Too Big to Think

When I was a kid, I loved dinosaurs because, among other things, dinosaurs were SO Big. Big is very cool to the young and relatively small. But the other amazing thing about the really big dinosaurs was that their brains were so small- way smaller than my kid’s brain. Big dinosaurs’ brains were so small that they needed a ‘helper brain’ near their hind quarters so their back end could keep up with the front end. When I was older I sometimes wondered what happened when the two brains disagreed with each other. Was it the equivalent of a Jurassic brain freeze? Well, no matter- dinosaurs went extinct. Maybe they just got too big to think.

Watching the US Congress debate and momentarily jump off the 2012 ‘Fiscal Cliff’ on New Year’s Eve brought back those dinosaur memories. Tomorrow (March 1), it appears they are going to take the leap. I couldn’t help thinking that the Federal Government was just too big for the two brains- Republican and Democrat- that were trying to control the beast. The choices- cut spending or increase taxes to save the government and the economy- now constitute the entirety of a binary decision conflict for an organization comprising around a fifth of the US economy. Apparently there are no other solutions that can solve this pending extinction.

Innovation is about problem solving with new solutions. When these emergent solutions are sufficiently unique, without precedent and useful, they can be turned into intellectual property. And intellectual property can be a valuable asset when it solves recurring problems that have economic dimensions. Increasing revenues or decreasing expenses are just the sort of economic dimensions I am thinking of.

The way to get these unique solutions also involves using binary logic. To see if a proposed solution is true, we use a scientific method that starts with the problem that is also a testable hypothesis. Computer geeks will recognize this method in the familiar IF THEN algorithm (IF such and such is true, THEN this or that will result). In business or academia or government this is the function of R&D. The proposal either does what we propose or it doesn’t- that’s the ‘binary’ part of the process. The key is to make the problem small enough to test in a laboratory or an environment that’s much smaller than place we intend to use the solution in the event it’s true. The Federal government knows how to do this- it has dozens of laboratories doing it every day. So do big businesses and big universities.

The thing about a big problem is that usually it is a collection of smaller problems which themselves are sometimes collections of even smaller problems. The smaller the problem, the easier it is to solve. But solving small problems is boring and tedious and not very glamorous. No one holds a press conference to announce the solutions of a portfolio of very small problems. There is no Nobel Prize for the guy who solves the biggest number of small scale experiments. The CEO doesn’t get the corner office with a hundred small deals as often as with the One Big Score- even if there are a thousand losses on the way. This is often true of intellectual property as well. But, as it turns outs, these small innovations are the sure thing solutions that actually work and have actual value.

This year I resolve is to think smaller and smarter. Dinosaurs may be big and cool but they are also extinct. I think maybe it’s a good time to be something else. Like a smaller mammal. With patents.

It’s a Demand World- Really??

Everyone is talking about the need for consumer demand to pull the global economy out of the tank. On this there even appears to be political consensus.  The only issues are taxes and government spending. Some want more taxes and more government spending to fund the demand that the unemployed consumers can’t afford. Others want to cut taxes and government spending to leave money in the hands of the remaining employed and encourage them to purchase more things that they don’t need. Is it me, or are the current strategies just a choice of economic suicide by poison or drowning?

As a capitalist I believe in supply and demand, free markets, and rule of law. So if demand isn’t working maybe it’s time to check out the supply source. Is there a demand for better means to supply our markets? You bet- it’s called innovation. And the asset that fuels innovation is intellectual property. So far, it is untouched by the credit markets. More importantly, it is already an existing group of assets.

Innovation is about doing something better. It can be a bucket, a light bulb, a car, solar collector or a shoe.  Or it can be a better way to furnish an existing good or service. Innovation builds the demand for new means to supply the innovation. Intellectual property like patents is a first means to build the structure needed to furnish the new means of supply. The investment in structure is usually a multiple of the existing market. The key is to access secure asset based credit to build the new means.  Let me again suggest- patents. They are an under recognized and non-capitalized resource representing trillions of dollars in assets. We can access this credit reservoir through the sale and lease mechanics of real property. It’s called the sale license-back of intellectual property. This is not phony demand or stupid consumerism. It’s time to stop being crazy and start being innovative. Really.