Although the human race as a whole has experienced incessant change, individual peoples saw a much more intermittent flickering progress because the pace and place of that change was itself always changing. Innovation is like a bush fire that burns brightly for a short time, then dies down before flaring up somewhere else. At 50,000 years ago, the hottest hot-spot was west Asia (ovens, bows-and-arrows), at 10,000 the Fertile Crescent (farming, pottery), at 5,000 M esopotamia (metal, cities), at 2,000 India (textiles, zero), at 1,000 China (porcelain, printing), at 500 Italy (double-entry book-keeping, Leonardo), at 400 the Low Countries (the Amsterdam Exchange Bank), at 300 France (Canal du Midi), at 200 England (steam), at 100 Germany (fertiliser); at 75 America (m ass production), at 50 California (credit card), at 25 Japan (Walkman). No country remains for long the leader in knowledge creation.
Note that the greatest impact o f an increasing-return wave comes long after the technology is first invented. It comes when the technology is democratised. Gutenberg’s printing press took decades to generate the Reformation. Today’s container ships go not much faster than a nineteenth-century steamship and today’s internet sends each pulse little quicker than a nineteenthcentury telegraph – but everybody is using them, not just the rich. Jets travel at the same speeds as they did in the 1970s, but budget airlines are new.
The electronic possibility that your card could be authorised for a purchase anywhere in the country or even the world was a powerful lubricant to specialisation and exchange in the economy of the late twentieth century, allowing consumers to express their choice to borrow against future earnings when it made sense. There was, of course, irresponsibility, but the credit card did not lead, as most intellectual grandees had feared, to financial chaos. In the early 1970s, when credit cards were new, politicians of all stripes denounced them as unsound, unsafe and predatory, a view widely shared even by those who used the cards themselves: Lewis Mandell discovered that Americans were ‘far more likely to use credit cards than to approve of them’.
This nicely captures the paradox of the modern world, that people embrace technological change and hate it at the same time. ‘People don’t like change,’ Michael Crichton once told me, ‘and the notion that technology is exciting is true for only a handful of people. The rest are depressed or annoyed by the changes.’ Pity the inventor’s lot then. He is the source of society’s enrichment and yet nobody likes what he does. ‘When a new invention is first propounded,’ said William Petty in 1679, ‘in the beginning every man objects and the poor inventor runs the gauntloop of all petulant wits.’
The seventeenth-century discoveries of gravity and the circulation of the blood were splendid additions to the sum o f human knowledge. But they did less to raise standards o f living than the cotton gin and the steam engine. And even the later stages o f the industrial revolution are replete with examples of technologies that were developed in remarkable ignorance of why they worked.
This was especially true in the biological world. Aspirin was curing headaches for more than a century before anybody had the faintest idea of how. Penicillin’s ability to kill bacteria was finally understood around the time bacteria learnt to defeat it. Lime juice was preventing scurvy centuries before the discovery o f vitamin C. Food was being preserved by canning long before anybody had any germ theory to explain why it helped.
In an eerie repetition of the same pattern, Silicon Valley owes much o f its explosion o f novelty to its venture capitalists on Sandhill Road. Where would Amazon, Compaq, Genentech, Google, Netscape and Sun be without Kleiner Perkins Caulfield? It is no coincidence that the growth o f technology industries took off after the mid-1970s when Congress freed pension funds and non-profits to invest some of their assets in venture funds. California is not the birthplace of entrepreneurs; it is the place they go to do their enterprising; fully one-third o f successful start-ups in California between 1980 and 2000 had Indian- or Chinese-born founders.
The financing of innovation gradually moved inside firms in the twentieth century. Private sector companies, haunted by the Schumpeterian fear that innovation can pull their whole market from them, and equally dazzled by dreams that they can pull the whole market from under their rivals, had gradually learnt to sew innovation into their culture and to set aside budgets for it. Corporate research and development budgets are only a century old and they have been growing pretty steadily all that time.
The proportion of GDP spent by firms on research and development in America has more than doubled, to nearly 3 per cent, over the past half-century. Little wonder that there has been a corresponding increase in invention and application. Delve beneath the statistical surface though, and the picture changes. Far from being able to spend their way into novelty and growth, companies are perpetually discovering that their R&D budgets get captured by increasingly defensive and complacent corporate bureaucrats, who spend them on low-risk, dull projects and fail to notice gigantic new opportunities, which thereby turn into threats.
The pharmaceutical industry, having tried again and again to instill a sense of radical thinking into its research departments, has largely given up the attempt and now simply buys up small firms that have developed big ideas. The history of the computer industry is littered with examples of big opportunities missed by dominant players, which thereby find themselves challenged by fast-growing new rivals – IBM, Digital Equipment, Apple, Microsoft. Even Google will suffer this fate. The great innovators are still usually outsiders.
Money is certainly important in driving innovation, but it is by no means paramount. Even in the most entrepreneurial of economies, very little saving finds its way to innovators. Victorian British inventors lived under a regime that spent a large proportion of its outgoings on interest payments, in effect sending a signal that the safest thing for rich folk to do with their money was to collect rent on it from taxes on trade. Today, plenty o f money is wasted on research that does not develop, and plenty of discoveries are made without the application of much money. When Mark Zuckerberg invented Facebook in 2004 as a Harvard student, he needed very little R&D expenditure. Even when expanding it into a business, his first investment of $500,000 from Peter Thiel, founder of Paypal, was tiny compared with what entrepreneurs needed in the age of steam or railways.
When Hero o f Alexandria invented an ‘aeolipile’ or steam engine in the first century a d , and employed it in opening temple doors, the chances are that news of his invention spread so slowly and to so few people that it may never have reached the ears of cart designers. Ptolemaic astronomy was ingenious and precise, if not quite accurate, but it was never used for navigation, because astronomers and sailors did not meet. The secret of the modern world is its gigantic interconnectedness. Ideas are having sex with other ideas from all over the planet with ever-increasing promiscuity. The telephone had sex with the computer and spawned the internet. The first motor cars looked as though they were ‘sired by the bicycle out of the horse carriage’. The idea for plastics came from photographic chemistry. The camera pill is an idea that came from aconversation between a gastroenterologist and a guided-missile designer. Almost every technology is a hybrid
The history of the modern world is a history of ideas meeting, mixing, mating and mutating. And the reason that economic growth has accelerated so in the past two centuries is down to the fact that ideas have been mixing more than ever before. The result is gloriously unpredictable. When Charles Townes invented the laser in the 1950s, it was dismissed as ‘an invention looking for a job’. Well, it has now found an astonishing range of jobs nobody could have imagined, from sending telephone messages down fibreglass wires to reading music off discs to printing documents, to curing short sight.
Knowledge is not the same thing as material wealth. It is possible to mint new knowledge and yet do nothing for prosperity. The knowledge o f how to fly a man to the moon, now nearly two generations old, has yet to enrich humankind much, urban myths about non-stick frying pans notwithstanding. The knowledge that Fermat’s Last Theorem is true, that quasars are distant galaxies – these may never increase gross domestic product, though contemplating them may enhance the quality of someone’s life. It is also possible to get rich without adding to the store o f human knowledge, as many an African dictator, Russian kleptocrat or financial fraudster can tell you.
The wonderful thing about knowledge is that it is genuinely limitless. There is not even a theoretical possibility of exhausting the supply o f ideas, discoveries and inventions. This is the biggest cause of all for my optimism. It is a beautiful feature of information systems that they are far vaster than physical systems: the combinatorial vastness of the universe o f possible ideas dwarfs the puny universe o f physical things. As Paul Romer puts it, the number of different software programs that can be put on one-gigabyte hard disks is twenty-seven million times greater than the number of atoms in the universe. Or ifyou were to combine any four of the 100 chemical elements into different alloys and compounds in different proportions ranging from one to ten, you would have 330 billion possible chemical compounds and alloys to test, or enough to keep a team of researchers busy testing a thousand a day for a million years. Yet if innovation is limitless, why is everybody so pessimistic about the future?