Thursday, December 01, 2005

More nonsense stemming from the study of Homo Economicus. Someone finally did a study showing that one of the things that makes Silicon Valley work is indeed good people moving around and spreading knowledge with them. Well, they could have told you that themselves. But economists are perplexed:

After all, the argument that Silicon Valley's job hopping fosters innovation contradicts economists' common assumptions. "It didn't feel right to me," James B. Rebitzer, an economist at Case Western Reserve University, said in an interview.

When employees jump from company to company, they take their knowledge with them. "The innovation from one firm will tend to bleed over into other firms," Professor Rebitzer explained. For a given company, "it's hard to capture the returns on your innovation," he went on. "From an economics perspective, that should hamper innovation."

You could write a small book about how this analysis ignores economic units at two scales which are as important as the companies in question: the individuals who are moving around, and Silicon Valley itself. (And yes, there are actors --- from synergy-minded venture capitalists to techies who just like having options --- who have it perfectly well in their interest to think about the economic health of the Valley as a whole). But if you did that, you'd be missing an even more basic mistake: If people were only motivated to do creative work when it was maximizing someone's financial gain, then "starving artist" wouldn't be a cliché.


Blogger TM Lutas said...

The economists should not be perplexed. They just have to understand the sheer joy that creativity provides good engineers. The economics of pleasure goods are uncontroversial.

12:36 PM  
Anonymous Anonymous said...

"They just have to understand the sheer joy that creativity provides good engineers."

And they have to understand that a company's direction may not coincide with the direction a techie's creativity is leading her.

If that employee stays, their insights and innovations will wither on the vine. If they go, the prior employer loses little but an employee who would probably become increasingly dissatisfied. They aren't losing technology, because they had no interest in the employee's ideas which are being taken to another company.

11:48 AM  
Blogger charles said...

Valid points --- which appear to be lost on the VCs who insist that companies try to claim patent rights on all an employee's innovations, on or off the job, whether or not they have anything to do with the company's business. I've seen companies lose the services of very good techies because of this sort of thing.

11:56 AM  

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