How to measure innovation
June 8th, 2011
12:25 PM ET

How to measure innovation

Editor's Note: This post is part of the Global Innovation Showcase created by the New America Foundation and the Global Public Square.

By John Cookson, CNN

Distance is measured in meters, time counted in seconds, and intelligence assessed by IQ, yet innovation lacks a standard unit of measurement.  Stand-in metrics for innovation, seven of which are listed below, help to fill this gap in measuring how new products and new processes have led to longer and better lives.

Those seven metrics are: (1) patents, (2) GDP, (3) energy captured, (4) R&D spending, (5) inventions, (6) urbanization, and (7) a social development index. Let's go through them one by one.

1. Patents

Innovation is quickly followed by desire to protect and profit from it, which makes patents a compelling proxy for measuring innovation.  Seventy-five percent of all patents filed, and seventy-four percent of all patents granted worldwide, happen in the patent offices of Japan, South Korea, China, Europe and the United States.

This year, for the first time, China is expected to become the world’s number one patent publisher, passing the U.S. and Japan in both total and basic number of patents.

Yet patent numbers alone do not separate the innovative ideas from the not-so-innovative ideas, the latter demonstrated by U.S. patent 6,368,227: a method for swinging on a swing.

Check Out: More from the "Global Innovation Showcase" created by the New America Foundation and the Global Public Square.

2. Gross Domestic Product (GDP) and Per Capita GDP

Economic output - both a nation’s GDP and as an individual share thereof - is another stand-in for measuring innovation.  The late British economist Angus Maddison calculated national GDP and per capita GDP numbers back several millennia.  His work shows how certain nations at certain times became innovation powerhouses.

Innovations in finance, shipbuilding and energy collection led to an economic boom in the early modern Netherlands, for example.

In 1500, GDP per person in the Netherlands was almost equal to that of the UK.  As the innovations listed above took hold in the Dutch economy, GDP per person doubled by 1600, and doubled again by 1700, at which point it was 1.7 times that of Britain’s GDP.

Read: Are we still an innovation nation?

It took until almost 1800 for the UK to catch-up with the smaller Netherlands in GDP per person, largely by implementing the innovation processes introduced in scale by the Dutch earlier.

3. Energy Captured

The history of innovation is also the history of humans using more energy.

Better agriculture has led to more and to more caloric food.  Transportation has become faster and capable of carrying more cargo.  And pulling electricity from hydrocarbons in the earth - as well as from sunlight, wind, and other sources - has allowed for more and for more complex technology.

Pinning so much human advancement on commanding more and more energy, the late American academic Earl Cook calculated the average energy captured per person, per day over the last few millennia.

Relatively constant from 1000 to 1600 (around 27,000 kilocalories per person per day), energy began an upswing in the 1700s.

At the dawn of the industrial revolution in the nineteenth century, individual energy capture reached 38,000 kcal per day, on its way to 92,000 kcal by the twentieth century, which introduced the agricultural and electrical revolutions.

Near the start of the twenty-first century, daily energy captured soared to 230,000 kcal, eight-and-a-half times the amount per person in the 1600s.

As Nathan Myhrvold said during a recent GPS interview, the twenty-first century will in part be defined by the developing world seeking to match the developed world in daily energy consumed.

4. R&D Spending

Another stand-in for innovation is funding of research and development.  Pharmaceutical companies spend a large percentage of their revenue on R&D, and the innovative offerings of this industry have been transformative for human life.

As historian Ian Morris writes in Why the West Rules - For Now, “In the richest countries doctors seem able to perform miracles - they can keep us looking young (in 2008, five million Botox procedures were performed in the United States), control our moods (one in ten Americans has used Prozac) and consolidate everything from cartilage to erections (in 2005 American doctors wrote 17 million prescriptions for Viagra, Cialis, and Levitra.)”

Yet as Fareed Zakaria writes in TIME magazine, R&D is not synonymous with innovation.

An innovation darling, Apple spends relatively little on R&D, a fifth of what Microsoft spends as a percentage of revenue, and less in total over the last decade than Microsoft spent in fiscal year 2010 alone.

5. Important Inventions Per Person Per Year

Pentagon physicist Jonathan Huebner measures innovation by calculating the number of important products produced each year and dividing that number by the world’s population.

Using this model, Huebner finds results at odds with common assumptions about the accelerating pace of innovation in recent years.

Read: Rebellion of an innovation mom.

Innovation peaked back in 1873, according to Huebner, and has been declining ever since as technology reaches natural limits of efficiency and economic feasibility.  “We are at an estimated 85% of the economic limit of technology,” Huebner writes, “and it is projected that we will reach 90% in 2018 and 95% in 2038.”

6. Urbanization

In 2008 the number of people living in urban areas surpassed half of the world’s population for the first time in history.  Rapid urban growth, which began in force in the 1950s, has seen new cities bloom and established cities expand and evolve.

This growth has earned comparisons to complex organisms, similar in kind to the growth and death within a biological system.  Yet with biological systems from microorganisms to large mammals, every increase in size results in a slowing circulation, a slower pulse, governed by a principle know as the quarter-power law.  A hummingbird’s heart, for example, beats faster than an elephant’s by a factor that is proportional to each animal’s size.

Based on the biological comparison, it would seem then that a larger city would have a slower circulation of ideas and innovation as it struggles simply to sustain its growth.  The relationship is, in fact, reversed.  A larger city is more innovative.

According to author Steven Johnson in Where Good Ideas Come From, the larger city is more innovative by an inverse factor of the quarter-power: “A city that was ten times larger than its neighbor wasn’t ten times more innovative; it was seventeen times more innovative. A metropolis fifty times bigger than a town was 130 times more innovative.”

7. Social Development Index

Another way to measure innovation is to combine several of the measurements listed above into an index.  While the portions allotted to each measurement in the index are subjective, a composite of measurements might more accurately capture the broad understanding of innovation.

Historian Ian Morris, noted above, has created an index not of innovation, but of “social development," which includes energy capture, urbanization and the capacities for war-making and for information technology.

Read and Watch: A brief history of innovation.

He assigned a maximum of one-thousand points and divided these points among the four categories listed above.  His index, which goes back to Neolithic man, is another stand-in for innovation across history, graphically showing how ideas and processes have led to a modern life very different from previous generations - as well as how much of human history has been, and may continue to be, an innovation race between the West and East.

Check out more at CNN.com/Innovation.

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Topics: Innovation

soundoff (141 Responses)
  1. beta

    you also don't need the fed. If all transactions were done on credit cards...then the value of money could automatically be adujsuted for inflation with no interest rates. (there is also quantum money, but thats a few years away). So once government doesn't need to fix for inflation or deflation (the money supply and its velocity gets a correction with an algorithm), then the only other plausible funciton woul be government bonds. However, since the government would then be seen as a monopoly that can affect stock prices and all other goods in the market, it would be forced to only spend what it can without borrowing (no bonds) because it creates higher order distortions in the market and it could not justify its borrowing by the concept of inflation control.

    June 13, 2011 at 6:04 am | Reply
  2. beta

    ggyou also don't need the fed. If all transactions were done on credit cards...then the value of money could automatically be adujsuted for inflation with no interest rates. (there is also quantum money, but thats a few years away). So once government doesn't need to fix for inflation or deflation (the money supply and its velocity gets a correction with an algorithm), then the only other plausible funciton woul be government bonds. However, since the government would then be seen as a monopoly that can affect stock prices and all other goods in the market, it would be forced to only spend what it can without borrowing (no bonds) because it creates higher order distortions in the market and it could not justify its borrowing by the concept of inflation control.

    June 13, 2011 at 6:05 am | Reply
  3. beta

    as banking becomes more distributed with internet services (such as micro financing) after the crash, it is very plausible (given the dimension you subconciously choose to inhabit) that banking becomes a distributed activity...there will no more 'banks'....once the banks and the fed funciton dissappear, then governments are naturally in check, because they no longer can promise beyond their means (as defined by mathematical parameters in your current reality) and end up not delivering...this can lead to a natural perfect market and a civil libertarianism across the planet (after a 'tipping' point) that eventually mutates socialistic order if you look at it as a systemic design. This would become easier (since it would be more utilitarian) as more people realize there is an after life, giving less meaning to death as an end of life and just a transition. Equally so, a collectivist socialistic world could accomplish the same thing by having people, with the knowledge I have shown above, work together as one cooperative commune, accomplishing a worldwide marxist order with even better results.

    In the end, its all in the mind.

    June 13, 2011 at 6:10 am | Reply
  4. beta

    lol hahaha

    [youtube=http://www.youtube.com/watch?v=QOdkS3Xpqlk&w=640&h=390]

    June 13, 2011 at 8:15 am | Reply
  5. thejedi

    http://www.youtube.com/watch?v=sMvYVIPWGFw&feature=related
    its not a 'pole' shift, but a new age of light–both spiritual and technological in nature.

    June 19, 2011 at 5:33 pm | Reply
  6. thejedi

    this means however the rebirth of gaia, so it can be perceived as autumn...the death of an old world to renew itself in a new form–kind of like a worm tranforming into a butterfly. Hence, since many people do not yet see the big picture, they may become frightened by the changes. But this is only a period of renewal, and since there is no waste in the universe as well as an afterlife, there really is nothing to fear.

    June 19, 2011 at 5:37 pm | Reply
  7. JD Meyer

    Once again, this is a very provocative story from Fareed Zakaria. Recall that Dr. Richard Florida calls for tolerance, talent, and technology as a the way to build a creative society. Larger cities concentrate the effect of creativity.

    June 28, 2011 at 5:13 pm | Reply
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    September 2, 2011 at 4:27 am | Reply
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