When I visited the Bay Area last week I noticed a strange kind of resource allocation problem: there are too many people trying to come up with new ideas. It shows in the number of re-hashed social networks, airbnb-for-whatevers, and minor feature enhancements being peddled as grand startup ideas. It's easy to dismiss it all as hype and jargon, but a moment of reflection reveals just how exceptional this situation is. Which other industry has so many people coming up with new ideas that people are running out of new ideas to try? Imagine going to an airport and seeing so much innovation in every step of the process that all the best ideas were already exhausted. Imagine setting out to build a house and finding as many new building materials as there are web development toolkits. Imagine if your annual medical checkup improved as rapidly year upon year as your mobile phone. Perhaps that would be too much of a good thing, but that would be a good problem to have!
The tech industry is what happens when innovators descend on a sector. There are a couple of reasons that the tech sector is attractive to innovators. First, tech startups are highly scalable, so a good idea can capture enormous wealth for the founders and early investors. This reason is the one widely believed to explain the vast innovation gap between the tech sector and the rest of the economy, but scalability is not really unique to the tech sector. Low barriers to entry are another important factor, as is the fact that technology is trendy and attractive to young people. Also, the tech sector hasn't been around for long enough to become shackled by regulation, an entrenched workforce, or monopolistic firms. These factors combine to create a perfect storm of innovation, and perhaps the only truly powerful engine of value creation invented in the last quarter century.
If this sounds to you like a naive and soppy fantasy of an industry full of hype and jargon and precious little value creation, then perhaps you're right. But whatever standards we hold for the tech sector we should also hold for other sectors. Over the same period that the tech sector has invented, deployed, populated, and commercialised the Internet, the aviation industry has made aircraft slightly more efficient and slightly slower. There is every reason to think that innovative opportunities await in the aviation sector, just as in the tech sector, but the aviation sector lacks the scalability, low barriers to entry, and innovation culture of the tech sector, so aviation improves slowly or not at all.
Perhaps the most powerful type of innovation, then, is meta-innovation, involving the opening of new sectors to innovation. We need to entice the innovation eco-system to colonise new parts of the economy; we need both innovators and investors with expertise and interest in new areas; we need to peel back the barriers to innovation, regulatory and otherwise; and we need to identify accurate demand signals in the new markets. It takes time to build innovation eco-systems; the current tech boom is much better organized than that of the late 90s. Tech is already working. Now let's go change the rest of the world.