Progress and destruction

“Innovation — it’s the reason you’re almost certainly richer than your great-grandparents, why your lighting at home is powered by electricity rather than refined lamb fat, and why your hulking great suitcase has wheels”

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The Apple iPhone launched in 2007 and now dominates—despite Nokia’s head start (© Krista Kennell/ZUMAPRESS.com/Alamy Live News)

Why are humans getting richer and healthier? The answer, says Matt Ridley in this superb book, is innovation. It’s the reason you’re almost certainly richer than your great-grandparents, why you don’t catch typhoid from tap water, why your lighting at home is powered by electricity rather than refined lamb fat, and why your hulking great suitcase has wheels.

It’s also the reason scientists are closing in on an effective cure for Covid-19, the happiest news of recent weeks. “By the time you are reading this,” the Afterword notes, “an effective antiviral cure for Covid-19 may have emerged from the crowd.” As it happens, so far it’s dexamethasone—a bog-standard steroid—that has been shown to save lives. But that’s the thing about innovation. The habit of applying new ideas to raise living standards may be the single best explanation of the “great enrichment” of recent centuries. But, Ridley explains, “it cannot be easily predicted”, nor  “choreographed, planned or managed”. Which is disappointing news, because once you’ve understood what innovation does—how it improves and saves lives—you wish we could pull a lever to hurry it along.

That said, it’s a brutal business that offers, according to economist Joseph Schumpeter, “the carrot of spectacular reward or the stick of destitution”. If free markets deliver progress through creative destruction, innovation is the economic dynamite. It goes bang.

Take the Apple iPhone. A brilliant invention that arrived in 2007, bringing the touch screen, music and apps to the masses. I was at university and remember, as soon as I could afford it, buying one and ditching my Nokia. What Ridley explains, though, is that Nokia should have got there first. Just as Kodak invented digital photography but had a vested interest in hoping it would go away, Nokia had ploughed tens of billions of dollars into cutting-edge research and development in the 1990s, far more than Apple or Google, yet failed to seize the day. 

Nokia nearly hit the jackpot, producing early prototypes of smartphones and tablets with colour touch screens. But due to “corporate caution” and infighting, it failed to develop these ideas into practical products. “It wanted to move smoothly, not suddenly, out of its core business.” Elsewhere, someone—namely Steve Jobs—was working harder at turning these new ideas into sellable reality. So having been a 300 billion-dollar company in the year 2000, Nokia’s handset business was eventually sold for about seven billion dollars to Microsoft in 2013. Innovation eats its own offspring, says Ridley.

The good news, for small-c conservatives who find all this helter-skelter innovation mildly terrifying—Nokia’s downfall happened over less than a decade—is that despite ever-present fears, from the Luddites to Keynes, innovation doesn’t lead to unemployment. The destitution Schumpeter warns of never truly arrives, so long as someone, somewhere is innovating. “Candles were replaced by electric lights, but wick trimmers found other work,” Ridley explains neatly. He quotes the American engineer Vannevar Bush usefully here: “Advances in science when put to practical use”—which is another good definition of innovation—“mean more jobs, higher wages, shorter hours, more abundant crops, more leisure for recreation, for study, for learning how to live without the deadening drudgery which has been the burden of the common man for past ages.” Three cheers for that.

Is there anything like a magic formula for it? No, not obviously. Much of the time, innovation is serendipitous. Louis Pasteur only discovered vaccination after he had been on holiday, leaving an experiment involving chickens and cholera bacterium with his assistant. The assistant put his feet up as well and forgot to inoculate the birds with a fresh cholera culture. But after a delay, they used the stale broth—still infected but by now weaker—and discovered that the chickens were then immune to full-blown cholera. The moral of the story, if there is one, is that forgetfulness can be as fruitful as genius.

In short chapters that are almost parables, Ridley explains the sorts of conditions that can encourage innovation. It occurs when “ideas can meet and mate”, when people can experiment and speculate, when they can trade with each other, when they are prosperous and live in cities and are on the receiving end of investment. Crucially, he notes that big companies can slow innovation down with corporate managerialism. Working with Government in “cosy cahoots”, they can also resist change, and act defensively to protect their market share and stifle others’ innovation—a trend that may have delayed the arrival of mobile phones by a decade. When changes are made to legislation or regulation, they make sure it is to their advantage and that newcomers are constrained. This is what’s really troubling. If innovation—“the child of freedom and the parent of prosperity”—grinds to a halt because of this, it won’t be a minor irritation. It means living standards stall and we slip back towards the dark ages.