Why innovators innovate

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Yesterday, over at Café Hayek, Don Boudreaux noted the work of the Yale economist William Nordhaus and his finding that:

innovators capture a mere 2.2% of the total “surplus” from innovation. (The total surplus of innovation is, roughly speaking, the total value to society of innovation above the cost of producing innovations.)

Boudreaux notes:

“The smallness of this figure is astounding. If it is anywhere close to being an accurate estimate, the implication is that “society” pays a paltry $2.20 for every $100 worth of welfare it enjoys from innovating activities.”

He asks: “Why do innovators work so cheaply?” But his answers, excessive optimism and the illusory lure of big winnings, don’t seem to me to tell the whole story.

Doesn’t this turn on the difference between intrinsic and extrinsic rewards? It is fun to make stuff up. More to the point, making stuff up is its own reward.

Anthropologists spend a lot of time talking to people who think in the well-worn groves supplied by culture. George Bernard Shaw said: “Most people would rather die than think. Most do.” But every so often, anthropologists run across people who are mad keen to beat their way out of the received assumptions and the defining ideas for their culture.

These are the innovators. Innovators love innovating. They look at the “road closed” signs posted by culture and drive right through them. They like to crawl into the Platonic cave and say, ‘that can’t be right.”

Maybe, it’s the sheer excitement of going “where no man has gone before.” Maybe it’s a willful, contrarian, anarchic wish to defy convention. Maybe it’s the sheer pleasure of building a bridge as we go, in real time, with no net, with the clear knowledge that we have no knowledge. This is intellectual weightlessness. It’s an opportunity, for a brief moment, to escape the gravitational pull of culture. For a moment, we exist “out”…of culture, convention, the body, and our minds.

For innovators, this moment is its own reward. I figure this is why Xerox captured so little of the value they created. The egg heads were running the shop, and they were already very nicely compensated. They were the first ones to ‘think” a Graphical User Interface. Let someone else, at Apple and then still more belatedly, at Microsoft, figure out the details. Let some one else take it to market. And, yes, let someone else reap the “rewards.” The innovator has already taken his or her cut.

I have a test for my proposition. (This is rare for an anthropologist, so let me pause for a moment of self congratulation.) Let us canvas the winners of the Nobel prize and give them this choice. They must choose between the moment of their “innovation” and all the credit that came to them as a result of the innovation: riches, prestige and the Nobel prize itself. The additional condition: if they take the Nobel prize, they will be prevented from engaging in innovative thought ever again. We will put a Denver boot on their brain.

I am prepared to bet virtually every winner would turn down the prize for the chance to think again. For someone who has tasted the joys of making stuff up, anything else would be a torment and the end of the great joy of life. Most innovators would innovate for room and board. They are thrilled, and a little surprised, to discover that a university or a corporation is prepared actually to pay them.

“2.2% of the total surplus of the innovation? Great. Put it over there. Got a moment? See, I have this idea…”

References

Boudreaux’s post here

Fox, Richard G. 1991. For a Nearly New Cultural History. in Recapturing Anthropology. editor Richard G. Fox, 93-113. Santa Fe: School of American Research Press.

With a hat tip to Tyler Cowen for the lead here

7 thoughts on “Why innovators innovate

  1. Jim

    Grant, I agree, it is the intellectual equivalent of human propagation. However we should not underestimate the ego. While I suspect most Nobel prize winners would take the continued use of their brain, seeing their idea in public also provides huge ego “payment”.

  2. Tom

    Teresa Amabile’s landmark work on creativity is certainly aligned with this thinking, Grant. She cites “intrinsic motivation” as the key force for creative people. In fact, she even found that too much “extrinsic motivation” (bonuses, etc.) is actually counterproductive for creative groups.

  3. Brian Hawkins

    Grant, you have eloquently described why I have chosen the career path that I have (I am a neurobiologist, defending my PhD in a few weeks.)

    The singularly most thrilling moment of my life (so far) came when I was seated alone in a dark room, looking at something under a microscope that I was 99.9% certain no one on earth had ever seen before. Before that moment, I was a breath away from dropping out of grad school. I haven’t looked back since.

    I suppose discovery is not exactly the same as innovation, but think the same kind of impulse drives them both.

  4. Grant

    Brian, nice one! Yeah, I was kind of eliding the “innovation/discovery” distinction. Good luck on the exam. I don’t remembering doing anything but prep and worry a few weeks before mine. Best, Grant

  5. Kevin

    It is as germane to Nobel laueates as well industrial designers who toil in somewhat obsurity assembling the components of innovation in innovative ways. Some are compensated well, but none make the staggering profits enjoyed by the companies which ultimately reap the benifit of commericalization of the “idea”. A remittance to feed and cloth is nice, but yes the end result consumer acceptance although shallow as it seems is a mighty motivator to challenge to see if your endevor can be made better. Alas more empty choices

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