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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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