3 April 2015

Innovation, technology and free markets offer a bright future


A crystal ball is not needed to predict the future. We have at our disposal a less magical and more precise indicator which is rarely consulted: the “triadic” patent. Our collective way of life is already described by the patents which are registered every day throughout the world. Not all patents will necessarily lead to a transformed future; statistically however, there are no significant innovations which are not protected by a patent.

That innovation is the ultimate source of progress had been initially understood in seventeenth century United Kingdom. Through the 1623 Statute of Monopolies, the British parliament sought to protect the intellectual prosperity of inventors against infringement. In the late eighteenth century, Thomas Jefferson enshrined patents and intellectual property in the American Constitution.

According to Jefferson, as America had no national resources (on this, he was clearly wrong) or accumulated capital, future wealth could only be based on their innovative spirit and the legal protection of these innovations. Moreover, after having observed the British experience, Jefferson understood that patents should only be temporary in order not to stifle competition and improvements of the original designs. Since his time, soft patents, that it to say, time-limited intellectual rights, have become a universal rule. All patents though do not have the same impact on progress: some are more significant than others. Those which portend our future are “triadic” patents, registered in the United States, in Europe and in Japan. A triadic patent becomes de facto universal.

Looking at the triadic patents figures over the last 50 years, we see their geometric progression: as the number of researchers and innovators grows, the number of patents grows even faster. Progress is a cumulative process: the more one searches, the more one finds decisive innovations. The geography of registered triadic patents shows where nations stand and where they will stand tomorrow.

Based on this self-evident rationale, the United States remains the undisputed innovation leader with nearly one third of annually registered triadic patents. Considering that these triadic patents will become the products and services defining our immediate future, American economic leadership is unlikely to be threatened in the coming decades.

Right after the US comes Japan.  Japan remains the second most important global innovator and actually the first per capita (Switzerland being second). This was confirmed in a dramatic way, when after the Fukushima tragedy in 2011, industries all over the world were paralysed, because they could not receive the indispensable spare parts that only Japan could manufacture. Europe comes third, the leaders in Europe being Germany, the United Kingdom, Switzerland, France, Denmark, Belgium. Consequently, we may conclude that while Europe right now is not growing satisfactorily, it is not doomed to decline either.

The poor political management of most European economies impacts neither European talent for innovation nor its predictable future. Thus, the United States, Japan and Europe remain the economic troika which leads the world. This continuous innovation process explains why, even under slow growth or no growth at all, the quality of our daily life and our life expectation is improving: think of the trivial, like the smartphone, or, more decisively, the quality of healthcare devices.

Where then are the emerging powers? As far as innovation goes, there aren’t many. The rare exceptions which have begun to appear on the radar screen in terms of triadic patents are South Korea and Taïwan. Beyond that, not much else has happened: China, Brazil, Russia, India register numerous patents but only within their borders, mostly to hinder foreign competition. All this means that economic growth in “emerging” countries is regretfully based on imitation, outsourcing or exploitation of natural resources. Tomorrow’s world looks pretty much like the world today.

We know where innovations happen: we also know what is being invented. Triadic patents reveal some leading trends. We shall focus on five of them which seem to us mostly significant: 3D-printing, individualised medicine, the internet of things, superior education, and synthetic food.

3D printers, which have improved by leaps and bounds, will allow, at home or in factories, the production of physical components designed on software. In industries or buildings, the impact on workforce cost will be negligible (or possibly negative) and there will be strong incentives to bring back production from low-wage countries and closer to the consumer. 3D printing could severely impact the Chinese growth model, in case China proves unable to shift from imitation to innovation.

Individualised medicine will allow each of us to implement self-diagnosis: the collected data will be continuously streamed to automated medical centres for verification and therapeutic purposes. A medical visit will become the rare and ultimate process for unequipped patients and the most life threatening conditions. The “internet of things” will allow us to manage every aspect of our domestic life from a distance and with great precision, from refilling our freezer to driving our car.

Regarding superior education, Massive Online Courses (MOCs) have already started, initiated by leading American universities: students all over the world, whatever their location and financial resources, will be able to follow the best lectures and have their credentials verified on the web. In the near future, a university education may require a couple of years through MOCs, followed by one year on campus: this happens to be already the case at the Arizona University. Synthetic proteins will sustain mankind as agricultural land becomes insufficient and the benefits of GMOs seem unable to bridge the gap between cereal production and an increasing demand for meat.

In our description of a predictable future, alternative sources of energy do not appear as prominent as expected. This may be explained by the abundance of traditional resources, gas, coal, oil, increased by productivity gains at the consumption level and fracking at the production level. For those who are preoccupied by climate change, many triadic patents will improve the recycling of carbon dioxide mostly through crystallisation techniques.

Such an innovation-based future requires a dynamic free market economy and more entrepreneurs. An innovation without an entrepreneur who makes it standardised, cheap and accessible for the greater crowd will remain sterile.

Recall ancient China, where brilliant discoveries led nowhere because entrepreneurship was not permitted by the imperial bureaucracy. Regretfully, neither the free market nor democracy, which incentivises innovation, cannot be guaranteed. What is patented, however, will most certainly happen and change our life. What is not patented may never happen.

Guy Sorman is an economist at the University of Paris and author of many books on classical liberalism including: The American Heart, In Praise of Giving, 2014. He is also publisher of France Amerique and founder of Action against Hunger.