The economic stimulus has been a hot topic in the news in recent months. Banks and investment firms are getting bailed out. Auto makers are getting bailed out. Even the adult entertainment industry is asking for money. But there’s a big problem with handing out money to try to help the economy – It Kills Innovation!
Here’s my take on why handing out stimulus money hurts innovation:
- Companies ask for money rather than innovate – This is a bit of social Darwinism here. Companies that can’t hack it should fail. A company has to keep growing or it gets eaten up by competitors. Look at Apple for instance – Imagine they only stuck to computers? Without the iPod, iTunes, or the iPhone the company would be severely hurting. But they moved beyond just making computers and now their computers are gaining a stronger market hold. They innovated! When a company gets a hand out it makes them lazy.
- People follow the lead of companies – When companies get handouts individuals expect the same. I’ve heard it many times already that the government should give people money because the economy is bad. But that doesn’t really help. Just like a company people have to grow and innovate. They need to create new income streams, become better at their jobs, and increase their knowledge. When they don’t others come up and pass them by. Or new technology comes along to make their jobs obsolete. Or they get their jobs outsourced.
- It shifts blame – When a company sees that money is being handed out they have the temptation to blame the economy for their troubles in order to get a handout. This shifts the blame to the “economy” rather than their own business model. When blame is shifted a company is basically saying outside forces are causing their issues. Instead a company needs to look at what they can do to improve their process and products to grow stronger and avoid economic problems.
- Some companies would be bad anyway – If a company isn’t already looking to be ahead of the curve and succeeding in some way then what would throwing more money at them accomplish? For example: The auto makers have been in trouble for some time. Rather than find a way to be ahead of the curve they have continued their old models with not much success. When you think of a “green” car what do you think of? Hummer? No, you think of the Toyota Prius. Toyota continues to innovate and re-define themselves and that’s why for the first time they are the largest auto maker in the world, taking over GM. Throwing money at a bad company doesn’t help it; it just extends it’s expiration date and wastes money.
Yes, the economy is bad. Yes, it hurts everyone. But the economy is supposed to move in cycles of growth and contraction. This is natural. It’s like nature’s way of getting rid of the dead weight so hungrier companies have a shot. But when we start handing money out it kills innovation and in turn ruins the whole idea of capitalism.
I hope Obama’s new plan will not keep the fat, fat. Hopefully it’s used to encourage innovation. Time will tell.