Fostering innovation: some thoughts

The illusion of eliminating uncertainty from corporate decision-making is not merely a question of management style or personal preference. In the legal environment that has developed around publicly traded corporations, managers are strongly discouraged from shouldering any risks that they know about—or, in the opinion of some future jury, should have known about—even if they have a hunch that the gamble might pay off in the long run. There is no such thing as “long run” in industries driven by the next quarterly report. The possibility of some innovation making money is just that—a mere possibility that will not have time to materialize before the subpoenas from minority shareholder lawsuits begin to roll in.

Today’s belief in ineluctable certainty is the true innovation-killer of our age. In this environment, the best an audacious manager can do is to develop small improvements to existing systems—climbing the hill, as it were, toward a local maximum, trimming fat, eking out the occasional tiny innovation—like city planners painting bicycle lanes on the streets as a gesture toward solving our energy problems. Any strategy that involves crossing a valley—accepting short-term losses to reach a higher hill in the distance—will soon be brought to a halt by the demands of a system that celebrates short-term gains and tolerates stagnation, but condemns anything else as failure. In short, a world where big stuff can never get done.

Neil Stephenson, here; a nice one; hat tip to Cowen at MR. What Stephenson says is true not just for industry but for research too.

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