Matt Ridley on How Innovation Works

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0:33

Intro. [Recording date: July 13th, 2020.]

Russ Roberts: Today is July 13th, 2020, and my guest is author Matt Ridley. His latest book, and the subject of today’s discussion is How Innovation Works. This is Matt’s fourth appearance on EconTalk. He was last here in February, 2016 talking about his book, The Evolution of Everything. I want to remind listeners, there’s a video of this episode available on YouTube. You can go there, search EconTalk. You can subscribe. You can watch as well as listen. Matt, welcome back to EconTalk.

Matt Ridley: Russ, it’s really nice to be back on EconTalk, one of my favorite shows.

1:08

Russ Roberts: Thank you, sir. This book, your latest, is the rare book that gets better as it goes along. It’s really almost two books. In the first half, it’s a catalog of the complexity of innovation, some of its history in some very important areas. In the second half–which is fascinating and we’ll, of course be drawing on that–but the second half are the insights that you come to having done that catalog in the first half. And I learned a great deal from the book. It’s very provocative. It’s just fantastic.

I want to start with a question–the difference between invention and innovation. I think a lot of people use those words interchangeably, but there’s an important distinction there. What is it?

Matt Ridley: Yes. And the way I distinguish the two words is that when a new device is invented, it also has to be made available, affordable, and reliable, and that process is innovation. And it’s often much harder work than the original invention. Coming up with the first prototype is sometimes the easy bit. Turning it into something that people want and people can afford, and that people can get ahold of is really tough work.

There’s a lovely story that Charles Townes, the inventor of the laser, used to tell, which rather nicely illustrates the difference between invention and innovation. He said, there’s a beaver and a rabbit looking at the Hoover Dam and the beaver says to the rabbit, ‘No, I didn’t build it, but it is based on an idea of mine.’

Russ Roberts: I love that story. It’s quite profound, actually. It’s funny, but it’s quite profound.

I think a lot of people come up with good ideas and then they claim that people stole them, forgetting as you point out in many cases, the genesis of an idea spontaneously is in many people’s heads at once. And that’s often not the hard part. The hard part is the practical side.

Matt Ridley: Correct. And the great innovators were people who realized the importance of the downstream innovation process. So, Thomas Edison is the classic example of this. He’s one of 21 different people who invented the light bulb, but he is the only one–

Russ Roberts: You said 21.

Russ Roberts: You said it quickly. I want to emphasize that because I wouldn’t have known that before I read your book, 21. Go ahead.

Matt Ridley: 21 different people deserve credit for independently coming up with the light bulb around the same time. It was kind of inevitable. It was kind of inexorable. The technologies you need to combine to make a lightbulb were ripe: they were ready to go. And so, Lodygin in Russia and Swan in England and various other people basically had roughly the same idea at the same time, and very little snooping, as far as we can tell in this case. Some of these cases of simultaneous inventions–which are very common by the way–some of these cases are based on people snooping on each other’s work.

But, the difference was that Edison realized that in order to make light bulbs reliable, make them last for a long time without going ‘phut’ [slang for ‘going out’–Econlib editor]. He needed to do a lot of hard work, and he needed to do a lot of trial and error. So, he put in huge number of hours or got his assistants to put in huge number of hours, testing different materials. 5,000 different plant materials were tried in the Edison factory till they came up with a particular kind of Japanese bamboo that made a beautiful filament that worked really well.

That’s the kind of thing that Edison meant when he said that ‘Invention,’ but actually he meant innovation–that word wasn’t around then, ‘Innovation is 1% inspiration and 99% perspiration.’

Russ Roberts: Which is another great line. You also point out, he sometimes said 2% innovation, ‘2% invention, 98%’–I like that clarification on the historical record because somebody might’ve–in today’s world–might’ve said, ‘Oh, well I saw 2%, so Ridley was off by 100%’ in his quote. But, I’m glad you showed there’s some variety there.

So, that highlights two things that I think shine through in the first part of the book that are incredibly important. One is that there are a lot of people working on most of the great inventions of our time to turn them into innovations. It’s a slowish process that is highly trial-and-error oriented. Those are two, I’d say key takeaway facts, stylized facts about innovation that you highlight.

And the third one I want to mention–you can add to that if you like. But, the third is that so many of the great innovations of history were not done by scientists. They were done by practical people trying to solve a problem that they were grappling with, that they solve via trial and error, not a formal theoretical model; and that there were a lot of people doing it at the same time. And because of that, they often built on each other’s gradual improvements to get to the stage of the technology that we become familiar with through history. And I think–so, talk about that. That’s an incredibly nice, stylized story of innovation generally.

Matt Ridley: Well, there’s a rather nice French word, bricolage, which means trial and error, means tinkering, really. And, tinkering is a good description of what a lot of innovators do. They take a thing and they just keep trying different versions of it till they make it a little better; and above all, they add in the insights of lots of different people.

So, for example, the Wright brothers, Orville and Wilbur Wright. They were absolutely insistent on writing to everybody they could find across the world, even in Australia, who had done experiments with gliders and other pre-flight things just to glean as much information as they can. They realize that innovation is not a matter of going and sitting in a darkened room with a wet towel around your head, because you’re such a genius you’re going to come up with the answer yourself. It’s a matter of combining lots of people’s ideas.

And the contrast with Samuel Langley, who got a huge grant from the U.S. Government to build a powered plane around the same time and refused to tell anyone his plans, did the whole thing in secret, and then unveiled it in front of a crowd in Washington, D.C., and it crashed into the Potomac within 20 yards, 10 days before the Wright brothers did it the right way in North Carolina–the contrast is very striking.

And as that example shows, the world is often very reluctant to believe that a couple of bicycle mechanics can have done something that a brilliant astronomer who is head of the Smithsonian Institution has failed at–which Samuel Langley was.

And you get the same thing in the United Kingdom. You get Humphry Davy and George Stephenson, both invent the miner’s lamp, but George Stephenson is an illiterate mechanic and Humphry Davy is the President of the Royal Institution. So, no one wants to believe that the better lamp has been invented by a journeymen.

So, one of the things I want to do in this book is not to denigrate scientists because they do have great achievements and they are key to this whole process, but to rescue the reputation of the ordinary tinkering people–the bicycle mechanics from Dayton, Ohio, if you like–what they can achieve. Because, quite often you find that they achieve a huge amount, and then they go back to the scientists to explain what it is they’re doing.

Sir Thomas Newcomen, as far as we can tell, who invented the steam engine right at the start of the industrial revolution–incredibly important discovery, the first use of heat to do work, basically–as far as we can tell, he’s just a blacksmith, an engineer. He may not even have been literate. We’ve got no portrait of him. We don’t know very much about his life. But he invented this tremendous machine. And, as a result, the science of thermodynamics was born. It’s effectively: the scientists had to catch up with what the engineers were doing.

9:35

Russ Roberts: Yeah. There’s a lot there. First, I want to observe that ‘tinkering’ has a slightly pejorative tone to it. It sounds like fooling around or just modifying things at the edges, when in fact it’s the key to the, not so much the scientific method, but the discovery method, that’s at the heart of innovation.

The other thought that comes to mind here and when I was reading your book is that, if you had asked me who invented the steam engine, I would have said Watt. Thomas Newcomen, whose name I had heard before, but I couldn’t have brought up from my brain until I read your book. I can try to remember it again, in his honor–but he doesn’t get much glory. A lot of the people who either contributed to these processes or who simultaneously created them, get no glory.

An obvious example, and it might be more familiar to some listeners, is Leibniz, relative to Newton, in inventing calculus; or Alfred Wallace with natural selection relative to Darwin. We understand the person who gets there first gets a little more of the glory. But, this isn’t just about that. This is about this whole underlying process. So, tell us why we honor these singular people, when in fact it really isn’t the right way to be thinking about it.

Matt Ridley: Well, we have a tendency to tell stories about brilliant individuals and put them on a pedestal. We do this in every walk of life. I mean, after all, we expect New Hampshire to discover a godlike figure to run America for four years, every four years.

Russ Roberts: That’s Iowa. But, that’s just portrays your–that’s Iowa, not New Hampshire. But, that’s okay. I knew what you meant.

Matt Ridley: Iowa is just a caucus. New Hampshire is a primary.

Russ Roberts: Good point.

Matt Ridley: Um, where have I got to? Yes. So, the ‘great man’ theory of history–that, Napoleon changes the world–whereas, versus the idea that Napoleon is a product of the French Revolution, as it were, is one way of thinking about this. That actually, if Thomas Edison had been run over by a tram before he had invented the light bulb, we would still have light bulbs. There were so many other people coming up with the idea.

If Sergey Brin had never met Larry Page, we wouldn’t call it Google, but we would still have search engines; and whoever got the most successful search engine would still be a billionaire. And so, if you look at the computer industry over the last 50 years, this industry has an extraordinary inevitability about it, which is expressed in Moore’s Law: this marching forward of the efficiency and the cost of computers. And yet, it produces these billionaires who make huge fortunes out of doing these inevitable things that were going to be done anyway–which I find an interesting paradox to think about.

So, to some extent, we are making the mistake of giving too much credit, and too much reward, to individuals. And we’re singling people out from teams and mixtures of people.

I mean, I have a section in the book called, “Who Invented the Computer?” And I draw very heavily on Walter Isaacson’s wonderful book, The Innovators, to understand that story. And in the end, I conclude that, even though this happened only a couple of generations ago and everything was written down and everybody knew what everybody was doing–so, it’s not one of these things that’s lost in the mists of time in the early 18th century, like the steam engine–we can’t say who invented the computer. There is no answer to that question.

The first computer–if it was the ENIAC [Electronic Numerical Integrator and Computer] in Philadelphia–well, the ENIAC didn’t have stored programs. Well, if it was the Mark I in Harvard–well, that didn’t have electronics. It was a mechanical device. You know, etc., etc. So you can see how it’s a much more collective, a much more distributed phenomenon–innovation–than we generally give it credit for.

Russ Roberts: We do have–we like romance. And I think the picking of the great inventor–the great mind, the great whatever–appeals to our sense of romance there. I’m not quite sure why.

Matt Ridley: And I should just add that the first half of my book is stories about people. And I single out these people. And I tell their stories.

But I do so partly in order to say that, although these people achieved incredible things–they invented the steam engine or vaccines or whatever it might be–they did so as part of a process and part of a team and part of a group. They didn’t–they weren’t gods. And I think this is quite an important lesson to teach young people, particularly today, because there’s a tendency to say, you know, Marconi, or Morse, or Watts, or someone like that was unbelievably brilliant. Or even Steve Jobs was unbelievably clever and could see far further into the future than anyone else.

And that just ain’t true. I mean, sometimes these were just people who worked a bit harder. They put in more hours, or they did more experiments. They weren’t particularly brilliant. They just were prepared to be open-minded, to fail often and fast, and learn from failure–all these kinds of things.

You know, Jeff Bezos actually says this very clearly, and I quote him in the book in the couple of places where he says, ‘What I’ve achieved is just by failing a lot and learning from those failures and trying things and swinging and occasionally hitting.’

You know, the story of Amazon is just a story of a string of failures. They went into the wrong businesses. They did things wrong. They did it badly–

Russ Roberts: Lost a lot of money–

Matt Ridley: Lost a lot of money. And then in the end they made a lot of money.

15:34

Russ Roberts: You can argue that Jeff Bezos’s biggest innovation is creating a company that tries lots of different things and fails and picks the good ones. Now, picking the good ones is not always easy. There’s an art to that, obviously. But there’s also serendipity and luck.

Matt Ridley: Correct. And I once asked Jeff, ‘Now, you’re a big company. How do you keep it innovative?’ Because most big companies stop being innovative when they get big.

And he gave me a very interesting example of the kinds of things they do at Amazon to solve that problem. Which is that, normally, if somebody junior in the organization has a bright new idea, what we should do is, I don’t know, is, ‘Sell dog food or something,’ he comes to a management committee and makes a proposal. And the management committee, three quarters of them say, ‘It’s a bad idea,’ and one quarter say, ‘It’s a good idea.’ And the idea is turned down.

And the problem with that is that–the higher up in the organization you are, the less you’re going to hear about the maverick ideas from the bottom. So, he operates a reverse veto system. If one person on that committee still thinks it’s a good idea, and all the others think it’s a terrible idea, then it has to be sent up to the next level of management–

Russ Roberts: Great insight.

Matt Ridley: It’s quite a nice concept.

16:54

Russ Roberts: I want to come back to what you said about Steve Jobs. I want to do it through an interesting list I saw from Gwern Branwen. Gwern Branwen has a website, @gwern.net, and he has an essay there called, “My Ordinary Life: Improvements Since the 1990s.” And, I love this list. It’s a list of innovations, some of which are obvious, dramatic. Some of them are not so noticeable and I’ve added a few of my own. So, just a few examples. He says, ‘Streaming video,’–huge, obviously. ‘The death of a VHS [Video Home System] and tapes,’ that meant no trips to Blockbuster. Enormous expansion of choice from both the archive of past work and new material.

You know, I like to say we lived in the golden age of storytelling through video. It’s incredible. No rewinding, it’s one of the things he emphasizes. You have to rewind the tapes.

The death of phone tag. You don’t have to constantly go back and forth trying to reach someone. Texting has allowed that to happen, and sharing calendars.

Hearing aids are smaller and cheaper.

GPS [Global Positioning System], the fact that you don’t get lost anymore is extraordinary.

Search, obviously.

Smartphones, obviously I would point in particular to the photography revolution that search phones have allowed and soon will be the death of cameras, I think in very short order.

Russ Roberts: He gives example of power tools that are often rechargeable. You don’t have to constantly be finding the right size of batteries.

Cars–

Matt Ridley: Just on that, on that one, when did you last have to replace a battery in anything? I did on a portable razor the other day, but I haven’t done so for a year or so, where we used to spend the whole time.

Russ Roberts: Cars have rear view cameras. They’re keyless. Movie theaters: ticketing is simpler, the seats are better. LASIK [Laser-Assisted In Situ Keratomileusis] surgery is safe and inexpensive. Board games: We’re not stuck with Monopoly, which I think is a lousy game, but rather you get Puerto Rico and Settlers of Catan. Obviously, we have a massive multiplayer, online, role-playing games that we talked about with Josh Williams last week.

Here’s one from Gwern: Self-adhesive postage stamps. Nice. It’s pleasant. The explosion of craft beer, high quality beer; and coffee. This one’s a fabulous one: Better apples. The Honey Crisp just so dominates the Red Delicious–and this is the one–I love this–Brussels sprouts are less bitter. Who knew? And he doesn’t mention wireless[?]–

Matt Ridley: Is that right? I should try them because I avoid them like the plague, because they taste bitter to me.

Russ Roberts: I love them. I don’t mind when they were a little bitter. They’re better. And he doesn’t mention wireless earbuds, but they’re, like, to me, a game changer–you can just walkin’ around and–

Matt Ridley: What about the seedless grape?

Russ Roberts: Huge. Seedless watermelon. There’s so many good things.

19:52

Russ Roberts: But, I want to suggest, and some of these–you’re laughing, and some of these are silly. But many of them are momentous. And I want to suggest that you could make the case that Steve Jobs is somewhat in a class by himself, as a revolutionary, in terms of how he changed the way we consume music, the role that the internet plays in our lives, because we can put it in our pocket, and it–the laptop, he transformed it. Is there anyone who’s put more of a stamp on our weirdly radically different daily lives since Steve Jobs?

Matt Ridley: I think you’re right. And I think he stands out in several ways, partly because the model of Apple was it developed things in-house. It wasn’t an open source model. The rest of the computing world is moving towards open source and always has been. But this was going in a different direction. And partly because of this, ‘fake it till you make it’ philosophy that he adopted, where, he would announce things that he wasn’t yet ready to produce–which is a risky option. Which, by the way, his disciple, or rather, sorry, the person who was trying to model herself on him, Elizabeth Holmes, tried with–

Russ Roberts: Theranos, yeah.

Matt Ridley: Theranos, and it didn’t work. And the reason he was able to get away with it, was because Moore’s Law kept delivering. I mean, the great thing about transistors was the smaller you made them, the cheaper they got–and the more reliable they got. Whereas, everything else gets less reliable the smaller you make it. So, he was able to deliver on these extraordinary promises.

There’s a very nice novel by Robert Harris, very recent novel called The Second Sleep, which came out about a year ago, in which he–I don’t want to give the plot away too much, but it’s set in the distant future in a very primitive time when we’ve lost most technologies. And, one of the things they’re trying to figure out is why so many of the devices that belong to the ancients had a half-bitten apple drawn on them.

Russ Roberts: Yeah. Well, that’s a great way to put his influence.

I was going to say something akin to what I said about Jeff Bezos. Both of us, I think in the last three minutes, used Steve Jobs as a–with verbs and then nouns as if he was the creator. But, of course, he wasn’t. He wasn’t the inventor of almost any of these things. He was not the innovator. He was the coach. What’d you call him?

Matt Ridley: Packager. I mean, he packages–

Russ Roberts: But, more than that —

Matt Ridley: It’s more than that. I agree–

Russ Roberts: He’s the coach, he’s the inspirer, he’s the muse. And he got people to do things for him. You said, ‘Fake it till you make it.’ He got people to make stuff for him that weren’t possible. But they did it because of his charisma.

The Walter Isaacson biography–I happened to pick it up last night after reading your book, and I was looking through it. He talks about when he launched the first Macintosh in 1984. The code wasn’t ready. It was a week before they had announced the launch. And, the team came to him and said, ‘We’re really sorry, we’re working like crazy, and it’s going to take us three weeks, not one week. So, what we’ll do is we’ll ship it with a demo software and then we’ll ship the real software two weeks after that.’

And, he said, ‘You know, you guys, you’re so talented. I know you can do it in a week.’ And, he walked away. And they did it. They did it. They did something they didn’t think they were capable of. And the Isaacson book is filled with those kinds of stories where–you know, he’s a visionary, obviously. But, I think, akin to Bezos, he created an innovation factory–not a factory of the late 19th century, but a place where minds work together, crowd-sourcing and creating and testing and failing. And that’s his gift–that was his gift, literally.

Matt Ridley: I agree with that. And I think Jobs, Bezos, and Edison have this one thing in common, which is that they spotted that innovation itself could be a product.

Russ Roberts: Well said.

Matt Ridley: You could have a place that, whose job was to generate innovations. Edison was trying all sorts of things. ‘Give me a common old garden device that’s in use, and I’ll try and find you an innovative version of it.’ That was the theme of everything he did.

One of the interesting issues that I grapple with in my book is why this works in some fields and not others. It’s obviously worked incredibly well in electronics in the last generation. It’s not worked as well in vaccines, as we’re discovering this year. It’s not worked nearly as well in transport, which ground to a halt about 50 years ago in terms of improvements in speed, at least. Sure, airplanes are less likely to crash, and have better movies on them, but they don’t go any faster than they did in the 1960s. In fact, we still fly 747s, which entered service in 1969. Imagine using a computer that entered service in 1969?

So, sometimes you come up against physical limits that make it very difficult, or sometimes you come up against regulatory obstacles. The reason nuclear has been unable to innovate in the last generation is because every new design must go through such an enormously expensive and time-consuming regulatory approval process that nobody tries anything new, because if it doesn’t work, you’re a billion dollars out of pocket, which nobody wants to be.

25:52

Russ Roberts: I want to go back to the Wright brothers for a second. Two things there. One is a wonderful quote in the book. You talk about a remark that a photographer made in describing the Wright brothers. He called them, ‘The workingest boys I ever knew. The workingest boys I ever knew.’ I think that’s just the greatest–

Matt Ridley: Isn’t that a lovely quote? I was just thrilled when I came across that quote.

Russ Roberts: And that they just worked like crazy. They didn’t have lives; they had no family other than each other. They weren’t married, no children.

Matt Ridley: Their sister was a–funnily, their sister was the only graduate in the family, she went to university; they didn’t, interestingly.

Russ Roberts: And, that they just kept trying. I read–i don’t think this is in your book, but I read on Wikipedia that in, I think it was 2003, the 100th anniversary of the flight at Kitty Hawk, they tried to recreate it; and it couldn’t be done because they had so much particular knowledge–

Matt Ridley: Fantastic knowledge–

Russ Roberts: of how that design worked, that to get to that, you couldn’t just steer it. You couldn’t just take off. It’s really a beautiful image. And it’s also–by the way, there’s a photograph we’ll link to, it was a very famous photograph, of the plane when it took off. It gives me goosebumps when I look at it and just mentioning it–it actually looks like it could be photoshopped. It looks like maybe they weren’t really off the ground. It’s hard to tell. And–I assume it’s Wilbur–is standing there in silhouette watching it. And there’s something about his stance and the way he’s standing that’s just incredibly moving to me as part of human creativity.

Matt Ridley: In a stiff collar.

Russ Roberts: Yeah. You talked about how they dressed for church every day, it sounds like.

27:46

Russ Roberts: But, I also want to mention, to take us to the next topic–it’s a segue here: there’s a book I love called Orbiting the Giant Hairball, which is an unusual title. It’s a book by the late Gordon McKenzie, who I had the privilege of talking to a little bit. He is a wonderful man. It’s about his adventures in Hallmark, the greeting card company. He was in charge of creativity there and how bizarre that was.

So, the ‘giant hairball’ is sort of the corporate mess that stops creativity from happening. He has a chapter in that book that is one sentence long, and this is the sentence, could have been in your book, one of my favorite sentences: ‘Orville Wright did not have a pilot’s license.’

And, there’s two great aspects to that. One is it shows the problems with licensing generally; but secondly, it’s really about permissionless innovation. Talk about that.

Matt Ridley: Right. Well, I think that’s a terrific insight. Because, the degree to which you have to get permission to go off and innovate in certain areas has become a real problem. As you say, it’s either through occupational licensing or through government regulation. But also through patents. You had to get permission from your competitors, essentially, to dive into certain areas.

And, one of the interesting things that I’m intrigued by is how the Clinton Administration in the late 1990s deliberately set out to pass some really astonishingly libertarian legislation through Congress that paved the way for eCommerce, that made online retail and online business possible for the first time.

And these rules were essentially it being permissionless. You didn’t have to seek someone’s permission before you set up an online business.

And, when you contrast that with what it’s like if you want to go out and develop a new drug to start to cure cancer or develop a new medical device to diagnose a disease, or something like that, the contrast is truly extraordinary.

And that’s why, essentially–and Peter Thiel often makes this point–today we don’t–you know, drug discovery has ground to a halt to some extent, whereas the making of video games goes from strength to strength. Because you don’t need permission to develop a video game, and you do need permission to develop a drug.

Now, there are good reasons for that. I’m not saying it’s not a sensible to have regulation in terms of safety for drug development and so on. But, is it really necessary to take up to 14 months to give approval to a new medical device? No, it’s not. The reason we know it’s not is because during the COVID-19 Pandemic of 2020, we shortened that period to a couple of weeks in many cases, and we gave new diagnostic devices, new ventilators, all these kinds of things rapid approval.

So, rediscovering the virtues of permissionless innovation is, I think–that phrase by the way, was coined, I think, or at least I came across it in a work by Adam Thierer. I don’t know how to pronounce him, T-H-I-E-R-E-R. It does feel to me that this gets to the heart of why I have as a subtitle of my book ‘And Why Innovation Flourishes in Freedom,’ because I think the one ingredient that is common to all the themes that came out from the stories I told in my book is that the innovator had to be free. He had to be free to fail and try again. He had to be free to change his mind and go in a different direction. He had to be free to try something without getting someone’s permission.

But, the consumer also had to be free to express his preference: to say, ‘Yes, actually I do want innovations in this area, but I’m not interested in them in another area.’ And this combination of completely unpredictable freedom expressed through permissionless innovation is absolutely vital.

And this reminds me of one other point, which I really like, which is that I mentioned earlier that the search engine was kind of inevitable in the 1990s. Once you’ve invented the Internet, it’s obvious you’re going to invent the search engine. At least, it’s obvious in retrospect, but in prospect, was it obvious? No! Nobody, very few people predicted the importance of search in the 1980s. When they did, they did so in a very vague way.

And in fact, even the people who were inventing search engines, including Larry Page and Sergey Brin, didn’t realize that’s what they were doing. They were just thinking of ways of cataloging the Internet. And in fact, they came up with–I’ll tell you what people were getting wrong. People thought we would go into the Internet and wander around and see what we came across. Instead of which, we go into the Internet looking for something, looking for–

Russ Roberts: Yeah. And then we wander around.

Matt Ridley: And then we wander around within a limited area, is what we do [?]–

Russ Roberts: But, it’s interesting how the wandering around has become such an important part of it, a testament to our wealth, I think, the amount of leisure in our standard of living, but–

Russ Roberts: There’s a paradox you just highlighted, I just want to emphasize, which is–and it’s what I had in mind also, when I mentioned Steve Jobs–everything seems inevitable, but it seems like every once in a while, someone like Steve Jobs comes along who makes something that only is inevitable in retrospect.

I mean, the App Store–I didn’t mention that–but that’s a genius idea. Again, on the surface, all of this, just a marketplace. It’s just a place to buy and sell stuff. What’s the innovation? Really amazing idea, and a risky one because he lost control, obviously, to some extent of what goes on the product, the phone. But, that paradox between: in retrospect, everything looks inevitable, but at the time we can’t figure out what comes next–it’s a little bit–it’s mind-bending.

34:11

Russ Roberts: The other point I want to mention, which I got out of your book, which was really not obvious to me: You can talk about the freedom of both producer and consumer. You have a quote from William Petty–18th century, maybe?

Matt Ridley: Seventeenth century: 1600s.

Russ Roberts: So, a long time ago. He had a tough life. A lot of his insights didn’t come to fruition. There’s a fantastic quote–I’m not going to read it at length. I’m not going to read it, but there’s a quote in there of his frustration. He had all these great ideas, barrier after barrier he couldn’t surmount. Competitors, lots of troubles, tough time. And, I thought of that long quote–and it’s a litany of complaint–in light of a bromide of–in English–which is: ‘Build a better mouse trap, and the world will beat a path to your door.’ Which is a statement about consumer sovereignty, basically, and the power of markets.

Yet, a lot of times the consumer doesn’t know they want a better mouse trap until it’s there, and then it sometimes takes a long time.

So, I thought of that whole dynamism of frustration and the time to market. You have the example of wheeled luggage. That was a good idea. What took so long? And the answer as you pointed out is, it actually was here for a long time. People just didn’t notice it–it wasn’t marketed well, or who knows? But, that whole idea that, ‘Oh yeah, once you build a better thing, it’s magic.’ It’s not.

Matt Ridley: Yeh. Yeh. No–and this comes back to this difference between innovation and invention–is that: you cannot say, ‘Here’s my prototype. I’m going to sit back and let everybody enjoy the product.’ You’ve got to get out there. And, first of all, explain to people that they might enjoy having your product–which isn’t always obvious in some cases. And then you’ve got to make sure that it’s reliable, that the instructions don’t take too long to read, or whatever.

I mean, right at the beginning of the book I talk about sliced bread–for the obvious re ason: ‘The best thing since slic ed bread,’ it became a sort of cliché.

Russ Roberts: I lov e that. I love that you did that.

Matt Ridley: A guy, a former optometrist in Chillicothe, Missouri, who first ma de sliced bread. Why there, in 1920s? Why then? Why there, why him? And there isn’t a particularly good answer to any of those questions, actually. I mean, he’s German and he’s probably a techie kind of guy.

And the heart of the country there has been surprisingly innovative. I mean, Ohio, you know, had produced a whole string of invitations from this airplane to the sewing machine in the decades before that. There was something weird about the Midwest at that point that. Well, the way Silicon Valley is today, if you like.

But, also, this guy realized that it’s no good inventing sliced bread unless you invent good packaging for bread. Because, if you slice bread and don’t package it properly, it’s just going to dry out quicker.

Russ Roberts: Right. It’s a great point.

Matt Ridley: So, he realizes, you’ve got to invent the whole package, quite literally in this case. You don’t just invent one aspect of it: you package it in a way that works for people.

And then you get cases like Google Glass, which is just a few years ago, Google came up with a device from their kind of Skunkworks, which they called Google X, which is where they come up with weird products. They came up with this pair of spectacles that you put on and you could basically see in the Glass, your emails or whatever it is you can see, I can’t remember–

Russ Roberts: In your field of vision. It can give you information about what you’re looking at. It was a brilliant idea, and it’s such a failure–

Matt Ridley: It’s an incredible technological[?] achievement.

Russ Roberts: It’s such a failure that you have to describe what it is because there are people listening who have already forgotten about it, or didn’t even know what happened because it dropped off the face of the earth.

Matt Ridley: Right. They launched it, and nobody wanted it. So, they withdrew it and said, ‘Well, maybe we’ll tweak it and relaunch it,’ and they tried that and it didn’t work. Turns out that $2,500 to be able to see things in your field of vision, like a fighter pilot can, while looking a bit geeky, because you’re wearing a weird pair of specs, doesn’t hit the spot for consumers. There are cases where you can take the consumer to water, but he doesn’t want to drink.

38:44

Russ Roberts: Yeah. There’s a great line in your book–you could teach a whole class of economics around this line, I think. You say the following, ‘The chief way in which innovation changes our lives is by enabling people to work for each other.’ What did you mean by that?

Matt Ridley: Well, I think this is the great theme of human history: that we’ve gone from being self-sufficient, where you go out and you plant your own crops and you eat them, to where you spend your working day doing things that help other people and in exchange you get paid for it. We get more and more specialized in the things we produce in order to become more and more diversified in the things that we consume.

So, compared with a self-sufficient peasant, as it were, I can consume a far greater variety of things. Movies, restaurant meals, whatever it might be.

But, in order to achieve that, I have to produce one thing–in my case, a book or in somebody else’s case, accountancy, or airline pilot services or whatever it might be–

Russ Roberts: Haircuts.

Matt Ridley: A haircut, exactly. And it’s innovation that has been at the heart of making that journey towards interdependence possible or away from self-sufficiency, because it’s–this is back to Adam Smith’s pin factory: by making me more efficient at cutting hair or writing books, whatever it is, it then makes more sense for me to cut a lot of people’s hair rather than just cut hair and plant my own crops. Because if I cut enough people’s hair, then I can get enough money to go out and buy food. I don’t need to plant my own crops. So, that whole process is–

Here’s a really nice story which actually gets to the heart of How Innovation Works. That way of expressing it–that we get more and more specialized in our production so that we can get more and more diversified in our consumption–I got that from a book called Second Nature by a guy called Haim Ofek, which was about, basically, sort of stone-age economics. And, I wrote to him and I said, ‘This is such a nice idea. I really want to take it further and explore it; and have you done anything else on this?’ This is a long time ago. He wrote back and said, ‘Well, I think I got that idea from your book, The Origins of Virtue.’ And actually, I hadn’t expressed it that way, but he had twisted what I’d said into a way that I then twisted back into a way that I found useful. That’s the way innovation works. In this case, innovation in ideas rather than devices, but it’s the same. [More to come, 41:47]



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