Innovation is the Monetary Policy of Tomorrow
When the chairman of America's Federal Reserve - arguably one of the most powerful men on the planet - says he's not going to talk monetary policy, pay attention. That's one speech you won't want to miss. Ben Bernanke did indeed do such a thing at a commencement address recently at a small American liberal arts college. The business reporters in the audience were initially disappointed that Bernanke wouldn't be providing them clues as to where interest rates would be headed in the coming months. But those who listened to his fascinating address on the power of innovation came away with some terrific insights.
Of course, the Fed chairman aimed his remarks at a bunch of wide-eyed graduates, ready to brave the real world, get jobs, and make a difference in society. Bernanke addressed something a lot of folks have wondered about for the last few decades: Is this the end of a century-long economic boom? Are our best days of innovation and exciting, life-changing inventions behind us? If you compare your lifestyle with that of your grandparents, you might say yes. In their lifetimes, they enjoyed jet travel, nice cars, long distance telephone calls, and access to quality health care. Our lives aren't that different from what they experienced.
But if you compare your grandparents' lifestyles with those of their grandparents, you'd find that society had been fundamentally transformed by technology and innovation. For most of the last 500 years, a person lit a fire to keep warm, ate whatever his family could raise on his land, and seldom ventured more than a few miles from his home. What began to happen at the dawn of the 20th century was extraordinary. We haven't seen that kind of sweeping social change since then.
His speech - when I read it - made me think again about innovation. First, innovation and invention were limited to the Thomas Edison type: an isolated scientist or tinkerer. Collaborating with other scientists or tinkerers was a sketchy improbability. So fewer people had access to new ideas and innovations and were less likely to adapt them to commercial use. Today, however, the planet is experiencing a population boom, and with more people comes a demand for better tools, devices, and commercial products. Not only in the West but in emerging markets like India and China.
The population boom has its advantages. More engineers and scientists are coming out of great universities and are aggregating and communicating their knowledge with their peers around the world. So an inventor in India might chat via Skype with an engineer in Silicon Valley, who then might get funding for a project from an investment banker in London. All within the blink of an eye. Trade and globalization are increasing the size of the potential markets for new products, so the economic rewards for being first with an innovative product are growing rapidly. Both humanity's capacity to innovate and the incentives to innovate are greater today than at any other time in history.
I agree with people like Bernanke who say that the only thing we can be sure about in the coming decades is that it will be filled with change. So it will pay to have the ability to adapt, evolve, and learn well after one leaves college. The need to 're-invent oneself many times' cannot be stressed enough. And the realization that 'success and satisfaction will not come from mastering a fixed body of knowledge but from constant adaptation and creativity in a rapidly changing world'. And this is true of individuals and organizations alike. In a rapidly changing world, those who engage with and adapt alongside new technologies will be most prepared to harness the changes that will occur in their lifetimes. What's also important to remember is that a machine is only as effective as the person using it.
So I join America's central bank guru by reminding myself to draw on my ability to think critically, analytically, and creatively in readiness for constant change and the world of tomorrow.