Strategy. Innovation. Brand.
Does Happiness Cause Innovation? Or Vice-Versa?
I’m happy being innovative.
Does happiness cause innovation? Or is it the other way round: does innovation cause happiness? Or is there a third variable that causes both happiness and innovation to vary together?
In the past, I’ve written about measures of national happiness (here and here) and measures of innovation (here, here, and here). I’ve been wondering: are happiness and innovation correlated? It seems like a reasonable thought but I haven’t had any evidence to make an inference. Until now.
I’ve just been reviewing the Global Innovation Index of 2012 (the GII) as published by INSEAD (the business school) in conjunction with the World Intellectual Property Organization (part of the UN). One of the goals of the GII is to develop effective measures of innovation that can be applied at the national level. INSEAD has published the report annually since 2007. Each year, it evolves and adds new variables. In theory, each year it becomes a better reflection of the true state of innovation around the world. In the 2012 edition, the report incorporates about 80 different variables.
What struck me immediately was the relationship between the GII and the World Happiness Report that I’ve written about before. While researching this article, I also stumbled across the Legatum Institute‘s ranking of national happiness. Though Legatum uses a different method, the results closely match the World Happiness Report. Indeed, the top ten countries in each report are the same — though in different order.
So, how does happiness relate to innovation? Look at the table below, which compares the top ten countries in the World Happiness Report (WHR), Legatum, and the Global Innovation Index (GII). Half of the top ten most innovative countries (with *) are also among the world’s happiest countries. The correlation seems to grow stronger if you look past the top ten. For instance, the USA is 11th on the WHR and ninth on the GII. Similarly, Canada, New Zealand, and Norway are 11th, 12th, and 13th on the GII and all three are in the top ten of both WHR and Legatum.
Why should happiness be related to innovation? I’m not at all sure. Part of the reason I’m publishing this is to ask my readers: what do you think? Let’s gather the best ideas and see if we can test them logically. Over to you.
| WHR | Legatum | GII | ||
| 1 | Denmark | Norway | Switzerland | * |
| 2 | Finland | Denmark | Sweden | * |
| 3 | Norway | Sweden | Singapore | |
| 4 | Netherlands | Australia | UK | |
| 5 | Canada | New Zealand | Netherlands | * |
| 6 | Switzerland | Canada | Denmark | * |
| 7 | Sweden | Finland | Hong Kong | |
| 8 | New Zealand | Netherlands | Ireland | * |
| 9 | Australia | Switzerland | USA | |
| 10 | Ireland | Ireland | Luxembourg |
Sunday Shorts – 10
Of course I can talk.
Interesting things I’ve found this week — even if they happened long, long ago.
Want to improve medicine and reduce costs at the same time? Just add robots.
If there’s a gorilla hiding in your chest x-ray, shouldn’t a radiologist find it? Maybe not. After all, they’re intent on finding other things, like abnormalities. But isn’t a gorilla an abnormality? Why would 83% miss it?
Can dogs talk? You bethca. In fact, Bella just finished telling about her trip to the nail salon. She liked the service but wasn’t happy with the color.
Is Iran Botching the Bomb? According to Jacques Hymans in Foreign Affairs, it’s hard to build a bomb without good management systems and that’s “why so few authoritarian regimes have succeeded: they don’t have the right culture or institutions. When it comes to Iran’s program, then, the United States and its allies should get out of the way and let Iran’s worst enemies — its own leaders — gum up the process on their own”.
Need more caffeine? I certainly do. How about buying soap with caffeine in it and absorbing it through your skin? Why not?
What are the 50 companies that are most likely to disrupt the market place in 2013? Yikes! And the accompanying editorial.
Will solar energy cost less than fossil fuels in the next decade? It’s possible if this new technology proves out.
Have a malformed ear? Print a new one using a 3-D printer. Vincent Van Gogh should be so lucky.
You’ve heard about 3-D printers. How about a 3-D pen — write in the air!
Critical Thinking. What’s That?
No, thanks. I don’t want my doc to mis-diagnose me.
I visited my doctor the other day. Expecting a bit of a wait, I took along Critical Thinking, a textbook for one of my courses. When I walked into the doctor’s office, he read the title and said, “Hmmm … critical thinking. What’s that?” I thought, “My doc just asked me what critical thinking is. This can’t be a good sign.”
I quelled my qualms, however, and explained what I teach in critical thinking class. He brightened up immediately and said, “Oh, that’s just like How Doctors Think.” I pulled out my Kindle and downloaded the book immediately. Understanding how doctors think might actually help me get better medical care.
So how do they think? Well, first they use shortcuts. They generally have way too much information to deal with and use rules of thumb called heuristics. Sound familiar? I’ve written several articles about rules of thumb and how they can lead us astray. (Just look for “thumb” in this website’s Blog Search box). So, the first answer is that doctors think just like us. Is that a good thing? Here are some errors that doctors commonly make:
Representation error — the patient is a picture of health. It’s not likely that those chest pains are a cause for concern. With this error, the doctor identifies a prototype that represents a cluster of characteristics. If you fit the prototype, fine. If not, the doctor may be diagnosing the prototype rather than you.
Attribution error — this often happens with negative stereotypes. The patient is disheveled and smells of booze. Therefore, the tremors are likely caused by alcohol rather than a hereditary disease that causes copper accumulation in the liver. That may be right most of the time but when it’s wrong, it’s really wrong.
Framing errors — I’ve read the patient’s medical charts and I see that she suffers from XYZ. Therefore, we’ll treat her for XYZ. The medical record forms a frame around the patient. Sometimes, doctors forget to step outside the frame and ask about other conditions that might have popped up. Sometimes the best approach is simply to say, “Let me tell you my story.”
Confirmation bias — we see things that confirm our beliefs and don’t see (or ignore) things that don’t. We all do it.
Availability bias — if you’re the 7th patient I’ve seen today and the first six all had the flu, there’s a good chance that I’ll diagnose you with flu, too. It just comes to mind easily; it’s readily available.
Affective bias — the doctor’s emotions get in the way. Sometimes these are negative emotions. (Tip: if you think your doctor feels negatively about you, get a new doctor). But positive emotions can also be harmful. I like you and I don’t want to cause you pain. Therefore, I won’t order that painful, embarrassing test — the one that might just save your life.
Sickest patient syndrome — doctors like to succeed just like anyone else does. With very sick patients, they may subconsciously conclude that they can’t be successful … and do less than their best.
The list goes on … but my space doesn’t. When I started the book I thought it was probably written for doctors. But the author, Jerome Groopman, says it’s really for us laypeople. By understanding how doctors think, we can communicate more effectively with our physicians and help them avoid mistakes. It’s a good thought and a fun read.
The Most Innovative Companies of 2012
Boston Consulting Group just published its annual (since 2004) ranking of the 50 most innovative companies in the world. BCG polled 1,500 executives and asked them to rank companies by innovation. More importantly (from my perspective), BCG asked the executives about their company’s plans, strategies, and tactics regarding innovation. You can find the entire report here. I’ll summarize some of the key findings below.
Perhaps the most important finding is that investment in innovation has recovered from the turmoil of the recession. Seventy-six percent of executives said that innovation is a “top three” priority — the highest level in the survey’s history. And they’re putting their money where their mouth is — 69% said they plan to increase spending on innovation in 2013, the highest level in six years. Further, companies that emphasize innovation tend to generate superior total shareholder returns (TSR). The most innovative companies of 2012 generated TSR premiums (compared to less innovative companies in the same sector) of 6.3% over three years and 3.5% over ten years.
How did these companies become so innovative? BCG identifies six key factors:
Get customers involved early — innovative companies get customers involved to generate new ideas and to separate the wheat from the chaff. One of the key reasons to involve customers is to ensure that weaker projects “fail fast and fail cheap”.
Use data to drive tough decision making — it’s hard to make tradeoffs among promising projects. Which ones will succeed? Which ones will simply be distractions? The most innovative companies allow executives to make firm decisions for “the right reasons on the basis of the right data”.
Think strategically about tradeoffs — “Best practice companies do not make [tradeoff] decisions in reference to last year’s budget but rather on the basis of the size of future opportunities.”
Ensure senior leadership commitment — “The most commonly cited force driving innovation was the CEO.” I don’t mean to brag but this is exactly what I found in my dissertation, a study of innovation in colleges and universities in 1984. It’s the person at the top who sets the innovation culture.
Envision innovation as a holistic system — don’t just try to optimize one piece of the puzzle. Create a strong vision for the need for innovation throughout the company and then build the enablers, including culture, processes, and organization.
Optimize intellectual property to create value — lots of companies have bright people. The most innovative companies also have collaborative processes and decision rules to create and capitalize on intellectual property.
The Structure of Predictions
The cost of my services may go down.
I like to think about the future. So, in the past, I’ve written about scenario planning, prediction markets, resilience, and expert predictors. What have I learned in all this? Mainly, that experts regularly get it wrong. Also, that experts move in herds — one expert influences another and they begin to mutually reinforce each other. In the worst cases, we get manias, whether it’s tulip mania in 17th century Holland or mortgage mania in 21st century America. Paying ten times your annual income for a tulip bulb in 1637 is really not that different from Bank of America paying $4 billion for Countrywide.
I’ve also learned that you can (sometimes) make a lot of money by betting against the experts. The clearest description of “shorting” the experts is probably The Big Short by Michael Lewis.
I’m also forming the opinion that the reason we call people “experts” is because they study problems closely. They’re analysts; they study the details. Like college professors, they know a lot about a little. That may make them interesting dinner partners (or not) but does it make them better predictors of the future?
I’m thinking that the experts’ “close read” makes them worse predictors of the future, not better. Why? Because they go inside the frame of the problems. They pursue the internal logic of the story. Studying the internal logic of a situation can be useful but, as I pointed out in a recent article, it can also lead you astray. In addition to the internal logic, you need to step outside the frame and study the structure of the problem. If you stay inside the frame, you may well understand the internal dynamics of the issue. But, in many cases, the external dynamics are more important.
The case that I’ve been following is the cost of healthcare in the United States. The experts all seem to be pointing in the same direction: healthcare costs will continue to skyrocket and ultimately bankrupt the country. The experts are pointing in one direction so, as in the past, I think it’s useful to look in the other direction and predict that healthcare costs won’t climb as rapidly as in the past or may even go down.
Here are two interesting pieces of evidence that suggest that the experts may be wrong. The first is a report from the Altarum Institute which notes that 2012 represented the “…fourth consecutive year of record-low growth [in healthcare spending] compared to all previous years in the 50-plus years of official health spending data.” Granted, there’s a debate as to whether the slowing growth is caused by the recession or by structural changes but the experts (yikes!) suggest that at least some of the shift is structural.
The second piece of evidence is a report by Matthew Yglesias in Slate that documents the dramatic decline in spending for healthcare construction. Spending to construct new hospitals dropped precipitously in 2008 and has stayed low, even during the recovery. As Yglesias points out, construction spending is “the closest thing we have to a real-time forecast of what the future is going to look like.”
So, are the experts wrong? As Chou En Lai liked to say, it’s too soon to tell. But let’s keep an eye on them. Otherwise, we could be framed.
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