Another reason for providing more housing: innovation (an impressive amount of it, anyway) begins at home

The Government in July launched a new approach to industry policy,aimed at growing more innovative industries in New Zealand and lifting the productivity of our key sectors.

The rationale was that New Zealand has a strong economic foundation but productivity has continued to fall behind our main competitors.

To take advantage of the opportunities of the technological revolution the Government announced Industry Transformation Plans would  be developed for key sectors.

Industry Transformation Plans were to be sector-led and government-supported, involving partnership between government and the private sector.

According to the Ministry of Business, Innovation and Employment website – 

The Government is committed to working with its partners to grow more innovative industries. Boosting productivity, including redirecting investment towards more productive sectors, is crucial if New Zealand is to lift the standard of living of all Kiwis, and this will be a key initiative for achieving this.

The initial priority sectors for developing Industry Transformation Plans are agritech, digital technologies, food and beverage, and forestry and wood processing. Over time, this could be expanded into other areas such as creative industries, tourism, aerospace, health technologies and renewable energy.

The fellow in charge, ministerially, is Phil Twyford, who took over from David Parker as Minister of Economic Development during a cabinet reshuffle in June.

Just before handing over the portfolio to Twyford, Parker released both a general guide to the industry transformation plan concept and a draft ITP for the agri-tech sector.

Progress since then?   We note a press statement from Twyford in August headed Interactive media a game changer for digital economy. 

He was launching a report  which found interactive media is a $143 million industry and is one of the fastest growing parts of New Zealand’s digital economy.

Interactive Aotearoa – Driving growth and wellbeing through interactive media had been prepared by the New Zealand Game Developers Association with support from the Ministry of Business, Innovation and Employment and NZTech.

Twyford said the sector was experiencing strong growth and had huge future potential.

“It also fits the profile of the kind of industries we need to foster to achieve a productive, sustainable and inclusive economy – it is low emission, export driven and scalable. It also offers a range of social and cultural benefits in fields like health and education.”

Twyford, of course, lost the housing portfolio a few months after he admitted the Government would not meet its first target of building 1,000 KiwiBuild homes by 1 July 2019 – he said only 300 homes would be built by then.

It may be argued that the innovation for which Twyford is responsible now could have been enhanced if more people had been housed when he was responsible for that portfolio.

Point of Order supports this contention by referencing an article at Freakonomics headed Honey, I Grew the Economy.

This says innovation experts have long overlooked where a lot of innovation actually happens.

The personal computer, the mountain bike, the artificial pancreas — none of these came from some big R&D lab, but from users tinkering in their homes. Acknowledging this reality — and encouraging it — would be good for the economy (and the soul too).

Those observations are supported in a transcript of  an episode from the Freakonomics podcast.  More information on the people and ideas in the episode can be found in the links at the end of the post.

MIT innovation scholar Eric von Hippel, one of those interviewed on the podcast, explains how the mountain bike was invented and brought to market. Not by a big bicycle manufacturer. Not by market researchers.

Eric VON HIPPEL: People start riding bikes down mountains. And then they modify bikes so that they can ride down mountains more easily. You discover, “Oh, I have to have stronger brakes. I have to have this, I have to have that.” And the manufacturers, meanwhile, are saying, “Well, that’s stupid. You shouldn’t be doing that.” Right? And, “Your warranty is void.” Which is their contribution to the innovation process. And then as a lot of people begin to do it, they say, “Aha! Not only is there a proven innovation, but there’s a signal of general demand.” And that’s the point at which you begin to define what a mountain bike should look like.

When you think about innovation – the article says – the image that comes to mind might be a massive computer-science lab or a well-funded medical-device workshop or a flavor-profile laboratory run by a gigantic food company.

But those are just the most visible sites of the innovation chain, the tip of the iceberg. Beneath this are millions of underfunded, under-appreciated home innovators.

Von Hippel estimates about 30 percent of R&D is not officially counted.

The study of innovation is a relatively new field.

VON HIPPEL: So really what you had to do was cobble things together. And in my case, I cobbled together engineering and business and economics.

His many distinctions include co-founding the M.I.T. Entrepreneurship Program and he recently put out a working paper, co-authored with the Wellesley economist Daniel Sichel, that summarises much of what he has learned over the years. It is called “Household Innovation, R&D, and New Measures of Intangible Capital.”

Von Hippel and Sichel calculate that Americans invest about $41 billion a year in household innovation. “This,” they write, “is about half of what producers spend in R&D to develop new products for consumers — a sizable fraction.”

Von Hippel and his colleagues designed a nationally-representative survey that has been conducted in 10 countries to learn what share of people were, as they put it, “developing or improving consumer products for personal use.”

They were only able to measure what they call “product innovations” — not services or process improvements, which are harder to pin down in survey data.

Among the nations included, Russia ranked the highest, with 9.6 percent of the population doing some kind of home invention. The US came in at 5.2 percent; China was the lowest, at 1.5 percent.

But in the upshot, many successful commercial products started off in someone’s garage or basement or crop field.

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