How Innovation Works: Serendipity, Energy and the Saving of Time – Matt Ridley | Free Book Summary

How Innovation Works: Serendipity, Energy and the Saving of Time – Matt Ridley

Liberty is the parent of science and of virtue, and a nation will be great in both in proportion as it is free.

Economics of Innovation: Innovation Is A Bottom-Up Phenomenon

It is believed that the main source of innovation has been the government’s support of research and that the government should therefore adopt an industrial policy of directed innovation. This is a myth.

While it is not impossible that governments can aim for, create, and perfect an innovation, it doesn’t happen very often. Serendipity and the exchange of ideas produce far more inventions and discoveries.

Innovation And Science

There is a widely held belief that science leads to technology, which leads to innovation. While this can happen sometimes, it is just as often the case that invention is the parent of science: techniques and processes that work are developed, but the understanding of them comes later.

Examples: Steam engines led to the understanding of thermodynamics, powered flight of aerodynamics, and animal breeding of genetics.

Big Companies Are Bad At Innovation

Big companies are bad at innovating because they are too bureaucratic, have too much of a vested interest in the status quo, and have stopped paying attention to the interests, actual and potential, of their customers. Thus, for innovation to flourish, it is vital to have an economy that encourages or at least allows outsiders, challengers, and disruptors to get a foothold.

Resistance To Innovation: Intellectual Property

The justification for intellectual property- patents and copyright are that it is necessary to encourage investment and innovation. The trouble is, the evidence clearly shows that while intellectual property helps a little, it also hinders and the net effect is to discourage innovation.

A further problem is that patents undoubtedly raise the cost of goods. This slows down the development and spread of innovation. 

Finally, patents tend to favour inventions rather than innovations: upstream discoveries of principles, rather than downstream adaptations of devices to the market.

How Innovation Works

The main ingredient that leads to innovation is freedom. Freedom to exchange, experiment, imagine, invest, and fail. Freedom for consumers to reward the innovations they like. Not freedom in the lawless sense, just the general idea that if something is not specifically prohibited, then the assumption should be that it must be allowed.

Freedom is why innovation cannot be easily planned because neither human wishes nor the means of their satisfaction are easy to anticipate. This is why nobody really knows how to cause innovation because no one can make people want something.

An Innovation Famine

The ability of Western economies to generate innovation has become weaker. Incomes appear to be stagnating and opportunities for social mobility drying up. The cause is not too much innovation, but too little. The West may still do new things in science and the arts, but it is slowing down in innovating products.

China And India

China’s innovation engine, however, has fired up. Their speed could be explained by work. Willingness to put in the hours, to experiment and play. But they have authoritarian restraints, which hinder innovation. Perhaps India will pick up the challenge and keep innovation happening.