Davos - Billionaire venture capitalist Jim Breyer is heading to the Swiss Alps this year with an upbeat message. “This is a magical time,” said Breyer, a partner at Accel Partners, which invested early in Facebook and RealNetworks.
He rejects the argument that the world economy is stagnating. From San Francisco to Shanghai, new ideas are bubbling up.
“Innovation is happening in centres of excellence around the world faster than ever before,” he said, “largely because it’s more inexpensive than it was even five years ago to develop a product or service for a global audience.”
His optimism is likely to be a welcome contrast to the trouble-ahead warnings that leaders of business and government will hear at the annual meeting of the World Economic Forum (WEF), beginning on Wednesday in Davos, Switzerland. Japan and Europe are on the brink of deflation, and one-time dynamos like Brazil, China and Russia are losing speed.
The best antidote to stagnation is innovation: The creation of products, services, and processes that make life better.
The good news on the eve of Davos is that there has been some innovative thinking about innovation itself, some of which will be shared at a forum panel moderated by Breyer and that includes Qualcomm executive chairman Paul Jacobs and Rolf-Dieter Heuer, the director-general of the European Organisation for Nuclear Research, the Swiss lab that discovered the Higgs boson.
Innovation has been a major theme at Davos since the 1970s, when a courtly Austrian professor of management named Klaus Schwab launched the high-powered confab. It’s one of the 12 “pillars” of the World Economic Forum’s annual global competitiveness index.
This past year the forum ranked Finland first for innovation, followed by Switzerland, Israel, Japan, the US, Germany, Sweden, the Netherlands, Singapore and Taiwan.
SHARED UNDERSTANDING
The purpose of the index isn’t to furnish certain countries with bragging rights. It’s “to build a shared understanding of the main strengths and weaknesses of each of the economies covered, so that stakeholders can work together” to make improvements, Schwab wrote in the preface to the 2014/15 report. In other words, the value of the ranking is more in the information it brings to the surface than in who finished in what place.
In Bloomberg’s own ranking, the top 10 countries for innovation in 2014 were South Korea, Japan, Germany, Finland, Israel, the US, Sweden, Singapore, France, and the UK.
The WEF’s ranking is more qualitative, as it relies heavily on a poll of 15 000 executives asked to grade the nations where they operate on factors such as “capacity for innovation” and the degree of co-operation between industry and university researchers.
A third approach, used by the conference board and others, is to measure what economists call total factor productivity. That’s the portion of an economy’s output not explained by the combination of workers and machinery used in production.
The theory is that this extra output can be attributed at least in part to innovation – say, a smarter way to run an assembly line or organise a restaurant kitchen.
For advanced economies, innovation requires pushing the frontiers of science and technology. That can’t happen without heavy government funding for basic research, along with pathways to its commercialisation.
The internet and the Global Positioning System are only two of the crucial technologies that originated as projects of the US federal government.
Singapore and South Korea have likewise used research and development to vault themselves into the top tier of economies, says Bart van Ark, the conference board’s chief economist. That’s not to say that governments can conjure innovation simply by spending money.
INNOVATION HAS TO “TRICKLE UP”
Breyer, the venture capitalist, said that while government could foster collaboration between universities and business, ultimately innovation had to trickle up from the bottom. “I’ve had dozens of meetings over the years with leaders from around the world who asked how they can build their own Silicon Valley,” he said. “It never works. There’s a magic. There’s a love for entrepreneurship and experimentation that needs to occur.”
Less-developed economies can make lots of progress in living standards just by playing catch-up. For them, innovation mostly means adopting and adapting existing technologies.
Sometimes the best thing a government could do to promote innovation was get out of the way, said Bronwyn Hall, a professor emerita of economics at the University of California at Berkeley. Take Uber, the mobile app that connects drivers and riders. Taxi drivers all over the world hate it. France banned one Uber service as of January 1. “In Paris it’s impossible to get a taxi,” Hall said. “It’s illustrative of the resistance to innovation.” – Bloomberg
Independent Newspapers will be represented at Davos by Ellis Mnyandu ( @Ellis_Mnyandu), Business Report editor and group executive: Independent Business Media, and by Karima Brown ( @KarimaBrown), Independent Media’s chief content officer. Follow our Davos coverage via Twitter @busrep and online at www.busrep.co.za