The Breeding Ground

by Dave Schuler on July 2, 2014

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
iPhone.

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?

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{ 29 comments… read them below or add one }

TastyBits July 2, 2014 at 8:34 am

You got it perfect, but I do not think that most people understand what has happened.

The right worships at the altar of business, and they cannot/will not see that their reality trumps theory. Given the opportunity, businesses will run wild, and as long as they have access to the legal system, they will screw anything and everything they can.

The left worships at the altar of government, and they … (swap government for business)

michael reynolds July 2, 2014 at 10:09 am

I think innovation moves in sudden advances followed by longer periods of absorption and consolidation. Look at the period of the mid to late 19th century, with everything from the light bulb to the stock ticker to the car, the radio and the airplane.

I don’t think innovation is predictable or controllable. Big inventions, like the automobile, set off long tails of smaller innovations – windshield wipers, automatic transmissions, airbags. But there isn’t some steady stream of big inventions that can simply be mined like a seam of coal. Right now we’re just riding the tail of the computer.

Also needs once met don’t have to be met again. We don’t need more and faster communication, for example, we got it. Same with transportation – we pretty much have that covered. Housing? Check. Clothing? Got it. Food? Yep. So, a middle class American in 2014 has all the food, lodging, clothing, communication and transportation he needs or wants. We’re down to the short strokes now, deciding whether our incredibly capable all-purpose device should be carried in our pocket or worn on our face.

The next big thing is probably just continued exploitation of DNA – a 1953 discovery. Unless of course someone has figured out FTL travel.

Janis Gore July 2, 2014 at 10:42 am

I’m pretty much in agreement, Michael.

Virtual reality and stimulation of the brain centers?

steve July 2, 2014 at 1:53 pm

We have most of our labor force tied up working for fairly large companies. They do not invest as heavily in basic research as in the past. (We have also cut govt funding into basic research.) Profits now go to management and shareholders. Not so much to labor or back into research. We have made tax rates very low for many top earners. They have responded by maximizing their income, surprise, not by maximizing innovation.

We should definitely try getting rid of more of the regulations affecting small businesses and start ups. We should recognize that a lot of these regs are at the state and local level.

Steve

jan July 2, 2014 at 2:49 pm

Tasty has made salient points regarding business and government’s commanding roles in how much a country is allowed to advance — be it stalled, slowed or put into high gear. In fact big business and big government are tandem powerhouses having the largess and ultimate authority to pace growth according to their own financial spreadsheets or political whims. This applies to most private sector entrepreneurs, no matter if the focus is in technological, automotive, housing fields etc. Any innovative and possibly future competing counterpoints can simply be bought up by large corporations, or tamped down, even obliterated, by a greater assembly line of rules and regulations created by big centralized bureaucracies.

Unlike what Michael is saying — that we have become tapped out to do much more, that first we must go through absorption/consolidation phases — I see us being restrained, at times constrained, by a consortium of big business/big government powers that want to consolidate and keep power in their own realm, rather than have it diluted and then shared by ordinary citizens empowering themselves. We’ve seen this in the automotive/ petroleum industry buying up innovations lowering fuel consumption, so they could be shelved. Increasing red tape, along with rampant foot-dragging in many local building departments, has increased the cost of housing and renting. Rent control, government’s panacea to high rents, though, has then introduced gentrification into former low and moderate areas, as well as shoving out small owners being bought out by foreign and large residential housing interests.

Denying that there is much more around the corner dealing with progress, IMO, is putting blinders on. Man’s mind is incomprehensible. Even mapping the brain has been a fairly recent accomplishment. However, knowing where we can go from here to there — setting arbitrary limits on future possibilities not even dreamed of yet — is like diving into a pool with concrete strapped to your feet.

michael reynolds July 2, 2014 at 3:19 pm

Let’s say someone had a good bead on basic science that would allow teleportation. Do you think either government regs or big business lassitude would stop it from getting all the financial support needed to continue research and development? I don’t think so. In fact, I think it would be swimming in R&D money.

FTL travel? Puh-leeze, they’d have more cash than they’d know what to do with.

How about something more mundane like, say, self-driving cars. Oh, wait, that’s already being funded by Google.

Okay, a new type of battery that might increase device life by multiples of 3 or 4 times? Capital would be kicking the doors down for a chance to buy in. A practical flying car? Wireless energy transmission? Ditto.

Silicon Valley is neck deep in venture capital. Every geek with an app can find capital and get his product to market. In fact, since markets are now increasingly global, the incentive to create new stuff is greater than ever. So where is this alleged stranglehold?

The thinking here seems to be that if we just assemble enough wagons and oxen we could all hop on the Oregon Trail and discover California again. Like setting the table in the belief that dinner would simply appear. This is magical thinking.

What is it that we are not developing that we might develop but which is inadequately funded or is stymied in its efforts to reach the market? If there’s no answer, then that’s the answer. Corporations are spending less on R&D because they don’t really have much (aside from medical) to either R or D.

Aside from the computer and its associated products (including smart phones) what great new invention has arrived on the scene in the last 50 years? We’ve been coasting along on a surge of invention – cars, telegraph and telephones, planes, generators, cameras – that are all a century old.

History does not support the notion that breakthroughs can simply be ordered up or wished into creation by cutting regulation or assigning more R&D dollars. I don’t believe you can brute force genius.

TastyBits July 2, 2014 at 3:54 pm

@michael reynolds

You have no idea of what you are talking about. Tech companies fight globally against each other. This is one of the reasons they keep a lot of cash on hand. Google only survived the Android attack because of its cash. They have been buying patents every since.

These companies patent anything and everything the patent office will approve. If they were publishers, they would copyright sentences, words, phrases, and clauses. It is insane, but they get away with it.

At one time, Microsoft was making more money from Android than Google, and it is possible Microsoft’s mobile profit’s will come from non-MS products.

Because Google gives away Android, there should be multiple mobile phone manufacturers, but Apple, Microsoft, Nokia, Motorola, and others have done all they can to strangle the market.

steve July 2, 2014 at 3:57 pm

“I don’t believe you can brute force genius.”

I think you are probably correct, but there are a lot of areas that do need brute force. Many of the pending breakthroughs in physics, just to pick an example, really do need it. The massive investments in supercolliders and other stuff is necessary if we are to make more of the fundamental discoveries we need to advance our tech.

Steve

Ben Wolf July 2, 2014 at 4:55 pm

That piece reads as remakably naive. Facebook bought Whatsapp because unless you opt out the application uploads your entire messaging database. That’s personal details on potentially tens of millions of users, and advertiser’s dream. Innovation had nothing to do with the acquisition beyond finding new ways to profit from your loss of privacy.

Dave Schuler July 2, 2014 at 6:07 pm

Michael:

You’re taking two different propositions, one of which is true and one of which is false, and conflating them to derive your conclusion.

This:

I don’t think innovation is predictable or controllable.

is probably true or at least mostly true. But from it you draw the conclusion that it’s impossible to influence or foster innovation which is false.

Incentives matter. The circumstances matter. The environment matters. Policies matter. Will they force innovation or render it predictable? No. But with better policies you can encourage a little more innovation. And that’s what we’re talking about.

It’s like having a garden. Most innovation isn’t the product of genius but the result of incremental change and systematic activity. Or, as Tom Edison put it, genius is 10% inspiration and 90% perspiration. He didn’t suddenly wake up one morning and create the light bulb. He had teams of engineers systematically trying every alternative that anybody could think of.

You can’t force a tree to grow but you can encourage it or you can kill it.

TastyBits July 2, 2014 at 6:15 pm


… finding new ways to profit from your loss of privacy.

If the US government had any sense, the NSA would create a few apps, charge for them, and track the crap out of people. They could pay down the US debt with the income, and with a EULA, nobody could claim they were doing anything nefarious.

The apps could have you agree to let them monitor your email, location, contacts, phone, etc. “Angry Jihadi”, “Build-a-Bomb”, “All-Blow’d-Up”, “Whack-a-Christian”

Zachriel July 2, 2014 at 7:58 pm

michael reynolds: I think innovation moves in sudden advances followed by longer periods of absorption and consolidation.

It probably resembles what is known as a scale free distribution; lots of small changes, a few big changes, and the rare revolution.

Guarneri July 2, 2014 at 8:23 pm

“Most innovation isn’t the product of genius but the result of incremental change and systematic activity.”

“It probably resembles what is known as a scale free distribution; lots of small changes, a few big changes, and the rare revolution.”

Correct observations. The first two require a proper environment. Rare revolution much less so, if at all. Michael is obsessed with rare revolution, which is, well, rare.

Janis Gore July 2, 2014 at 9:10 pm

To say Michael is obsessed is wrong. He sees a tech dam breaking then a cascade of developments after that.

Our own host has said we’ve picked the low-hanging fruit. Now we need research and development funds. I remember he cited a surgeon, who had figured out how to take the vapor from laser surgery and analyze the tissue. That’s huge, but will be a long time coming to your community hospital.

Meanwhile, we need to figure out how to keep bleomycin, a chemotherapy drug, from causing pulmonary fibrosis. My brother is having a helluva time.

Janis Gore July 2, 2014 at 9:39 pm

How y’all sister, Drew?

In a world where it seems nothing much changes, cancer treatment does get better. In leaps and bounds. Mainly.

Janis Gore July 2, 2014 at 10:16 pm

Michael, I think, is also thinking of “pent-up demand”. A horse takes a lot more attention than a car. Fill it up and forget it. It doesn’t have to be groomed and fed everyday, housed and blanketed in winter. (Though I do understand that happens in the cold north.)

A PC doesn’t need to be kept in a sterile, air conditioned room. Now I have two PCs, a tablet, a smartphone, an all-in-one printer, and I got the whole lot for $2000 or something near there, new.

I wouldn’t be surprised to find that the government is still using nine-pin printers.

Janis Gore July 2, 2014 at 10:20 pm

A nine-pin can put out reams.

Janis Gore July 2, 2014 at 11:00 pm

And I just bought a new required calculator for my upcoming math class. A TI30XIIs. It costs about$13, wherever you get it. In 1974, the Hewlett-Packard they wanted at Reed for the little nuclear reactor was a cool $260 or so.

One of the girls who had one was killed in a crash on a motorcycle in an intersection in a far West Texas town while I was still enrolled. We were a suicidal lot.

Janis Gore July 2, 2014 at 11:02 pm

Texans, not people who carried HPs.

Janis Gore July 3, 2014 at 12:16 am
Janis Gore July 3, 2014 at 12:18 am
Janis Gore July 3, 2014 at 1:05 am

For all the political huffing and puffing you see from Texas politicians, they do have and maintain the Austin corridor. Who all be down there now? Those are tax breaks.

TastyBits July 3, 2014 at 8:00 am

@Janis Gore

As of a few years ago, dot matrix printers were more widely used than most people would imagine, but I am not sure if that is the case today. I cannot remember the reason, but if I recall correctly, it made sense.

Dave Schuler July 3, 2014 at 8:08 am

I cannot remember the reason

Mostly cost per printed page and speed. When you need multiple copies of something, your choices are either multipart forms or printing multiple copies. When laser and inkjet printers were more expensive and slower than they are now and when costs per page were higher, multipart forms still made sense. And then there’s check printing. Actual printing of checks on security stock is still relatively uncommon. People are contracting that out more or using direct deposit.

michael reynolds July 3, 2014 at 11:27 am

Ah, so we’re watering the garden, are we? By removing those terrible onerous “regulations” we all hate so much. Would that be like the regulations the state of Texas lacked in the Texas City refinery explosion? Or (just to stick with BP) like the big Gulf blow-out?

How about Fen-Phen? How did that lack of regulation work out? Or, hey, how about the entire financial sector exploiting lack of regulation to blow up the world economy?

We regulate industry because industry likes to maximize profit and blow shit up or occasionally poison people or quite frequently rob people and plunge the country into a massive recession.

On the one hand we have the theoretical notion that too much regulation is stopping unspecified but longed-for innovation that would create we don’t know what, but probably coolness and jobs. On the other side we have lack of regulation demonstrably, provably injuring, impoverishing and flat-out killing people.

I have heard this whine my whole life. I recall very clearly the wailing and gnashing of teeth from the automobile industry when those evil government regulators insisted on safer cars. Industry was absolutely sure that seatbelts and airbags and crumple zones would kill their business. Bad government! Bad! Of course in reality what happened was a shift in how people bought, a prioritization of safety by the consumer, resulting in infinitely better cars and thousands of saved lives.

No doubt there are unnecessary regulations. But you’d have to be a fool to take the word of the regulated industries as to what those may be. Some certainly possible but still imaginary “innovation” that would perhaps spring into existence if only a regulation would disappear, has to be balanced against the trillion dollars or so that lack of proper financial regulation has cost us, not to mention the lives and quality of life that would be lost.

Andy July 3, 2014 at 11:54 am

Michael,

Perhaps you aren’t aware of it, but there is pretty wide continuum between the “no regulation” strawman and what we have now -it’s plenty wide enough to allow us to keep the baby and throw out the dirty bathwater.

TastyBits July 3, 2014 at 12:05 pm

@michael reynolds

Either you posted to the wrong thread, or you are missing the point. Regulations are not the problem. The original post was about Intellectual Property laws and the legal system.

Here is a clue: The world you live in has been created through the lack of proper financial regulation. If there had been proper financial regulation for the last 15, 30, 0r 100 years, you would be screaming bloody hell to have them lifted.

The digital age would move at a snails pace with proper financial regulation, or just another weird idea.

jan July 3, 2014 at 2:23 pm

“Perhaps you aren’t aware of it, but there is pretty wide continuum between the “no regulation” strawman and what we have now -it’s plenty wide enough to allow us to keep the baby and throw out the dirty bathwater.”

Amen…..

Janis Gore July 4, 2014 at 8:16 pm

I owned a Silver Reed type printer. I went to my Poli Sci at SMU professor one morning and told him that I couldn’t print my paper until the stores opened up and I could buy a new tape. It was true. The paper was due at 8 and the stores opened at 8:30.

There are some advantages to being a young, pretty, smart girl. This gets back to Michael’s DNA advantage that he’s been carrying on about at OTB. No one disputes that “work” is involved.

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