Technology Isn't the Only Source Of Innovation

Tyler Durden's picture

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

The solution is to recognize the critical role of social innovation enabled by networked human and social capital.

To my general astonishment, my new book Get a Job, Build a Real Career and Defy a Bewildering Economy has remained in the top 10 of the Kindle Store category "Job Hunting" since its release four weeks ago. Some observers attribute this to the book's platitude-free action plan; maybe people are looking for a career guide that explains the economy we must work with if we are to prosper in the years ahead.

This week I've addressed the structural reasons for the decline of the middle class. As with all complex systems, there is no one cause--instead there is an interconnected web of causes:

The Decline of Small Business and the Middle Class
The Changing Nature of Middle Class Work
How the Middle Class Lifestyle Became Unaffordable
The Destabilizing Truth: Only the Wealthy Can Afford a Middle Class Lifestyle

So what is the solution to this decline? We face a double-bind dilemma: we are constantly reassured that technological innovation can provide the solution to all problems--yet the problem here is that technological innovation is destroying the need for costly human labor. Technological innovation alone can't solve the problem because it is a key cause of the problem.

As I have noted many times, the solution is not to limit technology--that only leads to impoverishment of the entire economy.

The solution is to recognize the critical role of social innovation enabled by networked human and social capital.

I have stressed that the purpose of work is to create value and solve problems. To understand what this means in the real world, let's look at two small-scale examples of how value is created in the emerging economy with social innovation.

Studies have found that human creativity is largely the result of sharing ideas and transferring innovations in one field to other fields. Innovation may arise from a single person, but its application requires human and social capital.

These local-economy examples illustrate how human and social capital works in conjunction with infrastructure, community and financial capital.

Example 1: Farming as currently practiced is overwhelmingly industrial, and few would see any application of knowledge to the sector as being useful except to further the mechanization/automation of agribusiness. Yet highly educated people are profitably truck farming by applying their knowledge of marketing, food preparation and the restaurant business.

For example, the trend-setting restaurant Chez Panisse in Berkeley, Calif., has a supply network of small farms, which in some cases are run by former employees of the restaurant. These small farmers are paid a good price for supplying very fresh organic produce. What is delivered daily sets the restaurant’s menu for that day's lunch and dinner.

The key value creation in this arrangement is trust (social capital), attention to quality, and the ability to fashion menus around a variety of seasonal produce and meats (human capital). The labor of raising the produce is essential but it alone doesn't create the value.

Example 2: Street-Level Cycles in Berkeley, Calif., is an organization that partners long-abandoned city property with private enterprise to offer classes in bicycle repair and free use of the shop’s tools to do-it-yourselfers who want to repair their own bikes. It also provides bike repair services and sells used bicycles. The income generated by the repair service and sales of used bikes supports a small staff and enables the free community use of the shop’s tools.

The amount of financial capital needed to start this enterprise was modest. The city-owned building was unoccupied for years. In exchange for use of the property, the city gets a self-funding, free community educational resource and service.

The enterprise serves a wide spectrum of the community: students, do-it-yourselfers, those needing bike repairs or an inexpensive used bicycle. In offering the free classes to students, the enterprise has no competitors. In selling repair services and used bikes, it competes with other local bike shops. If someone wants to learn how to repair bicycles, this organization offers a nexus of tools and opportunities to learn and practice.

This low-cost synergy of local government, private enterprise, education, community service and social and human capital did not require any technological innovation-- it required social innovation. It illustrates that the profit motive--often held up as the only motivator within capitalism--is not the only motivation for either innovation or enterprise.

These small-scale examples illustrate that innovation often takes what already exists in terms of financial capital and infrastructure and combines these ideas and resources into new methods of value creation. They also show that the key role of human and social capital in creating value via social innovation does not necessarily require more financial capital or infrastructure--and indeed may require less. This can be summarized as doing more with less.

Value creation and problem-solving arise from many sources, not just the technological innovations that receive media coverage. If we combine the many sources of value creation unleashed by digital technologies, we realize that ours is one of the great transformative eras in human history.

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RaceToTheBottom's picture

Congrates on your son.  1 offer is approximately 100% better than none.  Which is what the person with the basket weaving degree has.  That was my only point.


If I had the choice, I would have been born filthy rich.

Seer's picture

"an engineering degree still pays more than a basketweaving degree and will always have less unemployment."

Let me guess, you've got an engineering degree?

Long-term I wouldn't bet on that engineering degree.  Most of what engineers are employed doing is borderline menial shit: yeah, "I engineer cardboard boxes!" and if there aren't products to go in them that people can afford...  As "economies of scale" start backpedaling there's going to be a shitload of engineers looking around to see whether basketweaving might not hold some promise...

RaceToTheBottom's picture

Yes, I have an Engineering degree, actually two of them.  BS and MS.  The power of those degrees is not what facts I learned, those were mostly gone after 10 years.

Engineering teaches you applied scientific thought: Problem Analysis Solution thinking.  That plus the ability to go from the grass level to the 50,000 ft level, hopefully makes me useful and employable.


Having said that I went through a stint when the consulting industry through that it could survive using only Indians at 5$/day where I was unemployed or doing my own thing.  Those 2 years were very hard...

Also I live in Seattle where when every 10 years or so Boeing lays off a bunch of engineers and scientists and they hang out pumping gas till Boeing asks them to come back (at a discount).  Talk about a license to rape and pillage...

ebworthen's picture

Let's start a social network called "Why Toil Send Us Money" or WTSUM.

We don't work, we apply for S.S. disability and other entitlements, and demand that the FED send us $10,00 montlhly.

Why not?  They give banks/insurers/corporations free money - and we'd be doing as much work as government bureaucrats.

It is time for a social network that uses peaceful civil disobedience to stop the madness.


Pure Evil's picture

I'm all in.

But, we need to get an F in their somehow

Like - Why Fucking Toil Send Us Fucking Money......

and let the imported foreigners do all the work, at least until the robots come onboard, den fuk dem fereigners.

ebworthen's picture

"Why Toil, Fucking Send Us Money" or "What the Fuck, Send Us Money", both would be "WTFSUM".  

Good suggestion, the network is started.

Pure Evil's picture

Ok, now we need to develop a two party system, vote ourselves a president, and create a ponzi scheme to skim membership fees and dues off the unsuspecting WTFSUM's that join our coalition.

Of course, all those that join early will enjoy the benefits of being on top while continuing to screw the rest our fellow coalition members.

I mean it is free money after all, might as well get richer taking advantage of a few of the rubes.

Seer's picture

It's a WTF world, so...

WTFSUM - What The Fuck, Send Us Money


Steve in Greensboro's picture

More delusional gibberish from Chuck-You.

The ongoing decline of the America is due 100% to the ongoing, metastatic growth of the U.S. Federal government.

ebworthen's picture

And 100% to the ongoing, metastic growth of the U.S. Crony Corporatocracy.

This is a two-headed hydra Steve.

Seer's picture

Fine, I get it that the govt ain't exactly making things better (slight understatement of course), but let's consider that this is a global shit-storm that we're facing.

The entire MODEL/SYSTEM is faulty.  The cause is not "govts" or even "corporations," let alone "poor folks" (or "rich folks").  The disease is based in the need for perpetual growth, and the govt and Big Corporations are doing no more than to keep pushing this meme as it is the only thing they are all geared toward.  Sure, they could pare down a bit (again, this is a slight understatement), but this will NOT fix the core problem.

TuPhat's picture

Charles is quite confused as usual.  These comments are more informative and accurate than the article.

Goldilocks's picture


brown_hornet's picture

I wonder how they keep the tools from walking away from the "community" shop?

Seer's picture

I didn't bother to read the article, so what I say should not be construed as being in defense of what may have or may not have been written by Smith...

I volunteered at a not-for-profit, community bike shop for several years (I was a board member, and I also wrenched).  While I'd encountered some theft (money- know who did it; improved security and that resolved that) I didn't really see it as being very rampant at all; mostly tools would just break and get used up.  Little different than what I've seen in the for-profit community.

Like anything else, there tends to be a need for folks who are, for a lack of a better word, "gatekeepers."

smoothie's picture

So your bicycle store, get this, Glasgow Uni, at the start of term all the new freashers turn up with flashy expensive bikes, mum and dad bought them for their 17 year old off to uni for the "ride" of their life.

OK so they have a little chain and they think Glasgow uni is a nice little place in the west end, it is so lovely there, ah...

See that little chain, well the junkies spotted that, now they are banging about undercover as students during the freashers party month, you know when the kids get to spend all the big loan they got on campus booze and cocaine, it OK because they have a bike you see, all good.

So the junkies have bolt cutters, and they are running all over campus cutting the chains off the bikes and breaking into flats for laptops.

Guess what that shimey new bike just got knocked kiddies. Where did it ultimately end up?

In the bike shop, where it is stripped, resprayed, and everything is sold, the frame and wheels is all that is left, but if they put on a single gear and cheap brakes they can sell it as a custom bike, you know cheap to the same kiddies they knocked it from, its a custom made city bike now with a hardcore lock this time from tesco! You see with only one gear the chain won't come off in traffic! We sell a lot of these, its so cheap too kiddies, we know you spent all your money in the party, we are here to help!

Since it has no !markings because the kiddies didn't think that kind of thing happens,and it has no original parts. Who would know it was the same bike!

That sum up your bike model up there!

Wait What's picture

scary because it's true. not just in Glasgow, in America, too. there's a whole black market for bikes and parts that lives off brand-new uni kids' bikes.

Seer's picture

Have you all lived sheltered lives?

I think that I was 15 or so when I discovered some neighborhood folks running a chop shop for cars.  Many of those doing it were just slightly older than I.  It was, as much as I could tell, however, about getting parts and money to build up their own cars.  Insurance companies pay out big time for auto theft; just consider how much vehicles are going for nowadays, and parts- wow!

Getting back to bike theft...  I recall getting some kid a bike from the bike shop along with a lock.  Had the fucking thing stolen within a day or so, from school I believe.

Seer's picture

Um... well, that's your anecdotal, and I'm sure that it applies in SOME instances/places, but, in defense of OTHER places, I have experience with a lot of CRAP bicycles, with a community bike shop (not-for-profit) that would NOT touch anything suspicious.  Occassionally we might get what were once thefts, but they came from the local police deparment and they could only be turned around and given away (others we could sell here and there to bring in enough revenue to keep the doors open and to buy parts to keep our programs going), though if memory serves me it wasn't that often.

If someone is registered as a 501(c)(3), like the place I volunteered for was, then they could face a loss of that status if they were caught trafficing in stolen goods, not to mention being completely shutdown by the local authorities.

Most bikes of value have serial numbers.  Ground-off serial numnbers are kind of a red flag...

smoothie's picture

No I get you, not everyone is playing this game, its an instance in microcosm, in the town where I originally come from there is an excellent shop like the one you describe, this is just an on the ground observation that o spotted going on, another would be the shifts that the beggers work outside certain places and how they rotate round the town, umdoubtable a network criminal entity, the scenario of the bikes actually another of its operations. Its just interesting when you start to look and watch what is happening around you, when your face isn't planted in an apple!

Seer's picture

"Its just interesting when you start to look and watch what is happening around you, when your face isn't planted in an apple!"

Awareness of one's enviornment is always good advice.

MedicalQuack's picture

First of all we know inequality is in fact "modeled" and you can watch a former Quant that worked for Larry Summers (who now says he's nuts in essence) talk in the video how modeling works...she's writing a book too called Weapons of Math Destruction..I sure like the the title..

We do have a "little" and I say little as this is still kind of new with the government hiring quants to audit bank models...Government Is Finally Hiring Some Data Sleuth Quants - Office of Comptroller of the Currency To Work In Compliance With Bank Models..

The OCC changed effort should be lest they are paying attention to what in the heck a models is and does.

This is somewhat related and you may want to look at it and it has to do with health insurance mergers and acquisitions.  When one group is merging with another, and this is in the OC in California, the report shows doctors and patients listed as mere "inventory"..pretty disgusting in my opinion.   packed a ton of related links in there too as the battle between hospitals and insurers heats up a bit.  So there's your great source of innovation...improving inventory..yuk!  This is what's wrong all over and I call it "The Grays" to where ethics have sunk to the lowest level I have ever seen and sometimes non ethical technologies get mistaken for innovation..

smoothie's picture

I can draw some parallels and interesting factoids relater to those points.

In the UK we have digitised patient records, supposedly to sell the "big" data to insurers etc, there are some conspiracy theories about that.

And I'm with you on the click logging, I try to mask things myself now, duckduck, 

the NHS is the biggest drugs purchaser by far, and with this merger with astrzenica and phiser, astra has a lung cancer advanced treatment apparently, ready (almost) along with a whole host of cancer drugs about to be published.

Astra and phiser is going to go through from what I can tell, right before the NHS gets a little more privatised. Because it already is in some places, when that happens I figure treatment costs and drugs prices will increase. Plus they will be as you note, pulling databases together.

Another thing I note was your security breach point, and its somewhat unrelated, however, so far encryption falls are being kept secret, but the hack s know most of them, the biggest risk I see in bitcoin, is actually Just that, what if somome BIG has got a vulnerability in that shit that no one can see yet (heartbleed was open source on its fringes BTW), then some bloke comes along one day with a flash drive and a ticket to HK and fires it out to the world, worst yet, consider a war where someone might be saving it for a Rainey day, to fuck your system over before a major attack! I note some BIG withdrawals from that shit. I'm sure you guys can see that scenario tho!

It was the snow that unblinded me tho, we have a new rector you know.

Seer's picture

Not to kill the sense of the wrongness of it all, but this is all but picking the bones from the dead and dying.

If we all had enough "meat" we wouldn't be resorting to these things.

Clearly this is all borderline criminal, but behind this I see it more as desperation, and this prompts me to dig deeper, not because I am wanting to know what ails them, but to understand why they are acting.  It's TOO easy to just stamp them as sick deviants.  I think that it starts when things are tight and there is the need for "creative 'fresh' solutions," you know, the kind that mange to just fit inside the existing laws.  The folks who operate here, like Summers, were, like the Trojan Horse, allowed to pass the gates.  If there had been no war/struggles then the likes of the Horse and Summers probably wouldn't see gates swinging open.  Of course, I could apply many other names to the long-list of gate-passers...

We have based ourselves on this notion that we can have infinite growth.  We bought into this notion.  It's the culture that we've engrained into ourselves, our very being.  We cannot, therefore, accept any discussion that challenges this.  As a result we accept more and more "snake oil" salesmen to draw our attention, either in "hope" or in attack.  It's a distraction from the real underlying forces.

The System is losing its margins.  In order to keep things running more and more bone picking.  Ultimately, however, it all will stop: good news for those who detest the vultures; bad news for those who feel compassion.

smoothie's picture

I like your take on what I just said, It has made me think morally about what I just said, I'm not going to go ahead with that, buy.

smoothie's picture

Its an example of one place.! Where the money moves down.! Oh but only if it wasn't your bike that was knicked.! 

q99x2's picture

Everyone knows Loyd Blankfein is the cause. He admitted it when he said he was doing God's work.

Seer's picture

Uh oh... that's got some "higher up" ramifications!

Goldilocks's picture

Madonna - Material Girl [Official Music Video] (4:03)

Cloud9.5's picture


The Greeks invented the first steam engine.  We were not ready for it so it took a couple of thousand years for the idea the catch on in the west.  Technology while amazing is not the panacea many think.   My cell phone is a useless paper weight when the battery dies.  The electricity that charges that battery is generated in a nuclear power plant that depends on a myriad of systems and resources just to keep it running.  A cyber-attack, earth quake, tsunami,  or EMP pulse and the power goes out and I am stuck with a dead phone and radioactive tomatoes. 


The fact that all this stuff still works is to no small extent dependent on luck.  Somebody could trip over the kill switch on any given afternoon.


Energy is bleeding out of the system.  Oil fields are declining at a rate of four to six percent.  If you doubt it, research the production rates of the Mexican oil fields or the North Sea.  All mature fields exhibit the same curve of production.  The Cassandras do the math and the Cornucopians trust in the magic of technology.  Hope as much as you want but gas is now almost four dollars a gallon.


Cities and states, except for those that are oil producing, are watching their revenues decline.   Small business is shuttering the windows and property values are declining in all but the bubble markets.  The only growth industry is government and government dependency.  The only way the federal government can keep the doors open is by hiring a bank to counterfeit the currency which it then borrows to offset revenue shortfalls.


For the last three decades we have been in resource wars.  We invade every country that might have a teaspoon of oil or natural gas.  We were going to invade Syria to save the children a Democratic mime just like we invaded Iraq over weapons of mass destruction, a Republican mime.  Now it seems we are concerned over some kidnapped girls in Africa.  My bet is that there is oil under their little feet.



Here is the deal:  the whole system, economic and political is based on exponential growth.  The only problem, we are in a contraction.   This contraction is not based on the business cycle.  It is based on resource decline.  Nothing can reverse that fact.  Our first leg down will take us to the 19th century as far as population and economic activity is concerned.  Once the cascade begins, it may even drop us back into the 18th century.


If you can’t feel the floor falling out from under you, you have not been paying attention.



Seer's picture


I never forget the story of the Easter Islanders.  Right up to the bitter end they were slaving away at continuing the "same-ol-same-ol" of chiseling up and dragging down statues.  I believe that it's stated/documented that they started waring against each other (groups).

We're burning energy to get energy so that we can...  We're a bit more sophisticated, but we nonetheless suffer from the same blindness.  Evolution of the human ego?

smoothie's picture

I know, I saw that they must have "known" it was the last tree.!!!!

kurt's picture

You may recall I have said the new economy is growing in the festering carcass of the old.

Debugas's picture

technological development is not a problem but not a soluution either because

the essence of the problem is social in its roots - fair distribution of the added value


technology simply expands the total carrying capacity of our planet - how large the total population of Earth can be sustained

regulating the actual amount of people living on our planet is more a social and political issue rather than technological

esum's picture

example 1 example 2  .... are you kidding