I recently wrote a blog post on The Mythology of Steve Jobs, in which I noted what I take to be a fairly standard understanding among sociologists: that technical innovation is generally the outcome of collective labor and that major innovations are generally produced by well-funded teams of researchers working in places protected from market forces.
The upshot is exactly the opposite of the standard story on innovation we get from mainstream economics. According to the latter, innovations are the result of individual entrepreneurs and are best fostered by intense market competition. But this simply does not fit the history of major innovations. This is shown very clearly in a recent article in the New York Times Magazine by Jon Gertner on the history of Bell Labs.
The article is a bit long, but very insightful and well worth a read. Let me just note a few highlights. Gertner explains that the researchers at Bell Labs were given “years to pursue what they felt was essential. One might see this as impossible in today’s faster, more competitive world.”
He distinguishes major innovations such as the transistor, which Bell Labs invented, from less significant “innovations,” such as smartphone apps and the like: “One type of innovation creates a handful of jobs and modest revenues”; another type, like that “Bell Labs repeatedly sought, creates millions of jobs and a long-lasting platform for society’s wealth and well-being.”
Perhaps most importantly, “The teams at Bell Labs that invented the laser, transistor and solar cell were not seeking profits. They were seeking understanding.” This is because Bell Labs hired intellectually curious researchers and gave them time, space and resources to pursue basic science.
While Gertner concludes “There’s no single best way to innovate,” the lesson is clear: major innovations are facilitated when researchers are shielded from the market, with its short time horizons and destructive forms of competition.
Without the giant businesses that are seen to generate “imperfect markets” and “market failure” in economics textbooks, it would be hard to imagine the 21st century as we know it.