This is an asinine argument. We live in a globalized world. You could perhaps make this argument if you were living in a closed society like North Korea.
Besides that, you're missing something important about the idea of a free market. Whenever a problem or an issue arises, eventually somebody somewhere will introduce a product or solution that addresses that problem. If the problem is seen as troubling for a significant number of people, enough people will buy that solution/product, which will incentivize more suppliers/producers provide even more of such solutions and products.
Basic economics. No need to write regulation to force companies to build functionality that people do not even want or care much about in the first place. If people are too stupid to look out for themselves, let them be punished for the consequences of their stupidity.
No, what I say is even more evident in the globalized world than in a local market. Consider few things that break your vision of free market:
- Economies of scale. In areas where fixed costs of production are huge, a one-size-barely-fits-all beats specialized solutions. Consider the mobile market. After Blackberry lost in the smartphone wars, there is no phone available that would be a decent tool. All of them are made for the lowest common denominator, and are useful for anything other than consumption as little as it is possible to still get people looking for practical aspects to buy them. Smartphone manufacturing has huge fixed costs, so when anyone ever tries to service a niche market, those phones are terribly expensive.
- Related: customers don't demand new things, they chose from what is available. Most people do their tasks by choosing from what is available. Rarely one does dream up a new solution (those who do end up sometimes creating them). New solutions only appear when there's a market incentive to make them - when someone believes they can make money on it. Which is determined by what can be sold profitably, not by what people actually need.
Compare: the famous (and probably misattributed) Ford quote: "If I had asked people what they wanted, they would have said faster horses." Also compare: Tesla having to force the market to accept electric vehicles by pouring shit tons of money until they actually became profitable. Rarely one has both enough will to fix the world and enough money to force the market to follow.
- Related: market optimizes for profitability, not for value. "How much people are willing to pay for it" is only a proxy for "how this thing is useful". It's worth to look at the areas where this proxy fails.
- Pour enough money into sales & marketing, and you can sell anything regardless of whether it is actually useful or not. People can be manipulated into believing they need your product, or the need may be manufactured out of thin air - and nowadays it's usually cheaper than making something actually useful.
- Related: information asymmetry. The wonders of free market depend in a big part on perfect and instant information exchange. This is not the case in real world, and the companies have all the incentive to deceive and misinform customers about their products (and their competition).
New solutions appear quite a great deal more than you would think, thanks in no small part to scholars, inventors, and visionaries. Whether these solutions are viable for the marketplace are a whole different question, but these solutions can (and have often) popped up without any financial incentive driving the creators.
So no, new solutions do not only appear when a market incentive is there. If anything, the market's role is better described as determining whether to drive the mass-production of these solutions.
On a tangential note, innovation and free markets may have little more than a relationship by happenstance now that I think about it.
And to your point regarding sales and marketing, this is exactly what I meant when I talk about not coddling stupid people. If stupid people are driven to buy a product because a particular celebrity endorses it, let them waste their money on that crap. Honestly, the government could only do so much to baby-proof the world for the stupid people. I am a big believer in the notion that government should only intervene against this idiocy when such behavior negatively impacts the rest of society (see chain smokers and the cost they incur on our health care system).
And nobody here is condoning this notion that companies be allowed to openly lie and deceive consumers. I'm not quite sure where this information asymmetry aspect you bring up is coming from. Free markets require an informed citizenry to perform efficiently.
Besides that, you're missing something important about the idea of a free market. Whenever a problem or an issue arises, eventually somebody somewhere will introduce a product or solution that addresses that problem. If the problem is seen as troubling for a significant number of people, enough people will buy that solution/product, which will incentivize more suppliers/producers provide even more of such solutions and products.
Basic economics. No need to write regulation to force companies to build functionality that people do not even want or care much about in the first place. If people are too stupid to look out for themselves, let them be punished for the consequences of their stupidity.