I mentioned both the term upstream and downstream in some of my previous blogs, and quite a few of my readers asked me to explain the intended meaning, importance, and differences within the context of innovation in more detail.
Use with care
The danger of simplifying thought processes into easy-to-understand analogies is that the similarities run out of depth before the refinement and iteration of the thought processes do. And thus, I warn you to use the following simplified explanation with that limitation in mind.
But if I do my job well in describing the principles below, entrepreneurs should think about and drive more meaningful innovation. Investors should quickly be able to distinguish the value of innovation proposed by entrepreneurs. The people and their governments should promptly assess the value and impact of the proposed economic change. And anyone should be able to quickly evaluate the effect of innovation along with its purveyors’ role.
So, without further ado.
The rivers of evolution
The most fundamental evolutionary first-principles come from nature, shaped to perfection by the evolution of a dynamic equilibrium over some 4.54 billion years. Sorry, not from some economics computation that can only dream of being an accurate derivative of reality. The best example I have found and reference every day is how river water runs down and shapes the rivers leading into the ocean as part of the hydrologic cycle.
For the uninitiated, and in short, the hydrologic cycle is nature’s process to absorb and guide the falling rain into rivers and underground capillaries to provide nutrition to flora and fauna and to eventually end up in the ocean, at which point the water evaporates into clouds, and under the appropriate circumstances, produces rain again.
Many other examples of nature exist that behave similarly. Like renal veins’ function in our kidneys, the capillaries in our lungs, the roots of a tree, the photosynthesis by leaves on a tree, the formation of the human genome from splitting exons and introns, etc.
The current of time
Evolution behaves like the formation of rivers in which the river current is the equivalent of the unstoppable passing of time. We grow older as time passes (never the opposite). Just like time, the flow of the hydrologic cycle (thankfully) never stops. The flow in a river branch can stop, which only means water is flowing through another branch or stream instead. Similarly, the current in the river will always flow from the highest to the lowest point.
The constant of change
With the branch structure of most rivers originating in the mountains, the direction of each stream is, for the most part, determined at the top (swayed by many parameters, such as soil, resistance, etc.) and with twists and turns will make its way down and directly affect flora and fauna down below. But the branching of the river changes very little. Just like socioeconomic value, defined as the basic needs of human beings, stays pretty much constant.
The conduit of distribution
Water that flows through the river acts as the conduit of nutrition. Not only does it contain and transport oxygen and hydrogen, but it also serves as a vehicle for vital minerals (side note: did you know we consume some 2 billion metric tons per year?) we drink and need for building things. Those minerals reinvigorate life.
Beautiful story, you say, but where does innovation come in?
Types of innovation
Well, simply put, (any kind of) innovation is the product of the minds of people who enter the river, defined by where and how they enter the stream.
Many people, driven by the guidance of their formal education, pick a river with a current that matches their comfort, walk up alongside the river up the mountain, enter the stream with a canoe, and paddle downstream, their behavior governed by the curvature of the river, and their speed more or less dictated by the rate of the current.
Meaning, they take life as prescribed to them as a given (fait accompli) and, with their existing knowledge and tools in hand, optimize their trajectory, and spend their lives on a path of least resistance paddling downstream to where, someday, they meet their peers resting comfortably in the ocean below.
Fewer people, despite rather than because being born as the proverbial sons and daughters of the down-streamers in the ocean, pair their dissatisfaction of how the world works combined with their refusal to submit, acting as the boundless motivation to swim their way up the river (like a salmon, continually challenged by the increasing resistance of downstream).
And finally, after a long swim, nurtured by minerals into well-developed skills as the preparation that meets their opportunity, they end up beyond the point at which the first downstream paddlers entered, admiring the world from a higher vantage point.
Higher altitude equals a higher magnitude
Using the above-described analogy, the higher the elevation of the people in the river with responsibility for innovation, the more impactful their proposed change will be.
Not only because the attachment to higher amounts of socioeconomic value (with fewer wild aberrations) by itself will yield significant new green-fields and greater adoption downstream, but the ability to redirect the river, change its current, or build dams upstream will inevitably affect all the economic flora and fauna below.
Minus those who understand the relativity of formal (higher) education and somewhere dissented into swimming upstream, the vast majority of downstream people who walked up the side of the river, ready to deploy their canoe, can at best reach the highest point their teacher – they looked up to – has ever gotten to.
Upstream people, guided primarily by the judgment of their growing dissatisfaction and experience, yield discoveries at new heights that have no precedent (or perish along the hard way up).
Or in Albert Einstein’s words, “Imagination is more important than knowledge.”
That was not too hard, was it? Now, take a breather and think before I deepen this corollary out a little further to represent more of the real world’s complexities. Then continue.
The laws of nature
While I have a clear favorite of people’s types, our world cannot flourish when driven by just one class. Both downstream and upstream innovations and their people are needed to make this world a better place.
The laws of nature dictate that the need for upstream innovation only becomes apparent (often as a last resort) when the evolution of downstream innovations has run its course into becoming commoditized. But upstream innovation requires a compass, a belief in, and a rethink from a different vantage point (higher up the river), an attribute coming from people who are an overwhelming minority.
Therefore, helping to prevent further commoditization is in very short supply. Many wish to change it, succumbing to the pressure and resistance from many well-socialized and well-established downstream waterfalls.
Death is innovation
The moment groundbreaking upstream innovation is deployed, many downstream innovations (genuine and fake) from that new starting point will soon take their place.
Upstream innovation lives only once, followed by an endless supply of downstream sub-optimizations (like branches of a river) that provide the complete coverage of the economic flora and fauna below. When downstream optimizations slowly die in the arms of commoditization and saturation, will it finally be surpassed by new upstream innovation deemed more worthy or the only option of last resort?
Upstream and downstream innovation are each other’s perfect parasites, and combined, they ensure a renewable evolution.
Resistance is futile
We do not accept upstream innovation easily because inventing it is costly, as swimming upstream is very hard. Combined with a real risk of failure (of acceptance) and often damaging personal consequences to the lone wolves that ignite upstream innovation.
That risk and cost appear more than the perceived cost and risk attached to downstream innovation. The damage of failure from downstream can be mitigated and gently dampened by the same socialism that ignited it.
The balance sheet of cost and opportunity caused by the prolonging of life of a plethora of downstream innovations that have run its course, at a certain point, becomes much less healthy than the balance sheet of upstream innovation and the new groundbreaking opportunities only it can unearth.
Cannibalization, and yes, death, is the necessary and inevitable outcome of the cycle that reinvigorates upstream innovation from downstream. In its path, suddenly, rules will be reset, ill-gotten or outdated power positions removed, and a new meritocracy deployed.
Resistance is futile, since the protection against cannibalization is a direct offense to the unstoppable evolution of innovation.
Conversely, we ought to put more stock into those who believe in and support cannibalization, as they prove to be the ones who value the evolution of evolution more than the enrichment of themselves.
Before I delve into examples of upstream and downstream innovation, it is important to realize that the evaluation of innovation remains a relativity theory. Meaning, the classification of innovation is relative to the current state and the purview and foresight of those interpreting it.
Notice in my description of the analogy that the entry position in the river is not absolute; the chosen river is not absolute, and the distance towards the ocean or mountaintop is not. That is because in the continuity of the hydrologic cycle, none of that matters. For seemingly approaching the top of the mountain means other mountains (some yet to be born), and their converging branches need continued scaling.
Abuse and deceit
As with any system, violence and deception are integral aspects of innovation too.
Downstream and upstream people can detect downstream innovation since they have been in the same place in the river, albeit moving in the opposite direction. Upstream innovation only warms the heart of upstream people with a more critical view and a burning desire to envision and invent our world anew.
But again, both types of innovation are a critical part of the evolution of evolution. And one cannot exist without the other. Without downstream innovation, there would be no need for upstream.
But severe damage occurs when false positivity, as the symptom of downstream people wanting to be perceived as upstream (there is no payoff for the reverse to happen), carries downstream on for too long. It is the choice method to those under cover of relativity, convince those resting below far enough away from the impending imperfections downstream, and sell their snake oil upstream. Their ploy often works. As to those below, downstream innovation appears as upstream.
False positivity is extremely dangerous as it prolongs the life of downstream innovation, increasing the societal cost and burden to those who buy-in, and preventing the evolution of innovation from igniting upstream. False positivity is the antagonist of evolution.
I hope that helped. Time to lighten the mood. Ready for some examples of upstream and downstream innovation?
Innovation relates to many more aspects than just technology. Economic systems, financial systems, behavioral systems, or anything else that attempts to capture evolution will need to be mapped to evolution as described above.
The challenge is not in the theory’s merit (since the theory itself is a derivative to nature), but in the theory’s execution, that yields more effective results in driving a renewable economy of prosperity and happiness for a growing number of participants.
So, here are a few top-of-mind examples of upstream and downstream innovation and states:
- The original iPhone (iPhone 1) upstream innovation created by Steve Jobs was a fundamental departure from previous “smart” phones. Not in its ability to place “smarter” phone calls to contacts in its address book (downstream), but to serve the needs of a green field of consumers (upstream) who wanted a multipurpose media device (camera, music, video, photos, internet, email) that also happens to make calls. The subsequent iPhone versions (now an iPhone 5) are downstream innovations from that unique original conception. And Apple has yet to prove that without Jobs, it can continue to deliver upstream innovation.
- In 1787 the U.S. Constitution, as the work of many minds, was a great upstream invention in its day. Followed by many downstream innovations in the many years to develop, it has not only demonstrated to run out of optimization but by lack of adaptation to new global economic challenges combined with a lack of specificity to reach its lofty ideals, is in dire need of upstream innovation to realign with the undeniable laws of nature.
- Our financial system (that rules the world) that find its origin in France, then popularized by the Dutch in the 1600s, later adopted by the U.S. as the foundation for our financial exchanges as upstream innovation, has under decennia of laissez-faire evolution (downstream) abused the guiding free-market principles of its inventors. Those financial systems are now ballooning our economy out of control with a stunning size of eleven times the production’s size (and power). Our financial system is in desperate need of upstream innovation instead of endless tweaking of downstream economic dials. To ensure that as a derivative of production, our financial systems trace rather than distort our production capacity.
Economics in need of upstream
I can name thousands of other examples for the simple reason that economics (upon which many of our other systems hinge) is in a severely downstream state itself.
We have now reached the point at which we have run out of downstream economic innovation, and the challenge is not to prolong its life further (by changing the dials) but let it be surpassed by upstream.
With the right kind of upstream economic innovation applied correctly (I will describe further in my book), our economy and everything below can prosper again. Like redirected river water from the top will breathe new life in the many seeds that lie yearning below.
And that, my dear comrades, is the authentic and boundless positivity only upstream innovators can provide.