The Economics of Innovation: The Road to Optimism

The Road to Optimism Mass Technology Leadership Council March 31, 2010 Dr. Michael Mandel Editor-in-Chief Visible Economy LLC

Brief Recap
When I last spoke here on February 25, 2009, the global economy was going through a near-death economic experience
The S&P 500 hit its low on March 9, 2009, down almost 50% from a year earlier
Jobs were melting away like snow in the springtime

And I was still chief economist at BusinessWeek

Today, the global economy seems to be growing again
The U.S. stock market is nearing 1200, almost back to its pre-Bear-Stearns collapse level of 1288 (March 14, 2008)
The job market seems to be bottoming out

And I am editor-in-chief and founder of a new venture, Visible Economy LLC , that combines news and education
(Plus an appt as a Senior Fellow at Wharton’s Mack Center for Technological Innovation. Plus my blog on growth and innovation. Plus….

But for all that has changed, the conclusion of my speech last year still holds
At that time, I linked the crisis to an innovation shortfall —the failure of many promising innovations to pay off since 1998

In a July 2009 BusinessWeek cover story, “Innovation, Interrupted,” I examined almost every breakthrough technology that seemed ripe for commercialization in 1998
Cutting-edge cancer treatments; Gene therapy; Cloning; Fuel-cell-powered cars; Biotech-driven discovery of new drugs; Internet service from low-earth-orbit satellites; Miniaturized silicon-based machines (MEMS); Tissue engineering; Speech technology

The same refrain came up over and over again. Successful commercialization was
“ harder/more complicated/more expensive than we thought”

The one exception: Communications
Successful innovation in communications, broadly defined , has continued at a rapid pace.

Communications did not escape the crisis….
….but there are signs that communications may drive the next boom

The Bust was Bad….

…But Signs of Leveling Off

Engineering Still Not Stabilized

Mandel’s Second Law of Booms and Busts
Industries which recover first in a bust tend to drive the next boom .

After the 2001 bust, residential construction and real estate businesses started adding workers well before the rest of the economy recovered.
These was a clue to the coming housing boom

The industries that seem to be recovering first :
--Internet publishing, broadcasting and web search portals
--Computer systems design and programming
--Wireless telecom

The situation for biotech and pharma is more ambiguous

We are starting to see the harbingers of a communications-driven economic boom
I’ve put my money where my mouth is

Will a communications boom be enough to overcome the drag from the rest of the economy?
Hard to tell.
(It sure would be nice to have a boost from the life sciences as well).

But innovation is the wild card.
It can surprise on the upside, as well as the downside.
New products and services boost both demand and supply.
Innovation creates jobs, spurs growth
The essential missing ingredient.
From last year’s presentation

At Visible Economy our goal is to create lively news stories and videos that cover today's events, with clear and correct explanations. Unlike most journal-ism, these stories and videos are designed to fit easily with courses and other educational programs. We are non-partisan and non-promotional. Our motto: C redibility, consistency, clarity Michael Mandel Editor-in-chief [email_address]

The Economics of Innovation: The Road to Optimism

by Christine Nolan on Mar 31, 2010

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