Autocracy & Innovation

Autocracy poses a threat to innovation. When decision-making is centralized, the degrees of freedom for creative outliers to introduce new ideas are constrained. In the battle between autocracy and democracy for global dominance, the fate of innovation hangs in the balance.

China’s economic growth, fueled mainly by U.S. investments, illustrates the unintended consequences of centralized decision-making. Despite the initial perception of exploiting China for economic gains, the U.S. inadvertently facilitated the transfer of innovation in manufacturing. The oversight became apparent as China, once seen as a mere imitator, capitalized on the innovation embedded in deploying ideas.

The Biden administration’s recognition of this issue, prompted by concerns over China’s actions regarding Taiwan, marks a crucial shift. The fear of China annexing Taiwan has forced a reevaluation of the dependency on Chinese manufacturing, particularly in the realm of chip design and manufacturing IP. The acknowledgment of the innovation value in the manufacturing process, often underestimated, is vital.

Maintaining a lead in technology requires a focus on building advanced manufacturing facilities domestically. If Taiwan Semiconductor and American companies invest in cutting-edge fab facilities in the U.S., it can safeguard the technological advantage. The risk lies in underestimating the innovation embedded in the manufacturing process, potentially allowing China to catch up.

Under an increasingly centralized power structure, innovation faces a slowdown. Creative individuals need ample degrees of freedom to thrive. While an autocratic shift in the U.S. might impede innovation, the impact would likely be less abrupt than in China.

From an innovation-centric perspective, nations must prioritize the conditions that foster creativity. History shows that eras lacking such conditions led to stagnation. The world’s path to a sustainable positive equilibrium hinges on innovation. Disrupting the conditions that enable innovation could jeopardize the future of humanity.

Redirecting focus from funding Chinese manufacturing to bolstering innovation domestically is crucial. Greedy executives must prioritize staying ahead in the U.S., recognizing that innovation is the driving force behind the global economy. Breaking the addiction to cheap Chinese goods or leveraging AI for next-generation U.S. manufacturing are essential steps in maintaining leadership in innovation. The West’s current advantage can be preserved with strategic decisions that prioritize technological innovation over short-term gains.

In order to accomplish this, an increasing portion of creative outliers, those in our society who have resisted socializing forces driving conformity, need to be permitted to evolve into innovators whose insights, ideas, inventions, and outputs become adopted. This does not occur by autocratically centralizing decision-making. It occurs by providing significant degrees of freedom. Overspecifying what people do does not encourage creativity or innovation but instead shoots for short-term profitability instead of long-term value contribution upon which a prosperous economy is built.