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What Drives Prosperity?

2012 March 25

“President Obama once said he wants everybody in America to go to college.  What a snob!” exclaimed Rick Santorum.  The reaction among the chattering classes was, as you would expect, visceral in its disgust.

But should it have been?  Is there really something wrong with wanting people who merely seek to work hard, put in an honest day’s work for an honest day’s pay and mind their business to be able to live a decent life?
Put another way, what is the true path to prosperity?  There needs to be more serious thinking about the question than we’re getting in political circles.  Is it luck, diligence, perseverance, government investment, private philanthropy, the profit motive or something else?  The answer is more complicated than you’d think.

Happy Accidents

In 1972, biologist Jared Diamond was walking and talking with his friend Yali a native of Papua New Guinea, when a question arose: Why does the West have all the technology? In other words, why did the Europeans colonize the rest of the world and not the other way around?

It’s one of those questions that’s so startling in its simplicity that you are struck dumb by the fact that you don’t have an easy answer.  Diamond devoted decades to the question, an effort that culminated in his Pulitzer prizewinning book Guns, Germs, and Steel.

What he found was that many of the factors had more to do with luck and chance than they were to culture.  For instance, agriculture began in the Fertile Crescent because that’s where the appropriate grains were.  Eurasia sat on a horizontal plane, which lent itself to the transfer of technology and no other continent did. He catalogued such examples for over 400 pages.

In a similar vein, James Burke argues in his excellent book Connections that powerful guilds for skilled labor in England, lots of cheap farmland (which created a shortage of labor for factories) and easily accessible water power combined to make America a manufacturing power.

A little serendipity goes a long way.


Louis Bamberger made a fortune in retail.  He also had the good luck to sell his business just ahead of the 1929 crash, leaving him and his sister, Caroline, with a fortune at a time when assets were cheap.  They wanted to give back to society and hired Abraham Flexner to help them decide how they could best invest in education.

The result was the Institute for Advanced Study at Princeton University and the impact was enormous.  The combination of high salaries, unparalleled working conditions (complete independence and no teaching requirement for professors) and the plight of Jewish scholars in Hitler’s Germany proved a powerful draw.

Among the first to come were Albert Einstein and John von Neumann (father of both game theory and the modern computer).  They, in turn, attracted stars like Niels Bohr, Enrico Fermi and Hans Bethe, who produced students like Richard Feynman and countless others (at the turn of the century, American scientists had to go to Europe to earn a PhD.)

The ripple effects of the Bamberger grant in education included the Manhattan Project that launched the nuclear industry, extensive military grants for basic research (including RAND and DARPA), the Internet and Silicon Valley.  Snobbery might not be such a bad thing after all!

The Creative Class

So innovation, and the prosperity that comes with it, is a product of both fortuitous circumstances and farsighted investment in research and education.  However, there is a third element that is equally important.

Education and research were high priorities in the Soviet Union and, as my Russian friends like to point out, many of the innovative people in Silicon Valley are of Russian origin.  Nevertheless, few would describe Moscow as a hi-tech Mecca.  Where are Sputnik’s ripple effects?  Why did the arms race produce ancillary benefits for the US, but not for the Soviets?

Richard Florida uncovered a surprising answer in his research, which he summarized in The Rise of the Creative Class.  Innovation, it turns out, is not just a matter of technology and talent, but also tolerance.  After all, top quality engineers can go anywhere, why wouldn’t they want to go to a place that has an active bohemian culture and fosters creative thought

So it’s not just research centers that build future prosperity, but also a cool art and music scene.  He even finds a strong correlation between innovation and the gay population (I don’t imagine Santorum is a fan of the idea).  It seems counter-intuitive at first, but it stands to reason people who think creatively feel more at home in a tolerant place than in a repressive one.

The Santorum Paradox

To be fair to Mr. Santorum, it’s important to stress that he wasn’t arguing against education, but for the dignity of people who choose not to go to college.  People who work in factories should be proud of the work they do.  There is, one must admit, something admirable in that notion.

Admirable, yet misguided.  This article in The Atlantic highlights the importance of college degrees in manufacturing.  Much of what is produced in developed countries requires high precision and, to operate effectively, workers need some form of higher education even in seemingly low tech areas like the auto parts manufacturer profiled in the article.

The days of dropping out of high school to go work in a steel mill are gone and aren’t coming back.  Those jobs have been outsourced.  Increasingly, the only truly unskilled positions are low-paying service jobs that have to be kept local.

To continue a on a path to prosperity, we need to be able to solve problems creatively, to think abstractly, visualize concepts in an idea space; not merely work hard, but work smart.  In short, we need to innovate.

Innovation is Combination

As I wrote in a previous post, innovation is combination.  You can’t choose to focus on one domain to the exclusion of others.  Causal chains are elusive, except in retrospect.  Gregor Mendel’s pea plants led to Watson and Crick’s double helix, which led directly to the bioinformatics that is revolutionizing medicine today.

In much the same way, innovation thrives in a complex substrate.  You need some luck, a well educated populace, government investment in primary research, an active venture capital community and a thriving culture (after all, Russian engineers are more likely to migrate to the Bay area, Seattle or Austin than the other way around).

And that, leads us to what is probably the most important insight about innovation: it requires a certain uselessness.  Big breakthroughs don’t happen along a linear path, but are the product of synthesis.  They happen when people of unlike minds and goals share an idea space.

Innovation and prosperity, much like dignity, require not only honest work, but honest discourse as well.

– Greg

7 Responses leave one →
  1. March 25, 2012

    This is a great post and resonates very much with the perspective I advanced in The Power of Pull – that, in a time of more rapid change and increasing uncertainty, serendipity becomes even more important. This book also made the case that we have far more ability to shape serendipity – to increase the quantity and quality of valuable unexpected encounters – than most of us realize. Bravo!

  2. March 25, 2012

    Thanks John! Very good point about increasing chances for Serendipty.

    For others, check out John’s book The Power of Pull and his work at the Deloitte Center for the Edge.

    – Greg

  3. March 25, 2012

    Another home run blast out of the park. Especially the soaring-over-the-fence ending.

    Innovation cannot occur – much less grow and flourish – via iterate mind.

    Giddyup Digital Tonto!

  4. March 25, 2012

    Bravo back at you John. So true.

    Unexpected encounters. Serendipity. Kismet. Mojo. Magic. Aha. There is so much more that can be shaped and extended with and through it – if we were only to cooperate with it rather than attempt to understand, analyze, or command it.

    Am reminded John, of that elegant Einstein quote, “No problem can be solved from the same level of consciousness that created it.”

  5. March 25, 2012

    Thx Jay. Have a great Sunday!


  6. April 15, 2012

    There’s an interesting article in the Economist about Germany’s economy and their emphasis on vocational study. ( Unlike other European countries and the US, Germany has continue to invest in the form of education. Perhaps transferring some emphasis to rigorous apprenticeships and vocational study could be an alternative to a four-year college program?

    Thanks for the great post!

  7. April 15, 2012


    Yes. I read it. Great article and very true!

    As I wrote in a post a few weeks ago, ( most manufacturing jobs in developed countries do require some form of higher education (i.e. basic calculus) but not necessarily a 4 year university.

    Thanks for a great comment.

    – Greg

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