A Case of Innovation Foreboding: 3 Things That Can Damage U.S. Innovation Long-Term |
When it comes to complex things, the proverbial glass is never full; it’s only half-empty. On the other hand, the glass is never empty; it’s always half-full.
The glass analogy perfectly applies to U.S. innovation.
In fits and starts, the U.S. economy has begun recovering from the devastating effects of the COVID-19 pandemic. Yet, the pandemic shocks, which will be felt for a long time ahead, have already forced many organizations to change the ways they do business. Almost every operation has been affected: from the manner firms talk to their customers to the logistics of product delivery to maintaining channels of communication between employees.
Will corporate innovation be spared the troubles of adjusting to the ‘new normal’?
Some people don’t even think that anything particularly bad has happened to U.S. innovation at all. Folks who prefer to believe that the glass of U.S. innovation is at least half-full point to the lightning-speed rollout of the RNA-based COVID-19 vaccines and impressive list of ‘fast and frugal’ innovations developed in response to the pandemic. They also celebrate the unprecedented level of the pandemic-driven cooperation between U.S. academic institutions and private companies. And, hey, did the Global Innovation Index 2020, an annual ranking of the world’s innovation capacities, not name the United States the 3rd most innovative country after Switzerland and Sweden?
Houston, do we have a problem?
We do. In fact, we have a host of problems. One of them, obviously pandemic-related, is ‘covidization’ of science, a dangerous ongoing trend of shifting research funding and, consequently, research activities to the field of infectious diseases at the expense of other areas of fundamental medical research. Others have deep and systemic roots in U.S. business and political environment, and in the space below, I highlighted three problems that, in my opinion, can damage U.S. innovation long term.
The well of innovative ideas is drying up due to insufficient R&D funding
Everyone would agree that ideas are the livelihood of innovation. Many also are used to believe that novel innovative ideas are plentiful and cheap, a notion solidified in a popular slogan “ideas are a dime a dozen.”
As I argued before, this wide-spread conviction that we are swimming in an ocean of cheap innovative ideas is no more than a myth. Available evidence shows that the U.S. is facing a growing shortage of novel ideas. Worse, the cost of getting these ideas is growing while their quality seems to be declining. Consider this: by the end of 2019, the venture capital industry had accumulated a whopping $121 billion in so-called “dry powder,” the money for which venture capitalists failed to find ideas to invest in. In other words, ideas might be plentiful and cheap but at the same time not worth of investing money in them.
Where should novel ideas come from in the first place? The answer looks obvious: from R&D, where else?
Exactly, and here is the root of the problem. In the decades that followed World War II, entirely new sectors of the U.S. economy (jet aircraft, modern-day pharmaceuticals, microelectronics, satellites, digital computers, etc.) have been created, thanks to a heavy infusion of public money, with the federal government contributing more than 50% of R&D expenses.
Things have changed since. Although the total U.S. spending on R&D has remained steady for the past years, at 2.5% of GDP, only about 30% of the money now comes from the federal government, whereas 70% of it is contributed by the private sector. With its focus on rapid ROI and competition, will private sector spend money on fundamental and, therefore, potentially risky R&D projects? No.
Sure, the industry can still generate incrementally innovative combinations of old ideas–which indeed may be plentiful and cheap–but it will likely fail to create breakthrough innovations.
President Biden’s proposal to dramatically increase funding for fundamental research along with the elevation of the Director of the White House Office of Science and Technology Policy to the cabinet-level position are promising steps in the right direction. Unfortunately, there is no institutional protection for the increased R&D budget, which may be easily slashed again by a future Republican administration.
The pandemic has disrupted existing innovation networks
A major question, the answers to which are about to start emerging, is to which extent massive shift to remote work has affected the country’s ability to innovate.
Following the initial euphoria over the fact that remote work did not immediately destroy the corporate world, sober voices of concern are heard. Experts warn that online communications, the hallmark of remote work, are characterized by lower information sharing; that means reduced exchange of ideas between members of the innovation teams.
Besides, and perhaps, more consequential, remote work has essentially eliminated serendipitous interactions, unplanned encounters between employees working in close proximity to each other. Serendipity is believed to play a central role in the development of new collaborative partnerships that are crucial for the sustained corporate innovation process—and, as such, serendipity represents one of the driving forces of innovation.
American history already knows one example of a sudden disruption of innovation networks, Prohibition of 1920-1933, when government actions abruptly intervened in the established pattern of people-to-people interactions. This had a profound negative effect on the U.S. corporate innovation.
Prohibition-induced effects on innovation had one characteristic feature: they didn’t change the scale or the identity of the individuals within innovation networks. They just disrupted established ways people belonging to the networks communicated with each other, and that was enough to damage the whole innovation process.
This is exactly what we see today: innovation budgets are still there (or at least most of them), people involved in the innovation activities, too. But the way these people interact has been dramatically changed by pushing them behind computer screens in their home offices.
The Prohibition case teaches us another lesson: while the innovation input fell dramatically in the years immediately after the Prohibition onset, it rebounded over time, meaning that affected individuals gradually rebuilt their informal social networks. As America gradually opens, and folks return to offices, innovation networks will be re-established. How long it will take, and how innovative the restored innovation network will be, remains to be seen.
The growing politicization of science
In general, Americans trust science. In fact, they trust scientists as highly as military and much higher than religious and business leaders, and, not surprisingly, elected officials.
Unfortunately, a troubling trend has emerged over the past 40 years: the growing distrust in science that has been specifically driven by conservatives. (The trust in science remains steady among moderates and the liberals.)
So far, this distrust in science among the conservatives has been mostly manifested by their skepticism about anthropogenic climate change. However, the COVID-19 pandemic has expanded the front lines of this ‘war on science.’ In December 2020, the Pew Research Center reported that while 84% of Democrats considered COVID-19 as a major threat to public health, only 43% of Republicans agreed. The same ‘blue vs. red’ divide can be seen over seemingly non-partisan issues like wearing masks and COVID-19 vaccination.
Research shows that distrust in science among the conservatives correlates with their unwillingness to support it. Taking to the extreme, this trend may result in increasing ‘defunding of science’ both in the Republican-controlled states and, worse, at the federal level.