How Innovation Works by Matt Ridley

These are my notes from How Innovation Works by Matt Ridley. Each one contains a core idea from the book that stood out. The goal of writing my notes this way is that each could be it's own independent idea with the need for the specific context within the book.

Innovation Breeds Interdependence

At the core of innovation is usefulness. It provides us with new ways of operating and organizing or greater, more effective ways of doing the old. The impact on our lives is enabling us to do more work—to be more productive. Innovation makes the world more orderly and less random but infinitely more complex. Because of this, we become more specialized in what we produce and more diversified in what we consume. Self-sufficiency is traded for mutually beneficial collaboration. As a result, the world gets more output through the interdependence needed to support the knowledge of progress.

Amara Hype Cycle

Roy Amara was an American researcher that created Amara’s Law. Focused on forecasting the effects on technology it states: we tend to overestimate the effects of a technology in the short run and underestimate the effects in the long run. A simple explanation for why we often miss new technologies that upend old ones. Innovation is a gradual process. The unrealistic expectations create the Amara hype cycle where all new innovations disappoint in the beginning only to exceed expectations once it gets going. The effect is slow, like social media replacing newspapers, but obvious in hindsight.

Pumping Water and Powering Boats

Denis Papin was employed to explore the idea of using gunpowder to create vacuums for a usable machine when he realized shortly after that steam would work better. Between 1690 and 1695 he built a simple piston that used steam to lift weights on a pulley. In 1698 Papin was working with Gottfried Leibniz to put the machine to use. The problem was mines flooding. Horses couldn’t be used and fuel was abundant for a machine that ran off steam. Miners couldn’t mine in flooded sites. Papin started dreaming of other places this steam machine could be applied. He wrote to Leibniz saying, "I believe that this invention can be used for many other things besides raising water. In regard to travel by water, I would flatter myself to reach this goal quickly enough if I could find more support." A great creation is one that can be applied to multiple problems at once.

Reputational Association Hurts

Denis Papin invented a simple piston that using steam could lift weights on a pulley (this discovery would later evolve into the internal-combustion engine). He had a vision to apply this technology to boats. Something that would surpass the manpower of oars, but getting support was difficult. In 1708, he went to London to get support from the Royal Society. Headed by Sir Isaac Newton, his request fell on deaf ears because of his work with Gottfried Leibniz in the past. A friend of Papin’s, Leibniz, had a feud with Newton over who invented calculus. This association poisoned his reputation at the Royal Society. His reputation killed his dreams to build a steam boat and left him with little money to show for his work when he passed.

From Accidental Breakthrough to Workable Machine

Thomas Newcomen experimented with steam for 10 years trying to produce a workable machine. His fire machine never quite worked. A stroke of blind luck happened on his last attempt to make it work. The heat from the steam melted the tin-solder. A way for cold water to flow into the lead-case was opened. When the cold water spilled into the cylinder the steam immediately condensed. A vacuum formed pulling the piston to the bottom of the cylinder. It worked. The machine reached its desired effect hitting the hot tin and running again. On the last attempt Newcomen had accidentally discovered a hidden force of nature that made his machine work.

Use Precedes Understanding

What comes first, something that works or the knowledge to make it work? In 1796, Edward Jenner infected an 8-year-old boy with cowpox from the blisters of a milkmaid. When Jenner tried to infect him with smallpox the boy was immune. The idea of deliberate infection for immunization was almost 30 years old (although not accepted). John Fewster, a physician, traced it in 1768. Trial and error produces solutions that work without knowing why. The idea of exposing people to diseases seemed irrational until the 19th century when Louis Pasteur could explain why it worked. Academics makeup in understanding after hobbyists and laborers solved their own roadblocks themselves. Farmers used this form of vaccination long before scientists.

Fleming’s Luck

Alexander Fleming left his laboratory in August 1928 for summer holiday. The weather was shifty. Cool in June, hot in July, and cooling off again in August. It affected the cultivation of bacteria he was growing in a petri dish for his book on bacteria. The weather was perfect for mold. Somehow the spores of Penicillium (a name you may recognize) got into his laboratory and fell into the petri dish. As both the bacteria and the mold grew, something interesting happened. The mold killed the bacteria it came in contact with. When Fleming returned, he noticed what had happened. It was intriguing. Fleming saved the plate and samples. But it would be 12 years before anything would come from this accidental discovery.

Innovation Only Appears to Happen at Once

In 1955, a young assistant professor of Mathematics organized a group of people at Dartmouth College. That summer project became known as the Dartmouth Workshop launching the field of artificial intelligence in 1956. AI, like all other innovations, comes from a long and deep prehistory of failures. As computer power became more affordable there was a short period of improvement and rivalries before one of the fields many winters came. Most people believe innovation happens all at once when they see ChatGPT has a crazy breakthrough, but this was only the final phase of evolutionary trial and error that created it.

Diesel’s First Principles

Rudolf Diesel was not like most inventors. Diesel thought from scientific principles. In science there was the idea that a machine could achieve 100% efficiency by turning heat into work without changing temperatures. The idea drove him crazy. It was an obsession. Eventually driving him to suicide before he could see his invention put to use. In the 1890s, he worked to build a machine that ignited fuel through compression rather than a spark to avoid extra energy loss. It worked too. With double the efficiency it was the best engine on the market. Diesel-powered engines fuel today’s world: ships, trains, trucks, and tractors are all fueled on diesel. Diesel’s practical exploration of a scientific idea broke new grounds.

Information Is Worth Its Weight in Gold

Fritz Haber looked to solve the alchemist problem: fix nitrogen from the air to make ammonia. He saw it as an impossible problem to solve. Everyone else saw it as worthwhile to make fertilizer and bombs easier. In 1908, he discovered the process to do it, but lacked the resources to do it scalably. Haber crafted a pitch to BASF, a giant chemical company, and they invested in his idea. BASF’s big budget and equipment allowed Haber to find the catalyst that produced cheap ammonia. Osmium had produced the result in March 1909. It was rare and expensive so the company made him look for alternatives. While protecting the secret, BASF bought up the world’s osmium supply. Once Fritz Haber found magnetite worked as a better compound they released the news that osmium worked in 1910. This early information gave BASF [stealth] knowledge and a significant lead against their competition.

McLean’s Breakthrough That Created the Asian Export Boom

Malcom McLean was an ambitious rising entrepreneur who used macro opportunities to get rich. He made good money transporting fuel. In the first decade of business he had 162 trucks earning $2.2M (a lot in 1945). Another 10 years and he would 3x that business only to later shut it down. Crowded shipping ruined post-war and roads were crowded. He tested standard shipping containers and immediately cut cost by 94%. To transport a ton now cost $0.16 compared to the usual $5.83. His big breakthrough really came with the Vietnam War. Supplying troops was difficult and the ports sucked. McLean persuaded the Pentagon to build a container port in Cam Ranh Bay. He would oversupply to build it on his own. With a huge contract from the military he was shipping 600 containers every 2 weeks. He then took those empty containers and shipped them to Japan to pick up more goods. This launched the Asian export boom that transformed their developing economies. McLean’s business, Sea-Land, was right at the center of it all.

Wheeled Suitcases Were a Tardy Innovation

In his 1970 patent filing, Bernard Sadow wrote: “the luggage, extremely glides, further, substantially any person, regardless of size, strength or age, can easily pull the luggage along without effort or strain.” Sadow was not the first to try creating a wheeled suitcase. There had been 5 other attempts in the past—inspiration was not the problem. A man landed on the moon before wheels were adopted on bags. It took the expansion of air travel to act as the catalyst for wheeled suitcases to be thought of as usable. Prior to that, airports were small, men worked as porters, and bag boys were everywhere. Once the Rollaboard was created by Robert Plath, a pilot, and sold to other pilots, then passengers began to want the same for themselves. Plath was the first person to successfully pull it off, launching Travelpro. Sometimes innovations happen late because the world is not ready. Usually, tardy innovations are ideas waiting for the world’s adoption.

Conversation Is Creative Stimulus

Onboard the Sully, a ship headed to New York, a conversation happened after dinner. Thomas Jackson, a geologist, and Samuel Morse, an artist, talked about the latest discoveries in electro-magnetism. One of the passengers asked if an electric current could flow down a long wire without being disturbed. Jackson said of course because Ben Franklin showed it could go as far as you wanted very fast. A lightbulb moment. Morse had the idea: "If the presence of electricity can be made visible in any desired part of the circuit I see no reason why intelligence might not be transmitted instantaneously by electricity." From this conversation Morse code was born. Bringing instant communication to anyone from around the world.

Intel's Tick-Tock Strategy

Moore’s Law outlined the incremental stages required to make progress in computing. Intel’s Tick-Tock strategy made use of that. Their plan was to release a new chip every other year—the tick. The next year in between was spent fine-tuning the designs and preparing for the next launch—the tock. It gave them a process for refinement and iteration. The time spent working on improvements led to products that performed at a higher level each year.

The Toilet Paper Principle

Economist Tim Harford came up with the toilet paper principle. Named after toilet paper, an invention we take for granted because of how simple it is. Harford said the most influential new technologies are often humble and cheap. More affordability often counts for more than the beguiling complexity of an organic robot. This was what made Apple great. They made computers to be affordable household items, not just office equipment. Jef Raskin, who originally led the Macintosh team, envisioned a computer that sold for $1000. In his manifesto “Computers by the Millions,” he wrote: “If personal computers are to be truly personal, it will have to be as likely as not that a family, picked at random, will own one.” A vision Steve Jobs was enthralled by. The history of innovation is created by the people who drove cost down and made their products as simple as toilet paper.

Effective Collaboration Requires No Communication

Leonard Read wrote his famous essay I, Pencil, to demolish the notion of socialist ideology in 1958. A simple pencil is made by many different people. Each unaware of how to do the other person’s role. Someone cuts the wood, another person mines the graphite, there’s a person to produce the paint, everything must be transported and assembled, and even a person to market the finished product. To produce a pencil, a collaborative phenomenon occurs between people without a need for them all to communicate with each other. Adam Smith called this the “invisible hand.” Every person is a part of the production process, but no one can achieve the full product alone. It’s too much for one single person to understand—despite how simple a pencil may appear.

Seeing the Possibilities First—Ripe Ideas

Many ideas are ripe and ready to be turned into innovations for the world to use. In the 1990s, it was impossible for search engines not to be invented. They were inevitable. The person who succeeds at creating them is interchangeable. What makes them remarkable is that they did succeed. With some luck, these people that capitalized on ripe ideas reaped billions of possibilities of a new idea. They understood the impact, if done well, that new thing could have in the world before the majority of people did. Larry Page and Sergey Brin did not create the first search engine in the 1990s. They created the best one after being able to see the possibilities it would hold.

The Two Components for Innovation to Catch

Amazon released the Fire Phone. It was a 3D-enabled smartphone that quickly ended with a $170 million write-down. The technology was innovative. The product was a commercial failure. Innovation cannot be forced on consumers. They purchase based on preferences, and in order for an innovation to catch on it must pass two tests. It must be useful, with extra benefit to people, and it must save time, energy, or money. People will buy a product that costs more but it must provide another benefit to their life. Without these two components, it doesn’t matter if you send a man to the moon, your innovation will inevitably lose.

The Grand Theme of Human History

Innovation has created a cycle of self-sufficiency and interdependence. During an economic downturn, there’s a retreat towards self-reliance. In economic advances brought on by innovations, an increase in interdependent cooperation comes because we specialize more in services but buy everything else. This cycle creates a lasting theme across human history. The narrowing of work and broadening of everything else. Put another way, there’s a gradual increase in specialization and a diversification in consumption. Something that increases specialization or diversifies consumption lasts through these cycles. Self-sufficiency comes and goes.

Monkey First

Google’s X team specializes in crazy world-altering ideas. They have a principle they use called “Monkey First,” which is a framework used to tackle the most difficult problem first. The “Monkey First” strategy says that if you want to have a monkey recite Shakespeare on a pedestal, don’t focus on the pedestal first and leave the problem of getting the monkey to speak till the end. Breaking this rule will waste time trying to solve problems that may be insolvable now.

Distracted from Disruption

More than half of Harvard graduates went to work as an investment banker or management consultant in 2007. Wasted potential. Intelligent and talented people are diverted from using their creative potential to have an impact on the world. Instead of entrepreneurial disruption, they’re diverted towards a role where they move money or resources around for others. A lucrative but unproductive way to shake something up in the world. Without a vision, it’s hard not to be minuscule in the desires you have. Imagine how much is lost every year by the potential that gets distracted from true disruption.

Reading Suggestions

These books were mentioned in How Innovation Works:

1. The Box By Marc Levinson
2. The Filter Bubble By Eli Pariser
3. The Rational Optimist By Matt Ridley
4. Catching Fire By Richard Wrangham
5. Novacene By James Lovelock
6. The Unravelling of the Double Helix By Gareth Williams
7. The Evolution of Everything By Matt Ridley
8. The Nature of Technology By Brian Arthur
9. What Technology Wants By Kevin Kelly
10. More from Less By Andrew McAfee
11. Knowledge and the Wealth of Nations By David Warsh
12. The Entrepreneurial State By Mariana Mazzucato
13. Slide Rule By Nevile Shute
14. Science: The Endless Frontier By Vannevar Bush
15. The Source of Invention By John Jewkes
16. The Everything Store By Brad Stone
17. Non-Bullshit Innovation By David Rowan
18. Innovation and Its Enemies By Calestous Juma
19. The Political Spectrum By Tom Hazlett
20. The Captured Economy By Brink Lindsey and Steve Teles
21. Launching the Innovation Renaissance By Alex Tabarrok
22. The Gridlock Economy By Michael Heller
23. The Innovation Illusion By Fredrik Erixon and Bjorn Weigel