There's been a boomlet this year in books and articles suggesting that innovation in recent decades has slowed to a trickle and economic productivity is flattening out for the foreseeable future. Peter Thiel has been pushing this meme for a while, Tyler Cowen made a splash in January with his e-book, The Great Stagnation, and Neal Stephenson nearly took the World Policy Institute offline last week with his essay, "Innovation Starvation." Talking about our innovation drought is suddenly all the rage. But is it really true? Or is it mostly just a product of discouragement borne of several years of lousy economic performance?
Honestly, I'm not sure. But maybe it's worth thinking out loud about this a little. The complaints mostly take two basic forms. The first I call "Where's my jetpack?!?" and it's pretty easily disposed of. The argument here is that back in the 1950s we thought the future would bring us flying cars, electricity too cheap to meter, and vacations on the moon. But none of that has happened. What gives?
The answer is prosaic: Forecasters in the '50s were wrong. It's not that the future never arrived—it's that the future brought us different stuff than we thought we were going to get. Our lack of flying cars simply doesn't tell us anything about the pace of innovation.
The second form of the innovation argument is more substantive. I call it the Great-Grandma Argument, and it compares innovation in the first half of the 20th century to innovation since then. Our Great-Grandma from 1900, we're told, would be totally flabbergasted if she were whisked to the year 1950. So much new stuff! But our mothers and fathers from 1950? If they were magically transported to 2011, they'd recognize almost everything they saw. Yawn.
There's obviously something to this. The end of the 19th century and the first half of the 20th century was an astonishingly fertile period: lightbulbs, radios, autos, airplanes, refrigerators, penicillin, TVs, air conditioners, the telephone, and much more. The period since then has seen the digital computer and....that's about it. Things like cell phones and flat screen TVs are mere technological improvements, not genuinely new inventions.
Which is true enough. But although I've often thought about innovation this way too, the more I've chewed it over the more I've decided that it misses something. Most of the best known inventions of the early 20th century were actually offshoots of two really big inventions: electrification and the internal combustion engine. By contrast, the late 20th century had one really big invention: digital computers. Obviously two is more than one, but still, looked at that way, the difference between the two periods becomes a bit more modest. The difference between the offshoots of those big inventions is probably more modest than we think too. Just as we once made better and better use of electrification, we're now making better and better use of digital computing. And to call all these computing-inspired inventions mere "improvements" is like calling TV a mere improvement of radio. These are bigger deals than we often think. We have computers themselves, of course, plus smartphones, the internet, CAT scans, vastly improved supply chain management, fast gene sequencing, GPS, Lasik surgery, e-readers, ATMs and debit cards, video games, and much more.
Wait a second. Video games? Am I joking? No indeed. Give some thought to just what innovation and productivity gains are for.