How to create the Roaring Twenties 2.0
Ingenuism Weekly 36
“When something is important enough, you do it even if the odds are not in your favor.” –Elon Musk
MEDIA
Silicon Valley on trial? – Silicon Valley Examined 25
In this episode of the Silicon Valley Examined podcast, Robert Hendershott and Don Watkins discuss the Elizabeth Holmes trial verdict and what it means for Silicon Valley’s alleged “fake it till you make it” culture. They also look at two of the biggest opportunities for progress in 2022.
INSIGHT
How to create the Roaring Twenties 2.0
Robert Hendershott and Don Watkins
The challenge
For most of human history, progress occurred in fits and starts, and regression was almost as common as betterment. Societies that enjoy relentless progress are ones that 1) nurture ingenuity, 2) provide connection to magnify the benefits of the insights ingenuity produces, and 3) consistently invest to discover novel insights that broaden the scope of productive activity.
Historically, that’s rare. Ingenuity is not new but environments that create positive feedback for the use of ingenuity are.
What distinguishes environments that nurture ingenuity from those that don’t?
(1) Establishing rule of law
Progress has an odd feature. Large-scale, widespread progress is an unmitigated good. But when progress is limited and creates relatively modest wealth and opportunity, this can encourage a zero-sum mentality where people look for opportunities to steal wealth others have created.
Unfortunately, this seems to be a pretty stable equilibrium. In societies with limited opportunity, expropriation is as common as wealth creation. This limits progress and opportunity, which in turn maintains the status quo of mediocre progress and modest opportunities to create (and keep) wealth.
Breaking out of this trap transforms human society.
(2) Embracing failure
Nurturing ingenuity requires conquering the default human relationship to failure.
For most of human history failure was potentially fatal. And while that is no longer true today, most people’s default perception of and reaction to failure retains flavors of our ancestors’ attitude. We condemn failure in ourselves and others. We avoid failure to the extent of limiting our ambition. We hide failure to avoid the scorn of others.
This default relationship to failure is antithetical to exploration, discovery, and learning. Progress requires making mistakes, learning from these mistakes, and ideally sharing these lessons.
There is no way to embrace learning without discovering ways to accept failure.
(3) Nurturing trust
Progress benefits from trust. Communication and information technologies that enable connection are correlated with a dramatic acceleration of wealth creation and progress. However, deep connection is predicated on trust.
We cannot independently verify everything we learn from others, can’t build relationships if we expect our partners to violate agreements, can’t engage in experimentation if we worry that others will use our failures against us.
That’s why low-trust societies tend to be low-GDP societies (and it’s why we should be worried that trust seems to be in short supply in high-GDP countries these days).
A lack of trust limits connection, collaboration, and even learning (the less you trust yourself and others, the more you’ll fear failure).
(4) Intellectual honesty
Finally, learning is predicated on intellectual honesty—accepting uncertainty and acknowledging how much we don’t know (and don’t even know we don’t know).
Progress has created a complex society with many legitimate experts, and it is tempting to think that experts can plan our next steps forward. But this flies in the face of the path of past progress and potentially stymies more than supports future progress. Ingenuity does not thrive in rigid, directed environments. See the failure of central planning in the 20th century.
There are, of course, examples of very successful top-down directed R&D. For example, the Manhattan Project and the Apollo Program produced large leaps forward in the areas of nuclear power and reaching/exploring space. But each was followed by a long period of stagnation. Only now, when SpaceX is willing to crash a series of Starship rockets in service of learning by doing is space on the verge of becoming accessible economically.
The opportunity
In many companies, sectors, and regions of the world ingenuity is thriving through the rule of law, a healthy relationship to failure, authentic trust, and an effective blend of ambition and intellectual honesty (and, perhaps other features of the economic milieu). We call this mix Ingenuism.
How to nurture Ingenuism (and the resulting progress) is the most important question our society faces. Whether you believe humanity’s greatest challenge is health and longevity, extreme poverty, global warming, or something else, Ingenuism offers the path to meeting the challenge.
In 2022 we will be focusing on and advocating for the opportunity of Ingenuism, both at the macro and micro levels. Society, firms, and individuals face choices that will either catapult progress forward or leave the world, its leading companies, and our lives falling far short of their potential.
We are particularly excited to see what develops in two areas that have exploded into being over the past few years, Web3 and Biotech2.
Dave Peck offers a nice summary of the state and potential of Web3. As Peck points out, one of the most interesting aspects of Web3 is its potential to revolutionize value capture on the web.
The history of the Internet is, in part, the history of the birth, adoption, and stewardship of distributed protocols by the broader community. Blockchains follow in this tradition, but also break radically from it: they are the first protocols to arrive with an asset class attached.
Protocols like SMTP (1981; email), TCP (1983; reliable packet transmission), HTTP (1991; web), and XMPP (1999; chat) all created immense value from public networks while capturing almost nothing for their inventors.
Web2 reversed that dynamic as companies like Google and Facebook built massive businesses using savvy algorithms and big data to build private networks. Web3 looks like it could find the happy Goldilocks point in the middle where inventors capture considerable value for themselves launching and building public networks.
In biotech, new technologies are beginning to mimic the precision of information technology. Genetic modifications are done at the base pair level. Critical new vaccines are identified in days or weeks. The potential is mindboggling: as Alex Tabarrok points out, “All of the economics indicates that if we could cure cancer, that would be worth trillions. Trillions.”
There’s an old joke about an economist and a student walking down the street when they pass a $20 bill on the sidewalk. The economist passes it by, while the student stoops to pick it up. “Why didn’t you pick up the $20 bill?” asks the student. The economist responds gravely: “Because obviously if there was a $20 on the sidewalk someone would have already picked it up.”
We are walking down a street littered with billion (and a few trillion) dollar bills. Anything less than a full commitment to Ingenuism is akin to leaving them on the ground.
QUICK TAKES
The progress movement puts its money where its mouth is
Most intellectual movements are focused on the problem of persuasion: how do we convince people to do what we want them to do? That’s important. But even better is to combine persuasion with action: how can we put our ideas into practice without having to win over new supporters?
For example, let’s say you think that the way basic research is funded is suboptimal. You could spend a zillion dollars trying to convince the government and universities to reform basic research funding—or you could just start funding basic research in a better way.
Enter Patrick Collison and the creation of the Arc Institute.
Arc is, fundamentally, a nonprofit that will conduct basic research in a somewhat new way.
See Patrick’s thread for a good breakdown of what’s gone wrong in science funding. See also a similar project from Slate Star Codex’s Scott Alexander. I think it’s appropriate that people championing the importance of progress are also creating it.
Overcoming the limits of connection at a distance
The pandemic has opened up a debate about the impact of remote work, and one thing that seems pretty clear is that the downsides for younger workers are probably greater than any downsides for people who’ve been around the block, learned their industry, and developed a solid network of personal relationships.
One way to think about this is that connection at a distance is only a partial substitute for in-person connection. But it would be really, really good for the world if we could make it a complete substitute.
Anyway, José Luis Ricón comes at this issue from an interesting angle. Namely, what’s involved in acquiring expertise in a new field? If it was a matter of simply reading papers in the field, then connection at a distance would work fine. But…yeah, that’s not at all sufficient. So much of becoming an expert emerges from ongoing interactions with people in the field. That’s because there’s an enormous amount of tacit knowledge experts possess and it’s not at all obvious how to convey that knowledge at scale. But it’s also not obvious that’s impossible.
Here’s Ricón’s summary:
Expertise requires acquiring a degree of private and tacit knowledge. Expertise cannot be taught using only explanations. Acquiring expertise can be accelerated by means of being exposed to a large library of examples with context. We are not leveraging this as much as we can and we should experiment more to explore how far this method can get us.
Much more at the link.
Why music players are getting better but music isn’t
Where are we making progress? Here’s Scott Sumner’s answer:
Technology: Very rapid progress
Science: Rapid Progress
Public morals: Slow progress
Sports: Slow progress
Human personalities: No progress
Art: No progress
Scott follows this up with some speculations as to why progress is so uneven.
My preferred theory is that the field of art involves discovery, and those who arrive first have the greatest opportunity to make major discoveries. If Thomas Edison were born today, he’d have trouble inventing so many new home appliances. Instead, he might have gone into software or biotech. A talented young artist born in the 20th century might have decided that painting and photography were exhausted, and gone into filmmaking.
Let me suggest one other factor. We see the most progress when there’s an agreed on standard of value and a feedback mechanism that pushes us towards satisfying that standard of value.
That’s easiest to see with science. We have an agreed upon goal—knowledge—and a method for validating knowledge. (There are institutional and cultural incentives that sometimes muck up the works, but overall scientists benefit from getting things right.)
The same goals for technology. The goal is to produce goods and services that people value, and the market rewards success and penalizes failure.
Sports fits here, too, except that the physical limits of human capability make the kind of unlimited, rapid progress we see in technology and science impossible.
The other areas? The standard for what constitutes good art is contentious and changes over time, and the feedback mechanism is wonky. It’s driven mostly by what rich people think will impress other rich people.
Similarly for morals and what Scott is calling human personalities. Widespread disagreement over standards of value and a weak feedback mechanism.
So I have to disagree when Scott says of his overview of progress, “Ex ante, this is not what one might have expected.” It’s actually very close to what I would expect.
Maybe the hype is all hype
Since we indicated our enthusiasm for Web3, we should probably acknowledge that there are a few doubters out there, and we should probably acknowledge that those doubters include freaking Elon Musk and Jack Dorsey.
Elon observes that Web3 “seems more marketing buzzword than reality right now.” Which is fair enough. For all its potential there’s a real question what that potential will amount to.
Dorsey’s criticism cuts deeper—namely, that Web3 will exhibit the same centralization as Web2.
You don’t own “web3.”
The VCs and their LPs do. It will never escape their incentives. It’s ultimately a centralized entity with a different label.
That would be bad! Though see Balaji Srinivasan’s responses in the thread.
The worst take of 2022
I know it’s a bit early, but still…I’m calling it. On January 1, The Intercept named the executives of Moderna and BioNTech the worst Americans of 2021.
The pandemic has turned nine pharma executives and investors into billionaires. This has only been possible thanks to a massive government intervention in the market via monopoly patent protection—for vaccines largely developed via government funding.
I mean…
If your company helps save millions of lives and trillions of dollars, maybe you should become a billionaire.
Patent protection is no more government intervention than contract enforcement.
And government funding? At most, it arguably sped up production by guaranteeing a buyer for vaccines.
The real question is: what alternative does The Intercept propose that wouldn’t have slowed down or stopped altogether the creation of the COVID-19 vaccines?
I’ll wait…
Until next time,
Don Watkins
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