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Patanjali Sokaris

Pondering the universe

Innovation

There is much talk about promoting innovation, but do governments really get how innovation occurs?

Innovation can occur in technology or business models, but what they have in common is that it is disruptive to a class of business, forcing them to react and change, or lose market share.

To be innovative, an idea has to be radically different from what has gone before. The problem for large enterprises is whether their culture can recognise innovation, much less be prepared to back it, especially if it involves a deviation from their core business.

The typical breeding ground for innovation is not big development labs or teams, but one or two people mulling over an idea and building a prototype as a proof of concept. This all happens in a garage or study, away from the inspiration-killing routine of their normal working lives.

Innovation precedes getting finance, because the idea is not ready to show anyone, nor do they have the time to do a pitch for venture capital or indulge in the complex grant application process. They need to focus on getting it built.

What innovation really needs to get going is arrangements that support the developers spending their time on their idea, instead of working full time just to get the money.

One method is to allow two or more people to split their income, so that one or more of them can devote their time to developing the idea, while preserving as much of their income for the living expenses of all of them.

This is much like what some people illegally use family trusts for, but which is probably a more equitable arrangement for families. For example, under most typical tax arrangements, the higher the income, the higher the tax rate. This leads to the absurd situation where a couple with a sole provider is paying more tax than two flatmates with the same total income, but who also save costs by their shared living expensives. This penalises families.

Governments need to get that innovation is not gained by giving their friends in rich organisations more money to basically do what they have been doing all along. That is just making them richer, but not really benefitting the nation or the world.

There may be other tax arrangements that allow individuals to spend their time on implementing their germ of an idea. All that is needed is innovation in tax arrangements, but given the generally blinkered thinking of most politicians, or rather their parties, they probably will not perceive them.


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