MIB: How Do Ideas Multiply?

The dotcom bust presented a conundrum. Innovation and creativity boom drove the global expansion, but there was no good ways to precisely measure innovation’s impact on productivity and economic activity.

That was the challenge for Joseph H. Davis, Ph.D. He is Vanguard Group’s global chief economist, and head of Vanguard Investment Strategy Group. Davis describes an “Ideas Multiplier” as a better way to think about technology and global trade, much better than GDP or Trade Balances.

Davis and his team traced the development of two million ideas throughout history (using books, research papers, etc.). The ratio of good to bad ideas in 1980 was 40 to 1; at other times the rate of influential ideas peaked at 200 to 1.  New ideas ebb and flow from different parts of the world, ebbing and flowing in long waves. The rates of idea creation accelerates and decelerates through time and place. Over the past decade, this leading economic indicator — its ahead of changes in productivity gains by 4-5 years — is now running at 400 to 1. Four fields today have a higher idea multiplier than computers did in the 1990s. They are Materials Sciences, Oncology, Agriculture and Plant Sciences, Genetics/Genomics

His favorite books are here; a transcript of our conversation is posted here.

You can stream/download the full conversation, including the podcast extras on iTunesBloombergOvercast, and Stitcher. Our earlier podcasts can all be found at iTunesStitcherOvercast, and Bloomberg.

Next week, we speak with Neil Dwane, portfolio manager, and the Global Strategist with Allianz Global Investors, which manages about $591 billion dollars.



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