“Little data exists at this point on how many start-ups are using A.I., and whether the technology is helping them to get more quickly on the path to hiring and, ideally, profitability. That is partly because the intersection of entrepreneurial activity and generative A.I. has only recently emerged as an area of study for economists.

But research suggests that newer businesses are, at a minimum, more inclined to experiment with the technology.

According to a working paper published in April by the National Bureau of Economic Research, A.I. use was higher among young firms. Applications like generative A.I. may be attractive to young and small firms, the paper’s authors wrote, because they are ‘general-purpose technologies’ that are not expensive to use.

And Gusto, a small-business payroll and benefits platform, found that roughly a fifth of businesses created last year said they were using generative A.I. to more efficiently carry out tasks including market research, contract reviews, bookkeeping and job postings. Liz Wilke, principal economist at Gusto, thinks use could transform the start-up landscape.”

From New York Times.

Summary: Human progress requires a culture of openness to change and innovation, which historically has been rare and resisted by established elites. Periods of remarkable achievement, like that seen in Enlightenment Europe, occurred when societies embraced new ideas and allowed for intellectual and economic freedom. The key to sustained progress lies in maintaining a culture of optimism and a politico-economic system that encourages innovation rather than suppressing it.

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To make progress, we must do something differently from what we did yesterday, and we must do it faster, better, or with less effort. To accomplish that, we innovate, and we imitate. That takes a certain openness to surprises, and that openness is rare. It is difficult to come up with something that never existed. It’s also dangerous, since most innovations fail.

If you live close to subsistence level, you don’t have a margin for error. So, if someone wants to hunt in a new way or experiment with a new crop, it is not necessarily popular. There is a reason why most historical societies that came up with a way of sustaining themselves tried to stick to that recipe and considered innovators troublemakers.

That means that innovation depended on stumbling on a new way of doing things. Someone came up with a new and better tool or method by accident or by imitating nature or another tribe. But when populations were small, few people accidentally came across a great new way of doing things, and there were few people to imitate. In other words, there is a limit to what can be done in small, isolated societies.

It took greater population density and links to other groups to get the process of innovation and specialization going. Cultures at the crossroads between different civilizations and traditions were exposed to other ways of life as merchants, migrants, and military moved around. By combining different ideas, they set the process of innovation in motion. Ideas started having sex with each other, in the British writer Matt Ridley’s memorable phrase.

Such openness gave rise to extraordinary periods of achievement in cultures like ancient Greece and Rome, Abbasid Baghdad, and Song China. They were, as the American economist Jack Goldstone calls them, “efflorescences”—sharp and unexpected upturns that did not become self-sustaining and accelerating. They did not last.

The American economic historian Joel Mokyr talks about that as Cardwell’s Law—named after the technology historian D. S. L. Cardwell, who observed that most societies remained creative only for a short period. Often, they were ruined by external enemies, since poorer states and roving bandits are attracted by the former’s wealth.

But there are also enemies within. Every act of major technological innovation is “an act of rebellion against conventional wisdom and vested interests,” explains Mokyr. And conventional wisdom and vested interest have a way of fighting back.

Economic, intellectual, and political elites in every society have built their power on specific methods of production and a certain set of mythologies and ideas. The vested interests have an incentive to stop or at least control innovations that risk upsetting the status quo. They try to reimpose orthodoxies and reduce the potential for surprises, and sooner or later they win, the efflorescence is stamped out, and society reverts to the long stagnation.

An escape from stagnation requires a culture of optimism and progress to justify and encourage innovation, and it takes a particular politico-economic system to give people the freedom to engage in the continuous creation of novelty.

Enlightenment and Classical Liberalism

Luckily, this culture emerged forcefully in western Europe in the 17th and 18th centuries, in the form of the Enlightenment, which replaced superstition and authority with the ideals of reason, science, and humanism, as the Canadian psychologist Steven Pinker summarizes it, and classical liberalism, which removed political barriers to thought, debate, innovation, and trade.

It was the combined forces of the Enlightenment and classical liberalism that reduced intellectual and economic elites’ power to stamp out progress. Cardwell’s Law started to break down, and the road opened for individualists, innovators, and industrialists to change our world forever.

Why did this happen in Europe, and why then? There are two traditionally competing narratives, one associated with the right and one with the left, and they are equally wrong. According to the first, it was because Europeans were better than others (perhaps because of natural superiority, the legacy of the ancients, or Christianity). According to the second, it was because Europeans were worse than others (perhaps because of slavery, colonialism, and imperialism).

The problem with the first explanation is that experimentation in science, technology, and capitalism had been present in previous pagan, Muslim, Confucian, and other cultures. In fact, Europe imported and improved upon many non-European advances. The problem with the second explanation is that all previous civilizations also engaged in slavery, colonialism, and imperialism when they had a chance. Yet, they remained poor. So, what made Europe more successful must have been something else.

As noted, elites everywhere reacted to surprising innovations by trying to enforce political authority and intellectual orthodoxy. What made Europe different was that the elites failed. Unlike the Chinese or Ottoman empires, Europe was blessed with political and jurisdictional fragmentation, which has been emphasized by scholars like the British-Australian economic historian Eric Jones and the English historian Stephen Davies.

European rulers had the same ambitions to conquer and control, but on a peninsula of peninsulas, they were halted at mountain ranges, bodies of waters, riverine marshes, and forested landscape. Therefore, Europe was split into a mindboggling array of polities, independent cities, autonomous universities, and different religious denominations.

Hundreds of different sovereigns could not coordinate repression and impose one orthodoxy on all. That always left room for thinkers, entrepreneurs, and banned books to migrate to the jurisdiction most hospitable to their particular heresy. The Protestant Reformation was a further blow to ambitions for universal authority. How can you revert to a trusted authority when you don’t know which authority to trust? Nullius in verba (take nobody’s word for it), was not just the motto of the Royal Society, founded in London in 1660, but the spirit of the whole Enlightenment project.

European princes discovered that rivals who welcomed more migrant scientists, entrepreneurs, and technologies also acquired more wealth and thereby more war-making capacity. Disruptive innovations still threatened the elite power base in the long term, but a lack of innovation might threaten their lives instantly—via a superior invading army. In a fragmented Europe, sovereigns faced the opposite incentive of rulers of vast empires, who feared domestic discord more than they feared foreign conquest.

Fear of change therefore began to give way to a fear of stagnation. “And thus, it is,” wrote the German philosopher Immanuel Kant in 1784, that the Enlightenment gradually arises “from the selfish purposes of aggrandizement on the part of its rulers, if they understand what is for their own advantage.”

Scientific and Industrial Advances

The associated classical liberal transformation, pioneered by the Dutch Republic, and then taken further by Great Britain and the United States, simultaneously widened the freedom for new experiments and enterprises through greater equality under the law, more secure property rights, and freer domestic economy and expanding markets.

That created a virtuous circle, since the scientific endeavor, businesses forced to compete, and an open society are by their natures works in progress, subject to constant challenge and improvement. They allow more people to experiment with new ideas and methods and combine them in unexpected ways.

As the American economic historian Deirdre McCloskey has shown, these processes went hand in hand with a profound reevaluation of urban and bourgeois life. Whereas commerce and innovation used to be seen at best as necessary evils to fund a hierarchical and aristocratic society, they now started to be seen as desirable, even honorable.

This relative freedom for inquisitiveness and irreverence unleashed first a scientific revolution and then an industrial one. The cumulative nature of knowledge instilled a powerful sense of optimism. When telescopes, microscopes, and the English scientist Isaac Newton unlocked nature’s mysteries, the whole world soon learned about it and started thinking about how natural regularities could be exploited for practical purposes.

Through migrations, correspondence, the printing press, coffee shops, and learned societies, scientists and entrepreneurs systematized knowledge in mechanics, metallurgy, geology, chemistry, soil science, and materials science. That made it possible to consciously manipulate, debug, and adapt methods, materials, and machines to changing needs. New knowledge pointed to new experiments that could be used to interrogate nature further, and the results of those interrogations pointed to new technologies that could be used to grow more food, prevent or cure disease, shape materials, and exploit energy sources.

The modern corporation and financial markets emerged as vehicles for systematically transforming capital and knowledge into goods and services that improved people’s lives. No longer did mankind have to wait for someone, somewhere to stumble on a breakthrough at widely dispersed intervals. An economic and intellectual system devoted to the systematic pursuit of discoveries and innovations had been created. From Manchester and Menlo Park to Silicon Valley, pioneers methodically pushed the technological frontiers further into the unknown, and free competition and international trade made such wonders widely accessible at everyday low prices.

Therefore, for the first time in history, progress did not come to a sudden halt. It continued and accelerated. More people than ever looked at the world’s problems and were free to come up with their own suggested solutions. Finally, mankind reached escape velocity, and progress was no longer a bump on a flat line of human development but a hockey stick, pointing sharply upward.

“It may be that the Enlightenment has ‘tried’ to happen countless times,” writes the British physicist David Deutsch in The Beginning of Infinity. And therefore, it puts our own lucky escape into stark perspective: All previous efforts were cut short, “always snuffed out, usually without a trace. Except this once.”

It should make us deeply grateful that we are among the few who happen to be born in the only era of self-sustained, global progress. But it should also make us focused and combative. History teaches us that progress is not automatic. It only happened because people fought hard for it and for the system of liberty that made it possible.

If we want to remain the one great exception to history’s rule of oppression and stagnation, every new generation must find it within itself the desire to make the world safe for progress.

Summary: Like Rome’s ancient grandeur, today’s economy is supported by human ingenuity. Rome’s technological marvels such as the aqueducts were threatened by barbarians who sought destruction and ultimately achieved it. Modern sources of flourishing are likewise under fire. Today, the “degrowth” movement advocates for radical reductions in energy use. But like the Ostrogoths destroying aqueducts, this new form of regression underestimates human ingenuity as our source of prosperity.

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In ancient times, the city of Rome was home to a million people—an achievement not to be repeated in Europe until the 19th century. The city flourished because of extensive Mediterranean trade networks, rule of law, and security provided by the far-flung legions. But Roman life would have been impossible without its aqueducts. These magnificent symbols of human ingenuity and progress brought water to the city, nourishing its population and lubricating its economy.

Rome began its long slide from preeminence in the 3rd century. By the 6th century, Rome was a shadow of its former self. It was then that the invading Ostrogoths sped up the process of decline by cutting Rome’s aqueducts and eventually capturing the city. Fast-forward to today and consider the “degrowth” movement, which advocates for slashing energy use in modern economies.

Degrowthers argue that to avert environmental catastrophe, we must drastically reduce our consumption of energy, particularly fossil fuels. They envision a future where economies shrink, energy use plummets, and humans adopt simpler, less resource-intensive lifestyles. While their intentions sound reasonable, their proposals are as destructive to our society’s prospects as the Ostrogoths’ actions were to ancient Rome.

The aqueducts of Rome were engineering marvels, bringing fresh water from distant sources to the heart of the empire. They enabled the city to thrive, supporting public baths, fountains, and private households. When the Ostrogoths cut these aqueducts, they didn’t just disrupt the water supply; they struck at the core of Roman life. In a similar vein, energy is the lifeblood of modern economies. It powers our hospitals, schools, factories, and homes. Cutting off this supply, as degrowthers propose, would not only slow our economies but would also unravel the fabric of our society.

Consider the immense benefits that energy has brought us. Over the past century, access to abundant and affordable energy has lifted billions out of poverty, extended life expectancies, and driven unprecedented technological progress. Our reliance on energy has enabled us to build skyscrapers, develop lifesaving medical technologies, and connect the world through the internet. To cut energy use drastically would be to turn our backs on these advancements and the potential for future progress.

The degrowth movement fails to appreciate that human ingenuity and technological innovation can solve the very problems they aim to address. Just as the Romans used their engineering prowess to build aqueducts, we can develop new technologies to create cleaner energy sources. Our use of solar and wind power is growing by leaps and bounds. Nuclear power is undergoing a renaissance, while geothermal and fusion energy hold much promise for the future. We’ll likely be able to reduce our reliance on fossil fuels without necessitating a return to pre-industrial lifestyles.

Put differently, degrowthers overlook the dynamic nature of human progress. Throughout history, humanity has faced and overcome numerous challenges. The Industrial Revolution, for example, caused significant environmental damage, but it also set the stage for the technological advancements that would eventually lead to a cleaner environment and greener energy sources. By embracing innovation rather than retreating from progress, we can continue to improve our quality of life while addressing environmental concerns.

It is also crucial to consider the global impact of degrowth policies. Developing nations, which are still striving to reach the levels of prosperity enjoyed in the West, rely heavily on energy to fuel their growth. Imposing stringent energy restrictions would stifle their development, thereby exacerbating global inequalities. Instead, we should focus on ensuring that these countries have access to affordable energy, enabling them to grow and share in the benefits of progress.

Degrowthers’ vision of a future with less energy consumption is a step backward, akin to the barbarians who, lacking understanding or appreciation for Roman civilization, sought only to destroy. Just as Rome’s aqueducts were symbols of human achievement, our energy infrastructure represents the potential for a brighter future. Let’s not let the modern-day barbarians cut it off.

“Mobile phones and the Internet have enabled the growth of mobile money accounts in regions with limited banking infrastructure. These accounts provide simple financial services like deposits, transfers, and payments to hundreds of millions of people.

As this chart shows, the number of active mobile money accounts globally has grown from 13 million in 2010 to more than 640 million in 2023. This is based on data published by the GSM Association.

While the adoption of mobile banking was almost exclusive to Sub-Saharan Africa in the early 2010s, Asian countries have seen significant growth in recent years.”

From Our World in Data.