We mustn’t forget the importance of risk taking and trial and error

Tim Harford spoke at Policy Exchange yesterday about the importance of innovation to the economy, reflecting on his excellent new book Adapt – Why Success Always Starts With Failure.

It was a fascinating and hugely entertaining event, which got many in the audience thinking about what Harford said means for both the pursuit of growth and for public policy overall.

One of Harford’s big messages is that trial and error, risk and accepting that the potential for failure is a key part of risk is a central means of innovation.  Innovation is impossible without risk taking, risk taking cannot be imposed from the top and risk taking is not risk taking if there is no possibility of failure.

And we should take heed of that message.  Trial and error should never be undervalued in both private business and the development of public policy.  However, as Harford pointed out, if we are to embrace trial; and error in policy making, we also have to be better at measuring outcomes and measuring  whether or not something is working.  To give one example, local pilots are all too regularly held with too little information being collected about their success.

Another message was about the effectiveness of ‘prizes’ in bringing about innovation and change.  Harford suggested that, in many cases, Government is better off incentivising the private sector and innovators than in trying to “pick winners”.  Prizes operate as a far more powerful incentive for innovators than traditional research grants.  Harford pointed to several examples, such as the Gates Foundation prize,  as examples of where prizes have already made a difference.

There is little doubt that prizes are going to play an increasingly important role in the years ahead – particularly as Governments look to solve seemingly intractable problems.

Diversity and risk taking are going to be crucial as the UK looks to encourage innovation and growth over the next few decades.  Companies that are prepared to take risks tend to be the most successful in today’s economy.  The companies and organisations that rest on their laurels lack the energy to take risks and encourage trial and error are those that are likely to stagnate.

Both the public and private sectors have much to learn from Harford’s new book.

 

 

 

 

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