Sunday, June 07, 2009

Failed Innovation

Micheal Mandel blames where America is today on the failed promise of innovation in this Business Week article. Among the several indicators he cites that point to the lack of innovation is this really telling one :

The final piece of evidence is the financial crisis itself. After the 2001 tech bust, trillions of dollars flowed into the U.S.—but most of it went into government bonds and housing rather than into innovative sectors of the economy. While subprime mortgages boomed, venture capital investments have more or less stagnated since 2001, with few tech startups going public.

A lot of readers blame the paucity in innovation on the intellectual property litigation. While it's contribution cannot be denied, many would argue it is important to have the checks and balances in place so IP gets the protection it deserves. It does not help that that countries with lax or unenforced IP laws have not been the hotbed of innovation because it weakens the litigation argument somewhat.

Having experienced the dot-com bust and some of the euphoria preceding, it appeared that public appetite for all innovation had vanished once the house of ill-conceived e-commerce venture cards came tumbling down. The malaise of the IT sector seemed to have tainted things that had nothing to do with it. Instead of finding the next cool thing to bet on, people simply stopped placing bets altogether. If anything, the average person learned to be wary of investing in technology and products that they did not quite understand or found too intangible to be comfortable with. In that sense the dot-com bubble preempted innovation in other sectors that may have otherwise happened.

1 comment:

just another guy said...

This article shows how much media articles can influence public perception. The argument that no money flew to VC industry and startups has not solid foundation. In fact, billions of dollars have ben invested in startups which have delivered nothing but promise to be next big thing. Also, I personally had conversation with few Venture Capitalists and they believe that VC industry is going to shrink in near future as the returns generated by VC industry have been very low, in fact negative in last couple of years. An article in WSJ last week confirms the view: