…is a sign of a threat to innovation:
The Dreamliner’s troubles reflect a wider trend. Innovation in mature economies such as America’s seems stuck in a perpetual holding pattern.
Venture capitalist Peter Thiel has warned about this slowdown for years.
“There is so much incrementalism now,” Thiel said in a recent interview with Bloomberg Businessweek. “Even back in the ’90s there were companies like Amazon that were willing to do big things. That has gone out of fashion now.”
Thiel points to Space Exploration Technologies Corp. and the electric car company Tesla Motors Inc. (TSLA), both run by Elon Musk, as the rare examples of recent attempts to leap forward boldly. Yet Musk often gets portrayed as a quixotic dreamer.
“I think this reflects the insanity of our country, that anything non-incremental is seen as insane,” Thiel says.
Who’s responsible for this perceived downturn in innovation? One obvious target is overweening government. Some Boeing defenders have charged that the FAA wildly overreacted by grounding the Dreamliner.
“They are trying to make us too risk-averse,” says Gordon Bethune, a retired airline executive who worked for Boeing and later ran Continental Airlines. “The FAA is teaching Boeing something. Are we sending the right signals to our innovators in automobiles, airplanes, appliances, that the heavy hand of God is going to come down on you if you have so much as one question wrong in a hundred-question exam?”
Yet an even more important factor than excessive regulation is that the public markets simply don’t reward big risks. While going public theoretically should give companies more access to capital to finance research and development, it turns out that an initial public offering actually tends to discourage bold bets.
More than 20 years of patent citations show that on average in the five years after a company stages an IPO there’s a 40 percent drop in the quality of innovation, says Shai Bernstein, an assistant finance professor at the Stanford Graduate School of Business, who has studied the trend.
I think this is why Elon has backed off on what were originally rumored to be his plans for an IPO this year.
Gee, someone should write a book about the consequences of extreme risk aversion for human spaceflight.