How Innovation Works: Serendipity, Energy and the Saving of Time by Matt Ridley; Windows of Opportunity: How Nations Create Wealth by David Sainsbury - review by Frances Cairncross

Frances Cairncross

Secrets of the Wheelie Suitcase

How Innovation Works: Serendipity, Energy and the Saving of Time


Fourth Estate 406pp £20 order from our bookshop

Windows of Opportunity: How Nations Create Wealth


Profile 274pp £20 order from our bookshop

Among the many remarkable aspects of the global coronavirus pandemic, few have been more interesting than the pressure to innovate. Faced with a surge in serious illness and a plunge in economic activity, all sorts of professions and companies are doing things that they have never done before. Academics are scrambling to develop an effective vaccine in a quarter of the time it would usually take; whisky distillers are producing hand sanitiser; hospitals are busting protocols and red tape to set up new intensive-care facilities.

Behind this urgent outburst of creativity is a mix of collaboration and competition: everyone is watching everyone else for promising signs of a safe return to something like normal life. Some of the work (developing accurate tests for the virus, for instance) crosses borders. Outside of wartime, we have never seen anything like it.

So it is a good moment to read two quite different studies of innovation, one by a businessman turned government minister, the other by a journalist who has had a brief career in finance. Full disclosure: I know them both. David Sainsbury is an old friend; Matt Ridley is a former colleague on The Economist. Their approaches are quite different, but both would probably agree with Ridley’s assertion that ‘innovation is the most important fact about the modern world, but one of the least well understood’.

Ridley gives himself the easier task. More than half his very readable book is a high-speed tour of innovation, stretching from prehistory to Facebook and Amazon, via the invention of the number zero, the steam engine, chlorinated drinking water, artificial intelligence and much more. Innovation, he argues, is not mere invention: to take off, an invention needs to become ‘sufficiently practical, affordable, reliable and ubiquitous to be worth using’.

His book is packed with fascinating anecdotes. Take sliced bread. It was, he points out, obvious that somebody would invent a way of automatically pre-slicing bread, and in the early years of the 20th century many people tried. But it took Otto Frederick Rohwedder, an optician turned jeweller in a city in Missouri, to come up with the winning formula. He spotted what others had missed: without a way of automatically packaging the slices, the bread would quickly go stale. Bingo! The sandwich never looked back.

Or take the wheeled suitcase. Why on earth wasn’t it invented before the early 1970s? Actually it was. A patent for a wheeled suitcase was filed in 1945, another in 1947 and yet another in 1969. But only in 1972 did one Bernard Sadow, a senior executive of a luggage-making company in Massachusetts, succeed in both getting a patent and (with more difficulty) persuading a retailer to sell his invention. The rapid expansion of air travel in the 1970s and the growing distances passengers had to walk in airports meant that sales took off. The lesson, says Ridley, is that ‘you often cannot innovate before the world is ready’.

Of course, not all innovations are made by one inspired individual. Most go through many iterations before they become genuinely useful. This was certainly true in the case of what Ridley calls ‘possibly the most important event in the history of humankind’: the controlled conversion of heat into work, which made possible the invention of the steam engine, and laid the foundations of the Industrial Revolution and, ultimately, the prosperity of the modern world. It is principally innovation in large and small areas of the economy that has led to an increase in life expectancy and a dramatic decline in the number of people living in extreme poverty, and has transformed diets, leisure, security and decision-making. Of course, the trend towards improvement in human health has taken a knock in the past few months, but it is hard to believe that we face a permanent reversal. Rather, most governments believe that innovation will help get us through this crisis.

Sainsbury also sees innovation as central to prosperity. He argues (rightly) that conventional economic thinking has often failed to find ways to incorporate this mysterious process into theories of growth. Partly as a result, governments haven’t given priority to promoting innovation. The most interesting chapters of his book describe his experiences in government, first as minister of science and innovation between 1998 and 2006, then as an adviser on science and innovation policies and technical education.

The tone of his dealings with Whitehall was set early on in his time as a minister, when his department was asked to produce a White Paper on the ‘knowledge economy’. A senior civil servant, he recalls,

wrote around to his colleagues enquiring whether they had any good ideas to go in it. These were then written up and presented to the Secretary of State, who decided which ones were politically attractive … It apparently did not occur to the civil servants that the policies in the White Paper should be based on a detailed analysis of the performance of British industry compared to other countries, and how it needed to change. This is perhaps not surprising, as the department had very little systematic knowledge about the performance of British industry, and apparently did not see any need to have it.

Sainsbury’s recommendations for government include properly investigating which industrial policies work well in other countries, devolving more decisions to cities and regions, developing policies for particular sectors in conjunction with industry representatives and hiring people who know about the industries for which they are making policy. Any of these would be an improvement on the ill-informed industrial strategies that repeatedly emerge from governments.

Ridley has a more radical approach: keep government at bay. Too often, he argues, governments have sided with incumbents and stifled new technologies. For him, cellular telephony is a classic case. America’s Federal Communications Commission saw the possibility of mobile telephony as early as 1945, but wanted to reserve the radio frequency spectrum for television. The established telephone companies, led by AT&T, found all sorts of reasons to keep mobile telephony at bay for the next forty years. Bossy governments, excessive regulation and powerful firms are all enemies of innovation.

Like Sainsbury, Ridley argues that the pace of innovation has slowed in the West in the past decade. He worries that the number of start-ups is falling in most OECD economies. The problem is worst in Europe, he argues, thanks to the tendency of the European Commission ‘to write rules that favour incumbent firms’. Not one of Europe’s hundred most valuable companies was formed in the past forty years. This contrasts with the situation in China, which is ‘plunging into artificial intelligence, gene editing, nuclear and solar energy, with a gusto that the West can only dream of’.

And will that continue? ‘Innovation is the child of freedom,’ he concludes – but China is hardly the land of the free. Indeed Britain, newly released from some of the EU’s constraints, now has the chance to create a new industrial strategy, perhaps absorbing some of Sainsbury’s suggestions and combining them with Ridley’s plea for a light regulatory touch. Once the pandemic ends, there will be a chance to review the impact of the crisis and the demands for greater freedom to innovate it has given birth to. It might provide a model for the future.

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