Quick Take: Ideas, individuals, institutions, and the freedom to innovate
Can we harness the principles of American prosperity to thrive in the digital age?
Freedom to innovate
Ideas, individuals, and institutions are indispensable ingredients for B2B innovation, the future of distribution, and revitalizing our society and economy for the digital age. I’ve written so here and here, and I am excited to find that John Cogan and Kevin Warsh—distinguished economists and policy experts at Stanford University’s Hoover Institution—argue that “ideas, individuals, and institutions are the sine qua non of American prosperity” in their just-published essay, Reinvigorating Economic Governance: Advancing a New Framework for American Prosperity. Through Cogan and Warsh, I am encouraged about my path and inspired to push ahead.
Cogan and Warsh aim to help us all thrive in our work and in our lives. I’m all in, but every generation needs a refresh, including mine and those that are rising. Right at the start, their paper quotes economist F.A. Hayek to make this case: “If old truths are to retain their hold on men’s minds, they must be restated in the language and concepts of successive generations.”
In this edition, I share insights from Cogan and Warsh’s paper, in bold font and italics, followed by my suggestions. I write not for policymakers but B2B leaders and innovators, and I hope to tap into their advocacy, encourage progress, and unlock innovations.
Ideas—if they are found, nurtured, and disseminated—fundamentally upend the conventional economic dialectic. I have found that distribution suffers from a lack of ideas. Leaders are skilled at following best practices and continuous improvement, but not with nurturing ideas as a pathway to seismic innovations. Cogan and Warsh shine a light on the power of ideas and how to use them:
Ideas, unlike other economic goods, are special. They are pure, nonrival goods. They are scarce until they are developed. Once developed, they are not depleted by their use. That is, greater use by some people of the latest software, search engine, or mobile device does nothing to lessen the ability of others to use the product or service concurrently. The idea that motivates innovation becomes more valuable with its prevalence.
Cogan and Warsh explain, “Absent new ideas, high levels of productivity growth and potential output growth would be unattainable.” In distribution, digital technologies are often implemented as shiny new things to protect profits and customers. In a better frame, ideas come first:
Ideas are not just about technological breakthroughs. Ideas manifest themselves in myriad ways: a new blueprint to construct a bridge, a novel drug formula to prevent infection or treat the symptoms of a virus, a new way of doing business directly with customers, the reorganization of a supply chain to lessen frictions, a song that inspires.
Individuals are the core of civil society. Their talents, motivations, and decisions are key determinants of an economy’s potential. Inspired by ideas, individuals must be free to pursue them. The radicals in our midst understand this, looking to upend worn-out practices that lock the status quo in place. Unchallenged distribution processes, metrics, job descriptions, and partnering arrangements are sometimes the enemy of progress. Cogan and Warsh argue:
What typical adults do as they set about their day matters immeasurably to the future prosperity of their country. A successful economic governance regime does not view the individual as indistinguishable from a group or as a mere cog in a machine; instead, it embraces the notion that individuals have beliefs, expectations, preferences, and ambitions, all shaped by civil society. Individual choices, hence, have significant effects on the path of the economy.
Human agency affects institutions, and institutions affect human agency. As explored here, value chain policies and practices create certainty for business planning and execution, but they also function as a governing system that resists change. If unimagined B2B innovations are to emerge, public and private institutions must work intentionally to empower and liberate individuals, teams, and organizations. Cogan and Warsh make the case for economic governance by government, and point to the role of private institutions with help from Tocqueville:
Private institutions—corporations, universities, media organizations, nonprofits—are fundamentally different from their governmental counterparts. Private firms are not state actors. They do not have the ability to command behavior; individuals must consent. In competitive markets, individuals have the right and ability to choose with which private institutions to conduct their affairs. Tocqueville admired the free-form “voluntary associations” that give vitality to civic affairs.
As individuals, B2B innovators need help from private institutions, including trade and professional associations, universities and colleges, buying groups and group purchasing organizations, and more. The value chain must evolve; but as self-organizing institution without centralized control, established companies must lead the charge, enabled by their voluntary associations.
In Quick Take: Free World Innovation, I argued that established B2B companies must play a role in staring down the ambitions of rising autocracies by pursuing innovations that strengthen our economy. From that point of view, Cogan and Warsh's paper is a call to action for every patriotic and civic-minded B2B leader and innovator. The future of distribution is the future of our society. Do you agree? What are you doing? How can I help? Please share your comments below or reach me at firstname.lastname@example.org.
Mark, Great, solid article. I love that you have gotten to ideas, and how powerful they are. My contribution here is a play on "Your are what you eat", instead, "You are what you think". Ideas do not manifest themselves, they need humans as vehicles. Championing people to be curious, think about possibilities, and take risks with ideas that may not prove productive is leadership often associated with high tech and Silicon Valley.