Neal Stephenson on Innovation and Uncertainty

I’m a big fan of cyberpunk / speculative fiction writer Neal Stephenson, particularly his dazzling Cryptonomicon and the remarkable Baroque Cycle trilogy. Here’s a short nonfiction piece on innovation and uncertainty, “Innovation Starvation.” Like Tyler Cowen, Stephenson worries that scientists, engineers, and entrepreneurs are devoting too much time to incremental improvement, rather than the Big Questions (space travel, nuclear fusion, flying cars, etc.). I don’t find this a problem, as incremental innovation is just important — arguably more important — than “big” innovation, typically state funded and isolated from the market test of success and failure. But Stephenson makes a good point that large organizations (and their stakeholders) tend to rely on information management tools designed to reduce uncertainty, not realizing that (Knightian) uncertainty is ubiquitous, steering them away from genuine novelty that can’t be assessed with the standard quantitative tools:

The illusion of eliminating uncertainty from corporate decision-making is not merely a question of management style or personal preference. In the legal environment that has developed around publicly traded corporations, managers are strongly discouraged from shouldering any risks that they know about — or, in the opinion of some future jury, should have known about — even if they have a hunch that the gamble might pay off in the long run. There is no such thing as “long run” in industries driven by the next quarterly report. The possibility of some innovation making money is just that—a mere possibility that will not have time to materialize before the subpoenas from minority shareholder lawsuits begin to roll in.

Today’s belief in ineluctable certainty is the true innovation-killer of our age. In this environment, the best an audacious manager can do is to develop small improvements to existing systems — climbing the hill, as it were, toward a local maximum, trimming fat, eking out the occasional tiny innovation — like city planners painting bicycle lanes on the streets as a gesture toward solving our energy problems. Any strategy that involves crossing a valley — accepting short-term losses to reach a higher hill in the distance — will soon be brought to a halt by the demands of a system that celebrates short-term gains and tolerates stagnation, but condemns anything else as failure. In short, a world where big stuff can never get done.

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