Why does the USA lead on innovation?
Originally published on July 21, 2016
I recently learned about the concept of “mystery boxes”, and I was amazed that such businesses (https://quarterly.co/) exist. It’s not that the idea of a mystery box is actually all that revolutionary (Japanese retailers came up with the idea of the fukubukuro (“mystery bag”) over a century ago; http://bit.ly/2ahZrjI) or that Americans are smarter than everyone else.
What is revolutionary in a historical sense, though, is the ongoing ability of American businesses to come up with things that would sound wildly fanciful in other cultures, and to make them happen. In other nations, there seems to be a conservatism that holds many products back; either because those who come up with it, or others along the route to market, don’t believe that it will fly. As a result, innovation elsewhere seems to be a hit-and-miss thing. There may well be just as many ideas being generated, but the quantum of them getting through to becoming viable businesses appears to be much smaller. In turn, I think that this mindset might mean that every entrepreneur feels that they have to go it alone, instead of there being a large enough social and economic infrastructure in place to support their growth.
The fact that this has been happening for so long now seems to have a created a structural base for ongoing innovation. So, apart from the usual things (a large domestic market, limited government interference, deep capital markets, skilled workforce etc.), why is it that this culture developed in the United States rather than elsewhere?
I think that being founded upon a set of ideals, as enshrined in the Declaration of Independence and other documents, reflects the markedly different American approach to the exercise of power. These documents impact upon how American people perceive themselves, and also upon how others perceive them.
What I think that this has meant historically is that when American pioneers faced problems, there was often no authority figure to appeal to. Either people worked out compromises together, or they fought, and eventually solutions were found (not always the optimum solutions). But the idea of being self-governing, combined with the creative destruction of the free market, has led to the corollary idea of people expecting to solve problems by themselves at a local level.
For generations, this has meant that Americans have not expected help from anyone else unless they ask for it – and even then, it could not necessarily be relied upon. But the clear financial and social incentives to being innovative led individuals to put time and effort into solving problems. Over time, this has become a cultural trait and American institutions have reinforced and encouraged it.
However, history is not destiny - other cultures are already picking up the best parts of America’s innovation culture. In doing so, the whole world will benefit from both the competition this creates, and from the fact that so many people and ideas worldwide will be able to reach their full potential.