On October 24th lecturer professor Vittorio Loreto came to lecture about innovation. Loreto talked about how to calculate the rate of innovation. Loreto’s thoughts on innovation was that the rate of innovation was decreasing and that only reason why innovation is increasing today, is that today, many more people are trying to innovate. By Loreto’s research most people try to innovate by trying to predict the future, and most analyze historical data to predict the future like analyzing past weather patterns in trying to predict tomorrow’s weather. Loreto believes predicting patterns in this way is inaccurate and this is one of the reasons why he believes that the rate of innovation is decreasing. He uses examples of tech companies like Wikipedia, Twitter, Last.fm, and Github and that the innovation rate is decreasing. Loreto says that innovation is getting tougher because successful patents are getting increasingly prevalent, which in turn achieving monetary return more difficult. Loreto believes that competition is increasing, which is increasing innovation today but the rate of change in innovation is decreasing.
Loreto’s arguments can be disputed that tech companies like Twitter, Wikipedia, Last.fm, and GitHub have been all old established companies. One cannot expect the rate of innovation and growth for these companies to have similar growth rates during the earlier days of the companies. As companies mature their rate of growth decreases because they fully capture their market share. As the rate for growth for these companies decreases and becomes a mature company their innovation might be affected depending on their investment in R&D (research and development). Most mature companies want to please their investors, so they look to spend less on R&D and look to increase their EBITDA for short term gains. Therefore, reducing innovation for mature companies, however the increasing competition within these tech companies is what drives innovation and the tech companies looking to increase their earnings before innovation dies out. If we trace the innovations that happened in our lifetime, we see an extraordinary progress made in people’s standard of living which can be directly related to innovation and our economy. The DJIA was about 81 a century ago, and now it’s around 23,500 today and at the current rate it could reach to be over a 1 million in another century from now. U.S.’s GDP per capita more than quadrupled between 1941 and 2017. You don’t need to be an economist to see that the world is innovating. In America alone we see 75 million home owners, 260 million vehicles, hyper productive factories, smart phones, electric cars, and artificial intelligence all net gains for America starting out around 241 years ago from a land of nothingness. U.S. has amassed a wealth totaling 90 trillion dollars. I am using past data to predict future growth and innovation, which Loreto seems to disagree with. However, it seems that I, and along with many investors, have been right when we predict the future growth of America’s economy will increase with using historical data of U.S. economy.
However, this is not only in America, but technological innovation has brought globalization which uplifted people in low-income classes all over the world dramatically in the last 20 to 30 years. The rate of innovation in our lifetime we see that we went from very small number of people who had access to information, now we have virtually everyone having access to world’s information in their own language, and made more convenient by devices such as our tablets, smartphones, and etc.. The strongest argument can be made with Moore’s Law that there is growth in innovation. Moore’s Law states that our transistor densities doubles every two years, which means that price performance of our technology is improving by factor of 10 to 20 which is phenomenal. Not only are transistors getting better, but our fiber optics, semi-conductors, storage, and etc.. all integral part of today’s technology is improving dramatically every day and year after year. The world only recently witness an artificial intelligent computer program, AlphaGo beat the Korean go champion Lee Se Dol. This phenomenon itself is a proof that world is only getting better and innovation is continuing.
It seems very optimisitic that our world is continually innovating and the getting better. People’s lives today are so much better in terms of compared to people even 50 years ago. The innovation and economic growth led to a creation of very promising and successful world. It seems in the lecture Loreto doesn’t seem to connect how origins, chaos or order has anything to do with innovation or novelties, but nevertheless I’m confident that the world will continually find growth in innovation in the future.