Is NOT the title of Matt Ridley’s latest book. It is in fact the far more optimistic How Innovation Works, befitting the author of The Rational Optimist. As such, one might expect this to be, well, a rationally optimistic take on innovation. For the most part it is. But Ridley also throws down a number of gauntlets (itself an innovation once, I suppose) as well as challenging some of our common preconceptions about innovation. 

The first among these to mention is a theme that runs like a red thread, or some might even say red flag, through the book.

“One of the flaws in the way we recount stories of innovation is that we unfairly single out individuals, ignoring the contribution of lesser mortals.”

Firstly let’s note the difference between “invention” and “innovation”, which Ridley makes clear early on. The former is the discovery or development of a new thing or concept, the latter is the process by which this thing is turned into a practical solution that gains widespread usage in its relevant field. A brilliant invention sitting in a shed is no good to anyone, it is only when it has been applied to a real-world situation, or satiates a need (real or perceived) that the invention becomes a useful innovation. This distinction is crucial, because most inventors are not good innovators, and many innovators are not really inventors at all.

Keeping that in mind, let’s look at the author’s claim that we tend to single out the heroic individuals too much. If I ask you who invented the light bulb, I bet you would answer “Thomas Edison”. You’d be wrong. And you’d be right. He did, but so did, according to Ridley, twenty other people before the 1870s. The light bulb, claims Ridely, “was bound to appear when it did, given the progress of other technologies.” Where Edison was different was in his ability to turn a novel invention into a useful, practical item that actually made a difference to ordinary people’s everyday life. This he did, not by one brilliant insight, but by his and his team of assistants’ putting in thousands of hours of hard work, as Edison famously said, “genius is one percent inspiration and 99 percent perspiration”.

Nearly all inventions, Ridely argues, from the steam engine, through internal combustion, electricity, the light bulb, aeroplanes, vaccines, clean drinking water, the computer, and so forth, become workable innovations through a long slog of trial and error over time, with one person standing on the shoulders of the giants who went before, in Sir Isaac Newton’s famous metaphorical imagery.

Now, if you are of the “rugged individualist” school of thought, often illustrated by the character in Ayn Rand’s magnum opus Atlas Shrugged Hank Rearden, you may rear up (pun intended) in annoyance and disgust at this. Rearden is an industrialist, inventor and innovator; he develops a new super-steel, Rearden Steel, makes railways out of it, lays the tracks and runs the railroad. Such a character is most unlikely in the real world, if Ridley is to be believed. Yet, the message of his book is not in such diametrical opposition to the Randian world view of Atlas Shrugged as at first it might seem.

In Atlas Shrugged Rearden is opposed tooth and nail by the established players in the steel and railroad industries. They lobby the government to squeeze the life out of his invention and to quell it before it becomes an interruptive invention, to coin Clayton M. Christensen’s phrase, with heavy-handed precautionary regulation. In this Rearden is a most realistic representation of the innovator:

Ridley tells of numerous examples, where new, innovative solutions that could challenge or threaten existing players, were held down and back by heavy-handed regulation enacted by politicians under the influence of existing “crony capitalists”, as Ridley puts it.

It also bears mentioning that the shoulders Newton singled out for standing on were those of giants, not dwarfs. If 21 people invented the lightbulb out of the millions of dullards who didn’t, Rand’s assertion that a few brilliant people move the word forward, is not entirely wrong.

But it is concerning the hindrance of over-zealous regulation you will need to put on shoes with protective toe-caps for all the gauntlets Ridley throws down: he is wisely careful not to enter into the debate about Britain’s membership of the European Union, and he points out the importance of free, international trade, but he also makes two interesting points:

1. Innovations historically seem to flourish in smaller, national countries – even city states – with a well-established framework of just law, peaceful conditions and social and economic freedom. In nearly all the cases where regimes develop into empires, innovation grinds to a halt after a while. One modern exception may be the USA, but Ridley argues that is at least in part due to its federalist structure. I would like to have seen some more discussion of this. Empires can be good at promoting cross-border trade, which we have seen through history, even with our own EU “empire”. Perhaps there is a point when these empires grow too top-heavy and centralized, with too many vested interests in the status quo, at which they tip over into an unhelpful state of governance.

2. Although he does not directly mention the EU in this empire critique, he later in the book deals in some detail with the hindrances and barriers to innovation raised by the EU under the influence of lobbyist, from the issue of GM food to bagless vacuum cleaners, the EU has shown itself as a handy tool for the incumbent with lobbying power to stifle disruptive innovation. (On the bagless vacuum cleaner, the EU decided to test energy efficiency in dust free environments(!), in contrast to international test standards, apparently in order to make German made vacuum cleaners appear as energy efficient as the Dyson vacuum cleaner, and only after a lengthy and expensive legal battle did they finally back down).

The result is, according to Ridely, a famine of innovation creeping across Europe, but also, surprisingly, the USA, with an increasing number of innovators moving away from Silicon Valley due to suffocating regulations. He points out how innovation has been taking off in China and India, and although he does not ignore that China’s political system may in the end collide with the most fundamental requirement for innovation: freedom, he thinks the Old World (including the USA) has grown complacent, fat and self-indulgent, obsessed with over-precaution, laden with top-heavy regulation and slowed by a decline in work ethics.

Innovation tends to take off in societies that work according to the 9-9-6 structure: from 9am to 9pm six days a week. When Britain and the US had this, they led the world; now China has this and is taking the lead.

Another point that I found challenged my prejudices, was that patent law, far from helping innovation, often hinders it. Ridley cites examples of patents being bought and sold as commodities in themselves, throwing a spanner in the works of innovators. He also points out cases where innovation has taken off when patents have lapsed or been released through one means or another. I would proceed very carefully with a discussion of this.

The value of an idea is perhaps the single most important factor in what creates added value and makes capitalism work, an understanding that evaded Karl Marx, focussing as he did on what the labourer physically contributes in the process of production. Ridley references the work of the economist Deidre McCloskey, who uses the term “the innovation economy” as a more accurate descriptive for the economic system we call capitalism.

Ayn Rand, in her essay Patents and Copyrights (in the collection Capitalism: The Unknown Ideal), argues, “Patents and copyrights are the legal implementation of the base of all property rights: a man’s right to the product of his mind.” But she goes on to acknowledge the problem that Ridley identifies in the book, “A patented invention often tends to hamper or restrict further research and development in a given area of science.”

Her conclusion, not too dissimilar to that of Ridley, is that whilst patent laws must offer the originator some protection of the value that lies in an invention or innovation, enabling long-term certainty for investors (Ridley mentions drug companies using many years and millions of pounds in R&D before a new drug can be marketed), it must not offer unjust reward to those who do not have a moral claim to the accruing benefits, and it should avoid, as Rand says, “…infringing the right of others to pursue independent research.”

Unlike physical property, an idea’s intrinsic value is not exhausted by its sharing, indeed its value may increase, Ridley points out, yet the oil in the innovation economy is capital, and if some capital-lubrication does not flow in the direction of the inventor and the innovator, then the cogs will soon cease up.

Ridley had finished this book just as the coronavirus hit our societies with all its panic inducing capability, and he has therefore included an afterword where he discusses innovation in light of the challenges thrown up by Covid-19. Not surprisingly he expects the solution to be an innovation – perhaps an unexpected one. If that sounds optimistic, however, remember that if the examples in his book are anything to go by, this could mean years of hard work before we’re anywhere near an innovative solution.

Ridley’s message is a most important one to disseminate throughout our society: capitalism and innovation go hand in hand. But the process works best if divorced from politics, so as to avoid too much lobbying leverage by existing players; the system must be open to interruption, and the bureaucracy should be light-handed to support, not stifle innovation.

One last story from the book to illuminate (this pun also intended) this point and to bookend the review with the light bulb: when politicians around 2010, under lobbying pressure from environmental campaigners and producers, decided to phase out the incandescent light bulb, they pushed hard for the compact fluorescent lamp (CFL). Do you remember those? They took forever to come on and were very expensive. According to Ridley, “The cost to Britain alone, of this coerced purchase and the subsidy that accompanied it, has been estimated at about £2.75bn.”

Cue the innovative solution of LED lamps, and we have a light-technology that is now cheap to buy, very inexpensive and energy-efficient to run, and extremely flexible. Ridley compares the CFL policy to the government in 1900 forcing people to buy steam cars rather than waiting for the internal combustion vehicle to develop.

And really lastly: Although I have bought two hard-back copies of this book to give away, I actually listened to this book through the complimentary audio book version you get by trying Audible.co.uk. I felt it right to mention this, because even though it was nice to be able to listen whilst doing other things, I prefer to consume my literature – especially non-fiction – pencil in hand, making notes in the margins and underlining, and so I won’t be going on to a paid subscription. This little commercial is me paying my dues.

And totally lastly: I hope you will support your local bookshop if you still have one. (At the moment the government’s face-mask enforcement policy is putting me off going into my local bookstore, more on that here. So much for getting the economy back on its feet). As pubs do not require face masks, I now have a double excuse for doing a lot of my reading there: no face masks, AND I am supporting the local economy. Happy reading!