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Today’s topic has been of genuine interest to me for a while. How does innovation happen and why does it happen in clusters?
There was a book and a corresponding video series written about innovation clusters a while ago. I don’t recall the author, but what was interesting were these moments in time when people came together and really moved humanity forward.
For example, it was in Scotland that David Humes, Adam Smith, and their contemporaries, inspired by John Locke before them, envisioned what a modern free society should look like. It took the American Revolution to put it into action.
The American Revolution unleashed an incredible period of innovation. We have never seen sustained broad-based innovation at any point in human history like we have seen in America from the founding of the country up and including today.
Inside our country, we see innovative clusters. Some are large and some are specialized. The most famous, generalized, and productive one is in Silicon Valley. But, when it comes to things like finance and risk, New York and Chicago are innovation clusters. Energy has an innovation cluster in Houston. Healthcare has an innovation cluster in Boston. It also has one in San Diego and in Minneapolis. Consumer goods has one in Cincinnati.
I like what Packy wrote today, and agree with a lot of it. But, this paragraph stood out and it seems really misplaced to me.
The list of challenges facing humanity is long and complex: climate change, inequality, natural disasters, travel, education, and more. We can’t leave solving those hard problems to chance. Understanding those productive periods and places might give us insight into organizing ourselves in such a way as to maximize our chances of solving them.
When we think about the great innovations that really raised standards of living in the world, why did people innovate?
The list that Packy enumerates in that paragraph has some things unsolvable with innovation or innovation clusters.
How are you going to stop natural disasters? I mean, when an earthquake happens it happens. When a volcano blows, it blows.
Inequality is something that has persisted since the dawn of man and will always be a part of society. The only way to have “equality”, is for every single person to be the same with the same thoughts, same desires, and same outcomes. The only way to get to that utopia goes through the tip of the spear. We know that is totally unattainable.
Instead of equality, what we should be focusing on is “opportunity”. People need to be enabled to give themselves a chance. How many stories are out there in the naked city about some immigrant coming to America and building a better life for themselves and their family? Millions of them. I am sure you might have met them in your life. I have.
Climate change is a big bugaboo of mine. No innovation is going to change the climate. All the solutions I have seen for climate change do not work unless forced by an edict or are heavily subsidized by a government.
Until the climate fanatics take a hard look and embrace nuclear, nothing will happen. Besides, it’s going to take communist China to change their ways and they ain’t changing until the government there falls. The climate people are fanatics and they aren’t that different from fanatical cults we have seen throughout history.
Innovation lifts up lives and creates great outcomes when there is an atmosphere that embraces freedom of choice. Climate totalitarians always serve up solutions that take away choice. The climate totalitarians always serve up solutions that make energy more expensive, which will break the backs of the poor and middle class. Hey, that will increase inequality come to think of it not decrease it.
When I look at the tone and tenor of public discourse today, all of it is against being free to choose. Solutions are anti-capitalistic. Leaders of modern-day movements that hold up the ideals of education, equality, and clean environment are anti-capitalistic and want to destroy capitalistic society.
Why do people innovate? Because they want to make money for themselves. Greed is a part of innovation. If you have an idea and build a business and don’t make net income, it’s not a business it is a hobby. (tip of the hat to Professor Magelli at Gies College of Business)
Without the profit motive, meaning capitalism, you cannot have innovation. It’s why China steals all of ours and Russia stole innovation from us when the Iron Curtain existed.
You never go broke taking a profit and you don’t innovate without making one either.
That being said, we don’t have rampant unbridled capitalism in the United States. It’s one of the largest philosophical problems I have with both political parties. They each try to imprint their will using subsidies, the tax code, and regulations that allow big corporations to game the system and stamp out competition. Our system in the US is anti-competitive in a lot of ways and that curbs the volume and ability to innovate.
For an example, just look at the farming industry. Take a peek at the subsidies. Take a peek at crop control programs. Government invades every part of our food supply from seed to harvest to distribution. Ask yourself why there are only a few large packers. Ask yourself why there are only a few seed companies, equipment manufacturers, and the rest. Why is the industry structured like it is structured? Heck, during Covid Governor Whitmer of Michigan banned people from buying seeds at stores.
Today, we have all kinds of people attacking wealth. Wealth taxes, higher income taxes, higher fees, and many schemes designed to take money out of the pocket of people and give it to the government to spend and redistribute as it sees fit. Without wealth, you can’t have innovation. It should be no surprise that since the US is the wealthiest nation in human history that most of the innovation happens here. As a society, we need to stop attacking wealth. Instead, we need to find ways for more people to have opportunities to earn it and become wealthy themselves.
By the way, all of this drek pointed at wealth and capitalism has an Achilles heel. It’s centralized. It’s against simple human nature. We always want to better ourselves and from early times we realized there were gains from trade and gains from division of labor. One thing I see with cryptocurrency is the ability to exploit that weakness and blow it up. Crypto can be David to government’s Goliath.