Despite the Hype:  Innovation Is Not Working

By Shlomo Maital    


                      cake failure   Innovation is flopping, like this cake

   My blog, and dozens of others, plus magazines, websites, newspapers,  all hype innovation. We read endlessly about how innovative people are changing the world.  

   But there is another view.  The world has run out of ideas. We may be entering a permanent era of non-growth and stagnation.  I hate pessimistic views, but this one is serious enough to deserve deep thought. 

    In his widely-discussed 2012 paper,  and forthcoming book,  economist  Robert J. Gordon argues alarmingly that “future growth in consumption per capita” [for 99 per cent of the US population] could fall below 0.5 per cent a year for an extended period of decades” (p. 1).*   He cites six headwinds that afflict the U.S. (and, by extension, many other Western economies): demography (aging poulations), education (declines in the quality and quantity of human capital), inequality in the distribution of wealth and income, globalization, energy/ environment and the overhang of consumer and government debt.”  These ‘headwinds’ are in fact global in nature, as shown by the 2013 World Economic Forum Global Risk Report.      

    Gordon claims that “…the rapid [economic] progress made over the past 250 years could well turn out to be a unique episode in human history. …Growth in the frontier [the technology-leading country – UK until 1906, US afterward] accelerated after 1750, reached a peak in the middle of the 20th century and has been slowing down since.”   Gordon explains that the Third Industrial Revolution, 1960 to now, featuring computers, the web, mobile phones, created only a “short lived growth revival between 1996 and 2004”, and was weak compared with the First (steam, railroads) and Second (electricity, internal combustion engines, communications, chemicals) Industrial Revolutions.  Underlying this bleak picture is the secular decline of innovation – new products and services that change and enrich our lives.

    Gordon’s arguments are  supported by the findings of Prof. Tyler Cowen, who argues that the global financial crisis is making a deeper and more disturbing “Great Stagnation”  ; as The Economist summarizes, “for all its flat-screen dazzle and high-bandwidth pizzazz, it seemed that the world had run out of ideas”.     

    The co-founder of PayPal, Peter Thiel, sums it up best:   “… instead of having flying cars, we have 140 characters (Twitter). “ 

     Are these tiny ideas that create big bucks crowding out big ideas that may make only small bucks?


*  “Is US Economic Growth Over? Faltering Innovation Confronts the Six Headwinds”,  NBER,    working paper 18315, August 2012,