The Roots of Innovation

The apple doesn’t fall far from the tree.

Photo Source: Pixabay

That’s the lesson from a new study about innovation, inventions, and incentives. The children of inventors are far more likely to become inventors themselves. Income, education, and geography also matter. But it’s the home environment that has the biggest impact.

Some researchers studied 1.7 million patent office applications and 1.2 million tax returns, asking why some people innovate and others don’t. If one of your parents holds a patent, you’re nine times more likely to become an inventor yourself than if your parents are not inventors. Innate ability, as measured by 3rd-grade test scores, doesn’t matter very much. Moreover, if your parents are automotive engineers, you’re far more likely to be an powerplant innovator yourself. If they have telecom and networking patents, that’s where your invention is likely to be.

Source: Chetty, et. Al.

Inventions even follow geographic lines. Children in San Jose and San Francisco generage computer applications, those in New Jersey work as biotech researchers, and upstate New York is an imaging hub. To some extent, this follows the work of the Enlightenment philosopher David Hume, who noted how difficult it is for people to trust one another, to develop the social capital necessary to pass on deep learning. It’s why the techniques of Stradivarius and Guarneri violin-makers were lost with those families.

Source: Chetty, et. Al.

That’s why incentives matter. Not because inventors need the income. According to the researchers, they’re already rich. Incentives matter because we want to leave a legacy. We don’t want our work appropriated (and subverted) by someone else.

Economic progress depends on innovation: container ships, just-in-time manufacturing, smartphones, genomic medicine. If we want to find our “hidden Einsteins,” we need to be sure that we support and encourage new ways of thinking.

Douglas R. Tengdin, CFA

By | 2017-12-05T08:21:28+00:00 December 5th, 2017|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. –
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