Matt Ridley reviews a new book by Peter Diamandis and Steven Kotler:
Economic growth is a form of deflation. If the cost of, say, computing power goes down, then the users of computing power acquire more of it for less—and thus attain a higher standard of living. One thing that makes such deflation possible is dematerialization, the reduction in the quantity of stuff needed to produce a product. An iPhone, for example, weighs 1/100th and costs 1/10th as much as an Osborne Executive computer did in 1982, but it has 150 times the processing speed and 100,000 times the memory.
Dematerialization is occurring with all sorts of products. Banking has shrunk to a handful of electrons moving on a cellphone, as have maps, encyclopedias, cameras, books, card games, music, records and letters — none of which now need to occupy physical space of their own. And it’s happening to food, too. In recent decades, wheat straw has shrunk as grain production has grown, because breeders have persuaded the plant to devote more of its energy to making the thing that we value most. Future dematerialization includes the possibility of synthetic meat—produced in a lab without brains, legs or guts.
H/T to Virginia Postrel, who also linked her own article from last year covering a related area:
The hardest economic question is, What comes next? What, in other words, are the new sources of economic value? How can businesses grow and our standard of living rise?
Sometimes the answer is simply more of the same. Growth comes from rolling out existing goods and services to new markets, until there’s a chicken in every pot and a car in every garage. This kind of progress may be hard to achieve, but you at least start with a clear notion of what it would look like.
That’s why catch-up economies like China today or South Korea in the past can grow so fast. Their businesses don’t have to figure out what to make or sell. They know what’s possible by looking abroad, and have a reasonable idea of what consumers, local or international, want to buy. Refrigerators and air conditioning are popular; so are shampoo and disposable diapers.
At the economic frontier, the hardest question gets much harder. You no longer have a clear vision of the future. You know neither what’s possible nor what people want. You can only guess. Starbucks or FedEx may sound obvious in retrospect, but they were once crazy ideas.
