Innovation and Inequality: Conservative and Libertarian Perspectives

Advances in technology have changed the way we work and the jobs that are available. This presents a challenge for us all to consider--a challenge that is not new. It is one that was encountered during the Industrial Revolution and every major economic transformation since then. (1) But the challenge is particularly acute today. Many occupations have become obsolete quite recently. Others will inevitably be left behind. But, notably, entrepreneurship is not obsolete. In fact, the founders and initial financiers of innovative new companies continue soaring to astronomical wealth, while many workers in other industries are out of jobs. (2) Perhaps part of the financial success of innovators is due to the availability of machines to fill the roles previously held by laborers. (3) Entrepreneurs do not have to distribute their revenue among so many people. Perhaps part of their success is a reward for their rarity. There is only a limited supply of such creative entrepreneurs. (4) Entrepreneurs' uncanny ability to identify and fill previously unimagined needs is worth rewarding because of its scarcity. Whatever the explanation for entrepreneurs' wealth, entrepreneurship can be valued and well compensated when it works, even while certain other kinds of work--assembly-line labor, for example--are facing extinction. The comparison between wealthy entrepreneurs and the endangered species of laborers raises real concerns about inequality, especially because these high-flying entrepreneurs come from a narrow slice of society. If society and the economy allow only certain individuals who are deemed "tech geeks" to succeed, then we are cutting many people out. There is some evidence of that kind of discrimination built into the entrepreneurial ecosystem. Inventors in the technology sector are often free to experiment and grow huge because the law has not regulated cyberspace, (5) while innovators in traditional service sectors--who may be more likely to come from less educated or less wealthy sectors--are regularly handicapped by legal restrictions. (6) Venture capital firms are much more likely to fund ventures started by people who fit a certain mold and are missing out on people who may have great ideas but do not look the way that entrepreneurs are expected to look or sound the way that they are expected to sound. (7) As a result, people with equally excellent ideas have wildly unequal chances at achieving economic success. Putting aside concerns about inequality per se, a society does not maximize innovation if it allows only a small slice of its population to execute their ideas and insights. Failing to take full advantage of the entire population's creativity and insight is simply foolish, as every individual is differently situated and has a unique view of the world. Not drawing on these diverse perspectives denies society of an untold number of innovations that could benefit everyone. Each individual, shaped by his own experience and perspective of the world, can see opportunities and solutions in a way that others cannot. No one--constrained as each one is by his own limited worldview--can predict in advance who will be inspired with a winning idea or which idea will in fact win. (8) The more people who are ideating and tinkering with the world, the better the chances are of benefiting from a great idea and a great execution of that idea. For these reasons, Americans should not want a single regulatory agency or single venture capital firm to run the world. Rather, Americans should fight for individual liberty, not only because it is good for individuals but also because it benefits society by, among other things, breeding more innovation. Based on this theoretical groundwork, it is concerning that society is not benefitting from the innovation and creativity of as many people as possible. Too few entrepreneurs are being generated--not because everyone should be an entrepreneur, but because almost everyone should have a job, and it is entrepreneurs, after all, who create jobs. …