Why Vacuum Cleaners are tested on clean floors and Speed is slowing down or, Why the Arc of Innovation bends toward Freedom

Matt Ridley’s “How Innovation Works” is an insightful read with many relevant stories, strong libertarian opinions and a panglossian view of innovation — what the author calls ‘infinite improbability drive’. Three central themes of the book are —

One, though often thought of as heroic, magical and one-person outcome — innovations happen with toil, trial and error, and through an invisible hand of inevitability.

Two, like ‘recombination’ swaps a swatch of parental genome to create a new life, innovations are associative of disparate ideas from different fields. Like with natural selection, the strongest of these innovations survives and get better with time.

Three, at an abstract level, innovations are efficient transfer and transposition of energy. i.e., it can be thought of with the paradigm of thermodynamics, namely — conservation of energy and entropy. e.g., cooking emancipated humans from raw food, that in turn gave us a smaller gut and bigger brain. The latter gave us iPhone so we could order food and get it delivered without us physically moving.

A possible fallacy of the book lies in its hyper-libertarian stance against government funded innovation. The best arguments sited show circumstances, arguably, would have yielded the same innovations — internet would probably be here without DARPA, but it remain quiet on the timing. Would it arrive a quarter century later if left to free market alone? Quite possibly.

Some ideas, opinions and insights from the book -

• Innovation happens when people are free to think, experiment and speculate.
• Is a gradual process, obsession with “disruptive and sudden innovation” is very recent. Innovation also begins with the “unlettered and ordinary people, before the elite takes the credit”.
• “Use often precedes understanding” — is a common feature of innovation. This is exemplified by the narrative of inoculation to vaccination arc.
• Another feature — “a long and deep pre-history characterized by failure; a shorter period marked by an improvement in affordability characterized by simultaneous patenting and rivalries; and a subsequent story of evolutionary improvement by trial and error.” This is exemplified by the story of the internal combustion engine.
• Innovation is not an individual phenomenon, but a collective, incremental and messy network phenomenon.
• The key success metric of an IC engine is “grams per watt” — how much mass it takes to generate a certain amount of energy. Humans and draught animals operate at ~1000g/W, Steam engines amplified the gains to 100g/W, Mercedes 35hp 8.5g/W and Model T just 5 g/W. The cost kept falling.
• Today, diesel engines run the world — almost all the cargo ships, and goods transported by road and rail, plus every farm tractor or bulldozer.
• The steep decline in air accidents (1970: 3K fatalities/trillion kilometers; 2018: 58 fatalities — 54x decline) is attributed to “many different people trying many different things”. This is an incredible feat considering till the 1820s nobody had travelled faster than a galloping horse!
• The sharing economy is a form of “more from less”, or growth by shrinkage — economic enrichment caused by using resources more frugally. e.g., private vehicles stand idle 95% of their lives — why not use them more?

Sharing economy is the oldest idea of the world — connecting people who’ve more fish than they need with people who have more fruit than they need.

• “There is a law about Moore’s law. The number of people predicting the death of Moore’s law doubles every 2 years”
• Intel’s famous ‘tick-tock’ corporate strategy : tick — release of new chip every other year, tock — fine-tuning the design in the intervening years.
• Agriculture was ‘impossible during ice age but mandatory during the Holocene (current interglacial)’.
• There is a correlation of innovation with richness — Silicon Valley, Medici states, Greek city-states etc. However, innovation in the upper Paleolithic is all about demography. Dense populations spurred human technological change, “because they create the conditions in which people can specialize”. e.g., Tasmania, being isolated by rising sea levels, showed ample examples of “disinnovation”. They had no bone tools, no nets, fishing spears or boomerangs!
• 150,000 years ago humans had become reliant on a collective, social brain mediated through specialization and exchange. If people got cut off, their chance of innovating was lower. North Korea being a recent example.

“Innovation is a collective phenomenon that happens between, not within, brains”.

• Fire was an innovation that changed human anatomy by lowering our dependence on raw food. Cooking resulted in us smaller teeth, narrower pelvis and less flared rib cage — all pointing to a smaller gut. Plus, a big increase in brain volume.
• Life itself is an innovation born out of fortuitous recombination. The same arbitrary genetic code is found in all life forms. The result of this successful recombination was reduction in entropy through harnessing of energy.

“Liberty is the parent of science and of virtue, and a nation will be great in both in proportion as it is free” — Thomas Jefferson

10 essential traits of Innovation

1. Gradual, not a sudden thing. Eureka moments are rare, and likely non-existent. Pointing one innovation to a single person, like to a single moment, is the equivalent of “Great Man” theory of History and similarly wrong. Nationalism exacerbates the narrative fallacy — e.g., Mayans may have used zero way before Indians while Fibonacci definitely did not invent it.
2. Innovation != Invention. Charles Townes, Nobel winner, “described a cartoon he liked, which shows a tiny rabbit and beaver looking up at Hoover Dam,” Townes-Anderson says. “The beaver is saying to the rabbit, ‘No, I didn’t build it, but it was based on an idea of mine!’” Toilet-paper Principle: Most influential new technologies are often humble and cheap.
3. Serendipitous — e.g., Velcro, Stick-it, DNA testing — they were not planned nor targeted.
4. Recombinant — ‘existing technologies beget further technologies’. Increasing and rapid dissolution of traditional industry boundaries. e.g., Cars today are more about software and systems engineering than about manufacturing. Recombination is the principal pattern of evolution. An embryo is a cross-over between father’s and mother’s genome. “Innovation happens when ideas have sex”. This is why it happens in places where trade and exchange are frequent and not in isolated or underpopulated cities — California rather than North Korea. Recombination != Mutation (small random changes). Mutation like small steps cannot help organisms cross ‘valleys’ of disadvantage to find new ‘peaks’ of advantage. Mutations are no good climbing slopes where one must, also, occasionally go down on the route to the summit. “Recombination is 1000x more likely to preserve life than random mutation”. Similarly, modern computers took the “gene slices” from vacuum tubes and idea of storage programs from the genome of Harvard Mark 1.
5. Involves Trial and Error: Edison perfected the light bulb by testing 6000 different materials for the filament. “I’ve not failed, I’ve just found 10,000 ways that won’t work”. An amount of playfulness helps. “I like to play with microbes” — Alexander Fleming. Takeru Kobayashi, hot-dog eating champion, worked out by experimentation that he could eat faster if he separated sausages from bread, and then dunk the buns in water! Famous Fosbury jump was ‘not based on science or analysis or thought or design”. Most human innovations evolve through a process awfully similar to natural selection, rather than created by intelligent design. The hole in the center of violin started circular, then semi-circular, then elongated and finally f-shaped by this gradual evolution.
   Innovation runs into ‘the same psychological resistance as natural selection faced in biology’. i.e., Error is a key part of innovation. America’s greatest advantage comes from its benign attitude to business failure — buttressed by liberal bankruptcy laws, and principles like ‘fail fast and fail often’, ‘move fast and break things’ etc.
6. Team-sport — Australian Magpies solve problems faster if they are in larger groups.
7. Inexorable — six people invented the thermometer, five the telegraph, four decimal fractions and two natural selection! Pyramid, boomerang, the blowpipe were all invented independently on different continents — so was agriculture. Simultaneous invention is more the rule than the exception. Light-bulb was independently invented by 21 people! Two paradoxical lessons — One, the individual is dispensable. If a car had run over Page and Brin, the world would still get a leading search engine, very likely at around the same time-frame. Two, even if innovation is inevitable, it is not predictable. No one sees them coming! Technology is absurdly predictable in retrospect, wholly unpredictable in prospect. Asimov predicted we would have moon colonies by 2000!
8. Hype Cycle — Amara’s law — we tend to overestimate the impact of a new technology in the short run, and underestimate it in the long run. Think of 3D printers, Genomic Medicine, Blockchain and AI. It takes a while for us to get it right, get it working, and achieve ubiquity. Full-self driving is not just a hard technical problem, but successful rollout requires reframing the entire road-, insurance- and ethical- infrastructure to suit such a paradigm.
9. Prefers ‘fragmented governance’ — Empires are bad at innovation despite being wealthy and educated. Italy’s most fertile inventive period was when it was an agglomeration of small city-states — Genoa, Florence, Venice, Milan together created the Renaissance. Ottoman and Mughal empires banned printing for more than three centuries. David Hume wrote China had stalled as a source of novelty because it was unified, while Europe took off because it was divided. America is not a ‘monolithic imperium’ but a federally structured government. Cities need fewer gas stations per person as they get bigger but have disproportionately more schools, patents and higher wages. i.e., infrastructure scales at a sub-linear rate, but socio-economic products scale at a super-linear rate. This, however, is not true of companies. As they grow bigger, they become less- efficient, manageable and innovative. Most importantly, they become less tolerant of eccentricity. That is why companies die all the time, but cities do not. Sybaris was the last city to vanish — in 445 BC.
10. Scarcity — as innovating units get bigger they use fewer resources rather than more. A whale burns less energy, proportionally, than a shrew and lives much longer. Much growth is actually shrinkage. Much of innovation is doing more with less — more food from less land and less water, faster processing from smaller chips, more number of socks for less money etc. By 2015, US was using 15% less steel, 32% less aluminum and 40% less copper than it did at their peak usage. A Coke can weighs 600% less today than in 1959. Much of the growth is thus sustainable. Jevon’s Paradox- saving energy leads to using it more. When power is cheap, we keep the lights turned on more. However, LEDs use less than 25% energy than traditional bulbs — so we have to leave them on for more than 10x as long to use the same power. That is unlikely to happen. Such ‘dematerialization’ is why many of the doomsday predictions (running out of food, for example) have turned out to be spectacularly wrong.

Economics

• Adam Smith’s dilemma: More specialization means more productivity means lower cost. So, both producers and consumers get more for less. They cannot be both right!
• Solution Framework: Innovation itself is a product of increased specialization, not a separate thing.
• Schumpeter: innovation was the main event, and increasing returns were potentially infinite.
• Solow: only 15% of growth can be explained by increasing investments. The residual 85% cannot be explained by factors of production.

West’s Innovation Famine

• Hyperloop is not a new idea. As early as 1800, George Medhurst patented an ‘Aeolian Engine’ to propel coaches using air pumps, and by 1812 he had a ‘plan for the rapid conveyance of goods and passengers upon an iron road through a tube of 30 feet in area by the power and velocity of air’.

“Our success at Amazon is a function of how many experiments we do per year, per month per week per year. 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’ — Jeff Bezos.

• Patents favor inventions rather than innovations: upstream discoveries of principles, rather than downstream adaptation of devices to the market. In biotechnology, especially, “small scale” patents (e.g., to the scale of manipulating molecules) are like a “merchant encountering tollbooths all along the route to market: raising prices and suppressing business”.
• Four times as much money is spent litigating over intellectual property as reaping rewards from it (e.g., litigations by patent trolls).
• A good solution is a three-tier patent solution, with 2-, 10- or 20- year patents with short ones granted much more quickly, easily and cheaply. Today, everyone gets a 20-year patent.
• Pharmaceuticals spend monopoly profits marketing and defending monopoly itself, rather than seeking new products.
• Bizarrely, European Commission stipulated that Vacuum Cleaners must be tested in presence of no dust! This was due to big German manufacturers (of bagged vacuum cleaners) lobbying against such testing as bagged ones increase power usage as they become clogged with dust or they perform worse. This is a classic case of crony capitalism stifling innovation. Dyson, of course, tests its cleaners with real-life situations, including with two different kinds of Cheerio cereals.
• The narrative above is an example of William Baumol’s postulate — if the policy means that the best way to get rich is by building, then entrepreneurial energy will build. But if it is simpler to profit from lobbying, then all energy will flow into lobbying!
• A medical device takes around 21 months to get through the regulatory process in America but 70 months in Germany. Western economies have ‘developed a near obsession with precautions that simply cannot be married to a culture of experimentation’.
• Thiel’s theory of software innovation: Bits were unregulated and atoms were regulated. So software was evolving through ‘permissionless innovation’, while physical technology was tied down in regulation stifling change. The hyper-cost structure of getting a new drug through FDA explains paucity of startups in drug development, or why we do not yet have a cure for Alzheimer’s.
• Baumol’s Cost Disease: innovation in one sector can cause an increase in the cost in another sector that experiences less innovation. E.g., in 1995, flat-screen TV cost the same as a hip replacement. Today, one can get 10 such (better!) TVs for the cost of a hip replacement. The salaries of surgeons had to thus increase because of the general increase in the productivity of the economy — that produced innovations in TV — even though surgeons’ own productivity is relatively unchanged. Thus, isolated innovation is a contagious issue.

‘We wanted flying cars, instead we got 140 characters’ — Peter Thiel.

• Speed itself is slowing down. 70 years ago, airplanes travelled at 600 mph and cars at 70 mph — same speed as today. If cars improved 1% as computers, they would get 40,000 miles per gallon of fuel!
• Science fictions predicted massive innovation in transport — routine space travels, rocket mailman and such — and never mentioned social media or the internet. Early 20th century saw big changes in transport and few in communication. Late 20th and 21st century, so far, have seen the opposite. Maybe, fifty years from now the growth of IT will slow down and innovations in biotechnology will accelerate.
• ‘The dead hand of corporate managerialism; finds it is easier to control markets than to contest them, to plan rather than experiment.’
• Regulations hit small companies harder, deterring new entrants.
• ‘The best way to make lots of money is not to come up with brilliant ideas and work hard at implementing them but, instead, to cultivate a government ally’.

Corporate leaders have become more of planners than entrepreneurs.

• “Schumpeter’s ‘perennial gale of creative destruction’ has been replaced by the gentle breezes of rent-seeking.”

‘I tell you genius is hard work, stick-to-it-iveness, and common sense’ — Thomas Edison

• The West has forgotten the perspiration, not the inspiration. Managers in China are working on a 9–9–6 work schedule (9am to 9pm, 6 days a week) that Western counterparts followed in post-war economies, no more.