Innovation Holds Risks, Economist Cautions

TAIPEI (06/13/2000) - Industry executives, academic and political leaders need to embrace the risky business of innovation, according to Massachusetts Institute of Technology professor Lester Thurow. Thurow was speaking on Monday at the World Congress on Information Technology here.

The prominent author and professor of economics and management said recent developments in computing, telecommunications, robotics, biotechnology and other fields signal not just an information revolution but a new industrial revolution that presents its own opportunities and risks for companies and investors.

"At the beginning of any new industry, we have a lottery" for investors, Thurow said, comparing the many U.S. automakers of the 1930s to the Internet startups competing in today's market. Nine out of 10 venture capital-funded start-ups go out of business, he said.

Nevertheless, industry can't afford to pass up the cost savings represented by new technology, he said. Automakers can slice off only a small part of a car's cost through more efficient manufacturing but could cut out much as US$3,500 of cost by making build-to-order cars purchased over the Internet, Thurow said.

"They have to force their customers to go electronic," Thurow said.

To compete in a global economy, governments and large traditional corporations have to learn how to foster innovation and deal with the disruptions it may bring, such as layoffs from obsolete industries, Thurow said.

"If you're not willing to destroy, you can't create," he said.