A Blueprint For an Innovation-Driven Society

Innovation is a fundamental cause of economic growth, but it also causes disruption, a nice word for failure and destruction of old industries and value chains. Societies need innovation to thrive, but they also fear its destructive power. Those which manage to strike a balance between the need to harness the full potential of human talent and the need for managing economic volatility associated with the high pace of innovation and the economic disruption it causes will become richer and more productive than their competitors.

The central public policy questions of today when it comes to innovation, then, are: 1) how to foster innovation and the development of new products and services, and 2) how to manage the volatility that results from the rise of new products and the subsequent destruction of business models and production chains?

Fostering innovation is fundamentally a matter of laws and financing that create appropriate incentives. Some policies are obvious, such as strong intellectual protection laws and robust capital markets. Bridge funding is also essential to bring a new idea from the initial basic research stage, which is often paid for by government, to a prototype or proof of concept stage, where it may interest the private sector. But there are other, more disruptive ways of making innovation happen.

One such idea would be to host a global incubator. The incubators of today are often attached to universities, serving as mechanisms through which faculty and students can commercialize their research. Consequently, they are limited by funding and the talent pool. One way of dealing with the limits of incubators attached to institutions would be to create inter-institutional incubators where several universities in a state can access a common research and development space. A state-level incubator would have access to more funding and ancillary services, such as business consulting, and would be more robust than a single institution can manage to provide. This still limits participants to university researchers and students, though. What if we think bigger?

What if there were a completely new kind of research and prototyping space, a public space where any start-up can access state-of-the-art scientific technologies and platforms? Rather than limiting it to universities, this space would permit corporations that would not otherwise be able to afford the research infrastructure to access state-of-the-art facilities.

What if this platform also provided applied research and engineering advising? Now startups facing technical problems, which might otherwise have been the death knell for their idea, could contract advice from researchers, who could sell their expertise. Access to expertise and interaction with other researchers would undoubtedly make many more startups successful than is the case in the current incubator model, which is also limited in its ability to access expertise and knowledge. Finally, corporations that cannot afford to hire permanent engineering staff and laboratories could use this space and its services to outsource development activities. 

There is also a way to disrupt the standard intellectual property office that would be attached to such a technology development space: what if this intellectual property office would offer the ability to access and license intellectual property from around the world by hosting an intellectual property market? Another option may be the creation of a pool of common intellectual property that any startup in the space would be able to use.

Other services can surely be added to add value to such a public innovation space, for example, accounting and market research. Such services would help to differentiate this incubator as a preferred location for prototyping products and commercializing technologies.

Further, what if this incubator space were to be available to innovators who live outside of a nation’s borders? As long as they have a great idea, they would be welcome to come to the incubator space to develop their prototype. In addition to other services, such as technical advising for startups from experienced researchers and engineers, then, what if this new kind of incubator would also have an immigration office where the cumbersome immigration process could be waived and research visas approved in minutes? Easy immigration policies would assure a steady inflow of talent from around the globe.

In an age of talent shortages, this public policy would act to attract talent from around the world, freeing a location from inherent limits that lack of talent places on innovation. The society that first adopts this incubator model will become a global research and innovation leader, attracting the most talented individuals from around the world. And where the talent is, venture capital follows.

In an era when communications and transportation technologies have allowed the rise of globally distributed value chains, it makes long-term strategic sense for a nation to enact policies that encourage the most highly value-added elements of that chain—the research and development work and the creation of new products and services—to be located on its territory. Becoming an innovation powerhouse could be as simple as merely investing in the right infrastructure and services. A pubic incubator would be what bridges and roads were as infrastructure projects of the previous era.

Although, in theory, it may also be possible to leverage global communications to create research chains, linking several locations around the world in the quest to develop an idea into a prototype, locations where there exist significant incentives for concentration of talent will reap the greatest benefits due to a clustering effect: locations that already have talented people tend to attract more of them. Places that offer platforms for innovation such as public research spaces will therefore have an advantage.

The most disruptive answer to the second question—how to manage volatility—is to simply separate income from work. By protecting some portion of a worker’s income from the volatility that innovation creates, the economic dislocation caused by innovation would be ameliorated as job loss would no longer have the same economic impact it does today. One way of protecting a percentage of a worker’s income may be a guaranteed-income scheme where everyone of working age gets some amount of money (an amount that adjusts upward with inflation). This amount should be enough to purchase the basics, such as housing, food, education and medical care—the basic stuff of life that everyone needs. At the same time, means tested programs would be phased out.  

Besides a guarantee of a basic income, education should also undergo reform to allow people who find themselves displaced economically by creative destruction to be able to obtain new skills faster. Today it is impossible to obtain skill-based education solutions at universities. To upgrade skills, you need to invest years into study at an astronomical cost. An upgrade of one’s skills is a costly, drawn-out affair.

As with decoupling income from work, the education system needs to decouple learning of skills from learning to become a researcher and scholar. Today all degree programs are designed for the creation of researchers, with no track open to those who wish to learn only specific skills. But most people do not need to spend years in an MBA program to learn advanced business concepts. A year of concentrated study will for most people suffice.

What if skill-focused education were available on demand, perhaps partially or entirely accessible through the internet and focused on skills necessary to start a new career? If you wanted to learn programming, for example, you would learn only the subject matter required. This would reduce retraining to a one-to-three-year proposition. If this were available entirely online, for instance, retooling for a new career would be much easier.

One could go beyond a certificate learning model toward a project-based one, where a person working on a project can learn just the skills necessary to complete the project.

As with income guarantee schemes, making education more accessible would increase the flexibility of the workforce and reduce the risk associated with being part of projects and companies that fail. In the case of education, greater, more flexible access means less risk as well—today it is entirely possible to emerge from a program after many years of study only to learn that the market no longer values the degree. Focused, skill- or project-based learning would reduce this risk.

Cost of education still remains an issue. Offering certificates means little if they cost a great deal. But what if students paid for their education after five years of work? If they found careers, they could certainly pay; if not, they would not be saddled with unreasonable student loan debt, which acts as a drag on the economy by limiting demand when students are forced to save by paying off their student loan debt. Normally this idea of paying what you can when you can does not make sense, but if everyone, including professors, were guaranteed an income, they could afford to forgo payment for their teaching and even not get paid if their students never make any money.