26.3.16

WHY ARE THERE ENTREPRENEURS?

We could get wonky and speak of agglomeration economies.  That term might exist because experts in regional economics were reluctant to speak of ideas having sex.  Contra Matt Ridley, serious thinkers in political economy, including the three Alfreds the Great (Marshall, North Whitehead, and Weber) were over this idea a long time ago.
Politicians, capitalists, and officials are flotsam bobbing upriver on the tide of invention.

Even so, the generation of new useful knowledge is far from uniform, steady, or continuous. Innovation is like a bush fire that burns brightly for a short time, then dies down before flaring up somewhere else. Fifty thousand years ago, the hottest hot spot was west Asia (ovens, bows and arrows); 10,000 years ago, the Fertile Crescent (farming, pottery); 5,000 years ago, Mesopotamia (metal, cities); 2,000 years ago, India (textiles, zero); 1,000 years ago, China (porcelain, printing); 500 years ago, Italy (double-entry bookkeeping, Leonardo); 400 years ago, the Low Countries (the Amsterdam Exchange Bank); 300 years ago, France (Canal du Midi); 200 years ago, England (steam); 100 years ago, Germany (fertilizer); 75 years ago, America (mass production); 50 years ago, California (credit card); 25 years ago, Japan (Walkman). No place remains for long the leader in knowledge creation.

Just as the bush fire breaks out in different parts of the world at different times, so it leaps from technology to technology. Today, as during the printing revolution of 500 years ago, communication is aflame with increasing returns, but transport is spluttering with diminishing returns. A greater and greater amount of effort is needed to squeeze the next few miles per gallon out of vehicles of any kind, whereas each additional tranche of megabits comes more cheaply.

But the greatest impact of an increasing-return wave comes long after the technology is invented. It comes when the technology is democratized. Gutenberg’s printing press took decades to generate the Reformation. Today’s container ships go not much faster than a 19th-century steamship, and today’s Internet sends each pulse little quicker than a 19th-century telegraph—but everybody is using them, not just the rich. Jets travel at the same speeds they did in the 1970s, but budget airlines are new.

So what is the flywheel of the perpetual innovation machine that drives the modern world? Why has innovation become routine? How was it that, in Alfred North Whitehead’s words, “The greatest invention of the 19th century was the invention of the method of invention?”
The institutions that make the method of invention possible, but ultimately, as Mr Ridley notes, it is about exchange.  "Innovators are in the business of sharing. It is the most important thing they do, for unless they share their innovation it can have no benefit for them or for anybody else."  But the innovators must have the opportunity to engage in intercourse.  Perhaps, with the internet, it is not as necessary for Bruno Nordberg to be in the employ of Edward P. Allis across the street from Henry Harnischfeger, where the ideas spawned much of industrial Milwaukee.  Hence Mr Ridley.
We may soon be living in a post-capitalist, post-corporate world where individuals are free to come together in temporary aggregations to share, collaborate, and innovate, and where websites enable people to find employers, employees, customers, and clients anywhere in the world. This is also, as the evolutionary psychologist Geoffrey Miller reminds us, a world that will put “infinite production ability in the service of infinite human lust, gluttony, sloth, wrath, greed, envy, and pride.” But that is roughly what the elite said about cars, cotton factories, and (I’m guessing) wheat and hand axes too.
As amazing as computer-assisted design, file sharing, animation, and all the rest are at bringing people and their ideas together, I suspect there will still be reasons for the inventors and the venture capitalists to get together for an expensive coffee.  Or a shot of peppermint schnapps and a beer chaser.

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