A Society of Tinkerers

Editor’s note: We’re pleased to publish a note today by Luis Perez-Breva, author of Inno
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Comments

  1. Avatar for O.P.A O.P.A says:

    I like the idea of incentivizing companies to publish their unused R&D. A suggestion on how to make that happen:
    Make it so that, while companies can still deduct the value of R&D efforts, if they are not using the results of their R&D in a commercial effort within a few (eg: three) years, they must either release those efforts into the public domain or risk the government clawing back the associated deductions.

    Not sure what the accounting changes will be needed to keep track of which ideas are associated with which deductions, and what exactly counts as being used in a commercial effort.

    Some way of tying the deductions from R&D to actually using them I think makes sense though. We allow deductions because, in lue of the tax payments, the research benefits society, however it stops doing that when it just collects dust on a shelf.

    Very nice piece overall, thank you for sharing your thoughts here Luis.

  2. Peter Drucker was famously said, “The purpose of any business is to create customers.“ I am in the railroad business and it appears that the big names in the sector are doing more to run off customers then to create new ones. Wall Street has glommed onto the themes of “operating ratio“ and “precision schedule railroading,”
    yet rather than using these themes to create new customers and build franchises with older customers, managements are using these tools as an excuse to cut costs, thereby improving the operating ratio without improving the core business.

    Happily, there is a cadre of smaller railroad operators who have glommed onto the entrepreneurship 1.0 theme. That’s where we’re seeing the growth; that’s where we’re seeing more customers coming to the railroad than running away from it.

    The present “financialization“ model of increasing earnings per share by cutting costs and buying back shares isn’t doing the customer any good. The chief beneficiaries are the executives with their stock options and – for the moment – shareholders who are buying the OR/PSR/share buyback program story.” The employees, the suppliers, and the customers see no benefit whatsoever and are increasingly looking away.

    Time to bring on entrepreneurship 1.0 on a larger scale to benefit all stakeholders.

  3. My biggest takeaway: “so moronically “elitist” (epidemiology, climatology, socioeconomics) that it seems as if you need some kind of advanced degree”… this is the biggest problem to solve of our multi-silo world, aka how to enable things to be done by a five year old

  4. Avatar for olowe olowe says:

    Thanks for posting Luis. For some reason, your article reminded me of Andrew Higgins and the Higgins Boat. I suspect he might fit your description of tinkerer:

    Andrew Higgins, a fire-tempered Irishman who drank whiskey like a fish, was originally building oil-prospecting wooden boats in Louisiana. Once WW2 broke out, he was positive there would be a need among the U.S. Navy for thousands of small boats—and was also sure that steel would be in short supply. In a common moment of eccentricity, Higgins bought the entire 1939 crop of mahogany from the Philippines and stored it on his own. Higgins’ expectations were right, and as the war progressed he applied for a position in Naval design. Insisting that the Navy “doesn’t know one damn thing about small boats,” Higgins struggled for years to convince them of the need for small wooden boats. Finally he signed the contract to develop his LCVP.

    https://cs.stanford.edu/people/eroberts/courses/ww2/projects/fighting-vehicles/higgins-boat.htm

    Best regards,

    Otto Lowe

  5. Dr Perez-Breva, thank you for this timely and timeless post, and congratulations on becoming a US citizen!

    I say “timeless” because the battle to encourage innovative thinking and problem solving has been around for decades. As long as there is more money for “integrated systems” programs rather than IRAD (independent R&D), publically held engineering companies will tend toward rewarding “grinding” over tinkering. There’s a fine line between the two, with the tinkering mindset being the one that is most likely to get punished if deadlines for deliverables are valued over investigation. An obvious example (to me anyways) is the contrast between achievements of the Apollo space program v. the decisions that lead to the Challenger space shuttle disaster.

    On a smaller scale, some of the more successful engineers I’ve known stubbornly stuck with their ideas and either left a company or even dropped out of school. They had the strength of personality to persist and finally convince others to either join them or at least buy into their good idea. That’s the hard part to teach: knowing when is the right time to quit and take one’s grinding/tinkering ability someplace else to start something new.

  6. O.P.A that’s a fair point, and with the right set of incentives (e.g. R&D deductions) I can see how it would help make the case for more sharing to companies with R&D .

    Once convinced that some degree of sharing (vs collecting dust) is advantageous, demonstrability of use would be key. One of the things that we would need is a clear way to demonstrate the R&D is actually being used. That’s one of the aspects of intellectual and industrial property that is most baffling. So I think we need a way to help R&D-heavy companies demonstrate that, and that’s a business question too.

    I imagine a new kind of instrumentation company intent on turning that R&D into a tinkering instrument. The kind of instrument that helps tinkerers explore problems. That way R&D producing companies could readily demonstrate their R&D --the same that would have previously been doomed to shelves-- is now being put to use for exploration. To R&D companies this could look a lot like taking an insurance while at the same time de-risking their R&D.

    Accounting and taxes are not my areas of expertise, but I’m intrigued by your comment. Do you have a sense for how many changes would be required to tax codes and accounting to enact your idea?

  7. Zero Mugen, that’s quite right and I believe we need to help more people see the connection the way you brought it up: our ridiculous approach to silo knowledge is causing false elites and much mistrust.

    Economists tend to praise specialization and they have a point, but the hyper-silo-ed world we’ve created has taken that to a dramatic extreme. So much so, that at times disciplines seem to exist for the sole purpose of excluding others, that is, create “elites”. Come think of it people think about patents much the same way “to exclude others”. The Founding Fathers had loftier goals when they elevated intellectual property to become a constitutional matter “To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”

    We oughta expect more. I believe those two problems are related, I think we are in sore need of a new literacy effort. I think tinkering is as critical to that effort as the ability to dabble in words was to the first effort to increase literacy.

    Interestingly, universal access to education led the charge over a hundred years ago; now silo-ed education and the creation of elites might have become the problem. Rusty Guinn has few great pieces here on Epsilon Theory on the topic of higher education.

    P.S.: BTW, five year olds, really? well, that might be just a tad too young, but I taught my 10 year old daughter (now eleven) differential calculus reading together the book “Measurement” by Paul Lockhart. So believe me, we can do far better than we are doing. Incidentally, next up for us is finding good books to read together on Quantum Mechanics and Game Theory, … Ben any ideas?

  8. There’s a big problem with democratizing innovation in the context of building sustainable businesses, and it’s the inevitable knock-off product. Not enough people are talking about how this is gutting small business innovators. Why bother making a new product when it will be copied and sold for less?

    The commercial trajectory of consumer 3D printing is a useful lesson. Patents locked up 3D printing cost/availability for a couple decades, and it was priced out of consumer reach. Then around 2010 open source advocates (tinkerers) in the RepRap movement and early community-oriented 3D printer manufacturers created innovative, important products that destroyed the Stratasys / 3D Systems patent duopoly, and made all the key enabling IP public (out of the exact ethos that I think Luis is advocating here). Both hobbyist and commercial R&D outputs were aggressively shared via open source software and hardware designs. Development was rapid through 2010-2015 and we saw a big hype-cycle boom. Unfortunately, the open source development also gave away the keys to the kingdom. Once the technology and market were proven by primarily US and EU inventors, the public IP got picked up by Chinese manufacturers with lower cost structure and no R&D costs, and most of the 3D printing innovators were commercially obliterated. Desktop 3D printers are now mostly commoditized, and innovation has greatly slowed in the last few years. There are pros and cons to this; consumers do get much cheap 3D printers now…

    The key point is, if you invent a consumer product today that doesn’t have some difficult-to-copy “secret sauce” or enforceable legal protection preventing knock-offs, it will be cloned and sold on Amazon at half price by five no-name competitors before you have a chance to scale. End of story. This is every consumer device now. International IP legal enforcement is only affordable for major corporations, so your choices as a small business are basically secret sauce or death. We’re now seeing the end of the line for traditional “guy in a garage” Entrepreneurship 1.0 business development. You need secret sauce to compete.

    Put another way, the way you make a successful business today is by getting enough of a head-start to scale before being copied. What works today as secret sauce? A large body of compiled code. Deep private databases. A large body of quality user-generated content. A service-oriented user experience. A big pile of VC money in a field with high barriers to entry. Regulatory protection. Working in an obscure B2B sector that Chinese businesses don’t have visibility of. Working in a quality-critical sector that doesn’t want to buy Chinese products.

    So, it’s unsurprising that most startups today are data-mining apps. It’s a reliable source of secret sauce. If you want to fix entrepreneurship, you have to solve the knock-off problem.

  9. Hi RCarlyle, good points.

    I believe I’m proposing a different kind of fix to what you call the “knock-off” problem. This may be hard for some to read, but the companies (new or old) that will get us out of this mess are not the one leading to things that are so easy to knock off. To your point, with so many no-name companies knocking off stuff left and right, if that entrepreneurship with its knock off problems were the solution, we’d be all set: Those knock-off manufacturers would have solved it.

    A more genuine approach to problem-solving is bound to attract long term investors, philanthropists, and sustainable investors too. My experience educating talent at MIT and worldwide on how to address problems that matter by doing allows me to be hopeful. But as I say in the article this is a new profession altogether not to be confused with speculateship.

    BTW, you may find it interesting to read Marina Hatsopolous (founder of Z-corp and 3D printing business pioneer) retelling of the story of 3D printing and how she as CEO led the company to compete with 19 other companies that were given non-exclusive rights to MIT’s portfolio of 3D printing patents in the early 90s.

  10. Thank you Chipperoo.
    I too believe the incentives are stacked up against the kind of tinkering, or at least have been as of late.

    What my (privileged) position at MIT has given me a chance to observe is that the numbers of tinkerers are growing. Sure, everyone expects engineers to be drawn toward tinkering, so few might be surprised by stories of engineers that tinker and persists as you well put it. But what made me realize tides may be changing for the better is that finance students too were asking for the opportunity and the education to learn to use their skills to find new and better ways to help and solve problems. Maybe the era of the startup for the sake doing a startup is finally over.

    So we have the people to do it and the appetite to do it. I am convinced we can bring long term capital to help us change the incentives.

  11. great piece.
    a lot of this gets back to the cost of capital argument. if capital is cheap, if failure is cheap, then speculation occurs.
    If we raised the cost of capital, if we punished production from overseas, we’d see more ingenuity and better products and services created. But we also need to focus on how the biggest companies either disrupt the little companies, or, snap them up so quickly, that they never release the competitive product.

  12. Hi BostonDad, Thank you. I’ve got to confess that I only fully understand the cost of capital argument thanks to David Salem’s patient explaining. It makes perfect sense to the mathematician in me (now). So I’ve come to generally agree with the notion that cheap capital may have caused lazy investing to become norm and all of it compounded into the current runaway condition.

    I am not at all convinced, though, that merely raising the cost of capital back is the solution. I even think (though I have no proof) that just raising the cost of capital might well be the way to deliver the final blow to the economy and with it to the hopes of enterprising minds. Maybe you’re right, maybe all we need is to persuade business schools to teach more critical thinking so ‘outsource your production’ no longer is the accepted dogma it’s become (another form of speculate-ship)… I truly don’t know

    I can draw various analogies to motivate my hesitation: for instance, you can use a hammer to smash a window but lifting the hammer back does not magically unbreak the glass the way Harry Potter’s ‘reparo’ undoes havoc. (in my magical analogy the hammer is ‘low cost of capital’, and the window is ‘economy’)

    It all boils down to the second law of thermodynamics (we, physicists love quoting that, but it was originally inspired by economics). Roughly the law says that systems don’t get simpler on their own, rather they tend to become more complex. So whether the economy is broken or not, cheap capital might have made it more complex. The economy we’re left with after decades of low cost of capital no longer behaves by the norms the old one did. Historical predictions might not do and raising cost of capital might have a host of unintended effects (That’s one of Ben’s points in his three body problem essay.) So the only way to undo some of the chaos it is to put work to steer the economy in the direction we want to see it grow.

    And for that we need a new narrative. Waiting for the chairman of the fed to raise cost of capital is one narrative. A Society of Tinkerers is another narrative (I’m biased toward the latter)

    P.S.: Incidentally, I’ve always felt the narrative about big companies snapping up small companies is a bit suspect. Sure, it happens, but I’ve grown wary that many of the small companies we see now are engineered to be “acqui-hires” from the start: speculate-ship…

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