Innovation with a little “i” is booming but we probably need bigger government for big problems…

“Yes! There’s an app for that!”  Too bad if its an app for trying to find  single men between the ages of 40 -50 in a 3 block radius when what you really need is an app for finding affordable health insurance after you’ve been diagnosed with cancer.  The dichotomy between the apparent collapse of real deal innovation and the explosion of useless “fluff” apps was brought to vivid life by C.Z. Nnaemeka  in the “The Unexotic Underclass” in the MIT Entrepreneurship Review.  It is a great article worth the read and don’t forget the comment thread.

Truth be told, the author was preaching to the choir as far as I was concerned.  I mentioned this in previous blogs about little “i” innovation outpacing big “I” innovation at an alarming pace.  America has big yawning problems with a dearth of solutions, yet there is app after app, and product after product for the trivial and irrelevant.  We have iPhones, iPhone apps, iPads, and even iShares to help you make a killing in the market.  We have apps to find the perfect restaurant, apps for train schedules.  VC flows freely into these ventures while the purse strings remain tightly closed for the big issues such as climate change, income inequality, or our apparent inability to keep Americas roads and bridges from collapsing.

C.Z. Nnaemeka brilliantly brings to life the extent and absurdity of this dichotomy. We have so many big problems that our screaming for our best and brightest minds, but they seem to be otherwise occupied with such projects as “Urban Spoon” and “Gluten Free Fast Food”.

The question that is not addressed (and was beyond the scope of the article) was why?  Why are we throwing money at nonsense when urgent issues screaming for solutions?  Let’s try to connect a few simple dots.

Venture capital and innovation flow where the money is:

Its simple profit motive.  Innovation is risky.  Funneling VC into innovation is risky.  People do not risk capital without seeking rich rewards.  High-risk needs to equal high-reward or the risk becomes a fools errand.

Innovators who might prefer to dig away at big “I” issues that address the urgent needs of society stil have to pay the rent and put food on the table.  They aren’t going to be getting large amounts of VC to work on a problem whose solution is complex and has a 30 year timeline.

From a personal standpoint, I understand where they are coming from:  I run my own business and I had some decisions to make last year on what  services  I was going to offer and for what price.   When I crunched the numbers and the time factor involved, I couldn’t make a viable living appealing to a mass market without taking on staff, an office and more equipment to provide my staff with the tools they need.  More risk.  At this time, the average person doesn’t have the money to spend today that would make that risk worth my while.  The solution was a high quality if expensive product that caters to the top 5-10% of the population.  So, in essence, I am doing the same thing as the other entrepreneurs.  Like everyone else, I’m going where the money is so I can actually get paid.

That sad reality of income inequality meets the politics of austerity…

Since capital flows where the money is we now have the perfect storm that is paralyzing big “I” innovation.

Income inequality, which is hitting all but the tippy-top of the  financial elite in the gut,  prevents innovators and venture capitalists from promoting products or services desperately needed by the masses.   If the masses can’t pay for a product, why invent one?  Money flows to where money goes.  When money only flows into the hands of the few – it becomes a cold day in hell when the masses can tap into solutions offered by the best and brightest.

The other avenue towards big “I” innovation has always been government funding. Traditionally, our government provided the “seed corn” for new innovation.  Researchers in  academia and the private sector were the beneficiaries of this largesse.  It permitted long term R&D to continue on a steady course without the pressure of an immediate return on the investment.  Although we tend to think of government funded research as inconsequential, it accounted for much of the technological and scientific progress that  was  a hallmark feature of the late 20th century.  From the invention of the internet  to the  sequencing of the human genome, we need to tip our hats to publicly funded research.  Public research laid the groundwork, the VC came later when a product was clearly on the horizon.

Unfortunately, government cutbacks in basic R&D are taking a huge bite out of grass roots innovation. The NIH budget has been hacked to death by the sequester.  Last I checked, the sequester alone will result in 8% fewer grants being funded in for fiscal year 2013. And that’s after cutbacks that have been taking place since the Bush administration came into office.  Scientists are leaving their benches for any kind of employment that they can find while new super-bugs are threatening to cause life threatening complications to surgical patients.  Sorry, we don’t have any answers for that – we fired all the scientists who could have helped.  VC isn’t interested because antibiotics are not money cows.

The lesson here is that big “I” innovation is generally not the province of VC.  Innovators really can’t innovate unless they are paid and with government funding off the table, we are sadly in for more of the same.

© 2013 – RGHicks – – All rights reserved.


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