Category: 1 – Read ASAP! (All Categories are 1 – Read ASAP!, 2 – BUY it!, 3 – SHELF it, 4 – SOMEDAY it)

Comments: Matt Ridley’s “How Innovation Works” was rich with insight. A great book.

Insights that resonated:

(1) “The main ingredient in the secret sauce that leads to innovation is freedom. Freedom to exchange, experiment, imagine, invest and fail; freedom from the expropriation or restriction by chiefs, priests and thieves. Freedom on the part of consumers to reward the innovations they like and reject what they don’t.”

This note from the final chapter is a point Ridley makes again and again. History has repeatedly shown free societies to be more innovative.

(2) Innovation works better bottoms up vs. tops down and when there is less burden of regulation. Example after example demonstrates how empires resist innovation (and even outright ban it). And, for a simple example of how burden of regulation kills innovation, we can look at how Europe’s regulatory changes over the past decade have only resulted in incumbents getting more entrenched and in the citizens of Europe getting access to sub-par technology.

(3) Regulation hobbles innovations because it increases the cost of learning. When learning costs go up, it is hard for us to iterate. Nuclear energy is a stand out example of this.

Also, regulation changes incentives. Instead of people spending energy to invent new things, they spend their energy in making friends with the government to bend the rules.

Iteration is key – it is what has saved millions of lives from diseases like whooping cough and malaria.

(4) “Innovation happens not within but between brains.” The “great man” theory is one we’ve created out of convenience and due (more recently) to intellectual property law.

Innovation has consistently arrived because of humans who chose to build on the work of their rivals and predecessors and combine existing ideas in interesting ways.

Crucial innovations are often thought to have been accelerated by war. However, most innovation has happened incrementally and has been driven forward by many people.

Innovations come when their time comes – regardless of the people involved.

(5) Growth never needs to stop. The nature of growth is such that we first figure out how to produce more. Then we learn how to produce more with less. Until our efficiencies far outweigh our appetite.

Light is a great example. Once the cost of light goes down, more people leave their lights on. However, the efficiency of LEDs mean we’re more efficient than ever before.

(6) Every innovation has been resisted. Politicians in India and Pakistan resisted the Green revolution. Europe was prejudiced against the humble potato.

These are examples of innovations that made their way through (most good ones make it over time). However, there are examples of innovations that haven’t – in multiple places because of successful smear campaigns.

Then again, there are others that were delayed. For example, Dyson fought a decade long battle to get its innovative bag-less vacuum cleaner approved in the EU (crazy, I know).

In effect, there is no such thing as a no brainer. As long as incentives to resist something exists, resistance will exist.

(7) “The main theme of human history is that we become steadily more specialized in what we produce, and steadily more diversified in what we consume: we move away from precarious self-sufficiency to safer mutual interdependence.”

Beautifully put.