Business Week ran a frightening article last week entitled, "The Failed Promise of Innovation". Author Michael Mandel asks the question, "What if outside of a few high-profile areas, the past decade has seen far too few commercial innovations that can transform lives and move the economy forward? What if, rather than being an era of rapid innovation, this has been an era of innovation interrupted? And if that's true, is there any reason to expect the next decade to be any better? "
Innovation is the ultimate leading indicator and our prosperity is dependent on being able to develop new and better products that can move the economy forward.
We have seen waves of innovation create jobs and growth starting with electricity, the automobile, and information technology. Unfortunately, the latest wave of investment was in financial "innovation".
I would argue that we are headed in the right direction. In the past decade it is has been the parasitical growth of the financial sector that has sopped business school talent, resources and time that could have been better spent investing in ideas that lead to real products and real jobs.
As we unwind the damage of the finance sector, we may return to innovation. Smart people will move to new sectors like clean energy, biotechnology or nanotechnology. Investors will spend time and money developing new products. There is a good reason to expect the next decade to be better.