TiB 170: How to get more growth, better institutions and more unicorns; and more...

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Prestige, Ancient Rome and economic growth

I stumbled upon this 2017 review by economic historian Mark Koyama of The End of the Past by Aldo Schiavone. It touches on lots of topics I've been thinking about so I thought it was worth revisiting, despite its age. The End of the Past is an exploration of the economy of Ancient Rome and Koyama uses it to ask a favourite question (which I generally consider the most important in history - see also TiB 105): why did the industrial revolution happen when it did?

Specifically, Koyama asks, why didn't it happen much earlier, in Rome? Rome at its peak was plausibly as rich as Europe on the eve of the industrial revolution. Why did it decline rather than generate sustained growth? Schiavone's short answer is that the wrong activities were prestigious. The only high status way to earn an income was to be a rentier. The ubiquity of slavery, as well as being a moral horror, meant that manual work - and certainly any attempt to increase productivity - was low status. As a result, there was no way for what Anton Howes has called “the improving mentality” to spread and a culture of innovation to thrive.

This raises interesting questions: what is prestigious today that holds society back? and what activities do we need to increase in social status? My two suggestions are probably not surprising to long-time readers. First, high-ambition entrepreneurship is still lower status in most of the world than structured careers (particularly in finance). Second, "learning by doing" in the physical world - the value of which we've discussed a number of times in the context of vaccines and semiconductors - remains low prestige relative to its importance. Both are fixable (see below), and worth fixing.

What are the great missing institutions?

We've discussed the potential power of creating new institutions a number of times (see, e.g., TiB 88 and TiB 100), so I enjoyed this thread by Jeremy Nixon of more than 20 ideas for missing high-impact institutions. They very much reflect the preoccupations of a particular school of thought among tech elites, but there are lots of interesting ideas here. Some will be familiar to TiB readers - such as Private ARPA and Focused Research Organisations - and several concern topics we've looked at frequently, like improving the productivity of science.

Two ideas in the thread that I liked and hadn't come across before are the institute for celebrating disaster avoidance and the respectability cascade organisation. The idea of the first is that we have successfully overcome threats to humanity in the past - such as fixing the ozone layer - but we haven't turned these achievements into cultural touchstones (prestige again, see above) to catalyse more action. The idea of the second is to reverse the social disincentive to explore "weird" but high potential areas (see, e.g., the amazing story of Kati Kariko and mRNA).

I've been pondering what I'd add and have three vague ideas. First, a global "talent agency" for exceptional young scientists. We know that outliers in these areas can have disproportionate impact, but many are held by lack of opportunity where they're born (see TiB 125). Second, "simulation / wargaming as a service" for geopolitical events (as featured in TiB 121 and 126) feels underused. Third, an institute dedicated to something like Slate Star Codex's "adversarial collaboration"-as-a-service. I can't claim deep conviction that these would be high impact, but I certainly think we need more institutional innovation rather than less!

How to increase the supply of great companies

I rarely talk about my day job here, but I want to make an exception this week, as it touches on several TiB themes. I'm one of the co-founders of Entrepreneur First (EF), which pioneered a new form of venture capital, which we call "talent investing"; we fund individuals before they’ve started a company, purely on the basis of their potential, and support them them find a co-founder and build a startup from scratch. This used to be pretty controversial. Last week, one of the first companies we helped to build through this model, Tractable, announced a funding round that values it at $1bn, the first EF company to reach this milestone. I wrote about it here.

Why is this of more general interest, though? Mainly because governments and investors tend to see high-growth technology companies as (a) highly important but (b) something whose supply is fixed. Indeed, the conventional wisdom is that it's hard for policymakers to have a positive impact on the number of high quality startups at all; if they want to see more such companies, the best they can do is "lay the table" (i.e. get rid of bad policies), then get out of the way, wait and hope for the best.

Tractable's story (alongside academic evidence that we discussed in TiB 165 and 167) suggests that this isn't true: the world may be missing out on most of its best founders. Talent investing allows an abundant resource (talent) to be transformed more or less predictably into a scarce one (valuable startups). My friend Alex once called this 21st century alchemy. I am obviously deeply biased, but this seems to me a more radical and important fact than is generally appreciated. EF is tiny today but, at scale, perhaps there could be 10x - even 100x - as many valuable startups created each year, even and especially in places outside Silicon Valley, as there are today.

While I'm on the topic, I should say that you can apply to join EF here and if you're a policy maker or capital allocator who'd like to increase the supply of great companies, I'm always happy to chat.

Quick links

Unicorn slowdown. Why have fewer billion dollar companies come out of China in recent years? (Please forgive the horrific x-axis)
We'll just quickly switch that gene out for you. Stunning case report on what's possible in genomic medicine today.
AlphaGo(al)? DeepMind simulates football. A surprisingly good way to build intuition on how (AI) training works.
Only the good (and Americans) die young. Why does the US lead the Western world in deaths among young adults? Striking chart (There are actually at least five interesting stories in that one graphic)
Bad Intel. Bearish signs for the endurance of monopolies (though see also TiB 158)

The bit at the end

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Until next week,

Matt Clifford

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