Saturday, April 27, 2013

Innovation vs. Efficiency

Matt Yglesias wrote a good post on how innovation and efficiency need not be confused. There are plenty of hyperlinks in his piece, so check it out.

There's an underlying belief among classical liberals and MBA types that if you can reduce inefficiency you'll get higher productivity and growth. While in many cases this is provably true, it is not always the case. Reducing red tape doesn't necessarily increase creativity and innovation; innovation is the heart of what makes the real economy grow.

Yglesias' point is that
"it's still a fundamental error to confuse the two, and to think that wringing the inefficiencies out of our resource-allocation system are either necessary or sufficient for fundamental growth."

Google, for example, often seems definitely inept and unorganized-- inefficient.  
"Does Google with its glasses, gigabit fiber, and autonomous cars strike you as a company with unusually "sound" corporate governance and managers who are faithful stewards of their shareholders' interests or a company where geeky managers are letting the staff run amok in pursuit of technological visions that are only loosely related to a return on investment calculus?"
Maybe if Google were more efficient and better-managed it would not produce some of the innovative products that change our daily lives. The argument is that the innovation is worth the cost of less efficiency.

Yglesias is correct that we don't dream of making the argument that authors and artists should be better stewards of their resources and capital-- art is concerned with creativity.

Think about your schedule today: are you more concerned with the efficient way you spend your time and energy, or with what is created from that time? How are the two balanced in your mind?

Addendum: Seth Godin's blog has similar thoughts today. We prize our competency (ie: efficiency) in a certain task and that prevents us from trying something new (ie: innovating) that we will initially stink at. If the market only awards efficiency, it eliminates possibilities for innovation.

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