Innovation and ‘Cut-Throat’ vs. ‘Cuddly’ Capitalism….

Just in case anyone is wondering, this is repost of a previous post.  I had to delete the original  because spam trackbacks were hammering my email in-box and taking the time to get rid of all the spam was getting ridiculous. 

Lately, I have been reading a book by Darron Acemoglu (M.I.T.) and James Robinson   (Harvard)  Why Nations Fail.  It is a fascinating book that can be easily downloaded onto your iPad or Kindle and well worth the read.  I plan to write several posts regarding the content of this book and its implications for innovation in America.

Does ‘Cuddly’ Capitalism Slow Innovation?

Today however, I am responding to a paper that Acemoglu and Robinson wrote with Thierry Verdier regarding “cuddly vs. cut-throat  capitalism”.  A link to the paper and an interesting review is available here: Will American Innovatiion Slow If We Go ‘Cuddly’?   The research paper can be downloaded as a PDF from the this web address  “Can’t We All Be More Like Scandinavians?” The authors contend that on a world -wide basis that we can’t be more ‘cuddly’ because cut-throat capitalism is the spur and that nations that have a more ‘cuddly’ form of capitalism with a bigger safety net actually mooch off of cut-throat innovation with a weaker brand of their own innovation.  In other words, the poach our big ideas to create small ones.

The Method:

In the paper the authors were comparing the innovation track record of “cut-throat” capitalist countries (the U.S.) with what they termed more “cuddly” capitalistic countries – The nordic countries of Denmark, Finland, Norway and Sweden.  The model is based on the  number of patent filings per-capita as well as the number of citations each filing obtained. The theory being that a more “important” filing will rceive more citations.

My critique on the paper….

At the outset and in the name of total disclosure, I admit that I am no economist.  As a former molecular biologist, I was familiar with statistical analysis and have a year of calculus under my belt from the dark ages of the 1980s.  I have zero experience in the machinations economic mathematical models.  So I will have to dodge on the mathematical modeling they use in the paper and stick with general cause and effect as well as my experience  as a scientist to guide me through this mine field.

Even though I don’t fully understand the mathematical modeling – I have some big problems with their charts….

Figure 1 –  looks at the number of hours worked…The implication here is that a lack of a safety net creates a “hunger” to discover.  This is based on a simple notion that I to keep food on the table and a roof over one’s head – people will work longer hours and be more productive.

There is so much wrong with that idea that I don’t know where to even begin.  Innovation is about 10% inspiration 50-55% perspiration and aout 35-40% dumb LUCK.   The trouble here is that luck has a great deal to do with it.  I was in research for 15 years and unfortunately, being in the right place at the right time had more to do with success then simply slogging away.

This is survivalist nonsense. That means having enough food to eat, being able to get health care when you are sick, and staying off the STREET for God’s sake. Make no mistake, that’s what this is.  Forget the safety nets – there are none in the US.  How many people in this situation are truly going to make themselves  that vulnerable to the vagaries of LUCK?  The answer is very, very few.  In fact, that is why I left my field in 2006.  I saw no future in what I was doing and was waking up every morning in a cold sweat about what was going to happen to me.  Its difficult to be innovative on the levels required here if you are worried about paying the heating bill or having enough food to eat.  There are other ways to make a living that aren’t so chancy.  Do you really think the best and the brighter are going risk starvation and life on the streets on the chance of becoming famous?  Not likely.

Figure 2 –  shows a veritable explosion in US patent applications over the past 15 years.  Funny how such an explosion comes at a time when retractions in science journals are on their way UP.  Fear is the motivator here.  People are losing their jobs, employment is very dicey. It seems to me that in America people are scared and just throwing anything up against a wall to see what sticks.  Applications for patents, no matter how trivial may be up simply as a shot in the dark.  Or, worse, they could be a result of trying to protect ideas from corporate poaching – even before they are fully thought out.

My other problem with this chart is that I do question how many American NATIONALS are involved. American molecular biologists have been jumping ship for years.  We have used the remnants of an academic system that is still the envy of the world (though it is losing ground fast) to attract foreign nationals to do the work American’s feel is too insecure.  That skews the data since this is concentrated influx from abroad.

This situation reflects the fact that the spoils go the CEO’s, the principle investigators, the shareholders…almost everyone but the poor slob who did the actual work. Often, there is little or no financial remuneration for the innovator at all.  New immigrants don’t know that science has become a race to the bottom financially.  They figure that out later.  Meanwhile, America has a new supply of fresh meat to exploit every year.  Eventually, this will no longer be the case.

Figure 3 – Tries to normalize the data against the number of citations.  The problem with this is that the data is taken from the decade of the 90s and stops at the year 2000.  Although the numbers look very robust for the good ‘ole US of A – there is a problem with that. Academic spending was at an all time high during those years. The NSF (National Science Foundation) and the NIH(National Institute of Health) were funding record numbers of projects.  Lab investigators enjoyed a high level of grant acceptance and many fields of science and engineering flourish.

That happy scenario collapsed when the Bush Administration created a slash and burn policy for said agencies.  After 2000 the rosy prospects for scientists in my field dwindled rapidly amidst budget cuts and an INCREASINGLY cut-throat environment.

Final Thoughts…

The seeds of inspiration are not found looking at the bottom of an empty rice bowl.  A well fed body means a well fed and agile mind.  A populous that can’t afford to see a doctor or who lives in an environment where they don’t know where their next paycheck  is coming from is shackled and pre-occupied.

Furthermore, all too often the mind and role of the innovator is misunderstood.  Most innovators are working people – not entrepreneurs.  These are two different skill sets folks!  By mixing these metaphors the authors miss the point.  Being an innovator generally involves an extensive education that involves years of sacrifice and training.  It is not, and has almost NEVER been a ticket to great wealth. The authors have the risk-reward thing mixed up.

Science an engineering used to be thought of as low risk, but low to medium reward careers in the financial sense.  People went into these fields because they were very personally satisfying and the generally guaranteed a middle class existence.  Few went into these fields to secure a fortune.

Today, these fields have morphed into HIGH risk and LOW reward tracks.  And cut-throat economics on the part of the business community as well as academia has created this situation.  That is why they are so unappetizing for today’s youth.  We need to take the risk OUT and make these fields more “cuddly”.  In short, the authors are wrong.

© 2012 –  RGHicks –



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