Building the Innovation Society

A beginner's guide to tech optimism

Max Roser based on World Bank and Bourguignon and Morrisson (2002), licensed under the Creative Commons Attribution-Share Alike 3.0 Unported license

Please take a second to look at the chart above. The red section shows the number of people living in extreme poverty; while the green section shows the percentage of the global population who have managed to escape acute poverty. Through most of human prehistory and history, right up to the middle of the 19th century, nearly everyone would have been in the red section, while only a handful of people would have found a way into the green category.

This began to change in the 19th century as the industrial revolution raised living standards first in the West and later elsewhere. The trend began to accelerate from about 1950, with the green line now looking like the infamous hockey stick beloved by tech entrepreneurs. At the same time, the red line has been collapsing in recent decades, as most governments have abandoned communism and capitalist countries have knit their economies together for mutual benefit.

People on the left will probably want to interrupt at this point and say something about imperialism. Unfortunately, this isn’t a great argument. Empires existed for millennia before the green line started to move. It is true that the earliest capitalist societies were imperialist, but the British Empire was effectively over by the time India won its independence in 1947. This date is more or less at the bottom of the green line’s hockey stock.

The real story is much simpler. Capitalism works better than other economic systems, particularly when it is combined with liberal democracy and a welfare state. It incentivizes permissionless innovation, which allows entrepreneurs to tinker with goods, services and systems to make them better. Innovations in one area can be combined with those in another area for added benefits.

Anyone over the age of about 20 has seen this over their lifetime as smartphones have gone from being toys for the rich to an essential part of life. Older people will remember the excitement around the introduction of home computers and the internet.

Of course, not every innovation is good for everybody all the time. Specialists in horse-driven carriages had a tough time when cars became popular in the early 20th century; photographers who refused to go digital often found their work dried up in the late 20th century; and children whose parents give them unlimited screentime miss out on the eternal joys of climbing trees and making their own entertainment in the 21st century.

Even so, the net effect of innovation tends to be positive. Cars and digital photography enrich the lives of many people; and more than half a billion Africans, many of them without bank accounts, now rely on mobile payments as they move from the red zone to the green zone of the chart above.

It is traditional for our left-wing friends to mention climate change at this point. And it is true that industrialization has released too many greenhouse gases. However, unless we want to return the world to pre-industrial levels of poverty, innovation in general and cleantech in particular are our best bets for building a sustainable future for everyone.

What can we do to develop a society that nurtures sustainable innovation even better in the future? A world that is dynamic, innovative and entrepreneurial will always move fast, sometimes in ways that ordinary people find bewildering. I think a touch of conservatism about preserving our institutions is probably going to be sensible in a world that can change so much in one lifetime. Meanwhile, the base of permissionless innovation will always involve mostly letting ordinary people live their lives as they see fit, as long as their decisions don’t harm others.

Once we move beyond institutionalism and laissez faire as a good rule of thumb for policy, a little triangulation can help us come up with good ideas. The right’s emphasis on cutting bureaucracy and red tape fit with an innovation-first approach, as do policies to encourage investment. However, the left’s emphasis on a well-funded state education system, strong government support for basic science and a safety net for people who run out of luck all fit too. Pro-immigration policies from the left make sense in this context too.

Pragmatic problem-solving without a left or right bias will also play a role in building the innovation society. Policies to support startups should find support from both sides. Helping adults retrain as their old skills become obsolete will become increasingly important as societies continue to change at lightning speed.

One element that is too-often missing from these conversations is the recognition that spending your whole life in a market economy can be exhausting. A little financial education can help show people who find capitalism unattractive that saving and investing can be their best defences against a life of grinding work.

Of course, we should adopt a skeptical attitude to policy, along with a willingness to change our minds as the evidence changes. As far as possible, we should try to separate policy and our perception of our identity. This is probably easier said than done! The comments are open. See you next week!

Further Reading

The Wizard and the Prophet by Charles Mann is an essential book on the role of innovation in environmentalism

Adam Frank’s book Light of the Stars is on the face of it about aliens and technology, but it also happens to be a masterpiece on climate change too

I’ve recommended Deirdre McCloskey’s Bourgeois trilogy before, but if you want an easier point of access, why not start with Why Liberalism Works?

Not every innovation has to involve tech, as Isabella Tree shows us in Wilding

Noah Smith is a tech optimist with an excellent Substack

Sharpen Your Axe is a project to develop a community who want to think critically about the media, conspiracy theories and current affairs without getting conned by gurus selling fringe views. Please subscribe to get this content in your inbox every week. Shares on social media are appreciated! If this is the first post you have seen, I recommend starting with the first-anniversary post, which includes links to a free book.

Opinions expressed on Substack and Twitter are those of Rupert Cocke as an individual and do not reflect the opinions or views of the organization where he works or its subsidiaries.