{ "episodeId": "SLP174", "speakers": { "stephan": { "name": "Stephan Livera", "role": "host", "tag": "STEPHAN" }, "matt_ridley": { "name": "Matt Ridley", "role": "guest", "tag": "MATT" } }, "segments": [ { "speaker": "stephan", "time": "00:04", "start": 4.02, "text": "Hello everyone and welcome to the Stephan Livera podcast, a show about Bitcoin and Austrian economics. Today I've got a great guest for you, Matt Ridley. but first let me introduce the sponsors of the show. So, the sponsors of the show are here. so Kraken, firstly, one of the world's biggest exchanges, they offer one of the most liquid exchanges, they're one of the longest standing, they, are, they should be one of your first choices in terms of if you're looking to buy Bitcoin or sell Bitcoin, this is where you go. Kraken are renowned for their security as well, they have Kraken Security Labs assessing the security, not just of Kraken, but also other peers and other parties in the Bitcoin industry. So make sure you check them out. They've also got Crypto Watch, which Trading and charting terminal. They've also got Kraken Pro mobile application, which is a beautiful mobile-first designed application for you to take the best of Kraken on mobile, on the go. so the website for that is kraken dot com, as you can see on the screen. next up is Coinfloor. So if you are in the UK or if you have any friends who are in the UK, this is the place to go to for auto buy. So you can see on the screen, as I'm putting on the screen, they have an auto buy functionality, which allows you to basically automatically buy every week or so, and you can set up very quickly and set up, an automatic transfer from your bank into Coinfloor. And so it's also only got Bitcoin Use any of your friends if they've got, if they might get confused by altcoins and so on, so that's, where you can find that. And Coinfloor are also introducing a really competitive affiliate scheme, so make sure you check them out there. They've got thirty-nine months o-on that affiliate scheme, so go and look them up also. next is Swan Bitcoin. So if you are in the US, this is the one for you. If you're looking for an easy way to automatically buy Bitcoin, AutoStac, you can do it every week or every month. You can set up your US bank account to connect up with Swan Bitcoin. And so really, you've got, you've got to also consider the, the psychology of just automatically buying. And Swan also offer the cheapest auto-buying service in the US. Now, disclosure, I am, I ho- I hold a small amount of equity in Swan. One Bitcoin, and I'm also an advisor, but that's also because, I, I know the founders of the company, and I believe it's, it's a great choice. now, lastly but not least, Unchained Capital, Bitcoin native financial services. So for those of you who are looking for ways to secure your coins, you can use multi-signature, meaning you have two of three keys, and Unchained will hold the third key, and so they've got the Vault product, which is an easy web interface, and you can use Trezor" }, { "speaker": "stephan", "time": "02:44", "start": 164.36, "text": "Stay, you can put up some Bitcoin and put that up as collateral to receive US dollars. Now, you pay interest on that, but then that could also be tax deductible, depending on if you're using that for a business purpose. So make sure you check them out, they've got an incredible blog, they've got awesome content, and they've also got open source material such as Caravan. So, I'll look out for an episode later, coming soon, with some of the guys from Unchained Capital. Alright, so the website for that is unchained-dash-capital dot com Alright, so now let me, just introduce my guest, Matt Ridley. He is, I'm, I'm personally a fan of Matt Ridley. He is, he's known as the rational optimist. He's an author, and he's world renowned for his writings on science, the environment, and economics, and we're gonna talk about his new book, How Innovation Works. Thank you, first of all, for joining me. I'm, I'm a fan of your work. I really enjoyed The Rational Optimist, The Evolution of Everything, and now you're-- I've had an opportunity to read your new book, How Innovation Works. So let's start with a little bit around why did you write this book? Stephan, thanks so much" }, { "speaker": "matt_ridley", "time": "03:45", "start": 225.08, "text": "for having me on the show, and it's, it's great, great to be with you. I wrote this book because I've become more and more intrigued by the subject of innovation. I've But I've never tackled the topic head on, and I think in a way it's still rather mysterious. We think we know how innovation works, but actually, when you look at it, we're not-- I'm not sure we do. We, we, we, we understand bits and pieces about innovation, but it's a slightly mysterious process. It happens to human beings, but not to rabbits or rocks. it happens in a sort of inexorable, inevitable evolutionary way. it's a sort of incremental phenomenon. and it's ab- Absolutely central to, progress in the world. I mean, there is no other significant cause of human progress. It is innovation that drives down the cost of things, it drives up the quality of things, it drives up lifespan, it drives down child mortality. You know, innovation is, is the central theme, of human history really. it explains things like, you know, why social media leads us to being badly, bad-tempered or whatever, you know? So, you know, even when you get into politics and, and social life, i-innovation is central to it. So I wanted to dig deep into innovation and tell lots of stories about innovation happening in the world and try and pull General themes out from those stories. That's what I set out to do in this book." }, { "speaker": "stephan", "time": "05:17", "start": 317.18, "text": "Fantastic. And it, it became clear that there were certain environments in which we see more innovation and others in which we don't see so much innovation. So what environment is conducive to more innovation? Well, in" }, { "speaker": "matt_ridley", "time": "05:31", "start": 331.1, "text": "one word, it's freedom. That is to say, the more you allow people to experiment, to go off in unexpected directions, to, try things without having to get permission first, these are the conditions under which people discover new ideas around the world and develop those into practical propositions. So on a broad geopolitical scale, I argue that repressive regimes and empires are are pretty bad at innovation. If you look at, the Ottoman Empire or the Ming Empire in China, or even the Roman Empire, there's not a lot of innovation happens in these places. Whereas fragmented regimes like the Italian city-states or the, the Low Countries, the Netherlands and so on, or modern America, which is very much a federal system, so that people can move from state to state and find a re-congenial regime, which is what they did In Europe during the great age of European, development and expansion, and funnily enough, in China too, in Song China around a thousand years ago, it wasn't a very well unified or centrally directed empire. There was a lot of freedom, and that's what led to innovation. So you need freedom, you need places where ideas meet other ideas and have, sex with them. That's the, the sort of slightly facetious way that I put it. ideas meet and mate and produce baby ideas, new ideas, and- that tends to be trading hubs, so port cities, places where people are gonna meet other people, and come across concepts from elsewhere. So, you know, I talk about the, this, Thirteenth century guy Fibonacci in, Italy, who brings Indian numerals to, to Italy. But he does say, because he's a merchant living in North Africa, where he's meet-- where he's learning mathem-- mathematics from the Arabs, and the Arabs have, have started using this fantastic decimal system with a, with a, with zero being a number for the first time. and they've picked that up from the Indians, who invented it a few hundred years before. and so- So on, so, it, it that, that's a nice example of how, an awful lot of ideas have to be imported in order to meet with other ideas before they can be exported as still fresher ideas." }, { "speaker": "stephan", "time": "07:57", "start": 477.16, "text": "And another idea that came related to, as you mentioned, freedom being the driving, or at least one important factor behind innovation. I think another theme that came through as I was reading your book was this theme of commercialization, that you might have a certain invention, but it doesn't really become a driving force and change until it is able to be commercialized. Could you expand on that idea?" }, { "speaker": "matt_ridley", "time": "08:21", "start": 500.69, "text": "Yeah, I think this is really important. I try and make a distinction between invention and innovation in the book, and I believe innovation is, developing an invention to the point where it's practical, affordable, reliable, and available to lots of people. and that's much harder work than people think. People think you make the invention, then you sit back and everyone adopts it and you're, you're a way to the races. That's not the way the world works. Nearly always, what's key is somebody who then puts in many years of hard work to turn an invention to A good example is the light bulb. There are some twenty-one different people who came up with the idea of the light bulb in the 1870s, but it's only really Edison who puts in the hours, literally thousands of hours, using a big team to experiment with different, elements of the light bulb till he, till he has a product that is reliable, that is li-livable to last for a long time. Y-you know, he did five thousand different experiments, before he settled on Japanese bamboo as the, the s-as the suitable stuff for the Inventor of the light bulb. There's a nice story that Charles Townes, the inventor of the laser, used to tell about a rabbit and a beaver standing looking at the Hoover Dam And the beaver is saying, \"No, I didn't build it, but it is based on an idea of mine.\" And that's quite a nice example of the, the way the inventor sees the world. He says, \"Well, hang on, I deserve the credit. I had this idea, but actually, it's the people who built the dam who've done most of the work since then.\"" }, { "speaker": "stephan", "time": "09:52", "start": 591.94, "text": "Right, and I think that also ties into this idea of incremental and gradual inventions and changes, rather than this kind of, \"Oh, grand eureka.\" And, from your prior book, you also touch on this idea of the great man thesis and how actually innovation can happen in a way that's count-running counter to that. Why is that?" }, { "speaker": "matt_ridley", "time": "10:16", "start": 615.54, "text": "Yes, I think we, we, we tend to tell stories about heroic inventors jumping out of the bath and running down the street shouting \"Eureka!\" or, an apple falling on someone's head, or, or James Watt watching a kettle boil and thinking \"Hooray, I've invented the steam engine.\" And in fact, the more you drill into these stories, the more they turn out to be after the fact reinventions of what actually happened, and in fact, it was a much more gradual process, a much more collective process. there's a nice, example in the case of containerization, you know, the, the development of standardized containers for, for international trade, which is a terribly important innovation, but a pretty low tech one. and the driving force behind it was a guy called Malcolm Mclean, who was a trucker, and then he sort of saw the point of this, and there was a story told that he was, you know, sitting in an Load onto a ship, and he thought, \"Well, there's a better way of doing this,\" and he, there and then, had the idea. He said that story's nonsense. I, you know, that's been made up about me, and it's not true. And his biographer said that's nonsense, but the biographer also said, \"I can't seem to eradicate this story. It's still out there. People see-- still think it was a one lightbulb moment.\" In fact, The more you look at, innovation, the more gradual and incremental and collective it is, the more it requires different people adding small things to different things. So think of Moore's Law or something like that, a very steady improvement in the, effectiveness and price of com-- of computing over a long period of time, not-- and funnily enough, no great jumps when you switch from one type of computing to another. When you go from the vacuum tube to the transistor or from the transistor to the integrated circuit, you don't get a leap in efficiency You get another incremental little step, in improvement. So, it's, we, we've been a bit beguiled by a, the famous inventor, the guy we give the patent or the Nobel Prize to, and b, the, the, the, the, well, the whole concept of, of, of it being sudden rather than gradual." }, { "speaker": "stephan", "time": "12:22", "start": 741.97, "text": "Right. And you also touch on this idea that, well, part of it is there are long stretches of preparation, and even for us in the, you know, for my listeners who are Bitcoin enthusiasts, we see it like it was a long journey of prior inventions that had to all come together, and Satoshi Nakamoto sort of pulled the pieces together into a working and cohesive thing that we now call Bitcoin. and From reading your book, you also mentioned how sometimes there were wrong turns along the way that people tried along different ways, and you just-- they fundamentally just had to keep doing a s- essentially a process of trial and error to find something that did work." }, { "speaker": "matt_ridley", "time": "13:05", "start": 785.13, "text": "Yeah, no, that word error is very important. and again, if you talk to, successful innovators, they go on and on about the need for, making mistakes. You know, it's from your mistakes that you learn. I think it was Edison who said, \"I haven't, failed, I've just found ten thousand ways that don't work.\" and Jeff Bezos is very good on this. He, he, after all, has presided over a company that, that, achieved a string of pretty Mistakes called Amazon, but in the end was triumphantly successful. and he says, \"You know, you've got to be swinging and missing as well if you're gonna swing and hit at all.\" You've got to keep trying different things, until you, till you hit upon, something that works. So, so error is very important. There's another aspect which I think is very relevant to Bitcoin, which is, I call it Amara's Law because it was first coined by this guy Roy Amara, in the 1960s, who was a computer scientist and futurologist, and he said we underestimate the impact of a new technology in the long run, but we overestimate it in the short run. and I think this is a very profound insight. It, it applies to almost everything you can think of. So we tended to, overplay the impact of the internet in the 1990s. We thought it was gonna transform commerce much quicker than it did. But by the 2010s, I think it's fair to say the internet was delivering rather more than we ever expected. Genomics, when the human genome was sequenced around the year two thousand, it was gonna cure cancer overnight, it was gonna do this, that, and the other, then pretty well nothing happened except a few court cases based on forensic DNA and things like that. But now genomics is delivering extraordinary things. So these things take ten to fifteen years, it seems, before they start to see that ex- that acceleration. And that's that preparation phase you talk about. And I would put Bitcoin quite early on that curve yet. I would suggest that it and other crypto areas probably have some disappointing to do before they deliver something pretty spectacular, in ten or twenty years' time. Well, I don't know, ten or twenty years from when? How do you, do you measure it from, Satoshi Nakamoto's," }, { "speaker": "matt_ridley", "time": "15:26", "start": 925.78, "text": "manifesto? I don't know." }, { "speaker": "stephan", "time": "15:28", "start": 927.78, "text": "Well," }, { "speaker": "matt_ridley", "time": "15:28", "start": 928.04, "text": "I would say," }, { "speaker": "stephan", "time": "15:29", "start": 929.46, "text": "yeah. So I mean, Satoshi released the white paper in two thousand and eight, and the network started in early two thousand and nine. So I guess if we're going on a fifteen-year rule, let's say twenty twenty-four, let's say approximately, that until Bitcoin really reaches that, that kind of level. And I think from your book as well, you mentioned this point around Setting the right level of expectations, right? So at the start we think, \"Oh my God, it's going to be amazing,\" and then it disappoints. But then it sort of climbs back out of that trough. So what are-- Do you have any other examples of things, that sort of operate on that kind of over, overestimate, but then you kind of disappoint, and then it kind of-- Then we set the right expectation on what we think this is really going to do for us?" }, { "speaker": "matt_ridley", "time": "16:16", "start": 976.0, "text": "Yeah, I mean, I think, mobile telephony is, is a very interesting one because it's, i-i-it's clearly been a huge transformation in your and my lifetime. well, maybe you're not old enough, you've grown up with them, but, but in, in my lifetime it is. And, it's-- and yet if you go back to the- Late '80s, beginning of the '90s, and you read what people are writing, their expectations of mobile telephony were extraordinarily low. they saw it as remaining expensive, a toy for certain functions, but no-nothing spectacular, limited battery life, there might be a million mobile handsets in the world by the year 2000, said the, Head of Motorola, I think. In fact, by then there was something like a hundred million, you know, I mean, the, the, it was out by a two orders of magnitude, and, you know, why is this? Well, it's, it's, it's, it's everything coming slowly together, until you suddenly reach a critical point where it's possible to do lots of different things. so, actually, you know, even going even further back, electricity is a, is a very good example of Of a technology that seems to come together in the late 19th century, light bulbs, et cetera, electric motors, electric generators, all these different things are perfected in a rush of interesting work in the eighteen seventies, eighteen eighties, eighteen nineties. But it's not till the nineteen twenties that suddenly you're starting to get all sorts of household devices using electricity, you're starting to get, machinery and- In, in, factories running on electricity, et cetera, et cetera. So, so the, the, the-- We, we think of innovation as a sort of headlong rush, but quite often it isn't. Quite often it, it has to take time and gather pace before it gets going. again, I think the, the whole crypto world, which is not one I know well, I have to say, I wrote a bit about it in The Evolution of Everything, I didn't write so much about it in this book. is one that is almost bound to have a big impact because it's almost-- it's, it's got to be the way in which we innovation floats free from the, the earth and goes up into the cloud. It's, it's gonna be the place where we don't any longer rely on California's taxes being right or California's, pro-innovation policies being right in order to get, to keep innovation going, or we don't have to worry about whether China is, is being, authoritarian or not, because this can happen in the cloud, isn't that the great promise of Brick Bitcoin and, and crypto? I hope so." }, { "speaker": "stephan", "time": "19:16", "start": 1155.86, "text": "Well, yeah, so for many of us in the Bitcoin world, we see it essentially as a challenge against central banking, and we see it as a challenge against, like, inflation, essentially, that's one of the main ones, and also a challenge against people who want to permission you and stop you from sending your money anywhere around the world that you want to. And so as you were mentioning, that, Bitcoin allows people Bypass or sort of do an end run around the censorship that governments enforce onto the traditional banking or PayPal and so on, where they say, \"No, this is AML, this is sanctions, you must do X, Y, and Z.\" Whereas once you are operating in the Bitcoin world, you're operating in a way where essentially you transact permissionlessly. So I think that for me is where I see a big, improvement and also the inflation, like the kind of anti-inflationary aspect of being able to hold our value in something that is- is not going down in value all the time, and so that's just another way that people want to, if they wish to save a small portion, they can do that kind of thing. but I, I think another really interesting topic that I saw from your book was this idea that You know, where does the innovation come from? Does it come from these academics in the universities, or does it really come from the tinkerers and the practitioners, the people who are really at the coalface? And the sense that I got from your book, and also from other books such as, Terrence Kealey's work, I get, I got a similar sense that really it's kind of like tinkerers and practitioners are really the ones who drive things forward, and oftentimes scientists and academics are almost the ones just after explaining it after the fact, although that's probably not A bit of a flip from the typical common sense, would you say?" }, { "speaker": "matt_ridley", "time": "20:56", "start": 1256.0, "text": "Yes. Th- th-this is the, the, the general view among people who've studied innovation hard, ha-is and has been for a long time, that it's not a linear process. It doesn't start with, academics having bright ideas in universities and end up with applications, spinouts, and, gradual dissemination of something into the, world that way. I mean, it can happen that way, but it isn't Necessarily linear in that way. Just as often it's going the other way that tinkerers, as you say, are, are fiddling with, technology and coming up with better ways of doing things, and in the, in, in the process, stumbling on general principles that scientists in academia then, have to explain. One of, and, and, you know, this is obviously true back in the, eighteenth and nineteenth century, so the steam engine led to the science of thermodynamics. Rather than the other way around, I think everyone can agree on that. But of course, it becomes less true as we come forward and we get a much bigger research and development sector in, in universities and, and innovation becomes part of their mission. Yes, of course, they're gonna contribute some original ideas that are gonna lead to spinouts. But even some of the things that look- Like they came out of pure research and went into application. Sometimes it's not quite that, that way. The example I give is CRISPR, the genome editing process that, has been developed within the last ten years, which is a fantastic new technology, a-- and which comes out of, MIT and, Berkeley and, you know, all the great universities, and is now being applied in industry. Fine, simple story, you know, from academia to app- Well, not when you look closer, because where did the guys in the universities get it from? They got it from the yogurt industry. The yogurt industry has a problem, which is that its bugs, the bacteria which it uses to ferment, dairy products, tend to get sick. When they get sick, it's viruses that make them sick, so they employ bacteriologists to try and understand how the bacteria can resist these viruses. And one of the things they picked up was a hint from a guy in a university but working with the salt industry. industry that he'd found weird sequences in bacteria that seemed to have viral sequences embedded in them, and maybe this was part of the virus's immune system whereby it was keeping a library of genomes of viruses to recognize when they turn up and, and attack, which indeed is what it turned out to be. so, we wouldn't have this Without some people trying to solve a simple basic problem in the yogurt industry, which then gets turned into a much more, available product for, both agriculture and medicine in, in human beings." }, { "speaker": "stephan", "time": "23:51", "start": 1431.13, "text": "And that also is an interesting one because it's like," }, { "speaker": "stephan", "time": "23:57", "start": 1437.34, "text": "I'm just reminded now of another concept from your book, which is that use often precedes understanding, right? So sometimes, you know, people are just using this thing and they don't quite understand how all the pieces sort of fit together, but then the academics come back and sort of post facto rationalize how it worked. But At, at the start, people didn't actually understand the entire process, correct?" }, { "speaker": "matt_ridley", "time": "24:18", "start": 1457.62, "text": "Yeah, yeah. Now, I mean, vaccines are a beautiful example of that. I mean, the idea of inoculating someone with a weak version of a disease to stop them getting a stronger version of, of the disease, goes right back to the eighteenth century in Britain and America, and probably an awful lot further back in China and Arabia and maybe even Africa. And, I write in the book about somebody called Lady Mary Wortley Montagu, who, went off to Constantinople as the wife of the British ambassador there and picked up from women in the harems of the, Ottoman rulers, that they were doing this, that they were scratching the, the, the skin of their kids to give them smallpox when they were small, in the hope that it would protect them against getting, fatal smallpox when they were larger. And, she brings this idea back to, Britain and promulgate Inoculates it and persuades the Prince of Wales and others to have their children inoculated. She has her own children inoculated very bravely, and many people in the medical establishment think she's a complete quack and a dangerous person. And indeed, there are riots to, to these early vaccinators, particularly ones in America, the chap had to lock himself in a room to, to, prevent being killed by the mob because he was promulgating this dangerous idea. And sure enough, when you look at some of the medical practices that were around at the time, this one does sound completely bonkers. You know, what do you mean you're gonna give a kid a disease? You know, how dare you suggest such a ludicrous idea? And it's hundreds of years after this, starting with Paste That we start to get an inkling of why inoculation or vaccination works. So it's a very nice example of use preceding understanding by a long way." }, { "speaker": "stephan", "time": "26:06", "start": 1565.73, "text": "Yeah, some very counterintuitive, things there, and I think that also ties into another theme I enjoyed reading from your book, which is that innovation isn't always socially acceptable. Oftentimes, there are times where society pushes back against the innovator. So what are some, examples there? And, why, why does society push back against these innovators? Shouldn't we be lauding their, their work?" }, { "speaker": "matt_ridley", "time": "26:33", "start": 1592.54, "text": "Yeah, I mean, we think we're pro-innovation, but actually if you look at the way we re- we react to new ideas, we're fantastically conservative. you know, oftentimes there's a, \"Well, hang on, I don't think that's a good idea,\" reaction. The examples I give in the book, I, I give the example of coffee Coffee is an innovation that comes from, Ethiopia into the Arab world in the 1400s, and then into the rest of Europe in the next couple of hundred years after that. And everywhere it, it's introduced, there's a ban on it. The, the ruler says, \"I'm banning this stuff,\" and he usually fails. People like coffee too much, they find a way around the ban, and he eventually gives up trying to ban it. But the, you know, there's some pretty strong, rules against it. So King Charles the second of England in the 1670s, he bans coffee houses. Now, two reasons he's doing this. One, because he's being lobbied by the brewery and, and wine industries who don't like competition, and that's a common theme. But the other reason is 'cause he's figured out that people go to coffee shops to have coffee, and when they're in coffee shops, they start talking to each other, and when they talk to each other, they sometimes talk about how the king isn't doing a very good job as king, and he doesn't like that." }, { "speaker": "matt_ridley", "time": "27:49", "start": 1669.06, "text": "It's fake news that he's worried about. So this is a very nice example of, of a, and by the way, the, the, the opposition to coffee is dressed up in very strongly sort of medical, pseudoscientific terms, you know, it dries out the lymph nodes, it causes abortions, I don't know, you know, there's sort of all sorts of arguments made against it which are spurious. The, the umbrella was resisted by, the people who, drove hansom cabs around London saying, you know, hang on a minute, People are gonna walk down the street when it's raining instead of getting in one of our cabs. We don't like that. This is a dangerous instrument, it shouldn't be allowed, blah, blah, blah. margarine. There was decades of opposition to margarine. A, bans on margarine remained on the statute in about half of American states right up until the 1940s. Entirely because of lobbying by the dairy industry. more recently and more seriously, we've seen a whole continent, that is to say, Europe, turn its back on an innovation in the, in this case, genetic modification of crops, on wholly spurious grounds, which has done real damage to the environment actually, by Europe would have been using far less insecticide now, if it had adopted GMOs, as opposed to rejecting them. so, opposition Attention to, new technologies, it continues and if anything is stronger now 'cause you have very well funded lobbies against it. Something like a mobile phone Get through this problem because it's so obviously useful to people as individuals that they don't wanna listen to the, to the scare stories. But there were a lot of scare stories. A lot of people tried to tell us that mobile phones were gonna fry our brains, if you remember, twenty, thirty years ago. and, but on the whole, we said, \"Nah, this thing's too useful, I'm, I'm gonna take the risk anyway.\" but if it's not of, of an individual use to you, like GMOs are not, Really, then, then you're quite happy to say, okay, let's ban" }, { "speaker": "stephan", "time": "29:54", "start": 1794.26, "text": "it. Yeah. And you also mentioned how sometimes, as you were mentioning, incumbents can block the new technologies if they compete with their technology, and they'll say something like, \"Oh, I think in your book you mentioned, trains, they, they were saying, early opponents of railways were accusing trains of causing horses to abort their falls.\" So like the, the incumbent just sort of leverages their political- Yeah. Connection and they, they keep throwing these random, you know, objections at the wall, hoping that something will stick, right?" }, { "speaker": "matt_ridley", "time": "30:25", "start": 1825.12, "text": "Yeah. The Horse Association of America has a huge campaign against tractors, and it's pretty successful. It actually, you know, manages to get, whole states not to allow tractors for, for quite a long time. no, I mean, sure, sure, the, you know, look for the person who's gaining from a, from, opposing a tech, new technology, there's nearly always a vested interest there. One of the Recent examples, which I discuss in the book, is vaping, electronic cigarettes. big opposition to this, very successful in some countries, even though it's quite clearly much, much safer than smoking and actually quite a good way of weaning people off a dangerous onto a less dangerous technology. nonetheless, big opposition to it. Where's the opposition coming from? If you track the money, you find it nearly always comes from the pharmaceutical industry. Why? Well, 'cause the pharmaceutical industry have very- Lukrative products that are prescribed, called patches and gums, now because they're prescribed, they get well reimbursed for them, et cetera. They don't want the idea of someone taking up, picking up an electronic cigarette instead and saying, \"This is much more effective than that patch which didn't really work for me and I had to keep trying it over and over again.\" So, you know, guilty, the, the pharmaceutical industry is guilty of, of a very self-interested campaign here, and it's, it's well hidden. You know, you" }, { "speaker": "stephan", "time": "31:48", "start": 1908.48, "text": "Traditionally, it's like innovations can sometimes go through these cycles of banning and unbanning, and in different jurisdictions around the world, is that also-- that seems to be a common trend in your research as well, correct?" }, { "speaker": "matt_ridley", "time": "32:04", "start": 1924.23, "text": "Yeah, I think, the, the, the pattern, either an innovation will gradually win out, and the bans get overturned, or, it, it dies. you know, so for example, fracking, you know, shale gas is a, is a extraordinary innovation of the last twenty years, that has transformed the energy industry in the United States. Some states have banned it and others have not. it's having a big effect, on, the prosperity of those states that allow it. And largely, the European countries have rejected it and said it's a dangerous technology, even though it's a very old technology and it's just an improved version of it. will it be possible to overturn those bans? Will we come back around at a future stage and say, \"Actually, we need the natural gas. It's a lot cleaner than coal. it's what we need to make, hydrogen from, and we want to move to a hydrogen economy, and we've found ways of capturing the carbon.\" You know, if these arguments come around, then we- We'll need to access these incredible resources of natural gas under countries like the UK. Will we be able to undo the bans we've done? I hope so. I mean, I think, you know, history teaches that countries like the, you know, the Ottoman Empire banned printing for several centuries 'cause they worried about people printing books that were, not exactly supportive of the regime. and eventually, inch by inch, they had to give in, but it was- It took several centuries. so, resistance to innovation is a huge problem, and we live in an age that isn't seeing as rapid and as effective innovation as we would like to, as we should be seeing, except in one area, and that's the digital world, where, as Peter Thiel points out, it's still largely permissionless, and the rules were written, such as the Digital Millennium Copyright Act in the United States, very specifically to encourage innovation in, in that area. area, but everywhere else, it's pretty hard to innovate nowadays. You have to persuade an awful lot of bureaucrats that you're doing the right thing. They often take a long time to make up their minds. I give the example of medical devices, a rather pertinent one at the moment in the middle of the COVID pandemic, m-medical devices take years to get licensed. Now, for an entrepreneur who's trying to develop a new diagnostic test for a virus, say years can be fatal. If he has to wait two or three years to get, approval from, a medical licensing agency in his country, then, he's probably gone bust in that time. So he doesn't actually try, he goes off and invents, you know, something in, in crypto instead." }, { "speaker": "stephan", "time": "35:03", "start": 2103.02, "text": "That's-- And, look, I think I see some parallels as well with the whole Bitcoin world here because- For example, discussions around a Bitcoin ETF get blocked for reasons where perhaps if it were some other commodity, by now it might well have been approved. It's just that there's this kind of constant resistance of pushback. Now, perhaps that could be a blessing in disguise in some ways. It forces people to innovate along different ways. Maybe they will start self-custodying, holding their own bitcoins, things like that. another area that's also related is Having society sort of have the infrastructure for this new innovation to work and to, for it to make sense. I think a good example you bring up is the, is the wheels on the luggage, idea, luggage bags, because you might think, \"Oh, well, we should have had that long, long time ago,\" but as you point out, it actually, it wasn't set up well to have that innovation. Why is that?" }, { "speaker": "matt_ridley", "time": "35:55", "start": 2155.15, "text": "Yes, I think this is a really nice, nice point because," }, { "speaker": "matt_ridley", "time": "36:01", "start": 2160.59, "text": "it, it's a useful thought experiment to say which technology That you have today, do you think should have been invented decades before they were? You know, why, why wasn't mobile telephony around in the nineteen forties? Why wasn't the internet around in the nineteen sixties? You know, you, you can go through these thought experiments, you nearly always come up thinking, \"Well, Actually, the, the infrastructure, the, subsidiary technologies you need to do it just weren't available. It wouldn't have been cheap enough or small enough or portable enough or whatever it might be in those days. And People quite often mention wheeled suitcases as a good counterexample. You know, why on earth did we have to wait till the 1980s and much later in the case of the rollerboard before we had really good wheels on suitcases? I mean, you know, suitcases didn't have wheels. And actually, I looked into the history of the wheeled suitcase, and sure enough, the guy who invents it in the, 1970s goes around to all the big, you know, luggage manufacturers trying to sell his idea, and most of them say, Then, once you think about it, and also by the way, other people had the same experience going right back to the nineteen twenties of trying to interest luggage manufacturers in wheels on suitcases and failing. but when you think about it, wheels would have been that much heavier then, you know, they'd have been made of steel, not aluminium, there'd been less plastic involved, they'd have taken up more, more space, they'd have, they'd have added more weight to the bag, and airports were much smaller, you didn't have to walk nea- Really as far, porters were much more numerous. You just handed your bag to a porter and put it on a cart, who wheeled it away. so actually, I'm not sure that the wheeled suitcase does arrive too late in history. It probably arrives about the time when all the other supporting, technologies are right for you. Just back to something you said earlier, about, the crypto world. And, and resistance to innovation. I just wanted to make the point that in a sense, Bitcoin is taking on the biggest monopolist of the lot, i.e. government. And if you think it's difficult to, win a battle against Big Pharma or Big Tech, wait till you try Big Government, because the jealousy with which governments guard their, monopoly on the issuance of money cannot be underestimated. I mean, in my previous book, I wrote about a, a fascinating episode in the history of, of money where in the eighteenth century Scotland developed, instead of a central bank, it had a, a bunch of competing banks, and this was partly because of the Jacobite rebellions. They didn't like a, a Jacobite-controlled bank having too much power, so they set up rivals to it. So a bunch of competing banks between them controlled the currency, in a way that wasn't true in England, and this led to an incredibly innovative- Innovative, an incredibly successful banking system with very little in the way of crashes, in Scotland as opposed to England. And it was eventually stamped out by a jealous British government in the nineteenth century who said, \"No, no, no, Bank of England's gonna control your currency.\" So don't underestimate the task you're taking on in Bitcoin, in try-trying to wrest control of a technology from government which likes to own it." }, { "speaker": "stephan", "time": "39:26", "start": 2365.58, "text": "I think that's a, that's a very fair point. I think, hopefully we see, well, first of all, I think we're probably at a point in terms of Bitcoin, I think we're probably not there yet that big, that governments really care about challenging Bitcoin yet, but potentially, I mean, imagine another five, ten years time, that could happen. but, I suppose for, for me personally, I, I'm sort of more optimistic on the idea that we'll see competitive jurisdictions, competitive, you know, competi- like Kind of idea, but, it remains to be seen, and, I think another, while we're talking about government and government, directed innovations as well, i- in your book, you talk about this concept of I'm not sure the direct, the correct term, but something like spillover versus directed, where it's sort of like the government tries to throw some money at science and just take, take credit for, okay, oh, the US government, DARPA, did internet, therefore, oh, look, see, the go-- we, we have to thank the, the government for the internet. but that's not necessarily the case because again, it com-- it comes back to that commercialization and getting a specific benefit, and I think perhaps that's also similar to the yogurt example, would you" }, { "speaker": "matt_ridley", "time": "40:41", "start": 2441.11, "text": "Yes, I, I do think that, that, that we, we, we tend to overestimate the, the degree to which, government is the originator of stuff. don't get me wrong, government is important in the innovation space, and given that it takes forty percent of our money off us, it would be a shame if it didn't spend some of that on, on innovation. I mean, if it spent it all on other things, that would be a pity. So I'm all for it spending money on research and on, development. But we tend to say things like, \"Ah, you couldn't have had the iPhone without government spending, because all the technologies in the iPhone, from GPS to plasma screens, et cetera, all came out of government-funded research.\" And there's some truth to that, but there's also an awful lot of nonsense in that because it's a bit like the beaver saying, \"Um, yeah, I didn't build the Hoover Dam, but it's based on an idea of mine.\" Huge amount of work had to go into, turning these basic concepts into things that were practical and useful, and that was all done in, in private industry. And in the case of, things like the touch screen, you know, this supposedly came out of a publicly funded," }, { "speaker": "matt_ridley", "time": "41:53", "start": 2512.57, "text": "thesis at Somewhere, but it was an accidental discovery. No, the, the government wasn't saying, \"Please invent touchscreens, for, for me.\" They were just saying, \"Right, here's a fund by which we fund research into interesting areas to see what you come up with.\" Well, that's fine, that's the way it should be. there's a tendency these days to say, \"No, no, government must pick winners, must decide who, is good at, w-which technologies we need to, to change in the future.\" Research to, so that we can find the solution to, emissions, et cetera. Now, as long as it's doing it in an open-minded way, we don't really know where the answer's gonna come from, fine. But if it's doing it in a directed way, then it's gonna fall flat on its face more often than not. The, you know, the best example of this comes from the 18th century, where a government said Measuring longitude at sea is a real problem. We've just lost a whole fleet on the rocks off the Cili Isles 'cause they were 200 miles east of where they thought they were, because they can't measure how far east or west they are. Using the stars the way they can, for, latitude. will someone please come up with a solution to this problem? We'll give you twenty thousand pounds if you do. And, lots of astronomers scratched their heads and had a go, and eventually a humble clock maker came back and said, \"Here's the answer. You just have really good clocks on ships.\" And as long as they don't mind being swayed around by the waves, et cetera, as long as the clock can keep time, then you can tell what the time is in London and what the time is where you are, and that'll tell you how far west or east you are. His name was John Harrison, and, the government said, \"Oh, we're not gonna give you the money. No, no, no, this money is for, astronomers and mathematicians and, you know, people who wear wigs, not humble clockmakers like you.\"" }, { "speaker": "matt_ridley", "time": "43:49", "start": 2628.85, "text": "So serendipity is really important here. A lot of the best ideas come from, unexpected directions." }, { "speaker": "stephan", "time": "43:56", "start": 2635.88, "text": "That's so fascinating. and a, another really cool topic I'd love to talk about is this whole fakers, you know, frauds, right? You got this whole Elizabeth Holmes, Theranos kind of idea, but at the same time, then you've got other examples where some people really did fake it until they made, made it, and they really did do that. So how do you think about that and how do you sort of, how do you sort the Do you know who's like really gonna make it and who's just a complete faker?" }, { "speaker": "matt_ridley", "time": "44:23", "start": 2663.14, "text": "It's really, it's a really good, question, and one that, and I've talked to people in Silicon Valley who said, \"Aww, all the old wise Silicon Valley people knew that Theranos was, was nonsense.\" Well, I'm not so sure about that. An awful lot of money got raised." }, { "speaker": "matt_ridley", "time": "44:42", "start": 2681.51, "text": "at, at one extreme, you've got people genuinely fraudulently faking things. So I, I write about fake bomb detectors that were, you know, that pretended to have, Quantum technology in them, they just had bits of cardboard in them, you know, these guys were lying and killing people. the other extreme, you've got, Steve Jobs saying, \"I'm gonna invent something in a few years' time,\" and he jolly well does, but he doesn't at the time he knows the, the announcement, no, how he's gonna get there. That's faking it till you make it. in between, you've got people hoping to do a Steve Jobs and failing, and that's where I think Theranos comes in, because, the Jobs had Moore's Law working for him, that is to say, things got cheaper And more effective, more, reliable as they got smaller. That's the weird thing about transistors, the smaller you make them, the more reliable they are. and that's, you know, the, the, the story of the modern world in one go, in a way." }, { "speaker": "matt_ridley", "time": "45:46", "start": 2746.19, "text": "Elizabeth Holmes banks on the same thing happening to microfluidics, that is to say, the processing of small samples of blood. she's gonna make it smaller and smaller, and it's gonna be just as reliable, if not more reliable. And of course, the opposite is true. The smaller you make a, a sample, the easier it is to get a false result, in that kind of area. so sh-faking it to, till you make it doesn't work for her. and then there are others, the vaporware stories where people thought they were gonna be able to fake it till they make it. There was a multipurpose games console that was constantly advertised and re-advertised at a certain point, in the early two thousands, and, ended up never happening, you know, They're, they're on the borderline between fraud and, fraud and just failure. but frauds, fakes, failures, and fads all go together. I mean, at the fad end, you've got You know, Gwyneth Paltrow's saying all sorts of weird stuff about what you can do with, products to make your body healthier based on some mumbo-jumbo about tradi-traditional Chinese beliefs. there's maybe an element of truth to some of them, but there isn't to others, you know? So," }, { "speaker": "matt_ridley", "time": "47:02", "start": 2821.74, "text": "the, the- The market sniffs out the, the mistakes in the end, but not before quite a lot of people have made quite a lot of money in some cases." }, { "speaker": "stephan", "time": "47:12", "start": 2832.35, "text": "Well, look, I think that really rings true, especially in the quote-unquote crypto space, in, especially in twenty seventeen, where, as, as I'm sure you're aware and many listeners are aware, there were a lot of scam projects in the space, and I, I, that's why for me as a caution, I normally advise listeners to really just stay with Bitcoin only, because we know Bitcoin works and it really is an innovation Innovation that you can control and you can use. People who talk about, you know, crypto, some of them essentially, some of them essentially were basically charlatan types who were sort of promising and promising and promising, but never really delivering because they didn't actually have a real product there. but, yeah, yeah. So, I, I think we will see, but, as you said, the market sort of proves it out over time and figures out who was lying and who was genuine. and one thing that I- I think is also very relevant today in this whole coronavirus crisis and so on, and, people are talking about, okay, how are we gonna get out of this? in your book, you mentioned this idea of the innovation famine, that if, you know, a society is too- You know, restrictive or if it's too closed off, right? And so even now there's some discussion and, you know, some what you might call saber rattling or whatever of people not wanting to trade with China. But I think there's probably a good caution there for listeners that In your book, you mentioned that those societies that closed themselves off to trade were also very poor from an innovation standpoint. So why was that?" }, { "speaker": "matt_ridley", "time": "48:42", "start": 2922.08, "text": "Yeah, that, that's unbelievably true. It's because the, the bigger your trading network, the more ideas you're gonna come across, and the more you're gonna be able to put different ideas together. it-- human ingenuity is a collective phenomenon. It's a cloud phenomenon. It always has been, well, not always, but for a very long time. Actually, there's an Australian story that, that tells- This very, very clearly, which is the story of Tasmania, and which became an island about ten thousand years ago when rising sea levels cut it off from the mainland of Australia, and the Bass Strait is quite a wide piece of sea So the people who lived on Tasmania during that ten thousand years until contact with, Western, sailors, were, isolated. there were only about four thousand people on the island most of that time. they had the technologies that, that all Australians had before the cutoff, but obviously they didn't get access to anything invented after that, like the boomerang, for example, was invented after ten thousand years ago, it never made it to Tasmania. So you're, you're not relying Playing on these networks to bring you ideas from a long way away, which is a hugely important part of, of human culture. In fact, in the Tasmanian case, they actually go backwards. They actually dropped certain technologies that they had to start with. They, they stopped making bone tools at certain point, for example. They stopped, making fishing tackle. a-and the reason for this seems to be that you need a large enough population to have the specialized skills to keep certain technologies alive. it's not because their mental, capacity is, is changing. it's because the collective effect, as I put it, if you put, a hundred very clever people in a room, they'll do worse than if you put a hundred, sorry, you put a hundred people to one side, but they can't talk to each other, they will achieve less than if you put a hundred, stupid people together and tell them to talk to each other. You know, that's how we achieve things, is by, sharing our ideas. and that's where international trade is important, and we Because it is now the most innovative society on, on Earth. If you look at what they're doing with, consumer electronics and, you know, just payments and things, it's way ahead of what, what other countries and continents are doing. albeit it's not very innovative in areas like democracy. you know, I'm not here to defend it, and we do have serious issues about how to deal with," }, { "speaker": "matt_ridley", "time": "51:14", "start": 3073.72, "text": "What, what China hasn't, hasn't shown in, in its openness during this pandemic, and indeed our reliance on it. And as you say, I think the pandemic shows that we haven't been doing enough innovation, not that we've been doing too much. You know, we've worried, we're in a precautionary way about new technologies doing us harm, whether it's, Bitcoin or, the internet, what the effect it's having on social media and pol-politics or genetic modification, what it might do, et cetera. Et cetera, all the environmental impacts of, of new technologies, we worry and worry and worry about that, and we weren't looking at the fact that vaccine development is still an incredibly slow, laborious, and difficult process, that the pharmaceutical industry has largely neglected it because it can't make money out of it, because if a vaccine works, it does itself out of business in short order, that the World Health Organization has done very little to advance vaccine development, and that as a result, we're now facing a delay of a year or two Which is not that different from how long it took to make vaccines thirty, forty, fifty years ago. that's shocking. That's terrifying. You know, it's the one way we know to stop these pandemics. We know they're a huge risk. The World Health Organization said in twenty fifteen, \"The greatest threat.\" To human health in the twenty-first century is climate change. That's the organization charged with stopping pandemics. It was looking in the wrong direction, I'm afraid. Yeah, the climate change needs worrying about, other organizations should worry about it, but the World Health Organization should have been spending more attention, I think, on pandemics." }, { "speaker": "stephan", "time": "52:56", "start": 3175.81, "text": "Right, and perhaps, in your book, you also mention how sometimes the red tape of these mature societies ends up with this scenario where you've got these rich consultants who are doing impact assessments on a new runway for the London, you know, for London Heathrow Airport, where while other countries are just getting on with their innovation and they're just building and they're creating new innovations that they can then become more prosperous, with." }, { "speaker": "matt_ridley", "time": "53:22", "start": 3201.85, "text": "Well, I do think, speed of decision by bureaucrats is much more important than whether they say yes or no. well, maybe not much more important, but it is more important because, what kills entrepreneurs is not that, that, that regulators eventually say yes, they often don't eventually say yes. I mean, both shale gas and GMOs are in theory allowed in Europe It's just that, you know, when BASF invented a genetically modified potato, it took them, eight years to get a clear decision out of the European Commission, by which time they'd lost interest and they'd moved their research team to America. it's, it's not the, the bureaucrats saying no, it's the bureaucrats taking an age to say yes that is often the problem if you talk to innovators and entrepreneurs. it doesn't matter, you know, by all means say no, just say it quickly, get, you know, get the decision" }, { "speaker": "matt_ridley", "time": "54:14", "start": 3254.42, "text": "A new runway is not an innovation, but we've been arguing about a new runway for Heathrow Airport for something like thirty years. and each time we think we're getting there, we said, \"Well, it's now quite a long time since we did a survey to see whether there are any bats or newts living there. Let's do the surveys again.\" \"Yeah, but we can't do them at the moment 'cause it's winter time, so we'll have to wait till summer the bats and newts are active,\" you know? Unbelievable how many excuses, officialdom can come up with for not taking a decision, and there's no, there's no downside to delaying a decision for, for a bureaucrat. In fact, it's quite often some upside, because it, enables you to pass the buck to your successor" }, { "speaker": "stephan", "time": "54:55", "start": 3295.36, "text": "Right, and I think, I guess, perhaps that's one area where Bitcoin, as a, in the ideal sense, it's permissionless. It's meant to be that you can just set up and you can create a Bitcoin business and earn Bitcoin online, and nobody can stop you. There's no government bureaucrat who can lay that on you. So, perhaps that's, a lesson for the listeners as well. so look, I think we're just coming to time, so I don't wanna, go over onto your time, but, perhaps if you" }, { "speaker": "stephan", "time": "55:24", "start": 3324.24, "text": "Listeners can find your book. So just for listeners, follow Matt on Twitter, his handle is at matt w ridley. And I've just got on screen now the, the website from, HarperCollins, which shows how innovation works. So, Matt, where would you like listeners to, find you or fol- find your book?" }, { "speaker": "matt_ridley", "time": "55:44", "start": 3343.78, "text": "My website is rationaloptimist dot com. as you say, that's my, you give my Twi-Twitter handle. the book is available in the US right now, from tomorrow. it's not available in the UK and Australia until, late June, but that's because I've written an afterword that is included in the book about the pandemic, so it's worth waiting perhaps for that. Thanks so much, Stephan, for having me on the show." }, { "speaker": "stephan", "time": "56:10", "start": 3370.16, "text": "Fantastic. Well, look, I think that's, pretty much Going to do it for us. So listeners, you can find my, material at stephanlivera dot com. Otherwise, that's it from us. Thanks, and we'll see you in the citadels." } ] }