Creative Class

Yesterday, we looked at the effects of class on economic growth. Today, we turn to the relationship between class and innovation.

It’s a well-established truism that innovation drives economic growth and development. Nations and regions around the world go to great measures to stimulate innovation in their attempts to create the “next Silicon Valley” which will generate new technologies, improve economic growth, and lift their living standards.

To examine the relationship between class and innovation, Charlotta Mellander used data on patents by country available from the World Intellectual Property Organization. Despite some limitations, patents are the best-available measure of innovation.

The relationships between class and innovation are, if anything, even stronger than between class and economic activity.

The working class and innovation - not so much. Countries with a large working class have much lower levels of innovation.

Source of all graphics: Martin Prosperity Institute

In a recent article in the Washington Post, Reid Hoffman has suggested that the way out of this crisis is not with a stimulus to the “same old same old” but a return to the 1990s when small firms and entrepreneurship led the way to technological change through innovation from start-up firms. In fact, that trend started in 1982 and lasted for over 20 years as year after year new start-ups brought us the wonders of inventions that changed our lives for the better. Can this work again this time in green energy, sustainable development, and plug-and-play cars?

This is a good question but during the last quarter of the 20th century the economy was growing, we had a robust financial system, and technological innovation. Today, we have a mini-depression that may turn into a major one. The stimulus package and the financial bailout were needed to stabilize the economy and the financial system and it’s nowhere near finished.

I support policies to promote entrepreneurship but this is a long-term strategy. Do we really believe that immigrants are the way to solve our economic problems? Will they return again? We should start to lay the groundwork for entrepreneurship but it is not a short-term solution to our financial problems but a solution to our long-term challenges.

On Tuesday, I DJ’d a party for the Governor General of Canada celebrating Barack Obama’s Inauguration. It was a cool little affair that brought a diversity of youth together to discuss what this event means to us as young Canadians. Peace to Emcee E and Nomadic Massive who also performed. At the end of the blog I’ll post my playlist, since people often wonder what one might play at an event like that.

In as much as we are different, Canada and the U.S. in fundamental ways - landmass, population, density, demographics, political structure, etc. - we are the same in that we are neighbors and share the same land and, in broad strokes, share ideals about how life should be lived. This event and the reactions in the room showed how more than ever the American dream is really a North American dream that we all take part in.

Young people are definitely empowered by President Obama as a living example of change. It’s interesting, however, to see how hungry young Canadians are to play a role in and identify with this change. As neighbors to ground zero of the global Obama-wave, and a nation that is deeply interlinked with the U.S., it is natural and fair that we pose the question “where is our Canadian change?”, and not unreasonable that we would yearn somewhat for an Obama figure of our own - to give young people a sense that their voices participate as equals in their democracy. In this new vision of the North American dream, what will Canada’s role be and where will its youth place?

While Canada’s version of the dream is younger, less dense, a bit smaller, and more cautious, it is sturdy, perhaps a bit more agile, and has the advantage of being able to consider the trials and missteps of its older, bolder neighbor in order to innovate on that experience and those ideas - probably in a faster and more dexterous way as a result of being over 60 percent slimmer in terms of population and density. While we might not do the scaling up, we are in a great position to build the models. The climate will most certainly be ripe for the ideas. More than anything, I think that’s where young people, particularly in Canada, will be participating heavily. Whereas Barack finally opened the door for youth in the U.S. to participate in driving the U.S. with their vote, he might have also opened the window for young Canadians to make significant contributions to the welfare of this continent with their ideas - particularly with the U.S. school system in the state that it’s in. With any luck, the positive feedback loop between the two countries will help us retrofit the way that leaders lead in Canada, because one thing that was voiced repeatedly at the forum is that we need that kind of reform.

While the U.S. is being clear that it wants to set the pace, how can young people in Canada help to finish the race, considering our position as neighbors and co-participants in the dream? What is the most constructive way to set up this partnership?  How can we see the innovations in the democratic process invoked over the border be brought into play over here?

And now, the inaugural playlist:

1. We Almost Lost Detroit - Gil Scott Heron
2. My People…Hold On - Eddie Kendricks
3. Long Time Coming - Aloe Blacc
4. Stakes Is High - De La Soul
5. Resurrection - Common Sense
6. The Souljazz Orchestra - Mista President*
7. Black President (Feat Johnny Polygon)  - Nas
8. Voices At The Crossroads - Knaan f. Tracy Chapman*
9. What’s Going On - Marvin Gaye
10. Change - Donald Byrd
11. Get Involved - Soule, George
12. Positivity (Mark Ronson ‘68 Remix) - Stevie Wonder
13. Brand New Day - Staple Singers

Would a ban on fast food restaurants in our cities and towns help lower the rate of heart disease? Would a program to collect Dog DNA from poop left on our streets and sidewalks help us target negligent owners? Could we harness our own bio-mechanical energy to charge our cell phones, even our cars? Does ‘redshirting’ children, holding them back so that they can enter grade school at an older age, wreak havoc on social security programs? Would local stock markets for regions no larger than Barrie, or Muskoka, help citizens allocate capital more efficiently to businesses that need financing? Could we switch our dietary habits from cow to kangaroo to help save the planet?

If you think I’ve just stolen and plagiarized part of the manuscript for the yet unpublished Freakanomics 2.0, you’d be wrong. These are the hypotheses and real life programs that earn brilliant and bizarre minds recognition in The New York Times’ “Year in Ideas.” If these few examples tickle your fancy, try “spray on condoms” on for size (not literally- these bespoke coital solutions are not yet widely available). Human ingenuity never ceases to amaze, eh?

One thing that stood out for me while reading these stories was how many of these truly remarkable ideas came from Canadians - three from Toronto academics and scientists alone. For The New York Times, where Canada’s parliamentary crisis earlier this month barely registered a blip on their radar, that is a pretty impressive showing from the Great White North, and I believe it speaks to the creative incubator that Toronto has become. Read the article and take notice of where many of these ideas began. There is perhaps no better indication of a “creative city” than the brilliant ideas it fosters and develops, and some of my favorite creative cities - San Francisco, Montreal, Washington, D.C., Minneapolis, and Boston, as well as my hometown, the T-Dot, get plenty of love.

The UK-based, independent, National Endowment for Science, Technology, and the Arts (NESTA) has released a new report on the influence of arts and humanities research on innovation. Their work explores how arts and humanities interact with science and technology in the innovation process and infrastructure. Check out NESTA’s site and view the full report:

But innovation does not happen in isolation. It requires cooperation between government, universities, third sector organisations, entrepreneurs, businesses and consumers.

Innovative performance depends on their relationships and on the quality of the overall system. Innovation flourishes when there is a strong knowledge base combined with a culture of tolerance that embraces novelty and a diversity of ideas.

Traditional understandings of innovation emphasize the importance of science and technology research. In contrast, this paper investigates the role that arts and humanities research plays in the innovation system.

So you’d think doing cutting-edge research gets you an edge in innovation and economic development? Places that do more R&D should be big economic winners, no?

Given Silicon Valley’s prominence, you would think California dominates. And in one sense it does: California conducts roughly $60 billion in R&D, far outdistancing its nearest competitors - Michigan, Massachusetts, New Jersey, Texas, and Illinois, which conduct between $10-15 billion in R&D, according to the National Science Foundation (via OREDI).

But California lags in terms of R&D intensity - that is R&D spending divided by economic output. Massachusetts has the highest level of R&D intensity, followed by Michigan, Connecticut, and Washington. California ranks fifth. Think about it: Michigan has a higher level of research and development intensity than California.

Could it be that R&D is a better investment in some places then others? Sure economists note local spillovers to R&D, but its results can also travel pretty widely. Research done in Michigan for example can be commercialized in New York.

Your thoughts?

Recently, I was going through some U.S. Patent and Trademark Office data on patenting and I was looking at patenting around the world. In the accompanying Figure One, I have plotted patent data from various nations over the last half century. It is a little difficult to interpret because it is on a log-linear scale. What you will notice is that the number of patents in the U.S. has roughly doubled over the last half century. Germany has also roughly doubled. Japanese patenting, on the other hand, has expanded enormously from 1963 through 2007 and then it continued to grow quite slowly. Taiwan and Korea began their rapid patenting growth in the 1980s. Korea is continuing to expand the number of patents filed quite rapidly in 2000. In contrast, Mexico has remained at roughly the same low level for the past half century. The new players are China and India, which have started from extremely low levels, but are expanding at an astonishing rate. This is interesting but not surprising.

When one looks at Table One, which depicts the number of patents per 10,000 persons, the data is even more interesting. Japan, the U.S., and Taiwan have roughly the same number of patents per person and Korea is not too far behind and will likely pull even with them within 10 years. However, China and India on a per capita basis trail these nations by three orders of magnitude. What if these two nations can improve their per capita performance to only one-tenth that of the more advanced nations? In sheer numbers, each of them will surpass Japan and rival the U.S.! If, as is entirely plausible, in three decades they become as innovative as Korea, they will produce more than twice as many patents as the U.S. Would this mean that centuries-long technological dominance of the Western European and European settler nations will be over?

How plausible is this scenario?

USPTO Patents per 10,000 Persons, 2007 (Total Number)

• U.S.     — 3.07 (93,691)
• Japan   — 2.81 (35,924)
• Taiwan — 3.26 (7,491)
• Korea  — 1.51  (7,264)
• India    — .0051 (578)
• China   — .0057 (756)

George Anders of the WSJ has an interesting piece on how innovation-dependent firms are attempting to extend the longevity innovative capacity in their researchers. According to Anders, Northwestern Prof. Benjamin Jones has found that, “Innovators are productive over a narrowing span of their life cycle.”

The article explains that Jones examined biographical data of 700 Nobel laureates and well known inventors of the past century and found that, in the early 20th century, leading innovators averaged slightly more than 36 years at the time of their greatest innovation.

In more recent decades, innovation from those under the age of 30 (think Brin and Page of Google) has become more common. This is because there have been many ‘booming’ fields over the last few decades that have been wide open to innovation and pioneer exploration.

Occasionally, Mr. Jones says, booming new fields “permit easier access to the frontier, allowing people to make contributions at younger ages.” That could account for the relative youth of Internet innovators, such as Netscape Communications Corp. founder Marc Andreessen and Messrs. Page and Brin. But “when the revolution is over,” Mr. Jones finds, “ages rise.”

Unwilling to see researchers at peak productivity for only a small part of their careers, tech companies are fighting back in a variety of ways. At microchip maker Texas Instruments Inc., in Dallas, executives are pairing up recent college graduates and other fresh research hires with experienced mentors, called “craftsmen,” for intensive training and coaching.

This system means that new design engineers can become fully effective in three or four years, instead of five to seven, says Taylor Efland, chief technologist for TI’s analog chip business. Analog chips are used in power management, data conversion and amplification.

At Sun Microsystems Inc., teams of younger and older researchers are common. That can help everyone’s productivity, says Greg Papadopoulos, chief technology officer for the Santa Clara, Calif., computer maker. Younger team members provide energy and optimism; veterans provide a savvier sense of what problems to tackle.

The article goes on to provide more examples from firms dependent on innovation for continued success and their efforts to extend the “innovation life cycle.”

Of course, the piece also sites some examples of “older” innovators that buck Prof. Jones research findings, citing domains where expertise is so specific that it takes a decade or more to truly understand the nature of the problems to be solved and opportunities to be chased.

Does your firm get most of its innovation out of younger or older workers? Does this free or constrain talent?

What about you? Has your innovative capacity increased with age and experience or decreased? For your current field, do you need years of experience before you can innovate?

It probably feels about as good to be a banker today as it did to be running an Internet startup back in the day. That is, until the other shoe drops. Yves Smith reports on the ennui engulfing this season’s technique-arbitragers, finance professionals with “a narrow skill, like being able to structure CDOs…unable to land jobs” in the imploding financial services industry. Reports indicate that half of the people working in debt sales, trading, or research in NYC at the beginning of 2007 will be fired at the end of the year or won’t get a bonus. For fans of Leveraged Sell-Out and the Banker Method, this is not good news.

The similarities are not lost on those of us who participated in the technology tomfoolery in the early to late 90’s, where those who could hand-code HTML had a skill they could trade - albeit for a very brief period - for 80 large and on-site espresso. Smart people understand the half-life of the trix-y things they know, and act accordingly. Those that miss the phase shift take a more stable job or shift careers, leaping from the back of one hungry crocodile to the next like Pitfall Harry. A few even become entrepreneurs. Some follow the heat and light elsewhere, “…moving west or to Europe, including Russia, or to Dubai” according to Jeanne Branthover, managing director of Boyden Global Executive Search.

Technique without creativity is a commodity, and all that this entails. What’s of interest to me is the crucial intermingling between technique and creativity, and how people use the current foundation of technical work as a mechanism to learn, incorporate, and innovate. There are heaps more places to do that then ever before. It’s a spiky world. Where will innovation in the production of complex, mission-critical software applications, energy and the environment, or finance happen next? I suspect that innovation will go where the people go.

What’s creativity and what’s technique in your line of work? When will the particular tricks-y things you do become automata, or simply routine knowledge that represents the ticket to entry? If the talent in your industry goes elsewhere, will you switch locations, switch industries, or stay put?