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Economic baseline, risk and Innovation

  • Category :
  • business and economics and politics
  • July 10th, 2006

    One of the fuel of innovation is companies and individuals who are willing to take risks.  Even thought no everyone who take risk will innovate, if noone deviates from “industry best practice”, we would have no innovation.  However, certain economic baseline has to exist for people to take risk.

    One of the thing I observed in China was that there is little risk taking going on.  People are afraid of asking the wrong question, or giving the wrong answer.  People tend to follow what the guy in front of him does, and are willing to happily accept current condition.  But why?  Why would people not willing to take risk?

    I discussed this over tea with George.  To encourage people to take risk, a society has to have some sort of safty net.  In the States, if you failed, you can still get a job pumping gas and survive with minimum shelter and food.  In China, if you failed, you have to sleep on the street.  Not only that, your parents and your kids has to sleep on the street as well.  Simpily for that reason, people are more adverse to taking risk.

    But then, risk taking doesn’t seems to be thriving in wealthfare countries either.  It turns out if the safety net is too comfortable, peole tend to absue it and stay in the safety net instead of where they should be.  The incentive of doing extra work to take risk isn’t big enough to justify doing so.  So how would China evolve into a country that encourage innovation.  I think this would take at least 10 more year.  Innovation came from necessity, whcih China has now.  But the country need to establish a social safetynet to make sure everyone can at least have basic needs, yet expose everyone to the potential reward of taking risk temselves.  With more risk taking in the marketplace, people will have a higher tolerance for risk taking, thus propelling innovation

    Entry Filed under: business and economics,politics

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