the 1990s. This allowed companies to extract gas and oil from “tight rocks” (which meant output from previously unknown or unusable sources).

Chapter 2: Public Health

  • Lady Mary Pierrepoint an early champion of viral inoculation in 18th century London during the smallpox epidemic.

    • She did not invent inoculation nor was she the first to introduce the practice (which originates in the Ottoman Empire).
    • Per Ridley, she was an innovator not an inventor. Her goal was to popularize and spread the practice.
    • “Innovation proves to be gradual and to begin with the unlettered and ordinary people, before the elite takes the credit.”
  • Louis Pasteur demonstrated how and why vaccination worked in the 19th century.

    • “Vaccination exemplifies a common feature of innovation: that use often precedes understanding. Throughout history, technologies and inventions have been deployed successfully without scientific understanding of why they work.”
    • Pasteur’s work with fermentation led to the germ theory of disease. Growth of bacteria in nutrient broths comes from biogenesis not spontaneous generation.
    • Pasteur fed chickens a cholera-infected chicken broth and then injected them (once recovered) with a virulent cholera strain. The chickens were immunized against the stronger strain.
  • Dr. John Leal recommended dripping chloride of lime (disinfectant) into the Jersey City water supply in 1908.

    • Leal wasn’t the originator of this idea, he heard about similar experiments in England during earlier typhoid outbreaks.
    • This innovation story has a confusing history (like many others).
  • Pearl Kendrick and Grace Eldering: Developed a reliable test for pertussis (a ‘cough plate’ that would grow pertussis bacterium if the patient was infected) as well as a vaccine.

  • Alexander Fleming

    • Penicillin: example of serendipitous and accidental discovery. Bacterial culture contaminated with penicillium mold that killed staphylococci.
    • When Fleming lost interest in penicillin (because topical application was ineffective), other researchers, continued the work by experimenting with injection (Chain and Florey).
    • Florey and Heatley kick-started American penicillin production and the discovery of higher-yielding varieties of penicillium mold.
    • Fleming returned to the limelight following Florey and Heatley’s innovations and received the lion’s share of public attention.
    • Lesson of penicillin: scientific discovery is often followed by significant practical efforts to make it a useful innovation.

Chapter 3: Transport

  • The locomotive

    • Before the 1820s, humans traveled no faster than the speed of a galloping horse. After 1820 it became common to travel 3-4 times that fast for long periods of time.
    • Stationary engines pulling coal-wagons uphill preceded automotive engines.
    • The Napoleonic wars created unprecedented demand on horses and hay. The mining industry was forced to explore less expensive alternatives.
    • Locomotion (1825) was the first train designed to haul large numbers of people.
    • Locomotives saw incremental improvements in subsequent decades.
  • Steam ships

    • The screw propeller replaces the paddle wheel in the late 1800s.
    • Steam overtakes sailing technology which peaks in the 1860s with fast clipper ships.
    • “The story of the screw propeller shows all the usual elements of an innovation: a long prehistory, simultaneous breakthroughs by two rivals, then incremental evolution over many years.”
  • Internal combustion engine

    • External combustion was dominant in the 19th century (for steam power) and was the main competitor to internal combustion vehicle in the form of steam-powered cars (like the Stanley Steamer).
    • Who invented the motor car? “There is no simple answer. Ford made it ubiquitous and cheap; Maybach gave it all its familiar features; Levassor provided crucial changes; Daimler got it running properly; Benz made it run on petrol; Otto devised the engine’s cycle; Lenoir made the first crude version; and de Rivaz presaged its history.”
  • Rudolf Diesel: Started from scientific principles. Wanted an internal-combustion engine with 100% efficiency (heat to work without temperature change).

    • In 1887, he achieved double the efficiency of the best gasoline engines.
    • Today diesel powers almost all the world’s cargo and shipping vessels. Road and rail transport of goods as well as farm tractors and equipment runs on diesel.
  • The Wright Brothers

    • Samuel Langley’s failed partnership with the US government to build a plane for the War Department.

    • “Langley had done everything wrong—spending lots of money, depending on the government, consulting few other people, building a fully fledged device from scratch, rather than inching incrementally...”

    • “The Wrights had done everything right. As experienced bicycle makers and diligent craftsmen, they had systematically worked step by step through the challenges necessary to solve the problem of powered flight.”

      • They consulted a German glider designer.
      • They studied birds obsessively.
      • They built numerous test kites and gliders to study aerodynamics.
      • They built a wind tunnel in which to test models and understand lift and drag.
  • Innovations in air safety and accidents:

    • Accidents are tragic but also represent opportunities to learn and incrementally improved newly discovered design shortcomings or develop new optimizations to avoid these problems.
    • Low-tech innovations like safety checklists and crew member cross-checks are powerful ways to make significant improvements [reminds me of the importance of hand-washing in medicine—low tech but huge impact]
  • Thomas Kelleher of Southwest innovated by creating a different experience of air-travel: inexpensive, no-frills flights that were fun.

Chapter 4: Food

  • Potatoes: Highly productive crop. Potatoes yield 3x the energy per acre as grain.

    • Potatoes are a case study on the difficulty of introducing and gaining acceptance for a new innovation.
    • Introduced to Europe from the New World, potatoes were initially forbidden by clergy because they are not mentioned in the Bible.
    • During wars in the 1700s and 1800s, potatoes had better survivability when farmland was trampled by military forces.
    • Antoine-Augustin Parmentier was an early proponent of the potato as a solution to French famines.
  • Fertilizer: The fixation of atmospheric nitrogen to ammonia is a key innovation. It helped overcome famine and make agriculture far more productive.

    • Nitrogen was in high demand for gunpowder and explosives.
    • During the 1800s, natural deposits of guano and nitrate-rich salt deposits were the primary source for nitrogen-rich fertilizer.
    • Fritz Haber (1909) solved the fixation problem and identified a reliable catalyst.
    • Carl Bosch turned Haber’s invention into a practical innovation by scaling ammonia production, discovering new catalysts, and setting up distribution of the product.
    • “It was synthetic fertilizer that enabled Europe, the Americas, China, and India to escape mass starvation and consign famine largely to the history books.”
  • Dwarf Wheat:

    • Dwarf wheat from Japan was crossbred with other varieties of wheat to create hardier plants that could survive harsher weather conditions and plant diseases.
    • This was an iterative process and led to higher yields (along with fertilizers).
  • Insecticides:

    • Insect-resistant crops are another key innovation for improved crop yields.

    • Bacillus thuringiensis (Bt): bacteria that kills caterpillars. Sold in the 1930s as Sporine (still on the market as Dipel, Thuricide, and Natural Guard). Organic farmers use it because it is natural (harmless to humans and mammals).

    • Genetically modified crops: Tumor inducing (Ti) plasmids, a chromosome inside a bacterium known as Agrobacterium tumefaciens, can be manipulated to insert new genes (from a different organism) into the target plant.

      • Initial use for this innovation was to insert a Bt gene into plants. The insecticidal protein within the plant would kill caterpillars that consumed it.
      • Insect-resistant plants are now widely used in America. Bt crops don’t need additional spraying which is beneficial to the surrounding ecosystem.
  • Gene editing:

    • CRISPR: A family of DNA sequences that can be manipulated via genetic editing.
    • CRISPR can be used to introduce beneficial genes into bacteria, plants, and living organisms.
    • Example: Argentinian scientists used CRISPR to cut the polyphenol oxidase gene in a potato. The result: the potato doesn’t turn brown when cut.

Chapter 5: Low-Technology Innovation

  • The numbering system:

    • In Europe, modern numerals, arithmetic and zero made mathematics more practical (aka Arabic notation) than Roman numerals.

    • Arabic numerals have their origins in India.

    • Two key features of modern numerals:

      • Numerical position indicates size. Example: 90 is ten times bigger than 9.
      • This positional system works in decimal systems when one of the numerals stands for nothing (zero).
    • This system made multiplication easier, algebra manageable, and accounting far easier.

    • Fibonacci helped spread these Arabic innovations in Europe, showing merchants how to employ them for commercial use.

    • Brahmagupta: Indian astronomer circa 628: “A debt minus zero is a debt. A fortune minus zero is a fortune. Zero minus zero is a zero. A debt subtracted from zero is a fortune. A fortune subtracted from zero is a fortune. The product of zero multiplied by a debt or fortune is zero.”

  • The water trap:

    • The S-bend or U-bend in pipes prevents bad smells, especially in homes, from entering via the pipe.
    • Alexander Cumming: inventor of the S-bend.
  • Corrugated iron:

    • Henry Robinson Palmer: invented it in 1829 as a means for creating cheap but strong shelter.
    • The grooving confers great strength and rigidity vs. a flat sheet. A sheet of metal 1/10 of an inch thick can sturdily span 18 feet.
  • Shipping containers:

    • Pre-1950s ocean shipping was slow and inefficient. Ports were a key bottleneck and accounted for half the cost of importing/exporting (due to loading and unloading of goods).

    • Malcom McLean had the idea in the 1950s to standardize containers for easy loading and unloading of shipping vessels and their goods.

      • An early experiment yielded a cost of 16 cents/ton vs. the standard cargo rate of $5.83/ton.
  • Wheeled baggage:

    • Robert Plath: Northwest airlines pilot who invented the Rollaboard (1987).
    • Lesson: You cannot innovate before the world is ready. Previous attempts to innovate wheeled luggage failed due to airport design, curbside porters, staircases, and more.
  • Restaurants:

    • Restaurants are highly competitive and must constantly adapt to survive or stand out in a crowded market.

    • The importing of foreign cuisines is a big innovation and trend over the past half century.

    • Stylistic fusion is another path of innovation.

    • Per Schumpeter: “Innovation combines components in a new way.”

    • Thought experiment on whether innovation can continue indefinitely:

      • Assume 10 kinds of meat, 10 kinds of spice, 10 different preparations.
      • This results in 10,000 possible dishes.
      • When you work with a realistic set of variables and combinations, the possibilities are infinite.
    • “Those who have studied how chefs innovate report that they follow a process of feed-forward trial and modification, experimenting with variations on a central idea till they hit on a dish that they think will win the approval of customers.” [Sounds similar to how comedians work.]

    • Ray Kroc innovated through the franchise model that emphasized uniformity and affordability.

  • The sharing economy:

    • Efficient match-making between supply and demand for idle resources.

      • Example: People with spare time and room in their automobile can drive others (ride-sharing).
      • Example: People with extra space in their home can rent out a bedroom (AirBnB).
    • “The sharing economy is a form of more from less, or growth by shrinkage—economic enrichment by using resources more frugally. In the case of car sharing, many private vehicles stand idle for 95 percent of their lives; why not use them a bit more.”

Chapter 6: Communication and Computing

  • Samuel Morse was a middle-aged painter before he invented the telegraph (1838).

    • Idea sprang from a serendipitous conversation on a train ride. Passengers were discussing electromagnetic discoveries and one passenger asked if an electric current could travel down a long wire unimpeded (answer: it can do so quickly).
    • Per Ridley: Morse’s real achievement was navigating political and practical obstacles.
    • “There was widespread utopian hope about the telegraph’s impact on society, as there would be 150 years later for the internet.”
  • Alexander Graham Bell and the telephone (1878).

  • Guglielmo Marconi and the radio.

    • Marconi read Heinrich Hertz’s works on electromagnetic waves (Hertz saw no clear application for them). Marconi determined that wireless telegraphy was one possibility.
    • Marconi didn’t see the commercial possibilities of broadcasting at first. His primary aim was wireless telegraphy as a 1:1 communication medium.
  • The complicated history of the computer.

    • Many people over generations made key contributions to the incremental development of computers. Modern personal computers are merely a single, visible point in this evolution.
    • Essential characteristics of a computer (to distinguish it from a calculator): Must be digital (i.e. binary), electronic, programmable, and general purpose (i.e. carry out any logical task).
    • ENIAC (1945) which used 17,000 vacuum tubes is an early computer. It wasn’t binary, but decimal.
    • Colossus (1943) was used to crack German codes. It was single-purpose.
    • Alan Turing’s ‘On Computable Numbers’ (1937) a paper that lays out the logical capabilities of general purpose computers.
    • Claude Shannon (1937) noted that Boolean algebra could be realized through electrical circuits. ‘And’ could be two switches in sequence. ‘Or’ could be two switches in parallel.
    • Jonny von Neumann (1945) set forth important ideas about the structure of computer systems, particularly that programs should be stored in memory alongside data.
    • Mark 1 (1944) a non-electronic computer that influenced Neumann and others.
    • Grace Hopper whose contributions were crucial to program subroutines, compilers, software and natural-language programming.
    • Charles Babbage designed complex mechanical calculators in the 1840s and Ada Byron presaged many concepts of modern computers including software and subroutines.
    • The Jacquard loom: a textile tool that used a kind of program—cards that automated a wave sequence or pattern.
  • “ENIAC was not so much invented as evolved through the combination and adaptation of precursor ideas and machines.”

  • Moore’s Law: “The complexity for minimum component costs has increased at a rate of roughly a factor of two per year.” (effectively, the number of transistors on a semiconductor chip were doubling every two years).

    • Moore’s Law continued for nearly 50 years.
    • Today the atomic limit is nearly reached. Transistors are less than 100 atoms across and chips contains billions of transistors.
  • Silicon Valley as an innovation attractor:

    • Egalitarian and open corporate cultures.

    • Collaboration and cross-pollination of ideas.

    • Innovation creates a kind of snowball effect or domino effect. Each innovation begets a succession of innovations.

      • Example: microprocessors (1971), video game systems (1972), TCP/IP (1973), Xerox Parc’s Alto GUI computer (1974), the Apple I (1975), the Cray 1 supercomputer (1976), the Atari 2600 (1977), the laser disc (1978), the worm virus (1979), the Sinclair ZX80 (1980), the IBM PC (1981), Lotus 123 (1982), CD-ROM (1983), etc.
  • For every innovation that survives, there are many failures and dead ends.

    • Innovation proceeds in fits and starts, by trial and error.
  • Search engines and social media both follow the evolutionary path typical of innovation.

    • “Incremental, gradual, serendipitous and inexorable; few eureka moments or sudden breakthroughs.”
  • Artificial intelligence

    • “The focus of artificial intelligence has shifted from the ‘expert system’ approach in which clever people try to impart their knowledge to computers, to a learning approach in which programs find ways to solve problems themselves.”
    • AI is driven by three key developments: new software (neural networks), new hardware (cheaper/faster/plentiful compute power), and ample data.

Chapter 7: Prehistoric Innovation

  • “Before the last two centuries, innovation was rare. A person could live his or her whole life without once experiencing a new technology: carts, ploughs, axes, candles, creeds and corn looked the same when you died as when you were born.”

  • The rate of change was slower and more sporadic the further back you go in history.

  • Farming changes humanity from hunter-gatherers to landscape-altering, higher density living.

    • Early river valley civilizations like the Nile, Indus and Yangtze became man-made agricultural ecosystems.
    • Farming was a simultaneous innovation in different parts of the world. One theory is that the climate of 12,000 years ago was finally conducive to farming (post Ice Age).
    • Richerson and Boyd: Agriculture was impossible during the Pleistocene but mandatory during the Holocene. Higher carbon dioxide levels saw a shift towards plant-intensive diets and the production of food.
  • Animal domestication

    • Taming of animals starts with the dog dating back to 40,000 years ago.

    • Experiments by Nikolai Belyayev (Russian geneticist) in the 1930s demonstrated that wild subspecies, like the silver fox, could be selectively bred, tamed, and domesticated as pets.

    • Domestication syndrome: Selecting for certain traits when prioritizing docility carries other complementary traits.

      • Example: reduced reactive aggression.
      • Humans are also a domesticated species: we respond less aggressively to strangers and can survive in urban environments.
  • Stone Age Tool-Making

    • “Dense populations inevitably spur human technological change because they create conditions in which people can specialize.”
    • Tasmanian regression: Tasmania was cut off from the mainland 10,000 years ago. The Population remained isolated until Western explorers arrived. Researchers found that some technologies available at the start of the Tasmanian isolation were lost over time: no bone tools, cold-weather clothing, hafted tools, boomerangs, etc.
    • When you cut people off from the exchange of ideas, goods, services, you cut them off from innovation and collective knowledge.
    • “Innovation is a collective phenomenon that happens between, not within, brains.”
  • Fire

    • Harnessing fire for heat and cooking changed human anatomy. Modern humans cannot subsist on raw food alone.
    • “Every human society that has been contacted cooks food, however simple their ecosystem and their dependence on particular species: from the Inuit to the Sentinelese to the Fuegians.”
    • Cooking predigests food. It doubles the digestible energy of starches. It denatures proteins (and increases available energy). Per Ridley: “It’s like having an external extra stomach.”
    • Biologically, cooking allowed for natural selection to favor individuals with smaller guts and larger brains.
    • “The shift to a larger brain and a smaller gut seems to have happened a little after two million years ago when Homo habilis was replaced by Homo erectus.”
  • Life as the first innovation

    • Life as the first rearrangement of atoms and bytes into improbable forms that could harness energy to a purpose.
    • Ridley sees many parallels between innovation, nature and evolution.
    • “All living creatures have an idiosyncratic way of trapping energy to make it useful. Their cells pump protons across lipid membranes to create energy gradients that then fuel the synthesis of proteins that do work: they turn energy into work, just as steam engines and computers do.”

Chapter 8: Innovation’s Essentials
In this chapter, Ridley considers the characteristics of innovation (as expressed in the examples from the preceding chapters).

  • Summary of the essential features:

    • Innovation is gradual.
    • Innovation is different from invention.
    • Innovation is often serendipitous.
    • Innovation is recombinant.
    • Innovation involves trial and error.
    • Innovation is a team sport.
    • Innovation is inexorable.
    • Innovation experiences a predictable hype cycle.
    • Innovation prefers fragmented governance.
    • Innovation increasingly means using fewer resources rather than more.
  • “Innovation is nearly always a gradual, not a sudden thing. Eureka moments are rare...and where they are celebrated it is with the help of big dollops of hindsight and long stretches of preparation, not to mention multiple wrong turns along the way.”

  • The incremental evolutionary nature of innovation makes it difficult to pinpoint historical starting points.

    • The closer you look, the less one can find a single moment of breakthrough.

    • “There is no day when you can say: computers did not exist the day before and did the day after, any more than you could say that one ape-person was an ape and her daughter was a person.”

    • Example: Automobiles

      • The earliest automobiles bear visual similarities with preceding technologies: carriages, steam engines, bicycles, etc.
      • Man-made technologies are not created out of thin air, but are based on their antecedents.
      • Evolutionary systems move to the ‘adjacent possible’ next step.
  • People prefer the narrative of revolution to evolution (even if it’s largely false):

    • It’s easier and more heroic to promote a revolutionary narrative for technology (there are personal and institutional incentives at play).
    • Intellectual property exacerbates this problem by granting patents and legal protections to select individuals who are best able to use the regulatory apparatus to their advantage.
  • “All too often, discoverers and inventors feel short-changed that they get too little credit or profit from a good idea, perhaps forgetting or overlooking just how much effort had to go into turning that idea or invention into a workable, affordable innovation that actually delivered benefits to people.”

    • Charles Townes (physicist) liked to quote an old cartoon: “The beaver told the rabbit as they stared at the Hoover Dam: No, I didn’t build it myself, but it’s based on an idea of mine.”
    • Example: Fritz Haber “invented” how to use pressure and a catalyst to convert atmospheric nitrogen to ammonia (aka “nitrogen fixation”). Carl Bosch’s innovation was to figure out how to do so on an industrial scale to make the outputs affordable and usable.
    • “It is the people who find ways to drive down the costs and simplify the product who make the biggest difference.”
  • Accidental discovery (serendipity) is common.

    • Examples: Google didn’t set out to build a search engine. Instagram was originally a gaming app. Twitter was meant to aid with podcast discovery. Teflon was discovered accidentally.
    • Genetic fingerprinting was originally considered narrowly for its medical applications. Only later did people understand its crucial use for criminal justice: as a tool for convicting or exonerating the accused.
  • “Every technology is a combination of other technologies.”

    • Thought-experiment: Try to think of a human-made object that isn’t a combination of technologies and ideas.

    • Example: A coffee mug uses glazed ceramic with a printed logo and combines ideas of baking clay, glazing, printing, adding a handle and holding a steeped drink in a reusable container that retains heat.

    • Author draws parallels between reproductive biology (the kind of recombination that results from sexual reproduction) and innovation, “idea sex.”

    • Innovation requires human interaction: people need to meet, transact and exchange goods, services, and thoughts. Settings that promote these activities, like cities, are better suited to innovation.

    • “Recombination is not the same as mutation and the lesson for human innovation is significant.”

      • Innovation can occur when one technology borrows entire parts from other technologies (rather than starting from scratch).
      • Example: The automobile did not need to invent wheels, springs, steel.
  • Experimentation, failure, and trial and error are essential to innovation.

    • “Thomas Edison perfected the light bulb not by inspiration but by perspiration: he and his team tested 6000 different materials for the filament. ‘I’ve not failed,’ he once said. ‘I’ve just found 10,000 ways that won’t work.’”
    • “The Wright brothers found out by crashing that the profile of a wing should have a shallow, not a deep ratio.”
    • Edward Wasserman (psychologist) argues that human innovations evolve through a process resembling natural selection rather than intelligent design. He cites the evolution of the shape and sound holes in violin design as an example of this.
  • “If error is a key part of innovation, then one of America’s greatest advantages has come from its relatively benign attitude to business failure. Bankruptcy laws in most American states have allowed innovators to ‘fail fast and fail often’...”

  • “Innovation always requires collaboration and sharing...”

    • Leonard Reed’s essay ‘I, Pencil’ documents how a simple pencil requires involves many parties: those who raise and cut down the timber, those mining the graphite, those in pencil factories, marketing, and management. No single individual can do all the things necessary (from scratch) to build and distribute a pencil.
    • The popularity of societies, clubs and mechanics’ institutes helped foster Britain’s innovation lead during the Industrial Revolution.
  • Simultaneous invention is common and suggests the inevitability of certain innovations (due to the adjacent combinations and ‘obvious’ new combinations).

    • Example: 6 different people invented the thermometer, 5 different people invented the electric telegraph, 2 natural selection. The electric light bulb was invented simultaneously by 21 individuals.
    • Park Benjamin (1886): “It is a singular fact that probably not an electrical invention of major importance has ever been made but that the honour of its origin has been claimed by more than one person.”
    • “There were scores of different search engines coming to market in the 1990s. It was impossible for search engines not to be invented in the 1990s, and impossible for light bulbs not to be invented in the 1870s. They were inevitable. The state of the underlying technologies had reached the point where they would be bound to appear, no matter who was around.”
  • The innovator is often the first to identify a new possibility or combination: “How incredible to be the one human being among billions who first sees the possibility of a new device, a new mechanism, a new idea.”

  • “Technology is absurdly predictable in retrospect, wholly unpredictable in prospect.”

  • Amara’s Law: People tend to overestimate the impact of a new technology in the short run, but to underestimate it in the long run.

    • Example: The internet boom of the 1990s followed by the dot-com bust in 2000. It took decades for the internet to flower into a mature set of ideas and applications.
    • Example: Blockchain. Initial excitement followed by a downturn. Long-term prospects are likely good.
  • “Empires are bad at innovation...imperial regimes tend to preside over gradual declines in inventiveness...”

    • Incumbents aim to protect their power. Funds are diverted to luxuries, wars, corruption.

    • Example: The printing press.

      • China originally developed printing technology but did not capitalize.
      • Printing flourished in a politically fragmented Europe (circa 1400s).
      • Gutenberg left Mainz for Strasbourg under a regime that let him work on his innovation. Martin Luther survived because of the regime in Wartburg. William Tyndale published his English bible in the Low Countries.
      • The Ottoman and Mughal empires banned printing for 300 years.
    • America’s federal structure enables experimentation:

      • Individual states are “laboratories” for different rules, tax structures, and regulatory ideas. Entrepreneurs can move freely from one to the other.
      • “Innovation has disproportionately happened in cities, and especially self-governing ones.”
  • “Growth can take place through doing more with less.”

    • More food from less land. More miles from less fuel. More light from less electricity, etc.

    • Dematerialization: The phenomenon whereby we generate more output but from less overall stuff.

      • In 2015, America used 15% less steel, 32% less aluminum, 40% less copper despite having a larger population and economy.
      • Innovation generates economic and resource efficiencies.
      • Standard aluminum can in 1959 weighed 85 grams. Today the equivalent can weighs 13 grams.
    • “Those who say growth is impossible without using more resources are simply wrong. It will always be possible to raise living standards further by lowering the amount of a resource that is used to produce a given output.”

Chapter 9: The Economics of Innovation

  • Allyn Young (economist) in 1928 stated, “that the invention of new tools, new machinery, new materials and new designs involved the division of labor as well...innovation was itself a product of increased specialization, not a separate thing.”

  • Joseph Schumpeter (economist) in 1942 argued that innovation was the ‘main event’ and that increasing returns were theoretically infinite.

  • Paul Romer (economist) in 1990 “made innovation into a product, something that is an output as well as an input of economic activity.”

    • New knowledge is non-rival: people can share it without exhausting its supply.
    • New knowledge is partially excludable: the first-mover can exploit the idea initially via secrecy, patents, or tacit knowledge/experience that others lack.
    • Knowledge is both a public good and a temporarily private one.
  • Some observers insist that government is essential for innovation:

    • Ridley only agrees with this insofar as governments get out of the way of innovation.
    • “Throughout the nineteenth century, as Britain and Europe developed new railways, steel, electricity, textiles, and many other technologies, government played almost no role at all except as a belated regulator, standards creator or customer.”
    • America became an economic and technological superpower without public research investments in the era before 1940.
    • Example: The failure of the government and Samuel Langley to create a powered airplane (compared to the success of the Wright brothers).
  • The question is not whether state sponsored innovation is possible. The question is whether it is better at doing so than private enterprise.

  • Spillover innovation vs. directed innovation:

    • The government did not set out to build the internet with the DARPA network.
    • “We must beware of down-playing the development of technologies after they are first invented, a huge part of innovation, lest we credit a beaver with the Hoover Dam.”
  • Crowding out effect: Government research spending diverts innovation energies towards specific priorities which might not align with market needs and desires.

    • Example: Consider the innovation expenditures of the Soviet Union. The only real innovation outputs were in military hardware.
  • There are select examples of large-scale projects that governments can engage: nuclear weapons, moon landings, interstate highway systems.

  • “Trying to pretend taht government is the main actor in this process, let alone one with directed intentionality, is an essentially creationist approach to an essentially evolutionary phenomenon.”

  • Linear model of technology: Posits that scientific breakthroughs lead to specific technologies.

    • This is true in some cases but not all of them.
    • The causation can work in the other direction: invention can promote scientific inquiry.
    • Example: CRISPR gene editing grew out of a need to solve practical problems in the yogurt industry.
    • “We make a mistake if we insist that science is always upstream of technology.”
    • “Often scientific understanding comes from an attempt to explain and improve a technical innovation.”
  • “Science is the greatest fruit of human achievement, bar none, and deserves rich and enthusiastic support in any civilized society, but as a worthwhile goal in its own right, not just as a way to encourage innovation. Science should be seen as the fruit rather than the seed.”

  • To benefit humanity, an innovation needs to meet two requirements:

    1. It must be useful to individuals.
    2. It must save time, energy, or money in achieving some task or outcome.
  • Innovation increases the specialization of production (new stuff) which results in the increasing diversification of consumption (new stuff to buy, use, and consume).

    • This increased specialization requires greater inter-dependence.
  • “In Western countries, much of the inequality that exists—though not all—is about luxuries, rather than necessities.”

    • Consider that we all use similar smartphones, the same internet providers, similar toilets, the same supermarkets, etc.
    • Innovation has resulted in the democratization of a great range of goods and services.
  • Innovation creates jobs, despite technological progress making certain jobs obsolete or unnecessary.

    • Remember: The purpose of production is consumption. The ability to satisfy needs and desires—these first principles don’t disappear because of innovation.
    • New jobs (often unimaginable ones) are created. Consider present day jobs that were once unthinkable: computer programmer, live-streamer, cryptocurrency investor, online retailer, etc.
  • Innovation also creates more leisure time and autonomy.

  • Big organizations are frequently “disrupted” by smaller, more innovative ones:

    • Microsoft was blindsided by the internet and smartphone.
    • Kodak failed to capitalize on digital photography.
    • “Big companies are bad at innovating because they are too bureaucratic, have too big a vested interest in the status quo and stop paying attention to the interests, actual and potential, of their customers.”
  • Innovation must have a dynamic and open economy in which new companies, upstarts and outsiders can challenge the status quo.

  • Competition is one phenomenon that drives big companies to innovate.

    • Example: Supermarkets have had to innovate constantly: barcodes, scanners, truck-to-truck loading docks, prewashed salad, ready meals, own-brand products, loyalty cards, etc.
  • “Free innovation by the consumer is a neglected sector of the economy...” (consider how consumer modify and retool existing products to satisfy their needs).

Chapter 10: Fakes, Frauds, Fads and Failures

  • The lucrative financial rewards of innovation attracts bad actors: fakes, frauds, faddists, etc.

  • The popular aphorism “fake it till you make it” is a valuable stopgap in some cases and entirely misleading in others.

  • Example of Theranos:

    • The idea was promising and innovative.
    • The underlying technologies needed to realize the objective were not yet ready or present.
    • “They were breaking a key rule of innovation, to tackle the most difficult issue first, in case it’s insoluble.”
  • Google X (skunk-works division) and the “monkey first” strategy: If your project goal is a monkey reciting Shakespeare on a pedestal, don’t build the pedestal first. Solve the monkey problem first.

  • “The world has grown so used to miraculous and disruptive changes...it sometimes forgets to be skeptical about wild claims backed by hubris.”

  • Some innovations fail as a result of diminishing returns. The new breakthroughs are no longer sufficiently better from a consumer perspective.

    • Example: The move to 3G smartphones was big but subsequent innovations in 4G and 5G are not as impactful to consumers.
  • Jeff Bezos: “Our success at Amazon is a function of how many experiments we do per year, per month, per week. Being wrong might hurt you a bit, but being slow will kill you. If you can increase the number of experiments you try from a hundred to a thousand, you dramatically increase the number of innovations you produce.”

  • Many companies create small entrepreneurial companies-within-a-company:

    • Lockheed Martin’s Advanced Development Programs (“skunk works).
    • AT&T’s Bell Labs (which won 8 Nobel Prizes).
    • Xerox’s Palo Alto Research Center (PARC).
    • Google X.

Chapter 11: Resistance to Innovation

  • Innovation threatens incumbents and competitors.

    • Example of coffee: Governments were threatened by café culture (places where citizens would discuss ideas—sometimes revolutionary ones) and wine-makers and beer-brewers were similarly threatened by a new competitive beverage.
  • Characteristic features of innovation opposition:

    • An appeal to safety.
    • Self-interested among incumbents.
    • Paranoia from the powerful.
  • The efforts to prevent the spread of biotechnology in European agriculture uses demonization and delay tactics to deter adoption and investment.

  • The precautionary principle: “A superficially sensible idea—that we should worry about unintended consequences of innovation—morphed into a device by which activists prevent life-saving new technologies displacing more dangerous ones.”

    • Example: The story of Golden Rice. A GMO strain of rice meant to alleviate mortality from vitamin-A deficiency. Activists prevented the distribution of this product over ideological concerns.
  • Regulatory approvals may be essential in certain situations, but the also hinder innovation.

    • “If Thomas Edison had needed to get special regulatory approval for every one of the 6000 plant samples he tested as a filament in a light bulb, he would never have found bamboo.”
  • Cellular phone technology could have been developed much sooner. AT&T’s application to create a network in 1947 was rejected by the FCC.

    • “The government, in cahoots with crony-capitalist firms with huge vested interests, made the development of cellular service impossible for almost four decades.”
  • Regulation typically favors incumbents and often erects a defensive obstacle against small, cash-constrained challengers.

    • Intellectual property and patents can discourage innovation.
  • Consider non-patented organizational innovations widely adopted by modern companies:

    • Multidivisional corporations.
    • R&D departments.
    • The department store.
    • The chain store.
    • Franchising.
    • Statistical process control.
    • Just-in-time inventory management.
  • Other technologies that were not patented in a meaningful way: automatic transmissions, power steering, ballpoint pens, cellophane, gyrocompasses, jet engines, magnetic recording, safety razors, zippers.

  • Ridley believes the first-mover advantage in most cases is sufficient (no temporal monopoly via patent is necessary).

    • He does make an exception for research-heavy inventions like pharmaceuticals.
  • “Patents tend to favor inventions rather than innovations: upstream discoveries of principles, rather than downstream adaptation of devices to the market.”

  • William Baumol (economist): “If the policy background means that the best way to get rich is by building a new device and selling it, then entrepreneurial energy will flow into innovation, but if it is simpler to profit from lobbying government to set the rules up in favor of an existing technology, then all the entrepreneurial energy will go into lobbying.”

    • Similarly, per Peter Thiel: “If you are starting a computer software company that costs maybe $100,000, but to get a new drug through the FDA, maybe on the order of a billion dollars or so.” The result is a paucity of startups in drug development.
    • Thiel also says that “we lived in a world in which bits were unregulated and atoms were regulated.”
  • The rise of the internet in America was, in part, attributable to several hands-off policy decisions by political administrations. For instance, the 1997 Framework for Global Electronic Commerce (which argued for market-driven development rather than regulation) and Section 230 of the Telecommunications Act which exempted online platforms from content liability.

  • Baumol’s Cost Disease: Phenomenon whereby innovation in one economic sector leads to cost increases in another sector despite the latter exhibiting better efficiencies or innovations.
    Chapter 12: An Innovation Famine

  • “The main ingredient in the secret sauce that leads to innovation is freedom. Freedom to exchange, experiment, imagine, invest and fail.”

  • “Innovation is the child of freedom because it is a free, creative attempt to satisfy freely expressed human desires.”

  • “Innovative societies are free societies, where people are free to express their wishes and seek the satisfaction of those wishes, and where creative minds are free to experiment to find ways to supply those requests—so long as they do not harm others.”

  • One reason why top-down innovation doesn’t work: You cannot make people want something.

  • Innovation can bring about positive changes, but the biggest obstacle to innovation is our resistance to change and the obstacles we place in innovation’s path.

  • The pace of innovation varies by field/domain:

    • Pre-1950s, transportation experienced tremendous innovation: adoption of the automobile, air travel, etc.
    • Post-1950s, communication experience tremendous innovation: personal computing, cellular phones, social networking, etc.
    • Author believes that the next 50 years will see greater innovation in biotech than information technology.
  • Some observers view a technological stagnation in the Western democracies (America and Europe).

    • “To the extent that incomes appear to be stagnating and opportunities for social mobility drying up, the cause is not too much innovation, but too little.”
    • “We should fear an innovation famine rather than an innovation feast.”
  • China is enjoying an innovation boom of the likes that Britain (in the 19th century) and America (in the 20th century) once experienced.

    • Despite an authoritarian government, Chinese entrepreneurs have been able to innovate so long as they don’t aggravate the Communist party.
    • China is at the cutting edge of mobile computing and internet use. Mobile payments are universal. Consumers are managing all aspects of their life through mobile services.
    • China is pouring money into artificial intelligence, gene editing, and renewable energies.
    • Chinese entrepreneurs work harder: the 9-9-6 week (9am to 9pm, six days a week) was once the province of American entrepreneurs (but no longer).
  • “Willingness to put in the hours, to experiment and play, to try new things, to take risks—these characteristics for some reason are found in young, newly prosperous societies and no longer in old, tired ones.”

  • “London takes three decades to (not yet) build a single new runway for its main airport, while the consultants get rich from investigating what will happen to every newt, bat and noise meter within miles.”

  • “Without innovation we face a bleak prospect of stagnant living standards leading to political division and cultural disenchantment. With it, we face a bright future of longevity and health, more people leading more-fulfilled lives, astonishing technological achievements and a lighter impact on the planet’s ecology.”

  • Thomas Edison: Genius is 1% inspiration and 99% perspiration. Ridley: “The perspiration, not the inspiration, is the bit that much of the West has forgotten or forbidden.”

  • “There is no practical limit to the ways in which the species could rearrange the atoms and electrons of the world into improbable structures in the centuries and millennia ahead...”



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