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Agricultural abundance creates rulers and ruled, masters and servants, and inequality of wealth unheard of in hunter-gatherer societies.
As societies switched from foraging to agriculture ten thousand years ago, the average height for both men and women shrank by about six inches, and there’s ample evidence of parasites, disease, and childhood malnutrition.
The Luddites weren’t worried about being replaced by machines; they were worried about being replaced by the cheaper, less skilled workers whom the machines would empower.3 So whenever a new technology emerges, we should ask: Who will win and who will lose out as a result?
Thomas Edison’s phonograph led the way toward a winner-take-all dynamic in the performing industry. The very best performers went from earning like Mrs. Billington to earning like Elton John. Meanwhile, the only-slightly-less-good went from making a comfortable living to struggling to pay their bills. Small gaps in quality became vast gaps in money, because nobody was interested in paying for a copy of the second-best when you could have a copy of the best.
Technological shifts can dramatically change who makes money, and they are wrenching because they can be so sudden—and because the people concerned have the same skills as ever, but suddenly have very different earning power.
In 2002, David Bowie warned his fellow musicians that they were facing a very different future. “Music itself is going to become like running water or electricity,” he said. “You’d better be prepared for doing a lot of touring because that’s really the only unique situation that’s going to be left.”
Artists have stopped using concert tickets as a way to sell albums and started using albums as a way to sell concert tickets.
Inequality remains alive and well—the top 1 percent of musical artists take more than five times more money from concerts than the bottom 95 percent put together.
This function of matching people who have coincidental wants is among the most powerful ways the Internet is reshaping the economy. Traditional markets work perfectly well for some goods and services, but they’re less useful when the goods and services are urgent or obscure.
Trust is an essential component of markets—it’s so essential that we often don’t even notice it, as a fish doesn’t notice water. In developed economies, enablers of trust are everywhere: brands, money-back guarantees, and of course repeat transactions with a seller who can be easily located.
Yet the passport is a tool designed to ensure that a certain kind of discrimination takes place: discrimination on the grounds of nationality.
The invention of market research marks an early step in a broader shift from a “producer-led” to “consumer-led” approach to business—from making something, then trying to persuade people to buy it, to trying to find out what people might buy and then making it.
human productivity peaks when the temperature is between 65 and 72 degrees Fahrenheit.
Sub-Saharan Africa, in particular, remains largely cut off from the world economy because of poor infrastructure. Without the ability to plug into the world’s container shipping system, Africa continues to be a costly place to do business.
Economic logic tells us that specialization and trade will increase the value of production in the world. It doesn’t guarantee that the value will be shared fairly.
They tend to be highly desirable places to live—as witnessed by people’s willingness to pay high rents to do so. They’re creative, as measured by a high output of patents and a high rate of start-ups. They’re rich, as measured by economic output per person.
The humble elevator is a green mode of transport that moves billions of people every year—and yet is so overlooked that it can hide in plain sight as the answer to a lateral thinking puzzle.
“It cannot well be expected that they should watch over it with the same anxious vigilance with which partners in a private copartnery frequently watch over their own.”
Adam Smith
let’s also remember what the limited liability company has done for us. By helping investors pool their capital without taking unacceptable risks, it enabled big industrial projects, stock markets, and index funds. It played a foundational role in creating the modern economy.
The truth is that even for a single invention, it’s often hard to pin down a single person who was responsible—and it’s even harder to find a “eureka” moment when the idea all came together. Many of the inventions discussed in this book have many parents; they often evolved over decades or centuries.
If markets can fail, however, so too can government regulators. Japanese women were denied access to the contraceptive pill for decades because regulators refused to approve it. One of the major obstacles that Malcom McLean faced in introducing container shipping was the bureaucracy of U.S. freight regulators, who seemed to feel that the only acceptable option was that nothing should ever change. And when researchers developed public-key cryptography, the remarkable technology that makes Internet commerce possible, the U.S. government tried to shut them down.
The Knights Templar were the Western Union of the Crusades.
A merchant from Lyon who wanted to buy—say—Florentine wool could go to this banker and borrow something called a “bill of exchange.” The bill of exchange was a credit note, an IOU. This IOU wasn’t denominated in the French livre or Florentine lira. Its value was expressed in the écu de marc, a private currency used by this international network of bankers.
When countries are poor, they might decide that pollution is a price worth paying for progress. Later, as their incomes grow, they decide they can afford to bring in laws that clean up the environment. Economists have a name for this pattern of increasing and then decreasing pollution: it’s called the “environmental Kuznets curve.”
Cash transactions facilitate not only corruption but also tax evasion. Matatu drivers understood that when income is traceable, it is also taxable.
Some of the most important parts of our modern economy are invisible. You can’t see radio waves. You can’t see limited liability. And perhaps most fundamentally, you can’t see property rights. But you can hear them.
If you don’t own anything, what incentive is there to work, to invest, to improve your land?
The standard way that anyone raises a serious line of credit is to pledge property as collateral. Land and buildings make particularly good collateral because they tend to increase in value, and it’s hard to hide them from creditors.
Napoleon needed to tax things to fund his incessant wars, and property was a good target for taxation. So he decreed that all French properties would be carefully mapped and their ownership would be registered. Such a property map is called a cadastre, and Napoleon proudly proclaimed that “a good cadastre of the parcels will be the complement of my civil code.”
Around the globe, the World Bank has found, after controlling for income and economic growth, the countries with simpler, quicker property registries also had less corruption, less gray-market activity, more credit, and more private investment.
Samuelson went further: he said that since professional investors didn’t seem to be able to beat the market, somebody should set up an index fund—a way for ordinary people to invest in the performance of the stock market as a whole, without paying a fortune in fees for fancy professional fund managers to try, and fail, to be clever.
Bogle was effectively saying, “Don’t pay these guys to pick stocks, because they can’t do better than random chance. Neither can I, but at least I charge less.”
For governments, fiat money represents a temptation: a government with bills to pay can simply print more money. And when more money chases the same amount of goods and services, prices go up. The temptation quickly proved too great to resist.
While populists surf the wave of anger by blaming immigrants and free trade, bigger long-term pressures always come from technological change.
Because we don’t have a good way to compare an iPod today with a gramophone a century ago, we don’t really have a good way to quantify how much all the inventions described in this book have really expanded the choices available to us. We probably never will.
The price of light alone tells that story: it has fallen by a factor of 500,000, far faster than official statistics suggest, and so fast that our intuition cannot really grasp the miracle of it all.
