Roots Of Innovation

Warning: I am not an economist. I have, however, lived and worked with economists in government and investment banking for so long that I regard myself as at least a half-baked economist, which gives me the advantage of not being overly encumbered by details that can get in the way of a big picture so essential to understanding and dealing with economics. That said…

There can be plenty of debate about the ingredients most essential to healthy economies around the world.

Among the most important of those ingredients are:

  • an economic system based on free-market principles;
  • an intelligent, educated and trained workforce;
  • adequate natural resources;
  • sufficiency in healthy food stuffs;
  • diversity in origins of population;
  • pluralism in work forces;
  • fair and balanced tax systems;
  • Innovation springing from openness of opportunity.

I begin with the simple idea that innovation (which is a key to most forms of beneficial economic growth) is highly dependent on diversity and pluralism. That concept has to be viewed in a larger context in order to see and understand how and why it is both true and necessary.

Innovation takes several basic forms: improved and simplified processes; new products and services brought on by changes in how peoples’ lives function; and at times, the juncture of ‘new’ people from different cultures operating in a new environment which sparks adaptive innovation designed to help such people function in our country.

One example of dramatic innovation was xerography.

As society grew, the need for paper copies grew exponentially. Carbon paper –sort of the Google of its day — was clumsy, messy and limited to only a few copies. Conventional printing was too expensive for most needs.  Then along came xerography and a new dimension of communication. At that time –long before the internet—the world was virtually revolutionized in a very short time by the low cost availability of as many copies as anyone wanted. As an example of process innovation Xerox did not charge for the machine—it simply charged per copy and no one imagined the size of the demand. That became known as ‘the Xerox effect’.

At roughly the same time, about 10 years after WWII, America began to see many more foreigners come into the country.  Xerography made it much easier and cheaper to communicate the same message in more than one language which of course became essential in a multi-language society. Thus, a combination of new technology, expanding needs and new language needs brought into being a whole new communications industry.

We cannot often visibly see [as above] the connections between diversity and pluralism to innovation, but it is assuredly there in many ways and cases.

The origins of our population, which are critical to both pluralism and diversity, require a wholesale openness to embracing newcomers who invigorate the  whole population with healthy differences that can lead to new ideas, new opportunities and new ways to do things.

Countries that have been relatively closed to new populations, for example Italy or North Korea, have much less diversity and, not surprisingly, less innovation, which surely at least partially accounts for the fact their economies have remained anemic for decades.

This factor may be the most important one why we must be very careful about pulling the ladder up into the tree house and/or building walls to keep new folks out of America.

 

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