Audacious, mesmerizing and… controversial.
The thesis of this book does not revolve around a single subject but rather a collective idea — so in order to present the argument, Matt Ridley relies on a broad range of sources, including economics, ancient history, philosophy, evolutionary biology, and so on…Whether or not you are a pessimist, it’ll help if you be one at least for the sake of reading this book. This will enable you to fully comprehend the author’s point of view.
Collective brain -> exchange -> specialization
Ridley begins by laying out the foundation for his basic thesis by introducing his ideas on collective brain, exchange, and specialization. His question mirrors what intellectuals have been asking throughout history — why us? What made homo sapiens so dominant on this planet? Rather than just culture, he argues that cultural economics holds the key.
Why us and not killer whales? To say that people have cultural evolution is neither very original nor very helpful. Imitation and learning are not themselves enough, however richly and ingeniously they are practised, to explain why human beings began changing in this unique way. Something else is necessary; something that human beings have and killer whales do not. The answer, I believe, is that at some point in human history, ideas began to meet and mate, to have sex with each other (page 6).
Cultural evolution can be seen through the lens of ‘exchange’ as biological evolution can be seen through the lens of ‘sex’. By exchanging, humans discovered ‘the division of labor’, the specialization of efforts and talents for mutual benefit. We will all be wealthier if more people are drawn into the global division of labour, allowing them to specialize and exchange. Evidently, we have been for the past half millennium, compared to all the other species on the planet that have only been able to survive by themselves. Nevertheless, some of the arguments about us getting rich over time should be scrutinized. According to Ridley:
Today, of Americans officially designated as ‘poor’, 99 per cent have electricity, running water, flush toilets, and a refrigerator; 95 per cent have a television, 88 per cent a telephone, 71 per cent a car and 70 per cent air conditioning (Page 29).
In spite of the risk of sounding excessively conservative, such facts make one wonder: What does it really mean to have such facilities? Although they make life ‘easier’, do they necessarily make life ‘better’? A typical person could probably fix their car in their garage if it broke down in the 60s, but with the increase in complexity and reliance on electronics in the automotive industry, even though modern cars make life easier than ever, it is impossible to fix them on your own if you are not specialized in that field. True, we can exchange time for money, but we must earn it somewhere as well, so it goes both ways. Thus, poverty can be defined as this. Poor in the sense that you cannot sell your time for enough money to buy the services you need, and rich in the sense that you can afford not only the services you need but also those you desire. It all boils down to one question: are people getting richer over time? Obviously, we are, since the average person is able to purchase many things that were previously only available to ‘the rich’. However…
Is it possible that not just the recent credit boom, but the entire postwar rise in living standards was a Ponzi scheme, made possible by the gradual expansion of credit? It is also true on both sides of the Atlantic that your state pension will be funded by your children’s taxes, not by your payroll contributions as so many think.(Page 29)
By laying out all the information for the reader to consume, Ridley successfully persuades the reader to view the situation with a more optimistic outlook. At least the glass is half full, and who knows what technology will bring us tomorrow. With technology growing exponentially, it makes sense to be optimistic about the future rather than pessimistic.
When you meet one of those people who go so far as to say they would rather have lived in some supposedly more delightful past age, just remind them of the toilet facilities of the Pleistocene, the transport options of Roman emperors or the lice of Versailles.(page 45)
Trade is the cornerstone of cultural evolution
According to Ridley, ‘Trade’ constituted the backbone of human evolution and negates the idea that ‘language’ played the key role as others believe. The author asks, “if language is the key to cultural evolution, then why did Neanderthal toolkits show so little cultural change?”
At some point, after millions of years of reciprocal back-scratching of gradually increasing intensity, one species, and one alone, stumbled upon an entirely different trick. Adam gave Oz an object in exchange for a different object (page 59).
According to Yuval Noah Harari, the author of ‘sapiens’, language made all the difference. However, Ridley rejects that theory. Harari’s views aren’t polar opposite Ridley’s, as evident in his book, Sapiens…
“You could never convince a monkey to give you a banana by promising him limitless bananas after death in monkey heaven.”
Ridley, however, argues that human evolution to become the dominant species on earth has more to do with economics than culture. However, this begs the question how exchange was made possible without proper communication? It seems that Harrari and Radley are both right, at the same time — that human beings are superior to other species because of their ability to communicate and their economic prowess. However, this is more of a chicken-or-egg situation. It is impossible to say which skill was developed first. It is likely that both skills built on each other in an upward spiral.
Trade brings people together
As the author lays out the groundwork, he moves forward with the premise that ‘trade’ is good for people, rationally introducing optimism as an element of the argument.
But the even more surprising lesson is that the more people are immersed in the collective brain of the modern commercial world, the more generous they are.(page 86)
The argument here is that in order to sell anything, organizations must first win the customer’s trust. It is unlikely that trades would take place if organizations were unable to build trust with their stakeholders. How do you build trust? You must consistently deliver good products over a long period of time. In the event that people trust each other well, then mutual service can evolve with low transactional friction; if they do not, prosperity will be eroded. As a result of this moment, one can expect rapid increases in quality of life, especially in areas where free trade is possible, as it is necessary for organizations to gain the trust of their customers in order to attain profitability.
‘This isn’t about auctions,’ said Meg Whitman, the chief executive of eBay, ‘in fact it’s not about economic warfare. It’s the opposite.’ It was survival of the nicest. (page 114)
Organizations are constantly battling over who is nicest, a struggle that is seen very differently by conservatives and liberals. Conservatives embrace economic change, but they hate its social consequences, while liberals love their social consequences but hate their economic source. Both viewpoints, however, are essential to the growth of nations in general.
Agribusiness fuels human development
RIdley argues that after experiencing the benefits of trade, people invented agriculture to keep it going, not the opposite as many other intellectuals believe. Eventually, farming replaced gathering, and herding replaced hunting.
Trade comes first, not last. Farming works precisely because it is embedded in trading networks (page 128)
Human development is ignited by agriculture, both culturally and technologically. The quest for fossil fuels enables the industrial age to come about, and agriculture forces the world to improve healthcare.
Free markets allow people to travel and exchange ideas, which stimulates economic growth
People gathered in cities, aided by agricultural advancements that were made possible through trade. Next, trade gained more traction when people sought to exchange ideas, a process that was engendered by the free market.
In these Bronze Age empires, commerce was the cause, not the symptom of prosperity. None the less, a free trade area lends itself easily to imperial dominance (page 166)
There is no doubt that economic prosperity grounded in free trade is a well known concept among economists since Adam Smith’s famous book ‘wealth of nations’ was published in 1776. Ridley, however, is attempting to reinforce this idea by providing historical examples. As European countries opened their borders for free trade, Asians were severely monopolized — resulting in an economical and cultural decline where Europe quickly gained traction. This is why the message from history is so clear – free trade leads to mutual prosperity while protectionism leads to poverty.
Economic freedom stabilizes the population
However, what if the difficulty of exchanging leads to a decline in specialization? The self sufficiency of the civilization would lead to a depressing era with the growing population. This is known as ‘The Malthus’s trap’. Therefore, the question arises, ‘Is self-sufficiency declining in modern times?’ We’ve learned our lesson from self sufficiency specially in the early 18th century where the Asia failed. Even in the 19th century, Germany, in particular, as it industrialized rapidly, saw a huge increase in the birth rate, but a flood of emigrants to the United States prevented the division of land among multiple heirs and the return to poverty and self- sufficiency that had affected Japan two centuries earlier.
But the statistics suggest a satisfying conclusion — if we save children from dying, people will have smaller families. Additionally, the more interdependent and well-off we all become, the more the population will stabilize within the planet’s resources. This means we are well prepared to escape Malthus’s trap in the 21st century.
There is no need to impose coercive population control measures; economic freedom actually generates a benign invisible hand of population control (page 211).
People are getting freed from physical labour
Another reason to be optimistic in modern times is that technological advances are making it possible to reduce the amount of physical labor required to earn a decent living. More optimistically, we might not run out of power sources in the future as most media streams claim.
Coal not only did not run out, no matter how much was used: it actually became cheaper and more abundant as time went by, in marked contrast to charcoal, which always grew more expensive once its use expanded beyond a certain point, for the simple reason that people had to go further in search of timber (page 216).
Civilization grows exponentially through the exchange of ideas that spark innovation
The reason why we can believe that we will not run out of our natural resources can be attributed to the innovation of a particular idea — and that is the ‘innovation’ itself.
The way to keep your customers, if you are Michael Dell, Steve Jobs or Bill Gates, is to keep making your own products obsolete (page 264)
In the modern world, prosperity is driven by accelerating knowledge generation. Bicycles, for instance, are things with diminishing returns. Having a bicycle is very useful, but having two or three isn’t much more advantageous. However, the concept ‘bicycle’ remains valuable. Regardless of how many times you explain how to make or ride a bicycle, the idea does not become stale or useless.
Turning points are unpredictable, because innovation is unpredictable
The book beautifully conveys the idea that even though we are consuming natural resources at an increasing rate, ‘the efficiency’ of consuming those natural resources is also increasing exponentially. As a matter of fact, this has been proven both technologically and economically, as well as being obvious to anyone. However, the modern world is driven by pessimism when it comes to issues of this nature. Collectively, people always wish to deny that life is improving. For some obscure reason, this mental friction is what gets the people going. Government politics would be a major contributing factor.
Disregard for the preferences and interests of individuals alive today in order to pursue some distant social goal that their rulers have claimed is their duty to promote has been a common cause of misery for people throughout the ages (page 288).
No journalist ever got the front page by telling his editor that he wanted to write a story about how disaster was now less likely. Good news is no news, so the media megaphone is at the disposal of any politician, journalist or activist who can plausibly warn of a coming disaster (page 295).
Conclusions
One of the most compelling qualities of this book is that the author is not trying to convince the reader that today is some kind of utopia. It’s true — there’s no silver bullet in his basic premise, and logically, there can’t be one. However, it helps you change your perspective in life so that you see the glass half full but not half empty.
So the human race will continue to expand and enrich its culture, despite setbacks and despite individual people having much the same evolved, unchanging nature. The twenty-first century will be a magnificent time to be alive (page 359)
