Innovation part 1

This is direct argument of Jared Diamond's Paper.

"Invention and innovation is a direct result of competition between different organizations."

He brings about some fascinating points - how the Japanese lost their guns while Europeans didn't, how in isolated societies, they ended up losing technology (one Australian tribe ended up forgetting to use bones as tools, and became extinct)

Frag is the Key
The basic idea is that societies go through fads - either doing something that is not profitable or not doing something that is profitable. However, the fads stop as soon as they compare themselves with neighbouring groups, because the neighbours end up outdoing them economically.

He also looks at why China, the past leader in innovation, suddenly lost its edge - his explanation was that it was due to China stopping its spending on Naval troops - a "fad", and since China was unified under one Emperor at the time, this hurt them much more than in other societies with fads. This is particularly ironic because the very act of dismantling the shipyards literally made china into an island.
Compare this to Europe, who never lost their ships. This was result of Europe having many different countries with many coasts and ports. So, as direct result of having other countries around, they were able to keep their ships - and this led to faster innovation and wealth building.

He also goes onto explain why Europe isn't like China - after all why was China united but Europe not? His answer is the Geography - the placements of rivers, mountain ranges, coastlines and islands gave Europe the characteristics for sustained separated cultures. After all, there have been men who tried to unite Europe - Hitler, Stalin, Napoleon... they just couldn't do it because of the geographical limitations.

So, in essence, variety and competition matters a LOT more than we think.

Ultra Frag =/= Ultra innovation

The argument is that you need optimal degree of fragmentation. For example, India, which was a lot more fragmented, isn't as developed - Germany, during its time of utlrafragmentation before it was united under Otto von Bismarck, didn't have huge innovative growth. The problem that I see with ultrafragmentation, is that communication becomes way too difficult between different groups. You can't be just fragmented - you need to be able to communicate ideas too.

Taking a look at Germany, Diamond explains that the reason why Germany's Beer brewing industry is shit while their steel industry productivity is as high as American counterparts, is that there are no points of competition in the brewing industry - Germans are very loyal to local beer - therefore, fragmentation exists, but conquer-ance doesn't exist. Same thing happens in Japanese food processing industry - as Japanese really care about fresh food: making them less susceptible to industry consolidation and ultimately COMPETITION.


INITIALLY applying the theory to Microsoft, should they much more inclined to have a "fad"? Yes. But, on the contrary, they are much more efficient than we think they would be. Reason being, they are comprised of many smaller units that do what they do the best with free flowing communication between them.
This is very interesting because it supports the theory of 150, introduced to me by Malcolm Gladwell's Tipping Point. The basic theory is that whenever organization reaches the critical number of 150 members, communication between members become much more difficult. The number one company that follows this model is Gore-tex.


It's all about give and take, and the right amount of competition, applied at the right time with right amount of communication between interested parties.