This Week in Venture Capital and Artificial Intelligence: The United States of Innovation

Every week I will share and summarize ideas and insights with the LinkedIn community. Some of the summarizations I may have covered during the week, and other things may have just been passing thoughts.

?WHAT IS INNOVATION THEATER?

Innovation theater" refers to the superficial appearance of innovation without meaningful progress or tangible results. It's when people, organizations or companies engage in activities that show process and look innovative—like hosting hackathons, launching labs, or developing flashy prototypes—but fail to produce actual, implementable solutions, truly drive change, create value and meaningful business impact.

Welcome to the show!

Innovation Theater from My Father’s Perspective

The whole thing of Innovation theater reminds me of the following statement my father used to make to me. I think the statement was his valiant attempt at antagonistically getting me to do something when he thought I was working hard at doing nothing, but either way it pissed me off which is probably why I joined the Marine Corps, so I could have a valid reason to be pissed off, after all the Marine Corps pays you to be pissed off,

“You know boy, you’re like a plumber bent over a pipe wrenching and yanking on the pipe with sweat dripping down his butt crack and you’re not making anything happen”…

First thing I want to say, is my body shape does not even closely resemble that, and second thing I want to say is that this was many years ago and that I now have a long, long, long track record of “making things happen”, professionally and personally. Let’s just get that out the way.

But I use that statement as a way to illustrate innovation theater to some sort of reality. A Plumber’s crack, what better analogy to make a valid point!

AMERICA IN COMPARISON: WHAT OTHER COUNTRIES ARE DOING, AND WHAT AMERICA CAN DO BETTER

Well, I am going to start with Israel. Israel is referred to as the "Startup Nation," and they have a culture that encourages calculated risk-taking and tolerates failure as part of the innovation process, whereas America tends to penalize failure. With military service being mandatory in their civilian population, many entrepreneurs have military backgrounds, and so there's a strong emphasis on adaptability and resilience that gets carried into business and the Israeli economical culture. This has resulted in practical innovation for the Israel economy, in the end being focused on solving real-world challenges, rather than showmanship.

The USA does have a similar approach to Israel, although the key difference is that the USA does not make its military service mandatory, likely due to a surplus of supply as the USA population massively overshadows Israel’s population. However, if the USA did adopt an exact approach vs. similar, it is likely to be able to drive stronger innovation by cultivating a much wider national network than current of technically skilled, disciplined individuals who are adept at problem-solving under pressure.

Part of the job shortage is that people cannot afford to educate and train themselves with the skills necessary, and many times companies are not willing to pay for it. If we had mandatory military service it would alleviate both of these problems in critical in-demand areas like cybersecurity and AI.

The USA could use military training to build a pipeline of talent ready to innovate in both public and private sectors, creating a stronger and shared focus of solution-driven development.

Another example is China. China's innovation model is heavily goal-oriented and state-driven, emphasizing practical applications and commercialization. Innovation is tied to national development strategies, which prioritize rapid implementation and scaling, avoiding theatrics of innovation that do not yield measurable results.

In short, while the USA has developed a culture centered around short-term gains, media attention, and perceived innovation, typically prioritizing appearances and high valuations over practical outcomes, countries like Israel and China take a more focused, solution-oriented approach. With strong government support and coordinated public-private efforts, they drive R&D and technological advancements aligned with national priorities, emphasizing real-world solutions and long-term impact. The fragmented public-private collaboration and market-driven nature of the USA really only fuels short-term successes, but a shift toward sustainable, impactful innovation is going to be evermore necessary for maintaining global leadership as a technological superpower…

INNOVATION THEATER BY EXAMPLE

The USA banking disaster of 2023 points out how innovation theater, where appearances and short-term gains took precedence over sustainable innovation. VCs pumped up valuations to ridiculous highs as banks heavily invested in fintech and technologies like blockchain and AI, branding themselves as "innovative" and "disruptive" to attract customers and investors. However, these moves lacked solid foundations or practical applications to withstand economic volatility. When conditions turned volatile, many of these "innovations" ultimately showed to be superficial, focusing more on image than developing resilient systems or transformative financial solutions.

THE PROBLEM WITH INNOVATION IN AMERICA

Leading off the upside of innovation strategies from other countries, did you know that innovation theater hasn't always been present in America. For much of the 20th century, the USA was largely regarded as the most innovative country on Earth, with technology and infrastructure advancements that tremendously outpaced other superpowers. Today, the title of 'most innovative country' does not solely belong to the USA anymore, but rather it is subjective and varies based on how innovation is defined and measured.

In the United States and even Canada, innovation theater has long plagued organizations to their deaths falling as failed organizations like tumbling skyscrapers

But as mentioned earlier, other countries seem to have adapted more quickly while we have become denser, or in friendlier terms, complacent. This doesn’t mean there isn’t great innovation in America—it just means there is room for improvement. I would defend America as still being one of the most innovative countries on Earth, but there is potential to do even better.?

THE PROBLEM WITH INNOVATION IN AMERICA IS THAT THE PROCESS OF INNOVATION ITSELF NEEDS TO BE INNOVATED…

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What America is doing right, and what we could do better

RIGHT: Creativity

America's decentralized approach allows for greater creative freedom and a diverse range of startups

WRONG: Innovators of Popularity and Paparazzi?

Innovation being driven by market trends, branding, and hype, sometimes at the expense of practical utility and impact.?

RIGHT: A World Leader

The USA leads the world in venture capital and institutional support

?WRONG: Failure to Adapt - The Main Catalyst to Innovation Theater

Innovation theater is a failure, and it is similar to a person’s failure to adapt in the military in that both failures involve prioritizing appearances and going through the motions without committing to real growth or change. Just as innovation theater emphasizes looking innovative over tangible results, a person in the military may appear to be adapting by following surface-level procedures or protocols, but they may resist evolving their mindset, skills, or strategies to meet new challenges, ultimately compromising effectiveness and progress. The end result, you get kicked out i.e. kicked out the market or kicked out of the military…

Failure to adapt in a corporate context refers to an organization's inability to adjust its business model in response to evolving market demands or align with industry trends. This can involve struggles or a resistance to adjust in response to technological changes, shifts in consumer behavior, or competitive pressures.

At the end, failure to adapt as a main ingredient of innovation theater culminates to a decline in market share, reduced profitability, a loss of relevance in its sector and sometimes, complete obsoletion, like say for example Blockbuster. Want to read my take on Blockbuster? You can in this link to a book I co-authored a couple years ago.

WRONG: Only Audiences, No Actors, Means No Show

Last but not least, another part of the problem is that we need more actors in the show making innovation happen, otherwise we just have the audience in the theater and no show.

This means we need innovation actors acting and working together to produce the show we call "innovation”. I call the VCs and the organizations the “actors”.

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There aren't enough corporations actively partnering with early-stage VCs and vice versa. Ideally, an early-stage VC firm should cultivate and build quality relationships with a network of corporate partners that are eager to innovate and co-invest in technology that drives business and market impact. For a first-time fund, a network of around 10-20 engaged partners is realistic, while firms with multiple funds or a multi-sector focus may benefit from expanding their network to 30-50 partners.

?WHAT ARE THE SYMPTOMS OF INNOVATION THEATER

First off innovation theater is recognizable because many times innovation theater in America is driven by ego, adherence to “the way we have always done it,” and fear of being fired for taking risks, which leads to short-term thinking and superficial efforts to seem innovative.

Other symptoms include endless prototyping without product launches, fragmented and misaligned initiatives, and innovation labs or events that don’t produce measurable results. Ultimately, this mindset wastes time and resources, diverting attention from meaningful progress, long-term investments, and real solutions that address market needs.

IT ALL STARTS WITH VENTURE CAPITAL: HELPING AMERICA AND ORGANIZATIONS OVERCOME INNOVATION THEATER

By VC firms focusing on institutional support and practical, outcome-driven innovation can help the entire American culture move away from innovation theater. When investors reward startups for sustainable growth, practical solutions, and real-world impact, it shifts the incentives across the entire innovation ecosystem. Entrepreneurs are more likely to develop products that solve genuine problems, and corporations will seek partnerships and investments that contribute to long-term value.

Ultimately, this promotes a healthier innovation culture that values substance over spectacle.

PATIENT CAPITAL ALLOWS FOR INNOVATION TO HAPPEN, AND INNOVATION IS WHAT SOLVES PROBLEMS

Shifting the VC approach to focus on patient capital and a long-term, impact-driven perspective has the potential to heavily address the root causes of innovation theater.?

Patient capital allows for longer development timelines and more thorough R&D, which reduces the pressure on startups to produce flashy prototypes or superficial “innovations” just to impress investors and generate hype. This aligns startup strategies more closely with genuine market needs and impactful problem-solving, rather than forcing rapid market entry for immediate profits.

Unlike most organizations that are driven by immediate profitability and cash flow, VCs have greater flexibility to take an impact-driven approach. Corporations typically face pressure from shareholders and market demands to achieve short-term financial returns, which leads to a focus on surface-level innovation that can be commercialized quickly. However, VCs are not constrained by the same cash flow pressures, enabling them to invest in startups that have the potential to achieve transformative impact over time. This long-term perspective allows for a focus on sustainability, market disruption, and technological advancements.?

HOW WE SEED AND GROOM COMPANIES TO THINK AND OPERATE NOW, IS THE CORPORATE AND NATIONAL INNOVATION CULTURE WE HARVEST IN THE FUTURE. SMALL COMPANIES ONE DAY BECOME BIG COMPANIES

The emphasis on patient capital also plays a role in reducing fear of failure and risk aversion, which are major contributors to innovation theater. More times than not, organizations fall into this trap because they are fearful of setbacks that could impact their financial standing or public perception. A culture that encourages experimentation and iteration reframes failure as a learning opportunity, allowing startups to test bold ideas and pivot as needed without fear of negative repercussions.

When patient capital-driven VCs lead by example and demonstrate how sustainable, value-driven approaches result in strong market positions and technological leadership, it shifts the narrative around success

CONCLUSION

In conclusion, to truly make America innovative again, we need to move beyond the theatrics of innovation and focus on substance over spectacle. While creativity, freedom, and venture capital leadership are strengths, the U.S. must address the underlying issues of short-term thinking, failure to adapt, and superficial displays of progress. By learning from the pragmatic, solution-oriented approaches of countries like Israel and China, and encouraging deeper collaborations between VCs and corporations, we can foster a culture where real innovation thrives—one driven by sustainable growth, tangible outcomes, and impactful problem-solving that cements America's leadership as a technological superpower.

WELCOME TO THE UNITED STATES OF INNOVATION…

?I hope you enjoyed this week's newsletter stay tuned for next Saturday's edition.

1. ) Upcoming - Stay tuned for:

-- Show release with Serg Masís on my podcast titled Explainable AI

-- Show release with Rohan Hall on my podcast titled Explainable AI

2. ) Upcoming publication

-- On IdeaScale, a well-known global innovation platform I write for

You can find out more about these by tuning into my LinkedIn profile daily and peaking my CV that is listed below from time to time. Also if you would like to be a guest on my 2 podcasts, Capital Unscripted, or Explainable AI, or if you would like to be a contributor to any of the medias I write for or am partnered with, -- includes AI Accelerator Institute , Idea Scale, or AI news -- then please reach me by inboxing me.

I hope you enjoyed this week's newsletter stay tuned for next Saturday's edition.

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