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01 June 2012

Incentives, Risks, and Innovation

As I mentioned before, I'm in the midst of another free trial-month of Netflix. I just finished Ken Burns' The Shakers yesterday. It's not a perfect film nor is it of the caliber of Jazz or Baseball--two of my favorites--but it's worth watching, especially for fans of history or religion. I was fairly ignorant to the Shaker movement, and I learned quite a bit. One interesting tidbit that caught my attention were the number of inventions that the Shakers amassed. Among the most notable are the circular saw, the flat broom, and the clothespin.

As Anabaptists emerging from the Radical Reformation movement, Shakers demonstrated a strong work ethic, which is nicely summarized in Mother Ann's famous imperative to "Put your hands to work, and your heart to God." Perfection in work was paramount, but it did not require toil per se. Thus, Shakers had a strong incentive to reduce the onerousness of their chores, hence such inventions as listed above.

Many business writers and economists today would have us believe that inequality is necessary as an incentive to overcome the risks that are required for innovation. Why would a pharmaceutical company spend money on research and development for a cure for a deadly disease if not for the promise of enormous profit? Why would people have developed the personal computer or social media networks if not for ludicrous futures filled with IPO's and wealth? It turns out that these are all counterexamples to this assumption. Mark Zuckerberg was an awkward teenager trying to be popular when he developed what would become Facebook. Only years later did he tack on a profit model. Steve Wozniak was having fun, doing what he loved when he developed his personal computer. He had to be convinced that it would be profitable. Jonas Salk was simply trying to help people when he developed the polio vaccine. He famously wouldn't patent it for personal profit.

Profit and greed are not the only motivations for innovation, particularly for pro-social advances. Religion, for example, can motivate in powerful ways and entail unintended beneficial consequences, as we see in the history of the Shakers. According to Weber, we have Protestantism to thank for the modern spirit of capitalism itself. Religion, in part, also drove the advancement of the printing press. Religion, however, can temper motivation in a way that laissez-faire capitalism cannot. (As I am wont to say, "There is no invisible head attached to the invisible hand.") The Hebraic religion gave us prohibitions on usury and a day of rest after every six days of work. It needn't be religion that does this, though. Reason is equally capable.

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