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The Crisis of Innovation

It’s sort of, something of a black box. You know — one thing we can say is that all the people who know are incredibly biased.

So if you’re a university professor working on, studying ants in the Amazon, you’ll, you know be writing grant applications and saying, this is actually, this is actually critical for developing a breakthrough drug on cancer. You’re not going to say, ‘This is a silly project. I just want to get some money to study ants in the Amazon.’ And if you’re a, if you’re running a, a startup company you will tend to say, ‘This is the greatest company in the world.’ You won’t say, ‘It’s, you know sort of a hit or miss things and probably it will miss.’

Peter Thiel (Session transcript)

There is a great disconnect in the "developed world".

It is a disconnect between the presumed exponential growth in technology and the actual—stagnant or negative—performance of economic indicators such as the returns for venture capital firms or the median wagesmedian income, and household sizes.

It is a disconnect between the predictions our experts make and how these predictions later compare to reality—a disconnect between the way we try to measure and predict and the way things actually happen in the world.

The big picture

When people talk about the "developing world", they usually think in terms of what is going to happen in the next 20 years. Trends are extrapolated over the long term, people tend to look at the big picture. When people talk about the Western world, though, they usually tend to think about what is going to happen within the next year, the next month, or—recently—within the next couple of days.

That is not the big picture. Short-term thinking and strategizing will not help us understand where the world is heading in the long run. Most people tend to assume that progress will continue to occur. But progress is bound to technological innovation. Without technological innovation, progress is impossible.

Our current crisis is really a crisis of innovation.

And the crisis goes far deeper than the housing bubble. The technology bubble. The sovereign debt crisis. The financial system collapse.

When you look at the big picture, the crisis is simply a result of not enough innovation to cope with the forces challenging progress.

Paradigm shifts and "unnovation"

Scientific and technological progress knows two modes: long periods of normal progress and short periods of revolutionary progress. The former is achieved researching established paradigms and the latter is the result of paradigm shifts—revolutionary new discoveries which change the rules of the game. Put differently, paradigm shifts are merely the Black Swans of innovation. In the startup world, paradigm shifts are known as disruptive technology.

Normal progress is achieved almost automatically. Paradigm shifts only happen when there is a large enough diversity of opinions, enough out-of-the-box thinking, and if there are enough shots at creating radically different products and services and achieving the impossible.

The opposite of a paradigm shift is what Umair Haque eloquently calls "unnovation". Unnovation looks like it might be innovation, but it is actually a step back—in the best case not creating any real value and in the worst case destroying value. Unnovation happens when people invent a razor with five blades instead of four. When entrepreneurs focus on unnovation, technological progress stagnates.

The challenge of the 21st century

Within the next decades, the Western world will experience a battle between two forces. Attacking on the one side is the force of innovation. Attacking on the other is a myriad of trends hampering progress. Whether the crisis of innovation can be overcome and whether we will see growth or stagnation depends on how strong our innovative forces will be.

Some of the trends we are up against are:

Make no mistake: These trends are strong and it is going to be tough to work against them. Technological innovation must be strong enough to counterbalance these forces or we will face a period of prolonged stagnation—not matter how the numerous concrete economic crises the Western world is facing at the moment are resolved.

The only antidote to the global crisis

When you think about it in the long term, when you try to look at the big picture, when your time unit is decades and not months, you cannot help but come to the conclusion that the only path to actual progress is technological innovation. Everyhing else stems from innovation. If technological innovation stagnates, the rest of the economy will not grow either. Technology is at the root of progress.

Once you accept this as a working hypothesis, it becomes clear what we need in order to achieve sustainable growth and avoid stagnation:

  • More education
  • More schools
  • More teachers
  • More scientific research
  • More entrepreneurship
  • More technology investments
  • More funding for startups
  • More radical innovators
  • More challenging the status quo
  • More disruption
  • More paradigm shifts
  • Less "unnovation"

To achieve this, we need a broad consensus that these are the top priorities. We need to heavily subsidize and support these seeds of innovation.

Right now, it does not look like this is going to happen.

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