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The “Great Ideas are Dime a Dozen” Myth

By Dale B. Halling

August 19, 2016

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A great invention takes incalculable intellectual skill, years of training, years of hard work, and significant resources.

There is a popular myth that great ideas are a dime a dozen (see here, here, and here). I don’t know what a great idea is. Is a Dick Tracey watch or a nuclear-powered rocket a great idea?  No, not if you don’t know how to implement them, then it is just a fantasy and unless you have a plot to go with it, it is not even a good fantasy story. However, I do know what a great invention is and they are not even a billion dollars a dozen. A great invention takes incalculable intellectual skill, years of training, years of hard work, and significant resources.

“Hey Mike—we’ve heard your ‘good ideas are a dime a dozen’ speech before. The electric light bulb, the cotton gin, the polio vaccine, the microcontroller, hell, the CAT scan, were all a dime a dozen.”

—John, Venture Capitalist, Pendulum of Justice

It may be that such conjectures are popularized by people in the finance industry, who are looking to improve their negotiation position or are just too intellectually challenged to really know when an invention is great. It also inflates their self-importance.

The reality is that most people create almost nothing original in their lifetimes and this includes many people in finance, even if they personally get rich. It is only by raising our level of technology that we increase our per capita wealth and only inventors increase our level of technology. Great inventors create incalculable wealth and even if they become wealthy, what they receive in payment is a pittance to what they provide.

“In proportion to the mental energy he spent, the man who creates a new invention receives but a small percentage of his value in terms of material payment, no matter what fortune he makes, no matter what millions he earns. But the man who works as a janitor in the factory producing that invention, receives an enormous payment in proportion to the mental effort that his job requires of him. And the same is true of all men between, on all levels of ambition and ability. The man at the top of the intellectual pyramid contributes the most to all those below him, but gets nothing except his material payment, receiving no intellectual bonus from others to add to the value of his time.”

—Ayn Rand, Atlas Shrugged

The concept “great ideas are a dime a dozen” may have been a spin out from Joseph Schumpeter who made a distinction between innovation and invention, while denigrating inventions and inventors.

According to Wikipedia:

Following Schumpeter (1934), contributors to the scholarly literature on innovation typically distinguish between invention, an idea made manifest, and innovation, ideas applied successfully in practice.

There is nothing inherently wrong with the distinction above, but the way it is applied blurs together a number of different skills. This blurring shows a misunderstanding of the process of innovating. Broadly speaking, innovation can be broken into two distinct sets of skills: creation and dissemination. By creation I mean creating something new, not production—which is re-creating something that has been created before.

A subset of creation is invention. An invention is a creation with an objectively repeatable result. A creation that is not an invention has a subjective result, such as the effect of a painting on a viewer, or the effect of a book on a reader. Many activities combine both a subjective creation and an invention, such as architecture. However, we can delineate the invention from other creative elements and this helps our understanding of the process.

Dissemination may include a number of processes, such as education (marketing, sales), manufacturing, finance, and management. This is not to imply that marketing cannot be creative; it often is creative with a subjective output. However, the creative part of marketing can be separated from the dissemination or execution part of marketing. The same is true of manufacturing, which can definitely include inventing. But an invention related to manufacturing is part of the creation step, not part of the dissemination step.

Finance can also have inventions but the scope is much more limited. For instance, a fractional reserve bank is an invention as is the process of securitization.

All real per capita economic progress is the result of inventing.

All real per capita economic progress is the result of inventing. This is not to say that it is unnecessary to disseminate inventions, but if there were no new inventions there would not be anything to disseminate. We would be stuck in a static world once all the inventions had been disseminated with no further growth. Of course, if we stop all dissemination activities we will quickly starve to death.

Business and economic professors may have focused on “innovation” instead of “invention” because they have no idea how to invent or how the process of inventing works. They concentrate on what they know, i.e. business and economic practices. As a result, the focus is on dissemination, while under-appreciating the importance of inventing. In addition, it results in misleading business theories, such as:

  1. Management teams are more important than the quality of the invention/inventors;
  2. Execution is everything; patents and other IP do not matter; and
  3. Get Big Fast.

The truth of these statements is directly related to the strength of the patent laws at that time. When patent laws are weak, these statements are more valid and when patent laws are strong, these statements are less true. Unfortunately, when patent laws are weak these theories do not overcome the disincentive to invest in risky new technologies. Management teams do not build revolutionary or disruptive technologies, they just disseminate these technologies. These sorts of teams are like large companies and generally can produce a return with less risk by NOT developing high-risk technologies. They tend to focus on incremental technologies or on replicating someone else’s technology. While this may be good business advice in a period of weak patents, it is bad for our country’s competitiveness and our standard of living.

The U.S. created the strongest patent system in the world and was rewarded with the fastest growing economy in the world and the highest standard of living, until the U.S. started weakening its patent laws.

The creation of property rights for inventors is the cause of the Industrial Revolution and resulted in an explosion of new technologies that we cannot imagine life without, such as automobiles, computers, telephones, vaccines, refrigeration, movies, the internet, etc. The U.S. created the strongest patent system in the world and was rewarded with the fastest growing economy in the world and the highest standard of living, until the U.S. started weakening its patent laws. Those countries with the strongest patent systems create the majority of new technologies, have the greatest technological dissemination, and are the richest countries in the world.  The foundation of patent law is natural rights, as a result whenever patents have been weakened so have all property rights.

The best management team in the world selling buggy whips at the turn of the century could not overcome the technological advance of the automobile.

In the long run, technological progress (i.e. inventing), is the only competitive business advantage. The best management team in the world selling buggy whips at the turn of the century could not overcome the technological advance of the automobile. The best management team in the world selling vacuum tubes in the 1940s, could not overcome the advance of transistors and semiconductors. This country is littered with companies that had great management teams that were overwhelmed by changes in technology. For instance, Digital Computers had a great management team, but they could not overcome the advance of the personal computer. Digital Computers, Inc. failed to invent fast enough to overcome the onslaught of small, inexpensive computers. U.S. steel was not able to overcome the onslaught of mini-mills, aluminum, and plastics. This was not because they did not have a good management team, it was because the management team under- prioritized invention and over-prioritized execution or dissemination skills. Ford & GM have not become walking zombies because they did not have strong management teams, but because they have not invented. As a result, they have antiquated production systems and weak technology in their products. 86% of the companies in the Fortune 500 in 1959 are no longer there. Some of these companies disappeared because of bad management, but most companies disappeared because they did not keep up with changing technology. In other words, they did not invent.

Great ideas are not a dime a dozen. Inventions are the reason we have such a high standard living, not dissemination.

 

 

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don
don
8 years ago

I disagree on many counts. Halling presents a view that grandizes his role in helping people get patents. It is full of errors and statements that just do not fit the facts. The first I would point out is the claim that “All real per capita economic progress is the result of inventing.”. My observation is that economic progress is increased when individuals apply them selves and their capital in productive ways. It does not matter if they just do more of what they have been doing (work longer) or work with a better tool or better method. They can produce more by just working harder, faster, longer or smarter, no invention required. If you use your talent to produce goods with higher value you will contribute to economic progress. You might do that by changing jobs. Again no invention required.

Now lets take a look at what a patent really is. It is a psudo-monopoly granted by government. I submit that all monopolies, reduce rather than increase economic progress. Is it true, as Halling claims, “The creation of property rights for inventors is the cause of the Industrial Revolution and resulted in an explosion of new technologies….”? I say the reason for the explosion of new technologies is the relative lack of government regulation and interference. Likewise the reason for the slowdown in the US is too much regulation, too many government protected monopolies, and too many people not applying their time and talents in value creating efforts. The very worst of these is government actions that discourage people from seeking productive work. Then come things like minimum wage controls that demand that many tasks, which could be accomplished cheaper with labor, must be done with more expensive machines. Worse yet, the tasks (which would contribute economic activity) might not be done at all.

Now lets look at another foolish claim. Halling says ” …if there were no new inventions there would not be anything to disseminate…”, how ridiculous. Lets suppose no invention are possible, and our society needs more food. Would we be doomed? What if farmers worked longer, or farmed more land, or raised crops with more food value. All of these would create more food to disseminate, as would many other options that do not involve invention. Human effort directed to productive activity is what is needed. Invention is just one of the ways that can help.

I worked in the US auto industry for over 35 years and developed many new technologies about 1/2 of which were patented. Halling says “Ford & GM have not become walking zombies because they did not have strong management teams, but because they have not invented.”. I say that is not even close to true. Our competitors never out invented or out patented us. We continued to invent as long as management funded creative activities. I submit the zombies (using Halling’s term) were created by governments protection of unions monopolistic take over of the business. A side note is the unions became even more powerful as management teams were forced into government controlled bankruptcies. So the Zombie term used by Halling is one of the few things he got right. The current US auto industry is truly walking dead. Completely captured by the UAW and the government. It is doomed. Matters not how many “inventions” are available.

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dbhalling
dbhalling
8 years ago
Reply to  don

The idea that increases in capital is the cause of economic growth does not fit any historical data and has been disproved by almost a century of development economics. Don seems to have missed at least ½ a century of economic research that includes the work of Robert Solow, Paul Romer, and Deirdre McCloskey. Don would have us believe we “can produce more by just working harder, faster, longer or smarter, no invention required.” There are only 24 hours in a day, so if people worked 1 hour a day and we worked 24 hours a day, then at best we could have 24 times increase in wealth, but no sleep. But in fact we have had somewhere around a hundred fold increase in living standards since the industrial revolution in the US. Don would have us believe that people with plows pulled by oxen and using non-hybridized seeds can produce as much or more than people with tractors, combines, hybrid seeds, modern fertilizer, and pesticides by just working harder and smarter (by the way smarter does include new technologies according to Don). Don’s position is soo absurd as to be laughable.

Then Don claims that patents are a monopoly. This is the anti-reason position of leftists and Austrians. Patents are property rights. Don thinks that he should be able to take the product of other peoples’ minds without paying them or even asking their permission. Of course, if inventions were as irrelevant as Don claimed, why would he care? Don is pushing the morality of a thief, while pretending he is pushing freedom.

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don
don
8 years ago
Reply to  dbhalling

Notice Halling does not try to defend any of his statements from the original article. Rather he responds by inaccurately representing my comments and continues to make errors and mis-statements. Like claiming, “Don would have us believe that people with plows pulled by oxen and using non-hybridized seeds can produce as much or more than people with tractors, combines, hybrid seeds, modern fertilizer, and pesticides…”. I do not believe that. In fact, using tractors and combines is a great example of applying capitol to improve economic output. Something Halling claims has been disproven. I admit ignorance of “development economics” and the works of Solow, Romer, and McCloskey, but in my MBA program we were taught economic output was the result of labor, capital, and technology being applied to satisfy human wants. Fertilizer and pesticides are examples of technology.

Halling correctly states that considering patents as a monopoly is consistent with Austrian economic theory. He believes it is “anti-reason”. I believe it is the best collection of economic theory and thought available. So, yes I agree with the Austrians that there can be no claim of “property rights” without property. I would also note that the Libertian political party is very pro property rights and yet anti-patent. It is not at all contradictory to believe in strong property rights while not recognizing patens. I do not find any property in what is claimed to be “intellectual property”

Here is one Halling got correct, ” Don thinks that he should be able to take the product of other peoples’ minds without paying them or even asking their permission..”
However, I do not understand how he could believe I think inventions are irrelevant. To the contrary, I spent my career trying to invent things, creating technology to improve the human condition. I recognize inventions are so valuable they should never be held back from full utilization by all. Patents prevent that by restricting the use of new useful ideas. New inventions are too valuable to allow government restrict them in any way.

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