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This piece has been originally posted on Medium.

Did you hear that idea generation is the easiest part of the innovation process? I’m sure you did. Generating ideas is easy, many people say; it is at the stage of incubating and scaling these ideas that the innovation engine begins to choke. Taken to extremes, this approach leads to the perception that novel ideas are plentiful and cheap. “Ideas are a dime a dozen.” Are they really?

A joint team of researchers from Stanford and MIT has recently challenged the dogma of “plentiful and cheap ideas.” They presented evidence that research productivity, a scientific term for a layman’s “idea,” is actually declining. According to the authors’ calculations, research productivity across the whole US economy declines at an average rate of 5.3% per year. More specifically, in semiconductors (the playground of the famous Moore’s Law), research productivity is declining at a rate of 6.8% per year; in agribusiness and pharmaceutical research, the annual decline is about 5.0%.

In other words, contrary to popular belief, ideas are not plentiful; we are experiencing a growing shortage of ideas.

If research productivity is on the decline, how then has steady economic growth been sustained? The answer is simple: by raising what economists call research effort, which in plain language means the number of researchers. Indeed, the number of researchers required to achieve the famous doubling, every two years, of the density of computer chips (Moore’s Law) is more than 18 times larger today than it was in the early 1970s.

In some areas of agricultural research, the number of scientists has risen 23-fold between 1969 and 2009. And while research productivity responsible for the drugs approved by the FDA between 1970 and 2015 has been declining at an annual rate of 3.5%, this decline was offset by a 6.0% annual growth in the number of researchers.

Now, let’s do some math. If the number of ideas is declining while the number of people generating them is growing, how can these ideas be cheap? You’re right: they can’t. The ideas are becoming more, not less, expensive.

We can at least hope that the quality of novel ideas remains high. Alas, nothing supports this intellectual refuge. Consider this: by the end of 2019, the venture capital industry had accumulated a whopping $121 billion in so-called “dry powder,” the money for which venture capitalists failed to find ideas to invest in. Plentiful and cheap innovative ideas, where are you!?

Let’s then ask this fundamental question: where do these novel ideas come from in the first place? The answer looks obvious: from R&D, where else?

Exactly, and here is the root of the problem. In the decades that followed World War II, entirely new sectors of the U.S. economy have been created: jet aircraft, modern-day pharmaceuticals, microelectronics, satellites, and digital computers. All these developments happened thanks to a heavy infusion of public money, with the federal government contributing more than 50% of R&D expenses.

Back to our days. Although the total US spending on R&D has remained steady for the past years, at 2.5% of GDP, only about 30% of the money now comes from the federal government; 70% of it is contributed by the private sector. With its focus on rapid ROI and beating competition, will the private sector spend money on fundamental — and therefore inevitably long-term and risky — R&D projects? No.

The quantity and quality of novel ideas are declining because sources of new scientific discoveries in the United States are gradually drying up. Sure, the industry can still generate incrementally innovative combinations of old ideas — which may still be plentiful and cheap — but it will fail to create breakthrough innovations.

What is to be done? First of all, we need to resume public R&D spending at the level that ensured the U.S. domination in innovation in the past. But we also need a renewed focus on idea generation. We need to identify conditions that will ensure a steady flow of innovative ideas and draw a roadmap to creating these conditions — with sources of funding clearly marked.

It is time to bring “ideas” back to innovation.