What the Innovator’s Dilemma Has to Say about Robots and AI
Empire or rebel scum? The future of robots and AI are up to us.
As the CEO of a U.S.-based startup that intends to be the Apple of personal robots, I spend a lot of time thinking about business basics: Resources. Competition. But while reading about the challenges facing the world’s most valuable company, I’ve added another factor into the mix: Empires. They rise, they fall, and rarely do they get back up again.
For decades spanning the 18th and 19th centuries, the British fleet was unparalleled, protecting merchants doing business around the planet. Not coincidentally, while doing so, the British amassed a global empire that was extraordinary in its ability to generate wealth and, therefore, power.
Then, moving into the 20th century, the U.S. hit its stride. And not because it competed head-to-head with Britain in terms of who had the better navy or more colonies. No, the U.S. disrupted the entire measure of how wealth was generated. The U.S. developed an empire of industry. The U.S. mastered mass-scale innovations, from the assembly line onward.
During World War II, the U.S. government pumped massive capital flows into building mass production capacities. And after World War II, private finance kept it going. Affordable access to capital assured inventors the ability to scale. And, ultimately, government-led investment in the Man on the Moon mission in the 1960s enabled the digital high-tech revolution that created U.S. dominance in the early high tech era.
What happened to Britain is an example of an established empire dealing with disruption — also known as The Innovator’s Dilemma. If they are to survive, established companies, industries, and, yes, even countries inevitably have to find ways to manage the transition between their current success and the uncertain future. As companies and countries scale, their entrenched size and weight become power centers for the status quo. But embracing the status quo is exactly what’s brought down many once-grand corporations and empires.
Now, the field of robotics and AI could not be further from the status quo. In fact, it just might be the next disruptive force that changes all known power structures. Assuming I’m right, the U.S. needs to get ready, because right now it’s not in the driver’s seat for this one.
Why do I think so? I follow the resources: human and financial.
Human Capital: The Flow of Brain Power and Invention
In private conversations, leading academics report that AI and robotics graduate students, Ph.D.’s, and professors are being attracted like bees to beef by Amazon, Google, Apple, Facebook, Netflix, and other corporations with deep pockets and gigantic domains that must be maintained and protected. Not only are they hoovering up the academics, but also every good software, mechanical, and electrical engineer at cash compensation that is 2x to 10x higher than what was very recently considered industry standard. These companies are behaving like the empires they are and acquiring resources seemingly just because they can.
What’s the point of this? Are they working to innovate themselves into positions of continued dominance for the foreseeable robotic and AI future?
Nope. And there’s the Innovator’s Dilemma for today’s industrial titans. It shows up in two ways:
- People who allocate financial capital inside these companies simply can’t be bothered to even look at innovative opportunities that start out small-scale. Companies like these “don’t get out of bed” for corporate product allocations that deliver less than, say, 1M customers within the first year of operation. Why? Because those same capital allocations can be applied to existing franchises within the company for far greater economic return. And to be clear, existing very rarely equals innovative.
- But what about all that human capital these companies are acquiring? Here again we have the tension between existing products and business units and innovative ones. All that human capital is going pretty much into exactly the same places it always has — in the areas that fuel current franchises. There isn’t a widespread effort inside these companies to explore 100 different vectors in robotics and AI. Instead, the investments all go towards the existing business: enabling more eyeballs if you’re Google or more widgets sold if you’re Amazon.
Financial Capital: Who’s Investing?
If there were a huge number of academics looking to be entrepreneurs or engineers who wanted to pursue their robot dreams, then what? Their human capital is not enough on its own — where would they procure the financial capital for their dreams?
Not from the traditional sources. Venture capital in the United States long ago got hooked on the drug of instant gratification. Software companies with instantaneous global distribution (the Internet) could grow and become prosperous in a fraction of the time it takes a hardware-based company. The costs to build a software-only digital company are also a fraction of what it takes for a hardware company. This, understandably, spells r-i-s-k to the average venture capital firm. Sure, a bunch of hardware companies get funded to a few million dollars in the seed or Series A round because the capital amounts are about equivalent, at that stage, to their software-only brethren. But come the stage where hardware companies want to start selling product, the rounds become 5x or 10x larger just to grow the business at a normal rate.
Which brings us to government funding and U.S. taxpayers. A majority of the latter are less and less interested in any increase in taxes. Because the majority rules, tax flows on a per-capita basis regularly decline. As society grows, the demands on that tax base grow as well, which makes it more and more politically challenging for leaders to gain consensus on the direction and priority in which those tax dollars should flow. This all leaves little hope for generous government funding of robotics and AI innovation for the foreseeable future.
This is all understandable, but it doesn’t portend great things for innovation, at least in the U.S. What are our alternatives? Glad you asked. I’ve got two.
Go West (No, More West)
There is at least one place on the planet where the future for entrepreneurial talent and financial capital for robotics and AI looks rosy.
China has enormous numbers of well-educated college graduates and post-grads, as well as a deeply entrepreneurial spirit. When millions of Chinese drivers were stuck for 17 hours making the 3-hour trek home during Chinese New Year, there were instant pop-up vendors on the side of the road selling everything from drinks to sweets to port-a-potties.
The big winner of a recent robotics race? DJI, a Chinese startup company that crushed its U.S. and foreign competition. Wondering about more consumer-oriented robotics? Look no further than UBTech, who just closed a $400M financing round.
Perhaps more importantly, in the Chinese economic system, capital flows are not strictly governed by short-term capitalism. The real money is from the government, and the Chinese government is extremely forward looking. For example, right now “Incentives” are offered to firms to move their business in a direction that incorporates more robotics and artificial intelligence.
And for better or worse, taxpayers in China don’t get a lot of say in how their taxes are spent. It’s all centralized.
Unsurprisingly, the response from Chinese entrepreneurs to this supportive environment has been enthusiastic. Robot startups in China are moving along thousands of different vectors, from silly to useful to quite impressive. It’s a creative, disruptive explosion.
This paints a daunting picture for U.S. innovators and entrepreneurs, no doubt. So, what’s our alternative?
Cowboys, Makers, and Rebel Scum
China, as many resources as it has, is still subject to the Innovator’s Dilemma. In the battle between existing mindsets and one dangerously innovative idea, the Innovator’s Dilemma seems to indicate that group-think is never the winner. Yes, you need synergy and a pool of people and money. But what you don’t need is intellectual conformity. And on that count, if nothing else, the U.S. and other countries still have China beat.
And while we can hope that our government starts funding robotics innovation the way China does, in the meantime we do have some other homegrown resources. For one thing, promoting innovation is exactly the reason that some of us are working to get flexible personal robots into the hands of anyone who can program. Just like the personal computer revolution took down the mainframe empire, we think personal robots are the best hope to disrupt whoever the future mainframe titans of robotics will be.
Our other homegrown resources? Well, we’ve still got our cowboy enthusiasm and strong wills. Plus our maker culture of determination and creativity. And at heart, we’re rebel scum who’ve never met an empire they didn’t want to take down.
