In Praise of the First Amendment - The Social Invention That Generates New Social Inventions

The first amendment is among the great inventions of history.

"Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances."

It has five parts:
1. Freedom of religion or belief
2. Freedom to speak out in defense of or attack on beliefs
3. Freedom of the press to reach a wider audience
4. Freedom to assemble – or organize – around those beliefs
5. Freedom to take your cause to the government in order to effect change, through laws or budget.

It offers freedom of religion and freedom from religion. Just a century before, Europe had been torn apart by religious war and the result was 10 to 30% of folks on the continent killed. Our founding fathers knew the absurdity of legislating religion, whether trying to force someone to not believe something or force them to believe something.

But the first amendment is more important than that. Much more important. And it is brilliantly constructed to result in perpetual progress.

What freedom of religion really means is freedom of belief. The US can’t pass any laws to legislate what you believe. So essentially this is like giving 330 million Americans a license to generate all sorts of wild theories – some folks tales, some religious, some that - if taken seriously - will create great wealth and some that - if taken seriously - will result in death and destruction, some conspiratorial and some downright scientific.

But it doesn’t end there. You can speak about your belief and even go to press with your belief. You can argue for your own belief or against someone with a different belief. The first amendment says that you have a right to believe the earth is flat. It also says that everyone around you – from your neighbor to the nightly newscaster – has the right to tell you how stupid that is. And here is the really amazing thing about you going to press with your belief: it becomes something a little different in the mind of each reader. Your idea becomes the community’s idea. It changes. Your idea becomes bigger than you. In the same way that a gene can be passed on to someone else, an idea, a meme, can be passed on to others and - blended with other ideas - create something new. Someone once wrote, a city is where ideas come to have sex. Once it enters into other people's minds, becomes a part of the community's discussion, your idea will become something different than how it was born in your head.

What’s next? People can organize around this idea, this belief. The most obvious thing is that you can assemble and protest. Less obviously, you can engage in social invention and entrepreneurship to institutionalize your belief. Women organize to become suffragettes, arguing that they have the right to vote. Those groups are the first bit of organizing and then that takes us to the fifth bit of institutionalization.

You can bring your cause – your belief – to the government and work to have it translated into a new bit of legislation. The organized group of suffragettes who argued that women had the right to vote dissolved because they pulled off an even better bit of social invention: they changed the constitution so that women could vote. The reality girls are born into is now different because of their success.

The first amendment traces the trajectory of progress: you have an idea or belief, you talk about it with others, you even publish it, sending it out into the world to become something independent of you, and then people protest the status quo, arguing for this new belief to be made into a new reality and then …. It becomes the status quo for the next generation. It is not enough that Isaac Newton knows the calculus he has invented. What is really powerful is that we teach calculus to teenagers and it simply becomes a common tool for them to model and manipulate reality. At that point – the point at which your idea is institutionalized – the status quo becomes something very different.

This is how progress is made. And that may well be the most beautiful and remarkable thing about the first amendment. It actually traces a thought in your brain into a new, shared reality babies are born into. Each child does not have to start civilization from scratch. We simply don’t have time for that. What we’ve institutionalized becomes the starting platform for the next generation … who begin this process of creating new beliefs that have to go through the stage of challenging and spreading and then becoming the next thing that is institutionalized. The first amendment is so much but to me perhaps the coolest thing is that it is a description of progress.

The first amendment is not about demanding respect for old ideas and traditions. It is about demanding respect for new ideas and innovation. The first amendment is the social invention that itself generates new social inventions. That’s something to shout about. And thanks to the first amendment, you can.

Progress Has a Direction

When it comes to politics, there are a lot of people who believe that the truth lies somewhere in the middle and that if only we listened to each side we'd find the truth there.

I actually agree with this on one dimension. Imagine a scale of 0 to 100. 0 is a world in which not a dollar of income is taxed, not a dollar of government money is spent, and not a single activity is regulated. 100 is a world where every dollar of income is taxed, every dollar spent is government money, and every activity is regulated. (And you could make this more complex and have three scales for the tax, spending, and regulation.) I have my own opinions about where we should be on this scale and so do you. (Mine involves more hand waving than precision.) It might be a simple thing to have democracy by averages in this instance and simply let every single American pick a value from 0 to 100 and let the tyranny of the average (or median) define our policy. We now have the technology for this. If every voter's opinion matters, we could easily weight every opinion equally and find our truth in the middle and let it move around over time as awareness of problems and possibilities changed.

(And it annoys me that we spend so much time debating this. Again, we have the technology that would let people quickly express their values and opinions on this. Once in place, we could know the answer to the question of where Americans think we should be on this scale in an instant.)

But some policies are not subject to average. Is slavery legal or illegal? Abortion? Do we make schooling mandatory for every child? Do we make child labor illegal? Or more relevant to my own obsession with economic progress, do we put in place policies that assume and support a national industrial economy or a global information economy? Or even better, an economy that popularizes entrepreneurship?

Progress has a particular direction and for me it can be captured along these four dimensions or scales. Progress isn't found in some average on these scales but always in one direction. 

Greater Interdependence and Specialization

Progress steadily makes us part of larger groups. Progress is coincident with greater levels of complexity and interdependence. One of the simpler ways that shows up is that we move from economies largely bound by tribes to city-states to states to nation-states to global markets. Individuals specialize more and more and their work is coordinated with bigger groups (partly through management and partly through markets and partly through platforms like Fiverr). When you are self-sufficient, you have to be a generalist rather than specialist and your living standard is very low. When you are interdependent, you specialize and your living standard has the potential to be very high. Nobody on a deserted island is living a life of luxury; some people in big cities are.

Autonomy Supportive vs. Control or Abandonment

William Deci makes really great distinctions for parents, teachers and managers. You can control a child or employee, driving them towards the fulfillment of your own goals. At the other end of the spectrum you can abandon them, leaving them to do what they want without your control, influence or help. He advocates instead supporting their autonomy by enabling them to define and pursue their own goals. Rather than dictate goals you help them to articulate their own. Rather than shrug and say, "Good luck with that," you help to develop their ability to pursue those goals.

Autonomy supportive is relevant in so many dimensions but for now I'll simply say that it applies in this matter of greater interdependence. Empire is one way to expand the circle of people upon whom we depend. In that sense it is progress. A global market is even better than an empire as a mechanism for increasing our level of interdependence. And of course even better than free markets is a world in which government enables individuals to succeed in markets, is autonomy supportive. What does that look like? Regulating health and safety so that the person can trust the water and transportation systems they depend on. Providing lots of research and education so that the individual has the benefit of a steady parade of new knowledge and best practices. Education and training so the person knows how to be productive. The government neither dictates nor abandons its citizens but instead is autonomy supportive.

Greater Inclusion

At one level of progress, white, male, land-owning Protestants are able to use government as a tool for their goals. At another level of progress, minority women atheists who rent are able to use the government as a tool for their goals. One dimension of progress is Carl Benz inventing the car. Another dimension of progress is Henry Ford applying the concept of the assembly line to building cars and making them affordable for 90% of households. It is the same concept for our government, laws, and institutions. The more people able to use them and call them their own the better.

More Inventive

As we make progress, our world becomes more inventive. We invent computers and canned goods as well as banks and corporations. The speed with which we travel across town is less defined by how fast we can run than it is by whether we have access to a bike, car or subway. Our level of affluence is less dependent on our ability to hunt or build our own hut than our access to great schools or venture capital markets or table saws and nail guns. Progress means increasing reliance on inventions - social and technological. This can be disruptive.

Given the above, progress clearly has a direction. Policies that are autonomy supportive rather than controlling or abandoning represent progress. Policies that help us to become more specialized and more reliant on a larger group are progress. Policies that are more inclusive, that allow more and different kinds of people to have the same access to the institutions - institutions like credit markets, courtrooms and schools - we rely on is progress. Policies that encourage more invention - technological and social - is progress. 

There will be times when we move backwards on these scales. Such movement might even be necessary. For instance, during war we no longer trade with some group of people we were formerly reliant upon. There are people we will have to imprison, to control. Again, that is not progress but is instead a breakdown at the individual level from what is ideal to what is necessary. Moving backwards on these scales is not progress. It is - at best - an interruption to progress.

It is true that for some issues, the best resolution is in the middle. Progress, though, is not somewhere in the middle but further along. 

The Random Ten Percent

Universities have standards they use to judge whether applicants deserve to join.
We have elections to decide who should serve on city council or in state legislatures.
Venture capitalists and banks have criteria for deciding whether or not to fund a startup or business.

Given that all of those processes can be gamed and all of those processes depend on judgement against a set of criteria that may turn out to be a really poor predictor of success, we should set aside 10 percent of all slots for a randomly chosen group.

This would have a host of benefits.

One, given these people would be randomly chosen from the population, they would be more representative. Right now, more than 90% of money venture capitalists give is given to men. Blacks and Hispanics are under-represented at universities. The folks who win elections tend to be good looking. The processes we use are skewed and a random process would help to partially offset that.

Two, it would be a chance to test the null hypothesis. All of these institutions have theories about what predicts success. Inevitably those theories have flaws. One way to discover those flaws is to compare the success rates of those randomly chosen with those intentionally chosen. To the extent that unpredictable things happen, it will be a chance to update the choice algorithm, throwing out criteria that turn out to be unrelated to success and adding criteria that - surprisingly - turns out to be very predictive.

Three, it would be an experiment to test the notion that access to these institutions will improve anyone's life, and not just the lives of those carefully chosen. Perhaps 4 years of Harvard will improve the life of a kid with a 2.4 GPA at least as much as it will a kid with a 4.2 GPA. Perhaps the community will be improved as much by the startled bartender or civil engineer who learns she or he has been chosen to serve in the state legislature by lottery as any politician capable of getting big financial donations. Institutions are powerful and it is important to better understand how much of the benefit they yield comes from their careful selection of who gets access to them vs. who those people are. That is to say, we need to understand when the goal should be to widen access to these institutions as a means to improve everyone's life or when we should narrow access to make sure that only people with a certain potential should be given access.

Prosperity, Genetics, and Social Invention (And Over What Horizon Progress Lies)

I'd like you to predict which of these three people is fastest.

We have a middle-aged woman, a young man and a young woman.

You might speculate about whether the young man is an athlete. You know the young woman is. Some of you will recognize her as Allyson Felix, 3-time world champion short-distance runner (100, 200, and 400 meters) and Olympic medalist. You will likely predict that Allyson is the fastest, then the young man and then the middle-aged woman. Some people might suggest that saying that out loud makes you biased or prejudiced and some might say that it's just common sense. And if you had to choose between other groups you'd judge based on apparent fitness, sex and age. Data might be on your side and there would be all sorts of things we could say about whether you're unfairly excluding one person over another in spite of not really knowing them as individuals. And there might even be a debate about how silly it is to debate this when we have data to inform us who is faster and who is slower. 

But I'm not done with this question. I did not mention the distance they'd travel. I also did not tell you what inventions they have access to.

Now that you know the distance is 500 miles and you know what inventions they have access to - the young man has a bike, the young woman a car and the middle-aged woman a plane - you have absolutely no trouble predicting who is fastest. And in fact, there is no difference in their speeds running that even begins to compare with the difference in the speed they can reach in these different inventions. 

Usain Bolt was this phenomenon of speed last decade. It was mind blowing what he did. He broke the world  record for the 100 meter run in 2009 in the fastest recorded time. He ran roughly 23 mph, probably humanity's fastest time for that distant. 

He was not, though, the fastest person when he was running his race. That honor goes to Nicole Stott who was traveling at 17,150 mph while Bolt was setting his world record. Nicole and her crew mates on the Space Station were moving 745x faster than Bolt.

We're still fascinated by human potential and raw speed. But we don't depend on it as we go about our day. We use technology to get from place to place because it is so much faster. The incremental gains in speed from evolutionary advances are so tiny and slow in comparison to the incremental gains in speed from technology advances that they're not worth mentioning. The tiny and highly variable differences in genetics in determining speed are noise compared to the differences in technology in determining speed.

Now we move to part two of this pop quiz. Let's look at the same three folks and ask the question, Who is most affluent?

Again, you'd have your ideas. You may realize how subject your generalizations are to variation within groups. If you know Allyson is a star you'd likely think she was most affluent. If you didn't and thought she might just be a high school athlete it would be easy to assume that a young, black woman would be worth less than a middle-aged white woman. Probabilities support that guess. 

Let's now throw inventions back into the mix. This time, though, we're talking about which social inventions our three have access to rather than which technological inventions they have access to. 

If affluence is measured by how much one can spend, the young guy is now most affluent. Our young woman has only cash, the middle-aged woman has a credit card and the young guy has access to venture capital. The first can spend hundreds, the next ten thousand and the young guy millions. People with access to consumer credit have more money than people who have only cash, and so on. 

One of the best social inventions is a stable and prosperous country. If you have access to that you will live better than someone who does not. (I know. I know. There is variation in all things and there are people in poor countries who live better than people who live in affluent countries. Still, if you were talking probabilities you would want to bet on the Norwegian rather than the Syrian, At this point in history anyway; it would have been dramatically different a thousand years ago and could reverse again in a century or two.)

The differences in genes as a determinant of speed are noise in comparison to the differences in what technology we have access to. Similarly, differences in self-sufficiency as a determinant of affluence are noise in comparison to differences in what social inventions we have access to. Groups who have access to a peaceful, prosperous country and great education and dynamic companies to work for will be far more affluent than groups who have access to none of these things. That is as clear as the fact that a group in a plane is faster than a group with sneakers.

And once more, a nod to variation. When we get into a plane we all move at 600 mph. When we get into schools or markets or corporations we don't all move at $60,000 a year. There will always be variation in outcomes from systems like factories, schools, and markets. If you want to understand how to better manage such variation, you may want to search for "deming" on this blog or W. Edwards Deming more generally. The claim is not that all individuals benefit equally from these social inventions: the claim is that communities with different social inventions at different stages of development have very different outcomes. Take two populations of 100 or 100 million and put one in a society where social inventions like universities or financial markets are nonexistent or reserved for just the elite and put another in a society where such social inventions are accessible to a wide swath of people, and it is the latter that will be more affluent. Every time.

For at least the last 10,000 years - maybe the last 100,000 years - social evolution has done more to determine our quality of life than has genetic evolution. There is no conceivable genetic advance that will ever make us capable of running 17,150 mph. Nor is there any genetic advance that will ever enable us to live as well from self-sufficiency as we do in today's modern world. The point is to worry less about differences in individual ability within our current systems than to worry about how to make those social inventions and systems more useful for groups and the distinct individuals within them. Significant progress is never about pushing people harder within current systems; it is about the continual act of invention and reinvention - sometimes tiny and incremental and sometimes sweeping and grand - of those systems to result in longer lives and more autonomy, more choice about how to live a life. We don't live better than our ancestors from 1900 because we work harder or make bigger sacrifices. We live better because the systems we depend on and use - the social technology that makes us more or less affluent - are better. Focusing on the performance of our systems rather than the performance of individuals within them is the direction in which progress lies.

Gales of Creative Destruction and the Stress of Progress

Since Oct-2010, the US economy has destroyed 475.6 million jobs (layoffs, retirements, firings, quits) and created 494.2 million jobs for net of 18.5 million jobs.

As of June, the labor force was 162.1 million.

So during the 8-year recovery the American economy has created 3X more jobs than there are people in the workforce and destroyed 3X more jobs than there are people in the workforce. 

244,000 jobs were created in May. More precisely, 5.8 million jobs were created and 5.5 million jobs were destroyed for a net of 244,000. It is not true that everyone kept his or her job except for 244,000 people who were newly hired. Every month people are laid off, fired, quit or retire; in May, 5.5 million people had such experiences. That's a lot of elation (those who retire), relief (those who quit), frustration and panic (those laid off and fired). We talk a lot about taxes but an economy this dynamic is emotionally taxing.

One of the challenges of the modern economy seems to be that given progress comes in the form of gales of creative destruction we have a high level of stress. Personally I think that just reinforces the necessity of things like universal healthcare, investments in job retraining and generous unemployment, etc. But regardless of the solution you'd advocate, you have to realize that anyone whose idea of the good life is a stable, predictable career is going to feel a continual level of stress and unease by progress.

Two things can be simultaneously true: we are creating better jobs and a lot of people end up with worse jobs. There are probably as many people laid off from manufacturing jobs paying $45,000 a year now working at Wal-Mart for $25,000 as there are people with new programming jobs making $75,000. (And of course that very dynamic is part of why median wages move upwards so slowly and why income inequality is increasing.)

This economy is wonderfully creative but it is increasingly disruptive. Entrepreneurship and social invention creates the new and obsoletes the old just as innovation does with products. We used to have marriage between one man and one woman and now we have same-sex marriage and polyamory. We used to have jobs with pensions and 40 hour workweeks and now we have 401(k)s and a gig-economy that offers us Uber-like jobs with both more freedom and uncertainty. We used to have an American economy and now we have NAFTA. If you find comfort in continuity you will actually find progress threatening because so often it forces us to act or be different. 

Innovation changes products while entrepreneurship and social invention changes people. That's unsettling.

It seems to me like the divide that doesn't get talked to enough is the divide between those who embrace progress and all its novelty and those who embrace tradition and all its familiarity. To the latter group, progress can actually feel like a threat.

Podcast - Social Invention, Progress & Trump

Here is my very first podcast:

Social Invention, Progress & Trump, one in a series of Fourth Economy podcasts.

"History consists of a series of accumulated imaginative inventions."

- Voltaire

The simple argument is that it is a struggle to understand politics and policy today without understanding social invention. A wave of social invention is simultaneously creating new opportunities and threatening old identities. Among the major points made in the podcast:

1. Social inventions like banks and nation-states are as important to progress as technological or product inventions like steam engines and computers.
2. 100 years ago the rate of product invention accelerated. Now, the rate of social invention (e.g., the EU, NAFTA, Uber-like employment, same-sex marriages) is accelerating.
3. Progress in the West has come from treating social inventions like tools rather than as either sacred or disposable.
4. The three major social inventions and reinventions that resulted in freedom of religion, democracy, and the American Dream (essentially the democratization of financial markets) inform us as to what strategies and measures result in successful social invention.

Inventions Matter More Than People

Inventions matter more than people. 

There are two kinds of inventions that fuel progress. Technological inventions like your smart phone or a bullet train give us what past generations would have thought of as super powers. Social inventions like nation-states or the modern corporation also transform lives.

If people mattered more than inventions, a "good enough" person could run faster than a bullet train or a "good enough" person could create a great and prosperous life even in the midst of anarchy and chaos. In the words of W. Edwards Deming, though, "A bad system will beat a good person every time." 

Racist: my race is better

Patriarch: men are better

The argument of racists and patriarchs is that we white men have ended up at the top of the heap because we're better. The simplest evidence of this is that we're wealthier and more powerful than people of color or white women. It is not that we've had better access to better inventions. It's simply that we're better people.

But differences in people do not explain differences in lifestyle or wealth. An American in 2000 made 6 to 8X what an American in 1900 made and could expect to live 30 years longer. Not because the American in 2000 worked harder or was morally better or was innately more intelligent. The average work week in 1900 was sixty hours (10 hours a day, six days a week). The average work week now is less than 40 hours.

It is true that Americans in 2000 were "smarter" than Americans in 1900 but that was not because of any innate intelligence. It was because of the popularization of social inventions like a K-12 education and the modern corporation that our efforts were leveraged into such (relatively) great lives. The American in 2000 simply had far better inventions than a person in 1900.

The notion behind white supremacy or anti-immigration, or patriarchy is that people matter most. In the minds of these people the systems are invisible and the people who sit atop them is all they can see. It's like thinking that the driver of the car is responsible for going 70 mph rather than realizing that anyone in that position could match or better the speed.

There are a host of reasons why racists and patriarchs are such passionate defenders of the border. A chief one is that they're convinced that the people living in more impoverished parts of the world are that way because they are lesser people. In fact, what has made our country great is that the inventions we've popularized - from Montessori schools to smart phones - make us better. It doesn't just work for our children; it can work for anyone's children.

When you welcome immigrants you're expressing confidence in the power of your systems to change life for anyone. When you reject immigrants you're saying that our inventions - our systems - are incidental to who we are and if other people come here to use them those people will still be lesser people, will be a burden on us.

There are obviously limits to the number of immigrants a country can absorb and migration laws do matter. But focusing on the border as a basis for prosperity is misleading for so many reasons. The most important reason that it shifts a country's focus and policies onto protecting borders rather than creating inclusive inventions that make more people more able to make themselves and others happy. It shifts the focus from inventing and change to protection and resistance. 

We've gotten off the path to progress. Hopefully someone will still find that path or else the global economy will stagnate and when modern economies stagnate, modern democracies flounder.

The British as Social Inventors (or, the policies that could make the UK wildly prosperous again)

The UK will elect its next prime minister in just a few weeks, on 7 May.

As an American, I envy the fact that British politics is so much more humane. But judging from the political debate earlier this month between the UK's seven major party leaders, the British seem to have lost their sense of history. Why were they the world’s leading force for centuries? Why are former British colonies so much more affluent than former colonies of Spain or France? Why is English still the world’s dominant language when it comes to business, science, and innovation? Knowing the answer to that question provides the answer to how the UK could again make its economy vibrant, perhaps even a global leader.

The simple answer is that, from before 1534 when Henry VIII severed ties with Rome to help to create the nation-state to the time that the British invented the single-payer healthcare system in 1948, the British led in social invention. And not just any sort of invention. They led in the social inventions that helped overcome that period's limit to economic progress.

Instead of discussing social inventions that redefine a century, though, political leaders are now arguing about changing tax rates or spending small percentages, each trying to find the right balance between fiscal responsibility and addressing needs. There is no sense of history now. Just a sense of responsibility. Rather than ask how to create jobs they’re asking how much unemployment and welfare they can afford. Rather than asking how to create wealth, they’re asking how much debt is reasonable. And rather than ask how to make the British once again world leaders in economic growth, they’re asking questions about how fairly government services are being shared among the poor and new immigrants. As an American I can only envy this delightful sense of fairness. In the end, though, it’s less about whether you share the mastodon kill fairly than whether you learn how to domesticate crops. If you want a great community, you don't choose between fairness and progress.

For centuries, the British were the world’s leaders at changing people’s minds about what was possible. Their social inventions were not just about what was fair or right. Their social inventions actually created wealth in ways that were unprecedented in world history.

The British National Health Service (NHS) is the oldest single-payer healthcare system in the world and is a wonderful example of social invention. The British set up a system that made healthcare a right rather than something only people above a certain income could access. Like so many of their social inventions, most of the West has since adopted some form of what the British created. (Even we Americans have taken steps towards following this example.)

But long before that, they also invented new institutions that made people more prosperous. 

In 1623, Edward Coke championed legislation - patent law - that rewarded inventors. By 1699, Thomas Savory had invented a steam engine. At that point, for the first time in thousands of years, per capita income began to rise. Because of social inventions like patent law that let people profit from the investment of time and money into new products, the British led in the industrial revolution.

The British were not just social inventors. They rapidly adopted what worked in other countries. The Dutch were the first to set up a corporation that could trade in a remote part of the globe on behalf of the state (the Dutch East India Trading Company), the first to set up a stock market (to trade shares in that one corporation) and the first to set up a central bank that could help to regulate currency and make loans on behalf of the state. The British were smart enough to adopt those inventions when they brought William and Mary over from the Netherlands in 1689 to become their monarchs, and that soon helped them to pass even the Dutch in per capita income. This was not just the kingdom that gave us the invention of the steam engine: it gave us Charles Darwin and the concept of evolution.  The British continued to innovate and tinker with these big inventions. It was the Bank of England that became the model for the world's central banks. And the eventual change they made to the corporation was even more momentous.

In 1862, the British Parliament passed the Company Act and invented the limited-liability, joint-stock company. That is, they invented the modern corporation, the best institution yet made for the creation of jobs, products, and wealth. John Micklethwait and Adrian Wooldridge called it “yet another quirky Victorian invention that changed the world.” Putting aside the fact that the Americans more fully subordinated themselves to this new institution, this transformative social invention was British.

Whether it is through patent law or the modern corporation, central banking or NHS, no people have done more than the British to make history by changing history. No people have been more ready to re-invent themselves or their institutions. 

So what could the British do now? What social inventions would shift their conversations from unemployment to job creation, from debating about how much debt they could afford to best strategies for creating wealth? It would be any social invention that would help them to overcome today’s limit to progress, which is different from the limit of a century ago – or two centuries earlier.

From about 1300 to 1700, the limit to progress was land and because the British people led in social invention and adoption that helped them to overcome the limit of land – from a nation-state and private property to standardized measurements and colonization – they became the world’s leading economy. 

From about 1700 to 1900, the limit to progress was capital and because the British people led in social invention and adoption that helped them to overcome the limit of capital – from patent laws that inspired invention to central banking policies that stabilized financial markets – they were the world’s leading economy.

From about 1900 to 2000, the limit to progress was knowledge workers. Even though the British people invented the modern corporation – the place where knowledge workers created products, wealth, and jobs through product manufacturing and invention – they lost their lead to the US, Germany, and Scandinavian countries because they were slower to realize the importance of public education. (In 1875, England’s illiteracy rates were about 10X higher than those in Germany and the Scandinavian countries.) In a world where English is the dominant language, it’s worth noting that kindergarten is a German word. The social and technological inventions that did the most to create knowledge workers and make them more productive were the ones that made communities richer and more powerful. One might argue that as the world's original capitalists, the British saw their invention of the modern corporation more as an investment tool than as a tool for making knowledge workers more productive, and lagged because - for a time - they made capital more important than labor.

The conversation the British people need to have now isn’t about how to get more land and make it more productive. Land is no longer the limit. The days of colonization and the British Empire are past. It’s not about how to get more capital and make it more productive. Trillions of pounds of capital wander the globe in search of returns. A massive infusion of capital now is as likely to sit idle in banks (or, in the form of industrial capital like robots, make labor sit idle at home) as to create jobs and wealth. It’s not even a question of how to create more knowledge workers or make them more productive. The good news is that - largely because of British social inventions - the West has overcome the limits of land, capital, and knowledge workers. The bad news is that more of those factors that no longer limit won't just fuel economic progress.

Period (roughly)	Market Economy	Develop & Acquire
1300 – 1700	First, Agricultural	Land
1700 – 1900	Second, Industrial	Capital
1900 – 2000	Third, Information	Knowledge Workers
2000 ~	Fourth, Entrepreneurial	Entrepreneurship

So what is the limit to today's economy that social inventions must help communities to overcome? Entrepreneurship. Last century, the West popularized knowledge work. Between 1900 and 2000, the economies of the West transformed from industrial economies dependent on child labor to information economies dependent on adult education. Now, it is time to popularize entrepreneurship. The first wave of this popularization will likely be like the British adoption of Dutch institutions. That is, communities able to adopt the policies of Silicon Valley, creating an entrepreneurial region, will make great progress. The next wave will likely come in the form of changing the corporation again. This will involve making more employees more entrepreneurial, allowing them to create equity and not just products. No one has yet taken the lead in this but the British (or for that matter, the Scandinavians, Germans, Canadians, Americans or the people of Singapore) could become leading innovators in this. And just as the British became prosperous in ways that past generations could not have imagined when they boldly overcame the limits of capital, so could this next generation.

The question for today’s economy is how to create more entrepreneurs and how to make more employees more entrepreneurial. As people find creative answers to these questions, they'll create jobs for knowledge workers and will fully employ the trillions in capital that people like Marin Wolf and Ben Bernanke warn is symptom of a savings glut (or investment dearth). Knowledge workers and capital are no longer limits. Entrepreneurship is.

The British people have proven themselves incredibly creative. For centuries. There is no question about that. The only question is whether British policy makers will decide to find creative answers to the question of how to create more entrepreneurs or how to make more employees more entrepreneurial. Last time they got serious about finding ways to overcome the limit to progress through thousands of small and large social and technological inventions, they gave us the industrial revolution. Who knows what extraordinary world lies on the other side of the myriad inventions that will help the West to overcome the limit of entrepreneurship?

Why Crowded Cities Provide the Space for Creativity

One reason that women migrate into cities is because they are more free to create their own lifestyle. At the extreme, you can think of the girl raised in a Taliban village who would be free to choose whether to wear a veil or jeans and t-shirt if she moved into the anonymity of a big city in the West. To a lesser extent, even moving from a small rural area where people don't just know you but also know your grandparents will make it easier for a young girl raised Amish, say, to pursue a career and buy a BMW without accusation of being pretentious.

Curiously, this freedom leads to innovation, both technological and social. It's not just personal lives that get invented within the anonymity of a city: a handful of cities generate more patents than the rest of the country combined. 

20 cities generate 63% of all patents in the US.

The research universities that are within these regions help to provoke a great deal of the innovation. They also tend to cultivate a spirit of openness and tolerance for new ideas and dis-respect for authority that fosters innovation. People in these innovative cities are more likely to be individualistic and are less family oriented than folks in less innovative cities. Innovation isn't something that gets neatly contained to work.

When you socialize with folks you know well -and who know you well - you are less likely to encounter new ideas. Job leads tend to come from folks outside of your immediate circle of friends. More than that, loose acquaintances are people with whom we're free to try on new ideas and new ways of being. Someone from a  small town who knows that you get your half grin from your grandpa are less likely to let you become someone new than an acquaintance in a city who barely knows you. This freedom not only lets the Amish girl wear lipstick but it lets the inventor explore new ideas The more varied our interactions, the more potential for novelty.

I have spent considerable time in 6 of the top 10 cities in the list above. They are characterized by what I'd call personality. Santa Cruz, Boulder, and Austin share a very similar vibe and the folks living there certainly don't match the description conservatives would give of capitalists. These are places that aren't merely tolerant of diversity: they celebrate it. The 6 cities I know lean left - to a considerable degree. They are places that are more likely to support people than judge them, less likely to require drug testing for welfare recipients than to legalize pot. It is in these milieus from which creativity emerges. It's not just that conservatives have very little support among creative types in the arts; conservative cities and rural areas have very little patent activity. When I lived in Santa Cruz in the early 1980s, it was the only city in the US with an openly gay, communist mayor. Austin has a campaign to "Keep Austin Weird." Yesterday I ate in Native Foods in Boulder, a place that more traditional communities might chuckle at for its unabashed embrace of organic, vegan food. It's little wonder that these communities are cradles to new ideas. It is, to me, no coincidence that 3 of the top ten cities in this list are in California's Bay Area, a place where people seemingly feel little compunction about conformity - whether in thought, dress, or lifestyle - a home to the Free Speech Movement that helped to usher in "the 60s." 

All cities - and some more than others - provide space for the individual to step outside of tradition. Unsurprisingly, being open to novelty is a package deal: whether you first open the door to social invention or technological invention, the disrespect for tradition is likely to spill into all walks of life. 

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Graphs are from a Brookings report here. Claims about how people in different cities poll on topics like family or individualistic tendencies come from p. 143 of Bill Bishop's The Big Sort.

The Simple, but Sweeping, Answer to the Question of How to Create More Jobs

We can continue to try repairing the old economy or we can create a new one.

Financial crises, stagnant wages, persistently high unemployment, protests, and growing government deficits coinciding with a loss of government jobs are all legitimate problems in their own right, but they are more likely symptoms of something deeper. We’re living into one of the four biggest economic transitions since the Dark Ages.

Since about 1300 CE. a pattern of social invention and revolution has created three economies:  an agricultural, an industrial, and an information economy. And that pattern is now repeating to create a fourth, entrepreneurial economy.

These changes we’re experiencing are different from normal business cycles. This is bigger.

The last shift in the West – beginning around 1900 - took us from an economy led by advances in capital to one led by advances in knowledge work, a transition from an industrial to an information economy.

Progress from about 1700 to 1900 came from dramatic increases in capital: steam engines, factories, stock and bond markets, and banks were invented or recreated and the communities that increased capital the most advanced the most.

Progress from about 1900 to the present followed from the rise of knowledge workers: inventions like the modern university and corporation, and radical advances in information technology helped to create an information economy in which companies making virtual products often became more valuable than those making “real stuff.” Communities that ignored the question of how to create more knowledge workers and make them more productive, and just focused instead on capital, were left behind. When the limit shifts so must the focus.

The emergence of each new economy has forced a revolution in the dominant institution. This is no small thing. The power of elites over the institution is dispersed outwards. People once used as tools by the institution begin to use the institution, instead, as a tool. “We are all priests!” Martin Luther declared, overturning the notion that religion was something to be defined by the pope. The first economy, from about 1300 to 1700, was catalyst to the Protestant Revolution. The second economy, from about 1700 to 1900, brought us democratic revolutions. The third economy, from about 1900 to 2000, democratized finance as knowledge workers’ pension funds and 401(k) funds came to define investment markets.

This new fourth economy will likely transform the corporation – today’s dominant institution - in similar ways. Most obviously, the role of the employee will become more like that of an entrepreneur.

The simple, but sweeping, answer to the question of how to create more jobs is that we need to become more entrepreneurial. The question of how we become more entrepreneurial will first be answered within the corporation. 

Depending on how one measures it, corporations make up between one third to two thirds of the 100 largest economies in the world, yet very few of them encourage entrepreneurship.

Developed countries are considered lands of opportunities where people can expect to make more than heads of state. (About 6 million Americans make more than Obama.) By contrast, corporate employees are about as likely to make more than the CEO as past citizens of Iraq, Libya, or 17^th century France were to earn more than Saddam, Kaddafi, or Louis XIV. Such restraints to opportunity and autonomy suggest huge gains could follow from democratizing corporations and creating more entrepreneurial opportunities for the employees within them.

Our media and attention is fixated on political – and sometimes financial – changes we could make to create jobs, but it may turn out that such changes are merely incidental to the scope of the changes needed within corporations.

Despite initial appearances, we’re living in a time of incredible opportunity. Shifting our focus to overcoming the limit of entrepreneurship will mean advances as dramatic – and at times as disorienting – as those of the last three economies. (And if you’re a student of history, you realize how very dramatic that is.) An entrepreneurial economy is ready to emerge. Millions of new jobs depend on today’s communities redefining the corporation as dramatically as past communities redefined church, state, and bank. The fourth economy is ready to emerge but it’s not something we’ll see as long as we stay focused on trying to repair the third economy.

Ron Davison has consulted to some of the world’s largest corporations and is author of The Fourth Economy: Inventing Western Civilization, available on amazon.com. 

Social Invention

In the 1700s and 1800s, technological innovations "just happened." Then in the 1900s, R&D labs within the military, universities, and corporations made technological innovation a regular occurrence. Technological inventions were both expected and managed. You may like your iPhone4 but you know that an iPhone5 will eventually debut. There is no expectation that any one piece of technology is the ultimate.

This century will be to social invention what the last century was to technological invention. It will become something we expect, whether through charter schools or new ways of managing employees or through new government agencies or even through the NGOs and foundations that have recently grown in number and impact.

More and more people are creating new kinds of banks and corporations, schools and governments. Soon, people will realize that this is the new process of society, not a one-time act. It will dawn on us in the same way that it finally dawned on Henry Ford that for all its genius, the Model T was not the final say in cars.

That, it seems to me, is worth thinking about.

Shaping Schools to Individuals (rather than vice versa)

The book, The Fourth Economy: Inventing Western Civilization from 1300 to 2050 is done. I'm now ready for the editing phase. The central notion is that social invention will become as intentional in this century as technological invention became in the last. The goal of this social invention will be to create institutions and organizations that not only create more value but better adapt to the reality of real, rather than idealized, people. Here is an excerpt about the future of education.

Schools can better adapt to real human beings by designing education to accord with some of the best theories about who people are.

Someone quipped that after Howard Gardner defined various kinds of intelligence, the question shifted from whether your child was smart to how your child was smart. Gardner writes and talks to these different ways that people learn, think, and create careers and change communities and lists 8 kinds of intelligence.

His list of intelligences:

§  Spatial- the artist or architect with the ability to conceive of and manipulate objects in three-dimensions,

§  Linguistic – Poets and speakers who use words and language as their tools.

§  Logical-mathematical – the computer programmer or math professor who can reason and manipulate numbers.

§  Bodily-kinesthetic – the dancers and athletes whose control over their body lets them do with precision and strength what others are left to admire.

§  Musical – performers, song writers, and composers.

§  Interpersonal – the leaders, salespeople, and politicians who sense what others are feeling and know how to influence their emotions, reasoning, and actions.

§  Intrapersonal – the psychologists and theologians who are introspective enough to understand the inner life.

§  Naturalistic – the farmers and ecologists who understand and work with the rhythms and dynamics of nature.

Additionally, fairly popular notions of learning suggests that people have at least three kinds of learning styles: some are visual, some auditory, and some kinesthetic learners. If we assume that anyone of the 8 kinds of intelligences could mix with one of the three kinds of learning styles, we have a fairly complex menu of minds. In theory, we’d have 3 X 8, or 24 different kinds of minds. This suggests that in a time of entrepreneurship and social invention, we might create at least 24 kinds of learning experiences, if not even 24 different learning institutions. This customization of learning for different types of students would be just one example of how institutions could be made into tools for the individual.

In this context, thinking of developing an educational system that would work best for a particular kind of learner, one gets a better appreciation of W. Edwards Deming disdain for grades. Imagine grading a visual learner whose potential intelligence was intrapersonal – a person who might be brilliant at reading facial expressions, gestures, and body language for clues about another’s emotions and thoughts. Now imagine that this person was struggling to learn within a school designed for auditory learners where the intelligences that are emphasized are language and math. This child would get a low grade. In this system, they would be made to (unfairly) look stupid or inept or lazy. This would almost be excusable if it were really the case that the only way to make a living was to be good at math or language. In fact, a person who can read and influence others might make more money in sales or management than anyone using literature or algebra.

Deming said that if we know a student got a 92, say, or a 58, we know nothing about the student. The amount of learning a student gains is a function of an equation of X * Y = student score. X is the system and Y is the student. You can’t solve for Y – the student’s ability – without knowing X, the system’s contribution. And of course, for one child the system is a perfect complement to her potential whereas for another it is a miserable clash. For one student, the system works. For another, it does not. For the intrapersonal, visual learner, the interaction of the educational system and the student produces a 58. A grade of D. For the logical – mathematical, auditory learner, the interaction of the system and student produces a 92, or an A. (And it is worth noting that these grades, the A, B, C ‘s that are so ubiquitous, are remnants of a time before the information economy. They were first used by cotton buyers to communicate back to England on the quality of cotton. This was a time when information was very expensive and a single letter grade was so much cheaper to send across the Atlantic than a description of the particulars of the cotton. Even in an information age where every high school kid seems to have the equivalent of a telegraph in his pocket, the now ubiquitous cell phone for texting, we still distill the child’s academic performance into a single letter.) 

The question is not whether the student is smart but how. In a time of rampant social invention, there is no reason that new systems can’t be created that better suit the individual. School should be a means for a student to discover and develop his own potential, not be ranked against other students on criteria that may or may not have anything to do with his future.

In the end, the child’s GPA is a distraction from the real task of creating a life and career. GPA tells us how well the child performed within the school system, a vague approximation of the child’s subsequent performance with the larger social system. (Although, of course, a child convinced that the grade really is a good indication of who she is would be more likely to let this become a prediction of their behavior if it is a poor grade. Sadly, a school’s label of failure is more likely to predict life after school than the label of success. Subject matter is not all that children learn in school; they also learn who they are.) 

The Slow Spread of Democracy (say, aren’t those peasants armed with voter pamphlets?)

The American Revolution didn't just happen once. In fact, it is still happening.

In 1689, England's Glorious Revolution shifted authority from crown to constitution. British Parliament essentially hired monarchs (William & Mary) and told them that they could have subjects but would - like everyone else - be themselves subject to the constitution.

About a hundred years later the Americans decided that if they had a constitution they wouldn't even need a monarch. It's worth remembering that George Washington was the first president in the history of the world. But of course it never occurred to the founding fathers, who thought that all men were created equal, that anyone other than white, property-owning, Protestant males should be able to vote.

The Revolution of 1776 was a beautiful thing but it didn't really change the the rights of most Americans. It took 34 more years before people (well, property-owning white males) of any religion could vote. It took 74 years before even white males who didn't own property could vote. 144 years before women could vote and 148 years before Native Americans were considered real Americans and also able to vote. 189 years later, minorities' voting rights were ensured. And it took nearly 200 years before the 18 year olds considered old enough to die for their country were considered old enough to vote for their leaders. (And it is probably no coincidence that since then we've not had a draft.)

The real limit to change is always the collective imagination. For all of their vision, it is not the least obvious that our founding fathers could conceive of an 18 year old black female casting the vote that might elect the next president.

Social progress is often a bet on the person who has yet to prove himself. By definition it almost has to be. Before 1920, women could not prove that their vote mattered for the simple reason that it did not.

A couple of centuries later, democracy is still spreading. Right here within our borders. Now that's a revolution.

Quaint Victorian Notions About Capital in a Modern World

We Americans live in the richest, most economically driven country in the history of the planet. And still we’re ambivalent about money and debt. Our revulsion to debt is literally Victorian.

There was time in history when capital was scarce and hard to get or create. Social inventions that helped to overcome this limit made communities rich. Social inventions included new norms, like traditions of saving and investing, and new institutions, like modern banks, and bond and stock markets.

One of the social inventions that helped in the early days of capitalism was uneasiness about debt, something shared by British and Americans in the 1800s and early 1900s.

19th century preachers inveighed against debt, teaching that it mars and stains the soul. Protestant preachers liked to quote Paul, "owe no man anything but love." Debt was proof that one failed at self-denial. Charles Spurgeon, the best-known English preacher of the late 1800s, described the trinity of evil as "debt, dirt, and the devil."

And yet by the early 1900s, debt had become obviously essential to economic progress. This is still a point little appreciated, it seems, but it has to do with establishing new industries. You'll have to follow a few steps here, but I'll try to keep it simple.

1. Imagine a world where everyone has to farm to be fed.

2. Then, someone invents a machine (capital) that can do the work of 100 men. This means that 99 men are freed up to work on something else.

3. 99 men are unemployed. 1 man is incredibly rich. Or would be, if only the 99 hungry and unemployed men had money.

4. Inventors and entrepreneurs create new products and services – from the sublime to the silly. [Look at the end of this post for a list that comes from the years around 1900.]

5. These inventions and business ventures require financing. Debt even. Debt creates. Getting these new industries started is an act of faith. It requires capital investment for building factories and stores. It requires capital for making payroll to manufacturing and sales people. And it requires consumer credit so that people can begin buying this new thing. Once established, though, capital gets its return and there is a new source of sales and salaries. Debt can create new wealth. And yes, even consumer debt that isn't obviously directed at creating wealth can be instrumental to this.

6. These new ventures and inventions don’t just make life more interesting, richer, and confusing: they create jobs for the 99 people made redundant by productivity gains in the old industries.

All this to say that reluctance to take on debt can hobble progress. One of the worst things you can do in an economy is treat what is scarce as abundant and what is abundant as scarce. Victorian England - with its social stigma against debt - was actually creating the right culture for that stage of capitalism. Capital was scarce and people should have treated it carefully. The reality behind the billions made in venture capital, junk bonds, and credit cards today, though, is expressed in Michael Milken’s observation that, “In an industrial society, capital is a scarce resource, but in today’s information society, there’s plenty of capital.” Today, jobs are scarce and capital is abundant; an economy that goes into debt because it is mis-using its capital but creates jobs so as not to mis-use its labor has an edge over an economy that leaves a large percent of its work force under- or unemployed.

So, with all the worry about debt, what does this suggest? To me, this change suggests that we ought not to worry about wasting capital that is abundant. Rather, we should worry about wasting labor. Our economy will be made stronger by employing more people into productive ventures, not by avoiding debt. Once we’ve got employment back up and have created jobs, we can worry about debt. But not about eliminating it – just in shifting it into the creation of new industries and services.


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Some of the inventions from the decades around 1900:
central heating; the safety razor; stainless-steel implements; the striptease; the electric toaster; iron, oven; sewing machine; dishwasher; electric elevator; dial phone; portable typewriter; radium treatment for breast cancer; heart surgery; the psychiatric clinic; contact lenses; toothpaste in tubes; motion pictures; musical comedy; the gramophone; volleyball and basketball; the Ferris Wheel; the jukebox; breakfast cereals; milk delivered in bottles; packaged produce; Coca-Cola; margarine; the ice cream cone; the refrigerator; public libraries; the correspondence course; the full-range department store; the chain store; the shopping center; the coin telephone; the traveler’s check; fingerprinting; the automatic pistol; the electric chair; the automobile and the airplane; the underground city subway train; the pneumatic tire; color photography; rayon and other artificial textiles; chewing gum.

Flow as the Compass for Social Invention

We’ve now reached a curious and potentially powerful point in history in which our social reality will be less defined by any one dominant institution or certain traditions than the act of intentionally engaging in social invention. It will, however, be social invention to a particular end.

A lot of our practices are about imitating. This is the opposite of inventing. We don’t call it imitating. We say that we’re studying principles of organizations and looking to apply what is proven or successful. But we’re imitating.
The problem with this and the practice of it is perhaps seen most readily in our approach to work within organizations.

In his book, Good Business, Csikszentmihalyi quotes Robert Shapiro, former CEO of Monsanto. He makes a critical point about how individuals are fit into organizations.

“The notion of job implies that there’s been some supreme architect who designed this system so that a lot of parts fit together and produce whatever the desired input is. No one in a job can see the whole. When we ask you to join us, we are saying, ‘Do you have the skills and the willingness to shape yourself in this way so that you will fit into this big machine? Because somebody did this job before you, somebody who was different from you. Someone will do it after you. Those parts of you that aren’t relevant to that job, please just forget about. Those shortcomings that you have that really don’t enable you to fill this job, please at least try to fake, so that we can all have the impression that you’re doing this job.’”

“It’s a Procrustean concept, and it studiously and systematically avoids using the most valuable part of you, the part of you that makes you different from other people, that makes you uniquely you. If we want to be a great institution, that’s where we ought to be looking. We ought to be saying, “What can you bring to this that’s going to help?” Not, ‘Here’s the job, just do it.’”

What does Shapiro mean by “a Procrustean concept?” Procrustes was a figure in Greek mythology who forced travelers to fit into his bed by stretching their bodies when they were too short or cutting off their legs when they were too long. It is probably true that the vast majority of employees are both stretched to the limits of their capacity in some aspects of their job and literally cut off from real and crucial parts of their self in others. In either case, fitting into a job in such a way does little to realize their own potential or, by extension, the potential of the organization.

In fact, such programming of one’s actions is antithetical to what any society would hope to see emerge: genius. “One admires genius because one has the imagination to see that there is no mechanism in him or his work, nothing that can be analyzed and rationalized, ” Barzun writes. Again, imitation is the opposite of creativity, a way to suppress genius.

And yet tailoring even a job to the individual is something we rarely do. We prod students, congregants in church, employees, and citizens into a particular way of being. We are focused on what is “best” without regard for what is unique.
But what if the purpose of social inventions like church, school, and business was to provide a forum for the individual to realize his potential and not simply realize the vision of some leader?

In this world, the guide to progress will be rooted in the psychology of engagement, in what makes us most happy.

Mihalyi Csikszentmihalyi has spent decades studying what makes people most engaged. He has called the state of engagement “Flow” and has found that it is in this state that people are most happy, most creative and from which people are most likely to emerge more able and developed. In short, the path of flow – found in challenges that stretch us beyond those in which we feel in control (much less bored) and less than those that make us feel anxious (much less overwhelmed) – is the path to self development. It is by following the path of flow that we find our own unique path and realize our potential.

If you can imagine a world in which learning and work follow the path of flow for the individual, you can begin to imagine a world in which social invention is necessary – where work and learning are as dynamic as a video game that raises the challenge as the gamer gets more skilled. This world is not chaotic, but it certainly is not static or generic.

And such a world is congruent with the basic theme of progress since about 1300: increased autonomy. We have increasingly given the individual more options and more freedom on how to construct his own life.

Accomplishing this will require massive amounts of information that is custom to the individual. That is, this kind of world could only sit atop an information age. There are a great number of obstacles to creating such a world but the major obstacle at this point in history is simply awareness: very few people are aware it is possible or even that is desirable. It’s time we ended this. Pass the word along. It’s time we stopped settling for somebody else’s life and created the context for our own.