This article is based on a presentation from John Mauldin’s 2020 Virtual Strategic Investment Conference, which is being held from May 11 to 21. To register for this conference, click here. The Strategic Investment Conference was just approved by CIMA and CFP for 14 hours of continuing education credits.
We are past the worst, according to Matt Ridley, and can begin to think about how we can put the world back together. But we need innovation.
Matt Ridley is the author of the 2010 best-selling book, The Rational Optimist, and has a TED talk, When Ideas Have Sex, that has been watched by over two million people. He a UK-based economist and a member of its House of Lords.
Ridley spoke on May 12 as part of John Mauldin’s Virtual Strategic Investment Conference. His talk was a tour de force of his observations on the nature of innovation and invention, with the underlying theme that society should be optimistic about overcoming the medical and economic challenges posed by the coronavirus.
The history of computing is often associated with great breakthroughs, he said, but data shows it is more gradual, as has been the case with semi-computer capacity. That capacity has increased steadily over the past 50 years, without significant spikes.
Innovation, he said, often comes from unrelated and unexpected sources. Post-It notes and Kevlar were developed by accident, when scientists were looking for something completely unrelated. Innovation is a process of combining ideas from different sources, he said.
A simple object like a pencil is the product of many people working in many places – from growing trees to producing graphite. None of the individuals in those processes knows how to make a pencil; that knowledge is in the “cloud,” sharable across unconnected groups of workers.
Innovation is different from invention, according to Ridley. Inventors are often shortchanged by not getting enough credit for their ideas, but those ideas go through innovation to make them affordable for most people. The light bulb is associated with Thomas Edison, but there were 21 others who have “good claim” to have invented it independently, he said. The technology was ripe to be brought together to produce the light bulb. It was inevitable, Ridley said. The same was the case with search engines and their rise to popularity. Once the internet was established, the rise and commercialization of search engines was foreseeable.
But nobody saw either the light bulb or search engine coming until the prerequisite technologies (electricity and the internet) were in place. They were “fantastically predictable” in retrospect, he said, but not when they were being developed. “That makes predicting the future incredibly difficult.”
Given how important advances in computing and communication power have been over the last 50 years, Ridley said we are probably overestimating their importance over the next 50 years.
In general, we underestimate the power of technology advances in the short run, but overestimate them in the long run. The internet has been around long enough that we are overestimating its potential, but blockchain is new enough that we are underestimating it.
Empires are bad at innovation, Ridley said, which is why the EU has stagnated. The same is true of big companies. Kodak famously failed to see the opportunity in digital photographic technology and Nokia missed the opportunity for mobile phones.
Innovation flourishes in freedom, he said. For example, in 1990s the DMCA advanced online commerce by recognizing that the internet was a platform and could not be legally vulnerable to copyright infringement.
According to Ridley, a crucial idea in understanding the evolutionary nature of innovation comes from the observation that every boat is copied from another boat. Boat technology has advanced through incremental, mimicking improvements. But the sea fashions the boats that will succeed, sending to the bottom of the ocean the bad designs. All technologies advance through modification, he said, as ideas “combine and produce offspring.” That is the key theme of his TED talk.
Politicians and journalists think that science produces technology linearly, but scientists know that technology is the seed of science rather than the fruit of it. Genome editing, for example, came from the yogurt industry, which needed to keep bacteria healthy and studied yogurt’s immune system. They found a repetitive structure in its DNA and repurposed this process in culturing yogurt to use it in biotechnology.
Innovation does not destroy the total number of jobs, according to Ridley. We’ve automated agriculture and manufacturing over the last century yet haven’t lost jobs overall. The reason is that innovation produces new jobs. We are worried too much that innovation will take away jobs, he said. “That is extremely unlikely.”
We may even be able to innovate indefinitely. For example, we use 68% less land to produce the same amount of food as we did 50 years ago.
How can Ridley still be an optimist?
Having recounted his observations on the nature of innovation, Ridley turned to a series of facts the support is unbridled optimism about improvements in the quality of life.
What if you had asked, “Has the percentage of the world’s population living in extreme poverty doubled, halved or stayed the same over the last 20 years?” Virtually everyone gets this wrong, he said, with 65% saying it doubled and only 5% saying it halved. Yet, the 5% are correct.
Only 7% of the world’s population live in extreme poverty, and 160,000 people per day exit from that state.
Similarly, child mortality has declined across the globe. Malaria was getting worse until the end of the last century. But malaria mortality halved since then because of innovations in insecticides and vaccines.
Famines were quite common until the 1960s, but have been mostly extinct since then despite the doubling of the world’s population, he said. The exception is in places with dictatorships like North Korea.
Even the population explosion has dramatically slowed and will stabilize toward the end of this century, Ridley predicted.
All measures of violence have declined. “We are living through a time of extraordinary peace,” he said.
Most measures of environmental quality are improving – there have been fewer oil spills and many more humpbacked whales thrive in the oceans.
What about climate change? We may face problems in the future, he said, but contrary to what most people think, we are not yet seeing dramatic climate changes. There have been fewer droughts; tropical storms increased in the 1980s, but stabilized and have not become more frequent since then. The sea level is rising, but at the same rate as in the 20th century (about one foot per century). There has been a 14% increase in green vegetation (“global greening”), which, he said, “is on the whole good news.”
Most surprisingly, we are more equal economically. On a global basis, poor people have gotten richer in third-world countries, offsetting the rise of the ultra-wealthy in developed countries. Ridley noted that Ethiopia doubled its average income in the last 10 years.
People even get happier as they get wealthier, he said. “It’s possible to get rich and unhappy,” he said, “but even that cheers others up.”
Is it about to get worse?
There is every reason to think we will get through the coronavirus pandemic, he said, and that we will defeat future pandemics and climate change.
But it depends on allowing and encouraging innovation.
For example, he said patents are a problem for innovators. When they expire, there is a burst of innovation, as has happened in 3D printing.
Ridley offered no specifics on how science or society will overcome the coronavirus pandemic. His optimism was based on his examples of progress through innovation.
He identified six major challenges for the post-COVID-19 era: Tackling zoonoses (diseases that can be transmitted from animals to humans) and wildlife markets, restoring global trade patterns, pandemic preparedness, improving health and medical innovation (such as vaccine development), economy recovery and, his mantra, rational optimism.
Read more articles by Robert Huebscher
This article is based on a presentation from John Mauldin’s 2020 Virtual Strategic Investment Conference, which is being held from May 11 to 21. To register for this conference, click here. The Strategic Investment Conference was just approved by CIMA and CFP for 14 hours of continuing education credits.
