Forum for Innovation

Using quantum physics, one University of Maryland graduate student was able to predict the winners and losers in last year’s “March Madness” NCAA basketball tournaments with surprising accuracy. Based on a phenomenon that scientists called superposition, this nerdy fan was able place a ytterbium ion in such a state that it had a 50-50 chance of flipping to one side or another. The result is truly random, and the accuracy of this student’s approach says a lot about the overall outcomes of tournaments like this. So, which team will come out on top according to this quantum physicist? The ions picked the University of Pittsburgh, a team that Nate Silver of The New York Times gave a 0.8% of winning it all.  Whoever wins or loses in basketball, the point is that whatever division there has been between the hard sciences and the marketplace is falling faster and farther, and that is certainly something to celebrate. 

DARPA, the Pentagon’s research agency built expressly for the purpose of doing cool things, is taking on what it calls the “Herculean” task of creating self-teaching machines. As Wired reports, “machine learning can be used to make better systems for intelligence, surveillance and reconnaissance, a core military necessity.” DARPA is also aiming for these artificial intelligence machines to be predictable easy to use. 

You may know innovation when you see it, but how exactly do you measure it in a company? In other words, what makes for an innovative company? Scott Anthony admits in a blog post for the Harvard Business Review that “measuring ‘innovation’ is a fuzzy business.” Nevertheless, he seems to have found some key metrics that are helpful for any business operating in this space, which should in turn help them make the case to investors when they are indeed being innovative. Anthony goes back to the 1920s to apply the “Dupont analysis,” which broke out return on equity into three discrete elements, to today’s indicator of return on innovation investment (ROII). He looks at three new measurements that are well worth studying:

1. Innovation magnitude
2. Innovation success rate
3. Investment efficiency

Ryan Avent at The Economist writes that “America, like much of the world, is facing a crisis of innovation.” In reply, he channels Dr. Neil deGrasse Tyson’s remarks to our own Business Horizon Retreat that the Chamber Foundation hosted this week. That is, we should strategically identify the role that government should play in fostering innovation and progress. Tyson concluded that throughout history government tends to play an outsized role in technological progress when confronted by war, clear economic opportunity, or the call of deity/monarchy. He finds, as does Avent, that an investment of public resources in research and development, even when accompanied by waste, tends to have enormous spillover effects into the broader economy. Such investments tend to perform much better when aimed at far-reaching, non-economical aims, such as space exploration. While Avent seems less concerned about crowding out the private sector than I might be (he looks at crowding in the broader economy, not in specific markets that government may get involved in), his point remains valid: “It’s no use pretending that the government hasn’t been a constant, and often critical, support for innovation.” 

It appears that local regulation is rearing its head in opposition to food trucks; of course, all in the name of protecting them. The DC city council is proposing that these culinary entrepreneurs enter a lottery for prime parking spots (which are in roughly five areas in the city) while assigning vending locations in 18 other business “zones.” The ostensible aim is to drive food trucks to underserved areas and reduce crowding in prime venues. All good aims, but in reality many food trucks will face insolvency if they must go where crowds won’t follow. As Megan McArdle writes in The Daily Beast, “it’s hard to run a business on the premise that many months, you will have a chance to sell your wares in a good spot, while in other months, you’re out of luck and will have to vend in low-density areas where there aren’t enough buyers to cover your cost.” It’s worth keeping in mind that while we rightly pay a lot of attention to the regulatory burden at the national and state levels, it’s often at the local level where entrepreneurs and small businesses confront the most hurdles. 

John Cochrane (the self-proclaimed “grumpy economist”) posted a series of charts this week showing America’s long term debt burden and the one clear way to deal with it: economic growth. The key chart is posted below. He writes that “the real budget news that could matter has little to do with tax rates or spending. What matters most of all is whether we break out of this sclerotic growth trap.”