Innovation is a Moral Good
November 20, 2011 – 9:54 amPondering the New Zealand fishing industry, I had an insight today. Forgive me if it's old news to you. You have three options to make more money: Lower costs. Sell more of the same stuff. Make new types of stuff to sell. In quota-limited systems such as fishing, you can't catch more fish because you don't have the quota to do so. So option 2 is out. All you can do to make more money is lower costs or find something new to sell. These are FUNDAMENTALLY DIFFERENT propositions. If you lower costs, you don't increase the overall size of the market. If there's $5B in sales, you can make more of that $5B by lowering your costs. This isn't entirely true: elasticity of demand might increase revenue because lowering costs means you can lower the price, so more people may be able to afford it, and perhaps this new number * new ...