The Theory of Innovation, and the future of software

The Theory of Innovation, and the future of software
March 13 10:00 2011 Print This Article

When we talk about accelerating software development, we’re really talking about accelerating innovation.  We can learn from other forms of innovation, like evolution, which share a common mechanism of creation.

Birds can fly about 100 miles per hour.  A jet airplane designed from similar principles, but optimized for speed rather than efficiency, can go 2000 miles per hour.  Evolution is famously a very slow process.  But, it’s not always slow.  And, with a theory of innovation, it’s likely that we can make an artificial version of evolution that roars like a jet airplane.

I’ve been collecting ideas about a theory of innovation for years, and I will take some time on Sundays to share them here.

These ideas come from a variety of sources.  The most important source is the study of natural evolution.  A man can make a better mousetrap, but evolution can make a cat.  And evolution is the starting point for humans, and hence all human activity.  Some argue that biological evolution produces humans, and humans produce silicon and DNA technology, and we’ll engineer that so that it can create and evolve, and it will all be one big continuum of creation.

If that sounds scary, you can can comfort yourself with the fact that we really don’t understand evolution yet.  Evolution turns out to be very intricate.  It’s not just competition, and survival of the fittest, with one caveman clubbing another caveman over the head and a selfish gene emerging smugly from the fray. It’s also cooperation, and symbiosis, and evolvability of genomes, and so on.

Some of the other inputs are:

  • Artificial evolution, including experiments with genetic programming – evolving software inside a computer.
  • Thermodynamics.   This is the really big picture.  Is there anything new under the sun?  How do new things come out of undifferentiated “macro states”?   In thermodynamic theory, noise is the raw material of information, but how does noise become meaningful information?  While we’re at it, is there a meaning of life, and will innovation ever come to an end?
  • Human creativity.  What makes an idea “creative” as opposed to logical or obvious?
  • “Dynamical systems theory” as it was so exuberantly discussed at the Santa Fe Institute, with universal ideas like power laws, emergence, chaos, and order.
  • Industrial innovation, including the art and business of invention.
  • Economics.  We need an economic theory of innovation. We don’t have one yet, but we have a few ideas.

Innovation is clearly an economic activity.  We spend a bunch of money on  it, and we expect a return  on  investment.  It’s the most important factor  of production, the most important product, and the most important determinant of the wealth of nations. When I started studying innovation, I wondered why economics doesn’t have much to say about it.  If you start from a theory of economics, innovation is a very strange beast.  I tried to tame the beast by defining some economic properties. Here is the first draft.

First, innovation is a process of production, sort of like pumping oil or making widgets.  Only, we aren’t producing tangible goods like oil or widgets.  Innovation produces something that I will call “design”.

Design has some strange properties, which will be confounding to economists, but useful for understanding the software business.

Design has the property of “non-rivalry”. That means that two or more people can use it at the same time.  Once I figure out how to make a wheel, you and I and some guy in China can all make similar wheels.

Although innovation can be expensive, it’s output, design, doesn’t have any scarcity or marginal cost.  As an innovator, you don’t get paid for the work that you do, and as a buyer of design goods, you don’t pay for any particular cost.  Instead, you pay for things like “ecosystems”. This leads to increasing returns, which is why our world is so crazy and constantly flying out of equilibrium.

Design also has the property of durability.  It can last forever. I can still make a wheel thousands of years after someone figured out how to do it.  Because design is durable, it builds up in layers that are very deep and impossible to measure. How much design is in a computer?  Well, how much design is in the paint on the computer, or the chemicals in the paint? We can deal with these questions using tricks like fractal math, but that’s beyond typical economics.

Software is a pure design good.  We can use as many copies as we want, and it never wears out.  Therefore, making software is a process of pure innovation.  It seems strange to say so, since much of the work of making software isn’t lightbulbs going off with “aha” moments, and the work of making software is in fact usually a lot like making widgets, and most software isn’t very innovative.  But, that only proves that innovation is a very inefficient process.   I’ll write about that on some other Sunday.


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Nataliia Vasylyna
Nataliia Vasylyna

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