03 January 2021
How Innovation Works
How Innovation Works
And Why It Flourishes In Freedom
Matt Ridley

Highlights

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. The resulting entities are the opposite of entropy: they are more ordered, less random, than their ingredients were before. And 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.
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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.
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The chief way in which innovation changes our lives is by enabling people to work for each other. As I have argued before, the main theme of human history is that we become steadily more specialized in what we produce, and steadily more diversified in what we consume: we move away from precarious self-sufficiency to safer mutual interdependence.
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[W]hen a new invention is first propounded in the beginning every man objects and the poor inventor runs the gauntloop of all petulant wits, every man finding his several flaw, no man approving it unless mended according to his own device.
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Innovation seems so obvious in retrospect but is impossible to predict at the time.
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[I]nnovation as a gradual, incremental, collective yet inescapably inevitable process.
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As the economist Don Boudreaux put it: ‘Any legislation forcing Americans to switch from using one type of bulb to another is inevitably the product of a horrid mix of interest-group politics with reckless symbolism designed to placate an electorate that increasingly believes that the sky is falling.’
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The key inventions along the way each built upon the previous one and made the next one possible.
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Because error could be so cataclysmic in the case of nuclear power, and because trials are so gigantically costly, nuclear power cannot get trial and error restarted.
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[A]s the ratchet of regulation turned, the projects began to add features to anticipate rule changes that sometimes did not even happen. Crucially this regulatory environment forced the builders of nuclear plants to drop the practice of on-the-spot innovation to solve unanticipated problems, lest it lead to regulatory resets, which further drove up cost.
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It has undermined OPEC and Russia, leaving the latter frantically supporting anti-fracking activists to try to defend its markets – with much success in innovation-phobic Europe, where shale exploitation has been largely prevented.
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Why did this revolution happen in America, an old, played-out and well-explored oil and gas region? The answer lies partly in property rights.
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Yet despite millions of ‘frac jobs’ in thousands of wells, there were very few and minor environmental or health problems.
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One of the flaws in the way we recount stories of innovation is that we unfairly single out individuals, ignoring the contribution of lesser mortals.
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[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.
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Innovation is not an individual phenomenon, but a collective, incremental and messy network phenomenon.
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Where 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 through each of the problems to be solved – 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.
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It wasn’t luck that made them fly; it was hard work and common sense.’
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Like radar and the computer, the jet is often thought to be a product of wartime inventiveness. But, as in those other cases, the key work was actually done long before hostilities broke out, both in Britain and in Germany, and it is impossible to know just how fast the jet would have been developed and commercialized in an alternative universe in which the 1940s were prosperous and peaceful.
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[N]ot from academia to industry but at least partly in the opposite direction.
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The name ‘Fibonacci’ was coined in the nineteenth century as a contraction of the phrase ‘filius Bonacci’ or son of a good bloke, which appeared on the title page of his book.
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Intellectual property therefore merely served to delay the innovation, as usual.
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The idea of a single moment of inspiration, of the apple landing on young Isaac Newton’s head, stirs the soul, even if it turns out to be apocryphal. In contrast, the idea that innovation occurs in fits and starts, with one person adapting a concept already in use and another figuring out how to make a profit from it, has little appeal.
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[Y]ou often cannot innovate before the world is ready. And that when the world is ready, the idea will be already out there, waiting to be employed: in America, at least. Nothing like this happened in Communist Russia or Mao’s China.
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[T]o re-create the extreme localism of ancient hunter-gatherers therefore becomes an innovation.
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‘Innovation is a process of search and recombination of existing components’, a point also made by Joseph Schumpeter in the 1930s: ‘Innovation combines components in a new way’.
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[I]t is the system of intellectual property that contributes to the singling out of individual inventors, as much as the other way around.
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For reasons that are not entirely clear, network television had the opposite effect of radio, bringing people back towards a social consensus, sometimes stiflingly so, rather than polarizing them.
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[I]nnovation in computers was and is not really a story of heroic inventors making sudden breakthroughs, but an incremental, inexorable inevitable progression driven by the needs of what Kevin Kelly calls ‘the technium’ itself.
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‘tick-tock’ corporate strategy: tick was the release of a new chip every other year, tock was the fine-tuning of the design in the intervening years, preparatory to the next launch.
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Intellectual property hardly mattered in the digital industry: there was not usually time to get or defend a patent before the next advance overtook it. Competition was ruthless and incessant, but so were collaboration and cross-pollination.
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[H]istory endows the triers who made the fewest errors with the soubriquet of genius, but for the most part they were lucky to have tried the right thing at the right time.
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[T]he usual path of innovation: incremental, gradual, serendipitous and inexorable; few eureka moments or sudden breakthroughs.
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‘The Anatomy of a Large-Scale Hypertextual Web Search Engine’.
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Social media took the world by surprise in another way too. Far from ushering in an era of utopian democratic enlightenment in which the world is flat, everybody is sharing and we all see each other’s point of view, it plunged us into a maze of echo chambers and filter bubbles in which we spend our time confirming our biases and railing against the opinions of others. It polarized, enraged, depressed, addicted and soured us.
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As Pariser predicted: ‘Left to their own devices, personalization filters serve up a kind of invisible autopropaganda, indoctrinating us with our own ideas, amplifying our desire for things that are familiar and leaving us oblivious to the dangers lurking in the dark territory of the unknown.’
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[T]he explainability – the opportunity to interrogate an algorithm as to its reasoning – will be a key ingredient of making artificial intelligence trustworthy.
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Innovation is a lot less directed and planned, even today, than we tend to think. Most innovation consists of the non-random retention of variations in design.
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[T]he correlation of innovation with richness.
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[H]uman beings had become reliant on a collective, social brain mediated through specialization and exchange. If you cut people off from exchange, you lower their chances of innovating.
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Innovation is a collective phenomenon that happens between, not within, brains.
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This is a key characteristic of evolutionary systems: the move to the ‘adjacent possible’ step.
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If innovation is a gradual, evolutionary process, why is it so often described in terms of revolutions, heroic breakthroughs and sudden enlightenment? Two answers: human nature and the intellectual property system. As I have shown repeatedly in this book, it is all too easy and all too tempting for whoever makes a breakthrough to magnify its importance, forget about rivals and predecessors, and ignore successors who make the breakthrough into a practical proposition.
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Again and again in the history of innovation, it is the people who find ways to drive down the costs and simplify the product who make the biggest difference.
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Simultaneous invention is more the rule than the exception. Many ideas for technology just seem to be ripe, and ready to fall from the tree.
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That is to say, the infrastructure scales at a sublinear rate, but the socio-economic products of a city scale at a superlinear rate.
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Those who say that indefinite growth is impossible, or at least unsustainable, in a world of finite resources are therefore wrong, for a simple reason: growth can take place through doing more with less.
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Knowledge is both a public good and a temporarily private one. Knowledge is expensive to produce, but can sometimes pay for itself.
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[G]overnment spending on research diverts the energy of researchers into its priorities, which might not coincide with industry’s or the consumer’s.
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[F]ar more often inventions and discoveries emerge by serendipity and the exchange of ideas, and are pushed, pulled, moulded, transformed and brought to life by people acting as individuals, firms, markets and, yes, sometimes public servants. Trying to pretend that government is the main actor in this process, let alone one with directed intentionality, is an essentially creationist approach to an essentially evolutionary phenomenon.
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In 1776 Adam Smith was well aware of the primacy of practice. He saw innovation as deriving from the tinkering of ‘common workmen’ and ‘the ingenuity of the makers of the machines’. These were far more important than academic research, for although ‘some improvements in machinery have been made by those called philosophers’, philosophy had got more from industry than vice versa: ‘The improvements which, in modern times, have been made in several different parts of philosophy, have not, the greater part of them, been made in universities.’
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The grand theme of human history, I have argued, is the increasing specialization of production combined with the increasing diversification of consumption. We have gradually got narrower and narrower in what we produce – we call it a job – in order to get more and more varied in what we consume.
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For most people today in Western countries, much of the inequality that exists – though not all – is about luxuries, rather than necessities.
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The ultimate open-source innovation is that done by consumers themselves.
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[F]ree innovation by users for their own benefit is the only kind indulged in by non-human animals. That is to say, there are no such things in the non-human world as producers and consumers.
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The anti-GM movement caught on amongst wealthy people with plentiful, cheap food. It was not pressing and relevant to their lives to increase crop yields. Those who paid the opportunity cost of the prohibition were the sick and starving who had no voice. Even the big pressure groups have tiptoed away from it in recent years. But the damage was done.
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[R]egulation favours incumbents.
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What explains this speed and breadth of innovation fury? In a word, work. Chinese entrepreneurs are dedicated to the 9–9–6 week: 9 a.m. to 9 p.m., six days a week. That was what Americans were like too when they changed the world (Edison demanded inhuman hours from his employees); and Germans when they were among the most innovative people; and Britons in the nineteenth century; and Dutch and Italians before that. 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.