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The Philosophy of Innovation

2012 April 15

Einstein was a low-level clerk when he dreamed up relativity.  Mendel was a monk when he discovered genetics.  The structure of DNA was cracked not by the acclaimed minds of the day, but by two young, underachieving post-grads working in relative obscurity.

Breakthrough innovations tend to pop up in funny places.  Some like penicillin and teflon were accidents. Others, like the Internet, world wide web and the graphical user interface, originated in big labs, but flourished elsewhere.

What do we make of that?  Why do really big ideas tend to come from small places?  How do we push our organizations to innovate when it seems like organization itself often squelches innovation?  The answer lies, strangely enough, not so much in organizational structure, but in organizational purpose, outlook and philosophy.

Why Germany Kant Compete

Way back in 1999, when the Web was just beginning to pay off economic dividends, it had already became clear that America was dominating the digital space. But why?  The Web, after all was a European invention, born at a CERN, a massive government funded physics lab that had little use for it.

The story is not unique.  Steve Jobs famously made use of Xerox PARC’s innovations to create the Macintosh, a fact that led Malcolm Gladwell to proclaim him a tweaker.  It seems that, in the digital age, such tweakers have the advantage, while massive R&D centers, with all of their brains and resource, are left to watch in awe as others exploit the fruits of their labor.

The economist, Paul Krugman, wrote an essay, Why Germany Kant Compete, in July of 1999 that proposed an interesting explanation.  The answer, he argued, lay not in economics, but in philosophy:

The real divide between currently successful economies, like the U.S., and currently troubled ones, like Germany, is not political but philosophical; it’s not Karl Marx vs. Adam Smith, it’s Immanuel Kant’s categorical imperative vs. William James’ pragmatism.

What the Germans really want is a clear set of principles: rules that specify the nature of truth, the basis of morality, when shops will be open, and what a Deutsche mark is worth.

Americans, by contrast, are philosophically and personally sloppy: They go with whatever seems more or less to work. If people want to go shopping at 11 P.M., that’s okay; if a dollar is sometimes worth 80 yen, sometimes 150, that’s also okay.


Therefore, he concluded, over the long haul orderly institutions get better at making things efficiently and with precision, while ad hoc upstarts are more likely to try new things and adapt to change.

The Corporate Divide

Krugman’s notion is especially troubling for large corporations.  They, after all, have to get things done.  They have employees and suppliers to pay, investors to keep happy and margins to maintain.  The trains need to run on time.  If they don’t, the organization’s stock price will fall and they will become a takeover target.

Making money is hard work.  It requires a certain amount of planning and organization. Expenses must be subject to an approval process, investment must be planned through an asset allocation strategy and so on.  Senior management has to keep a steady hand at the helm or chaos will ensue.

That’s in stark contrast to start-ups, where chaos is often the order of the day.  The problem is, they rarely make money.  They often fail and the ones that do succeed, as I’ve noted before, end up having their own problems.  Some falter and are unable to stay competitive, others, like AOL and Yahoo, continue to make money but become unable to innovate.

Infinite Monkeys and the Library of Babel

I think that key to the problem is the infinite monkey theorem made famous by the Jorge Luis Borges story The Library of Babel.  The basic idea is that if you had enough monkeys at typewriters, they could compile all the great works of literature just by pecking randomly.  Great works would, in fact, just be a matter of time and curation.

The idea is disturbing because we have come to prize our Homers and our Kafkas, just as we revere our Einsteins, our Watsons, our Cricks and, of course, Steve Jobs.  It’s not just the innovations themselves that thrill us, but that fact that the story has a hero.  Tales without protagonists are notoriously poor sellers.

But why?  Scholars doubt that Homer existed.  Kafka died completely unknown.  Einstein, Watson and Crick discovered no new information, but simply synthesized the ideas of others.  Others surely would have put the pieces together in time.  Einstein published his theory of general relativity only one week before David Hilbert published another version.

The truth is, as I’ve written before, technology is something we uncover more than it is something we build.  The monkeys have already written the story and we are merely curators in our own Library of Babel.

Strategy, Optimization and Innovation

Big ideas are useless.  They represent a new uncovering and therefore don’t apply to the world as it is, but as it might become.  Small ideas don’t get noticed, we merely put them to their purpose and call it a day’s work.  We of course, need both:  to uncover and to build.

That’s the fundamental difference between strategy, optimization and innovation. Strategy and optimization are products of design.  Successful organizations are immense undertakings in clockmaking, where each piece needs to work in lockstep with every other piece.  Innovators, of course, are searching for a new way to tell the time.

The real trick is to be able to do both.  As F. Scott Fitzgerald put it, “The test of a first-rate intelligence is the ability to hold two opposing ideas in mind at the same time and still retain the ability to function”

– Greg

18 Responses leave one →
  1. April 15, 2012

    There are implications that emerge in the content layer: culture, philosophy.

    But the problem is one of social structure.

    We work through social networks. Power, capital, resources naturally accumulate at the tightly bound areas of high centrality in a network.

    Innovation, the archetypical story of two guys “tweaking” something up in thier garage that is needed and works better, most often happens on the fringes of networks because the have nots are trying to penetrate the centre; displace the incumbents.

    Even VCs and progressive corporate leaders have a tough time sorting out signals when faced with the challenges of the social structure of innovation.

    With the Cdling platform we are using prediction markets, played with a reputational currency that is rooted in the real world social networks of innovators.

    This will introduce a new way to manage signals from the frindges to the centre of social networks critical to innovation.

    It looks like just a tweak. But there are some far reaching implications. Much better accounting of individual players’ discretion regarding innovation and a breakthrough in how we allocate capital and attention at the earliest stages.

    Markets function in all cultures and philosophies, and making them more efficient has always led to greater productivity.

  2. April 15, 2012


    You make a very good point. The structure of social networks play a big part as well. I wrote about this a while ago if you want to take a look:

    – Greg

  3. April 15, 2012

    *Really* enjoyed this post and think you’re spot-on with it. Funny, but it also explains why I abhor disorganization and messiness which seems to always hold me back from capitalizing upon the innovations I see clearly (yes, my ancestry is German!).

    But it also explains why so many people just like me excel at turning disorder in to order; seeing the inefficient and starting up a company/service/innovation to make it efficient. In fact, I would argue that it’s exactly this sort of intuitive understanding of the places where the inefficient can be made efficient that is at the heart of your post and innovation itself.

    For me and so many other innovators I’ve come to know (successful and unsuccessful ones) it’s wrestling with an inefficiency, “scratching an itch”, and then seeing the convergence of technologies/processes/possibilities that give an innovator an “Aha!” moment as they see how the time is right to map the possible on to the need.

    Unfortunately for the unsuccessful ones (me somewhat included) the timing wasn’t right and timing is everything. Didn’t know about Einstein’s one week lead on Hilbert publishing, but the adage “I stood on the shoulders of giants” is pretty apt as you point out how even Einstein didn’t come up with all relativity notions independently, but rather took everything and added his insights.

    BTW, welcome back to the US.

  4. April 15, 2012


    You make excellent points. I think that we need our Douglas Engelbarts (the inventor of the ethernet, the mouse and the GUI), our Steve Jobses and our Jack Welches. What is most important is to be comfortable in the role you can play and let others play theirs.

    And thanks. It’s good to be back.

    – Greg

  5. April 16, 2012

    I dealt a lot with market segmentation, and the question, what phenomenoms are influencing thinking and behavior of people. Basically there are psychological, social and cultural factors of influence, natural and learned ones, conscious and unconscious ones. Everybody is influenced by all of them in different extensions, and striving for a balance of all those “subpersonalities” or “neurological hubs” in order to achieve a maximum of personal wellbeing. Probably all of this stuff is still underestimated, and people and enterprises are dealing too little with it. A guru in the field of cultural and cross-cultural studies is Geert Hofstede, who is dealing with this complex for decades. Check him, for questions about that. But things are changing quickly everywhere, impressingly demonstrated by psychographic studies (f. e. sinus millieus) and the progress of neurological research.

  6. April 16, 2012

    Thanks for the tip Ulrich. I’ll check it out.

    – Greg

  7. Shelley Hinson permalink
    April 18, 2012

    This is a very good read. So much to learn and very interesting topics. Pretty amazing how the mind works and how inventions from the past really had a place this generation.

  8. April 18, 2012

    Thanks Shelly, I’m glad you liked it.

    – Greg

  9. April 19, 2012


    good article. The philosophy of innovation is surely different from pure business calculations. You accurately pointed out two main philosophical doctrines:
    – “making control” – Prussian (German) idea to govern everybody on the basis of the truth (principles, data, analysis) => doctrine of rationalism (from Renaissance to our days);
    – “making money” (American pragmatism based on persistent expansion of capital) => doctrine of monetarism (industrial development based on advanced and global financial system).
    And let me add one modern doctrine – “making life” (man and entrepreneurship together with information and knowledge become the main economical factors) => doctrine of creativity or praxeology (today it is transformed in concept of information society = innovations + social partnerships and collaboration).

    Surely, corporations are most successful within the rationalism and monetarism. But innovators are the winners in “making life” by their creativity. That is why the “R&D centers, with all of their brains and resource, are left to watch in awe as others exploit the fruits of their labor”.

    You are right that philosophical basis is a core issue today. Truth (rationalism), profit (monetarism) gradually are migrating into praxeology where the man (individual) is the ultimate goal.

    Doctrine of praxeology was always very popular and regarded as free entrepreneurship by Ludwig von Mises, F. A. Hayek (Nobel Prize winner in Economic Sciences) and Austrian School of economics. Earlier the Lvov-Warsaw School of logics (1890-1939) tried to make a formal description of man’s activity developing meta-logics, semantics, meta-languages for knowledge description, etc.

    Today we watch the principle difference in philosophical and cultural position of various economies. The West view on individual is based on the ancient Greek philosopher Plato’s definition of man: “Man is an animal on two legs, devoid of feathers. And with broad nails” :=))) But Oriental culture regards the man as micro-space. Today’ economies which regard the man as sovereign economical monad (basic entity) are in better position than the economies of traditional rationalism. We watch the situation when “Economy is behind the Society” and creativity yields a better return than rationalism.

  10. April 19, 2012

    Thanks for your input Sergei.

    – Greg

  11. April 23, 2012

    Greg – Brilliant.

    There is so much focus on big ideas, yet you mention the monotonousness of the small ideas. Interesting as it applies to one’s current organization. Where is the R&D money being placed? And who/m is responsible for defining innovation?


  12. April 23, 2012


    Thanks, Jon.

    Good questions. I’m coming out with a post in a few weeks that I think will help answer them, but basically I think it comes down to two questions:

    1. How well is the problem defined?
    2. How well is the domain defined? (i.e. Who is best equipped to solve it?)

    I’ll let you know when it’s out.

    – Greg

  13. thom permalink
    April 29, 2012

    Great article. And the feedback is so polite and well reasoned that I find myself wondering whether I’ve reached the wrong internet.

  14. April 29, 2012

    Thanks Thom! It’s people like you who make it so nice:-)

    – Greg

  15. Juergen Aschenbrenner permalink
    May 15, 2012

    Could it be that the author entirely forgot to consider the implication of economies of scale that come into play when turning innovation into successfull products?

    Probably this is what the *tonto* in the blog title referes to 😉 Anyway I enjoyed reading the article.

  16. May 15, 2012

    You’re right. Scaling is important.

    – Greg

  17. Juergen Aschenbrenner permalink
    May 15, 2012

    which explains why Germany isn’t as successfully in the innovation of products which are sold to the masses. You will eventually learn when China and India will develop their customer base.
    There is still scope to compete on and it is this where Germany still does good.

    BTW the citation of Krugman is quite outdated, at the time of his writing the shops in fact closed 6 PM. Now they are allowed to stay open all day around. In practice they don’t. But I can shop up until 10 PM.

    When it comes to money my perception is, that attitudes differ depending on the age. Younger generations tend to just get along. Rising kids, keep a job down and a marriage together is so damn difficult that one just doesn’t care about the exchange rate, inflation etc. Older people most certainly do care about those things, because they lived the war and they are receptive to all sort of problems, illnesses etc and they form the majority when it comes to elections.

  18. May 15, 2012

    Yes, as I wrote it’s from 1999.

    Thanks for your comments. Very helpful.

    – Greg

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