May 20, 2011

Innovation Nation—Or Stagnation?

Nothing’s new in the kitchen. All the appliances, apart from the SaladShooter, were invented decades ago. The automobile isn’t much changed since the Model T.  All we’ve been doing is adding new ornaments to old innovations, and the days when technology gave rise to millions of new jobs are long gone.

That, at least, is the argument of economist Tyler Cowen in his new book, The Great Stagnation. A “PBS NewsHour” segment this week explored Cowen’s argument and posed a provocative question: “Why hasn’t recent technology created more jobs?”

Cowen’s answer is simple: We’re inventing new things, but not enough of them. We’ve picked the low-hanging fruit.  “The rate of progress has slowed down,” he said. “And this is our central economic problem today.”

But Erik Brynjolfsson, who runs MIT’s Center for Digital Business, sees plenty of innovation in the United States. “Tyler Cowen and a lot of the people who are focused on the great stagnation, I think, are sort of backward-looking at the mature technologies that are at the peak of their S-curve, rather than the new technologies that are just emerging,” he told the NewsHour. In other words, inventions abound, but they’re just getting off the ground.

Image source: dreamstime.com

Peter Drucker—though he well understood the notion of the S-curve of technologies, a notion first analyzed by Russian economist Nikolai Kondratieff in the early 20th century—would have probably had an altogether different take on the matter. “The high-tech industries . . . have so far not been able to generate more jobs than the old industries have been losing,” Drucker wrote in his 1985 classic, Innovation and Entrepreneurship. “All projections indicate that they will not do much more for long years to come, at least for the rest of the century.”

[EXPAND More]But, he noted, “Something in the United States offsets the Kondratieff ‘long wave of technology.’ Something has already happened that is incompatible with the theory of long-term stagnation.”

For Drucker, the mistake that people make is to automatically equate innovation with high-tech. In fact, it is often improvements in doing business (rather than inventing new gadgets) that bring prosperity and generate jobs. Devising new ways to manage an organization, to change a process, to bring a service to customers—all these things should be viewed as forms of innovation, according to Drucker.

“The ‘technology’ is not electronics or genetics or new materials,” Drucker asserted. “The ‘new technology’ is entrepreneurial management.”

What do you believe: Has the United States entered a long period of inventive stagnation?  Or are we doing much better than many people think?[/EXPAND]

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