On Innovation and Prosperity
I had the pleasure of spending an evening last November at Roving Heights with Efosa Ojomo, for a discussion around the book “The Prosperity Paradox: How Innovation Can Lift Nations Out of Poverty”, co-written with the late great Clayton Christensen and Karen Dillon.
It was an engaging discussion and below are some of the key points I noted. These are a mix of various thoughts shared and any errors are wholly mine.
Innovation
There are 3 “types” of innovation; efficiency innovations, market-sustaining and market-creating innovations. Efficiency innovations help us do more with less and can be viewed through the lens of cost-cutting, cash-flow freeing innovations. Market-sustaining innovations, in simple terms, make things (processes, products etc) better. They serve already existing markets and are targeted at folks who can afford the product. Market-creating innovations, on the other hand, transform complicated products into simpler products which are more accessible and thus serve to stimulate demand in areas where it was hitherto non-existent. In other words, they serve to transform non-consumers into consumers.
If we consider innovation as the process by which we transform inputs of lower value to outputs of higher value, then the question of who has access to these outputs guides the extent to which innovation can directly result in increased economic growth.
Culture and Incentives
Culture is essentially the way a people have evolved to produce optimal output. It is how people have figured out how to make progress. By this definition, two things are evident. Firstly, there can be good and bad culture. Secondly, culture is not static; it is malleable and transient, and should continue to evolve as the prevailing resources available change, and should tend towards rest at a point at which, anecdotally, the whole exceeds the sum of the parts. Thus, in a logical world, there is clear incentive for cultural shifts.
There have to be incentives for value-creating innovations, for the value-creator and the would-be consumer. The promise of a good return influences the entrepreneur to take risks to innovate. The promise of satisfaction, an easier life or more prestige influences the consumer to spend. There are also barriers to consumption, sort of anti-incentives. What prevents people from consuming a particular product? Is it money, time, access or skill? Or is it culture? That’s the essence of research; it should help us understand how the world works, firstly, not how the world should work. For example, selling a product to someone who has very scarce resources would be difficult if it is not on the basis of cost. Appealing to morality and not utility would be a tough sell. What does the product help the consumer save or what does it help the consumer achieve?
Infrastructure
It is difficult to create sustainable (hard and soft) infrastructure in countries which are yet to figure out what value is and how to create it. Hard infrastructure are things like bridges, rails, hospitals etc which make life easier for citizens. Soft infrastructure revolve around strong systems which create an enabling environment for member of the society to both flourish and express themselves.
Infrastructure has to be connected to value and should be designed to help the economy become more productive and efficient. Building a University in a particular location in Nigeria should be a straight-line from an identified need for, say, a specific kind of research. Still, infrastructure has to match, and is stimulated by, value creation. Of course, there is no one sense of value, and value is determined by the prevailing, specific needs of the people, both in relation to themselves and the external world (other communities, countries etc).
A point that stood out is that when the inefficiencies caused by losses due to corruption are layered upon the already low government spend per head, we are a poor country and the situation is dire. Our lack of infrastructure is no surprise.
Questions
Ask questions that if the answers are figured out, they help to move the needle a little bit forwards. The seemingly simple questions often have hard answers.
P.S. I admit that I had not read the book prior. Thanks to Goodreads reviews, I had a fair idea of the overall thesis of the book but after the discussion, I felt compelled to get a copy, to dive in deep. On my signed copy of the book, Efosa quite graciously left a bible passage. It was Numbers 6:24–26 — “The Lord bless you and keep you; The Lord make His face shine upon you, And be gracious to you; The Lord lift up His countenance upon you, And give you peace.”
