Michael Malone muses over why technological innovation is slowing:
For more than a half-century, big technology companies have led the way in inventing revolutionary products and services, from calculators to smartphones. Startups, meanwhile, have built upon those creations with innovations like peripheral devices and software applications. This was as true for the IBM 360 computer as it was for the Apple
But something fundamental has shifted in Silicon Valley. The emblematic event was Facebook’s February acquisition of the mobile messaging startup
WhatsApp for an astounding $19 billion. WhatsApp was barely five years old and had 55 employees. The question from one end of Silicon Valley to the other was: What possessed Facebook to spend that kind of money?
Surely there must be a method to Facebook CEO Mark Zuckerberg’s apparent madness. In fact, a strategy is emerging: In 2012, the social media giant bought Instagram for $1 billion. The number of Facebook users grew less than 4% last year, but the number of Instagram users jumped 23%. Millennials are getting bored with the website and abandoning the platform in far greater numbers than their parents—the kiss of death—are joining.
So Mr. Zuckerberg has two options: radically transform his current product (no small matter with the drag of 1.3 billion users), or buy the Next Big Thing. And the next one. Then the one after that.
It may prove a brilliant strategy. But it also means that Facebook, one of the most innovative companies of the past decade, now depends on purchasing the inventiveness of others.
If you want the volume of innovation that existed when Apple and Microsoft were founded, you should think about what’s changed since Apple and Microsoft were founded. We’re not subsidizing technology the way we used to. We’re importing most of the technological products that people buy. We’re importing numbers of foreign technology workers to push wages here down.
We’ve broadened intellectual property law considerably, giving established firms the weapons to crush upstarts and creating industries of intellectual property pirates.
Capital investment and the willingness to wait for it to bear fruit aren’t what they were then.
And, most of all, there are technology giants like Microsoft and Apple, ready to strangle start-ups in their cribs and people like Larry Ellison who buys companies just for the products, firing all of their employees.
The breeding ground for technological innovation is gone. Why are we surprised?