Weekend Journal — The Trickle Down Techonomy

Weekend Journal — The Trickle Down Techonomy

You know the term “trickle down economy“, right? It’s a term attributed to supply side economics, both positively and negatively. Basically, it’s the idea that if you have top performers and give them beneficial tax treatment, the effects will ripple throughout the economy. I don’t care about the politics behind it, I care about the idea (and will, in fact, delete any and all political comments in the comments section). That the top performers (or in the case of the economy, earners) should in theory pass any benefit they receive to those less fortunate is what I’m focusing on. However, I have seen a similar effect, though abstracted, in the technology industry. Instead of earnings, imagine knowledge to be the currency. In place of “taxes”, the top tier workers will pay in “knowledge” to the world, which then should filter down to the masses. Everyone still with me? My basic point is that those with the most knowledge eventually pass it down to the rest of the technology world. If you have John Q. Software who has brilliant ideas and they’re executed, eventually they will start to show up everywhere. Why? Because they’re good ideas! Stolen, repackaged, reused, licensed, borrowed, however it happens, the idea is good enough to be replicated. Many times over. And the idea (or knowledge, as it exists in John’s head) is what actually does the trickling. OK, so it almost seems like a truism. Technology changes and continually gets better. But do we ever ask how or why this happens? Who is actually pushing once innovative techniques out into a wider marketplace? Why is it that the iPhone pushed out a product and 6 months later all the other phones look similar (or myriad other examples)? How do these ideas trickle down from the top producers to the smaller manufacturers and the off-brand generic-looking manufacturers (offered at a low, low price at your local big box store)? And what kind of implications does this have for the economy and the human race over the long run?

    • Patents — Patents are one of the best and the worst things ever conceived, if you ask me (and another political hot button topic I’d rather not discuss). On the one hand, you protect those coming up with new ideas so that others cannot replicate them, and yet it must be done in broad daylight, where all your competitors can see what and how you did something. Instead, it often turns into a hot bed of product ideas for low cost manufacturers, who want to match your high margin product in the marketplace and undercut the heck out of you. Or maybe not even do that, maybe your competition just wants to offer something similar and see what your product actually does. Patents allow your competitors to see just that! But it also allows everyone to see your brilliant idea (though not necessarily use it in the same incarnation). Recently on my podcast I had a chance to talk with Ben Krasnow, a prolific inventor and tinkerer who tries out ideas he found on Google Patents. Why? Because that’s how he learns about new technology! And don’t think he’s the only one.
    • Customer Expectations — While this isn’t necessarily something that aids in spreading ideas directly, it is the economic driver that then pushes companies to replicate behavior, specifications or functionality. If Company A makes a power supply that is 95% efficient, you can bet Company B, C and D will all be working to match or beat that specification in their next product (sometimes referred to as “also-rans“). Will they do it the exact same way? I’d love to say it never does, but silliness like industrial esponage does happen. Other times they just tear down a product and replicate everything internally and externally (see also: China). Most of the time though, the company will try to replicate the behavior and not necessarily copy the circuit or internals (also, see the patent section above). The end result is that a technology that was once novel and in only one product is now in 4, possibly done 4 different ways. Those 4 different ways could then splinter into many other iterations and could end up being a boon for their industry. Regardless, it was that first breakthrough “trickling down” (sorta) that pushed larger scale changes in the marketplace. Ask yourself this: When you pick up a large screen phone these days, do you have any doubt you’ll be able to use a “swiping” action on the screen? That didn’t exist 7 years ago.
    • Integrating System Chips — An interesting development in the field of electrical engineering is the consolidation over time and where it’s taken most of the talent. I personally work on board-level electronics. But I know in my heart of hearts, regardless of how many other interesting and brilliant people I meet in the board-level world, that the true talent is at the chip manufacturers. However, 40 or 50 years ago, the talent was in board level electronics…because the chips couldn’t perform well enough. Now, with the most talented designers working at large chip manufacturers, the dreams they have not only get pushed to the marketplace to be replicated by other chip vendors; the parts they make can be bought at a miniscule fraction of the development cost of that chip and pushed into literally millions of end user products. Take the Qualcomm Snapdragon Chip, popping up in tablets and phones all over the place (watch any network for CES coverage this week). This one chip has 1+ GHz ARM processor, onboard GPS and wireless radio. Can you imagine that 5, 10 or 15 years ago? It wouldn’t be possible. And now it’s readily available to virtually the entire marketplace because one company’s integration into a chip allows many devices to have this functionality. I think similarly about power supplies (a darling of my everyday work). Whereas switchmode power supplies (SMPS) were once cutting edge, bulky and expensive, they were top of the line and allowed for previously unseen efficiencies. Now? You can roll a 6 MHz, triple output switcher into any kind of device with minimal supporting circuitry because it all got integrated onto a single chip (or package if you want to be technical about certain products from chipmakers). These previously primo features are repackaged or reinvented on silicon and “trickle down” to smaller devices that would not be capable of integrating each part of that system chip individually.
    • Research Labs — This is an often cited example when talking about the trickle down effect in the technology world. Where does an idea really start? How does a never before seen technology first get sparked? While I’m sure many of our readers would not be surprised, I’m sure the general population would be surprised the biggest technology companies these days are not funding the true innovations at a base level. GPS is a good example of a technology that is mainstream, expected and just about everywhere these days that was developed in the 70s to help with military navigation systems. But you cold take it another step backwards and say that the relativity research of Einstein was partially responsible for the common technology that now allows me to show up places without getting lost.  And since we’re already talking about space based research and satellite based technology, we would be remiss if we didn’t mention the “trickle down” contributions of large NASA projects (and no, not just that delicious astronaut ice cream):

      • Private Sector Sniping — The above point demonstrates how government money often funds long-timeline innovations. But these ideas and experts aren’t always content with sitting around waiting for the ideas to get onto the space shuttle or placed deep underwater. Instead, they sometimes get lured away by money, fame and fortune (well, at least a little of the first one) and go design products for commercial use. If it’s not against patents and is kept legal, there’s really nothing the government labs can do to keep their top researchers (or even the top researchers’ underlings who picked up a trick or two) from leaving and working in the private sector. This means ideas will naturally disseminate into the features of commercial products. Which then can be copied or replicated en masse. The “trickle down” effect in action, once again.
      • The Open Source Movement — What’s the second best way of pulling people away from a job, aside from money? Absolutely no money. Lots of feelings though: fulfillment, accomplishment, goodwill towards humanity, etc. Daniel Pink talks about this in a talk explaining his book “Drive”, shown below animated by RSA Animate. This translates to hundreds or thousands of people participating in their free time, with no compensation on a project. You can watch the video for their motivations, but the end result is that you don’t just have amateurs working on these open source projects; you have true experts pouring in the knowledge they have gained over their careers because they want to participate. The end result? A completely free solution is now available to you because of the “trickle down” effect. In fact, I believe this to be the bottom. How much lower can it go? Perhaps when the Open Source Hardware (OSHW) movement figures out a way to actually give away the hardware for free, that will be the bottom. But the economics of giving someone a pile of molecules (vs a pile of electrons) is a whole other story.


That wrapped up nicely, didn’t it? We started at the top where research is done and we saw the knowledge filter all the way down to a completely free solution. We should be smiling, right? Well, not so fast. Here’s the real drive behind this article. What is feeding the innovations of 50 years from now? We were graced with unbelievable science and engineering funding 70 years prior to now. Sure, WW2, The Cold War (and subsequent Space Race) and many other factors helped along the way. Are we better off than back then? Of course! We’re sitting on the shoulders of giants! But my question is, how will this affect us in the future? Like it or hate it, true research spending is down. Have you heard of Bell Labs? If you’re currently an engineer, you probably have. Ask an engineer under 30 that in 10 years, they’ll be clueless. Bell Labs are no longer a functional group. They have been diced up over the years, chasing trends here and there and generally taking the fall along with the rest of the telecom industry in the 2000s. What about NASA? Funding has been flat for years and is still far below the peak in the 60s. This is a trend that has continued over the planet, with research falling primarily to Universities. Sure, that’s good, and many of our writers here can regale you with the effects and detriments of those research dollars entering academia. But are we getting the same return? Aside from academia, much of the research is moving offshore, with “design centers” regularly popping up in Shanghai and Bangalore, where top talent can be recruited. But if that technology will ever “trickle down” or if there is true research occurring in the first place, remains to be seen. What about you? Have you seen technology trickle down from a research group either above you at work or from other sources not affiliated with your company? Are you in a design center working on future technology that may one day see the light of day as a consumer product, possibly even a free one? Do you think there is hope for research centers or will it be more of the same, cranking out product evolutions and recycling technology from 70 years ago (as opposed to 30)? Let us know in the comments!


Actually, I disagree. I don’t think the chips have all the best and brightest at all. System design is different complex in it’s own right. Actually, it takes a more mature approach to do system design (both at the chip and board level).

A big problem is that companies like HP used to spend more than 10% of revenue on R&D (in the 70’s and 80’s) and that’s down to less than 2.5 %!! They’re eating their seed corn in the name of short term revenue gain. Most of the income at high tech companies comes from products less than 3 years old.

Very interesting post. To me, it feels like an analysis of how trickle-down has occurred in the last 50 years, and we’ve been on the falling edge for some time.

Maybe as part of the rising economies and middle classes around the world, the innovation hubs will continue to move ‘off shore’ and closer to high-growth areas of educated middle-class consumers, and it will take a different form of eg. small tech companies (mobile software in Africa, network equipment in East Europe, extremely low-cost electronics in South East Asia..) that know their market exceptionally well.

If I understand this right, you’re saying that the core of technology is developed only by large projects, usually large organizations with large budgets. Small businesses may copy the work of large organization or find new applications for the technology, but the real breakthroughs, e.g. the solid-state transistor, come through large research budgets.

Is that what you’re saying?

If so, that could be true. I wonder if tricked-down innovation will be just as powerful, perhaps, but take a different form. Maybe we’ll get thousands of tiny steps forward instead of fewer large leaps. I hope you write more on this topic. I could see it turning into a book about how to succeed in the “trickle-down” economy.

On Patents and Innovation, outsourcing, etc…

One of the best articles I have read against the use of patents was done by Steve Ciarcia here: http://www.circuitcellar.com/archives/priorityinterrupt/247.html

I think that the open source movement is a direct result to the insane patent, copyright, and trademark laws. As originally written in the US, I think you had 16 years, and then another 16 if applied for. Especially at today’s speed of change, try to think of most any technology that existed 16 years ago that is still so specialized to be generating revenues for the patent holder. Patent mills and trolls are especially despised.

One case in point was the quick release magnetic (Magsafe) power connection touted by Apple. I haven’t seen this tech. on any other devices, although I think it may have a wide use. Is this because it doesn’t work, Apple’s license fees are too high, or Apple refuses to license this to keep it’s products unique. I doubt the first, and suspect the third. In a sane world the patent wouldn’t have been issued to Apple because idea already existed for fryer connections, etc… (According to Wikipedia). In any event, at least the patent should enter into the public domain after 16 years (2022?).

‘Trickle Down’ seems to be working for those of us that live in the areas being explored by natural gas exploration (fracking). The drilling companies come in, hire labor, purchase facilities and services in the area, and help the local economies. Especially when even companies like Boeing are trying to outsource most if not all of the product they design and become an ‘IP’ company, trickle down opportunities exist for those who are good at what they do.

As an offshoot of outsourcing, when talk is made of shoddy products made in far off places for brand name companies, I suggest that these companies are buying products exactly as they specify (they know precisely what they are buying), and are only looking at short term gains, as these are the only ones that they see in this climate. That their shareholders are clamoring for instant profits every quarter tells them exactly what their priorities should be.

A true visionaries like Jobs at Apple, or Brin, and Page at Google are unique indeed and provide literally thousands of trickle down opportunities.

DARPA is funding research that is being carried out at defense companies and universities. It isn’t all big name, well publicized projects but bits of the work are trickling down behind the scenes.

Regarding patents, they can be a pain in the butt, but they can also spur innovation. If you are unable to do something because of a prior patent, you are forced to come up with a different way to do it. Sometimes it can be a kludge, other times it can be much better than the original idea. Without the patent, there would have been little reason to push to come up with a better idea if the original ‘easier’ way were available.

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