Reflections on Innovations

The new year is a time for resolutions, but also a time for reflections. Reflecting on 2023, undoubtedly what comes to mind is innovations. First is ofcourse the popularization of Large Language Models (LLMs) that are driving Generative AI. Commercialization is also happening on a large scale in areas like drones, chatbots, robots, etc.

While all these are exciting areas, for a better understanding, we need to dive deeper. I divide innovators into 2 categories. The first category is people who build something on top of existing things, such as a new type of payment solution, a new way to detect fraud, a new way that simplifies KYC and customer onboarding. The second category is people who make improvements in existing technologies, such as improving the way software is developed, improving business resiliency, reducing data center energy consumption, improving construction methods, etc.

So the question that I wonder about and will pursue is the impact of the former (creators) vis-à-vis the impact of the latter (improvers). This classification then raises some bigger questions: Which kind of innovators make a greater impact on society? Should we deliberately encourage one kind of innovation over another, in terms of financing or education or other ways, or should we let nature take it course?

Another point to ponder over is which customer segment is the beneficiary of the innovation – those who are underserved or those who are overserved? The latter category is usually wealthy and it can be extremely profitable to create new innovations to serve them. But the former are much more in need of innovations to improve their lives.

My final question is directed at regulators – should they have a higher level of comfort with one kind of innovation over the other, or should they be agnostic to the type of innovation. Regulators will probably look at it from the risk perspective, and give preference to the type of innovation which carries lower risk. They might also prefer those innovations that have fewer negative side effects and 2nd or 3rd order effects.

The final thought is that innovation, which was once a rare occurrence, is now becoming much more frequent. Even as it improves things, it disrupts others and it creates secondary impacts. Some of these impacts may be undesirable, and hence we as a society need to sharpen our focus on responsible innovations. ESG should apply to innovation earlier rather than later.

I wish all our readers lots of happy innovations in the new year. May each of you reach new heights of innovation in 2024.