Volume 3: Innovation or Exploitation?
Last week we talked about value and the role it plays in our decision-making. This week I want to keep tugging on the value thread.
I've been thinking a lot about innovation. It's one of the things we value most. Today, when we think about innovation we typically think about innovative corporations. Apple, Google, Tesla. The underlying belief is that capitalism is an engine of innovation; that free markets create innovative breakthroughs, while governments seek to curtail them or even stamp them out. This is problematic in a number of ways. First and foremost is that it's actually not true. Secondly, because it's not true, it skews our definition of innovation with significant consequences.
Capitalism is not an engine for innovation. It's an engine for exploitation.
Fundamentally, capital is risk-averse. The goal of investing is to get a return. The riskier the investment, the higher chance you lose your money. Do that too many times as an investor and you're out of the game. What this means is that capital rarely funds the research and experimentation required to create truly groundbreaking innovation. There is too much risk. New technologies are completely unproven, not only from a feasibility perspective but more importantly from a commercial perspective. We don't know if it will work and we don't know if there is a use case where people will want to buy it. To consistently fund that kind of high-risk R&D you need entities with deep pockets, long time horizons, and the absence of the profit motive. In most cases, this means governments, though universities, and non-profits are also in the picture (though frequently they are working with government funds). Sometimes very large [and cash rich] companies might do some of this, but even that often comes with some sort of government support or incentive.
Right now you are using an electronic device to read this newsletter. You bought that device from a company, but the majority of the underlying technologies that make that device possible didn't come from that company. Instead, they were developed decades ago through government-funded programs and academic research, and only then were they exploited by companies to create marketable products.
The word exploitation carries a lot of negative baggage, but in this case, it's not necessarily a bad thing. What we are talking about is the process of commercialization. Taking a technological breakthrough and making it useful for people. Steve Jobs wasn't a great inventor, he was a great commercializer. He saw use cases for newly emerging technologies that few others saw and he exploited those gaps in the market.
This process of exploitation has become our prevailing definition of innovation, and over time it has narrowed our sense of value.
We see incremental improvements in the commercialization of a given technology as breakthroughs (as evidenced by every Apple keynote event) when in reality, it’s just slightly better exploitation - like a faster processor or better camera. Our innovations on the web fall into the same category.
This distinction between innovation and exploitation might feel like a semantic argument, but conflating the two has real consequences.
The exploitative nature of capitalism, left unchecked, spins out of control. And when we allow exploitation to masquerade as innovation, it gives us license to squeeze every possible ounce of exploitable value out of everything we create.
The only difference between a poison and a cure is the dose, and it’s very easy to overdose on exploitation.
This is how we end up with 300 different kinds of spaghetti sauce, hundreds of social media apps, billions of single-use plastic products, and ecosystem collapse.
By conflating exploitation with innovation, we’ve skewed our view of progress, and we’ve lost sight of what’s really valuable. We lionize industry for its innovation and efficiency and deride government for blocking progress. In many cases, the opposite is actually true. Government is the enabler and free markets hold us back by clinging to the value derived from legacy technologies - think about the fact that free markets are currently holding us back from transitioning to clean energy, and government subsidies are the major reason we’ve made any progress on that front. In fact, even government regulation is not a check against innovation, it’s a check against exploitation.
Of course, this doesn’t mean we all need to quit our jobs or that all the things we’re designing and building don’t have merit. In many cases, exploiting and commercializing technological breakthroughs brings real value to real people. But, to design like you mean it means thinking critically about the systems we’re participating in, and assessing how we might show up differently.
If we’re honest with ourselves, we’ve set our bar of value incredibly low. In the big picture, we’ve actually hit a point where we are losing value when we rush to exploit every niche of a market, or create a slight different spaghetti sauce, or when we try to convince people that their life will be transformed by throwing out their 10-megapixel camera for the new 12-megapixel version. It’s time we raised the bar and reset our definition of innovation.
Jesse