Its great to be with. I noticed from doing podcasts we are going to read a few sentences i will probably gather from your book and the first question, you write in the book, innovation is most important on the modern world but the least understood. Its the reason most people say prosperity and wisdom prepare for their ancestors. The main ingredient in freedom to exchange, experiment and fail liberals have argued that freedom mean needs prosperity bi would argue theyve never found the chain by which one causes the other. Innovation is the driving change, the missing link. If a child of freedom and parent of prosperity. The theres a growing belief since the Apollo Space Program and the innovation from this part of central planners in the industrial policy. People exchanging the ideas freely yes we are experiencing innovation also a care in the western world there are areas we havent been able to get enough innovation and the pandemic has reminded us of that. We havent been able to as much as we would have liked to. Im not sure if as many people think innovation is good and we think of disruption and job loss. If you think innovation is good and we need more of that, im not sure how many people would say we need more freedom. I think they would say we need more government, we need a powerful innovation geared sta state. This is partly because people always have an episode of top down they think the world is run by people, they dont think of it is being ru as being run by c and spontaneous. They assume if something happens is because someone ordered it to happen anhappen in my argued tht the case in this book. Its something that bubbles up inextricably and try new ideas. The. Which are going to subsidize in the public fund, and i think that is a dangerous tendency because the history of innovation shows you cant do that, you can suddenly make supersonic flights cheap. There are physical limits to things. You can suddenly make a low Carbon Economy easily. It might be possible over the long run but thought instantly. We have been innovating as a society. If we dont keep doing so we will find that it dries up pretty fast. Im sure youll remember back in the 1980s there was a concern about whether japan was going to be the leading economy in the future and people looked at how it was smart bureaucrats in the agency that now we are much smarter it didnt work out so well. Im not sure that is how they were innovating and now today we are in a situation where theres a fast growth rate, they hear about these events and have big ideas for the future thats going to become the leader and Everything Else you think of. Now they figure out another modeling seem to be doing great. Has china figured out a better way to do innovation . Innovation . Guest i think people misread japan in the 80s. They said its the ministry that house specifically singled out the sectors of the future and invested in them and thats why theres such an innovative country. Once you looked at what was happening in japan, it wasnt because the bureaucrats were telling people what to invest in and wants to invest. It is because the small firms and big firms and middle sized were just going out and trying new things and for developing new technologies as an extraordinary rate. It is an innovative country. You cant deny that its caught up with the United States but in some areas, its overtaken it in terms of Consumer Electronics and digital behavior and so on. Theto say that the communist ree with a directive plan to innovate is simply wrong. If you look at what happens in china, yes it has a very strong monopolistic authoritarian political regime, but as long as you dont deny the communist party below that level, there is a huge amount of freedom. It isnt directing the entrepreneurs do. And in fact, in china they decide to build a factory to do something new they could do the whole thing in america of weeks which would take years in the west for the various regulations. Msn is free. In that sense, china is getting worse in terms of authoritarianism. Its becoming much more of a state that for a while was drifting towards democracy. It has been reversed a. And i think that youll find that the chinese bureaucrats will think they can direct and control exactly what happens in the innovation and if they do try that, they will fill the golden goose. I wouldnt bet on china being the lead innovative country in the world for a long time, said ken democritus and liberate its regime. Im going to debate whether china can over the long term be in innovator entrepreneurial state without being much freer right now it looks like theyve managed to be an authoritarian country with one Political Party and highly innovative. If they want to be innovative people have 2 p. M. The democratic nation. I think it is simply not possible given the role freedom plays an innovation as i argue. The ability to change his mind, change direction, to suddenly try one thing and then another, trial and error, to make mistakes and in the end, put something new that will change the world. Given the importance of that ideal in the long run that isnt compatible with the regime that tries to control things from above. China has been here before. It was the most innovative place in the world and it was responsible for a series of extraordinary innovations, printing and all those kind of things. And these came about because it wasnt a very centralized regime. There was a lot of local autonomy and there was a lot of freedom. After that came the empire that was quite the opposite. They wanted centralized control of everything. They literally controlled where you could travel and they needed a report from every mention on how much stock was held in a warehouse. The disc is a recipe for killing innovation and sure enough, china sank into the lack of innovation eventually extreme poverty over the next few centuries. So, the lesson is if you run an authoritarian regime and it gets more into the lives of the ordinary smallbusiness income oincomeand you willandcompany w. It is quite easy to do. I worry that if we worry too much about china being a leading technological power having an authoritarian country be in the technological frontier come if those two things are not sustainable and maybe they figure out a different model and that is what we have to follow in already in the United States as morthere is more and more tak about the industrial policy and we need to be picking this up. Everybody knows the invest a lot in it and the biotech is the future so we have the best biotech and i wonder if that is the lesson. Theres just not a lot of confidence in the United States right now. Now. Is thatheres that freedom and e enterprise but ultimately our best for pushing for the technological frontier. They have a record sometimes if you go back to the 1980s when it was about japan, all of the emphasis was on having a policy for the manufacturers. This was going to be absolutely vital to have a strategic interest in keeping the manufacturers onshore. They completely missed the fact memory chips were turning into a commodity into the action is moving to the microprocessors and software. And if you go back even further to 1983, the u. S. Government poured an enormous amount of money for a time an into the project for the development of the first airplane. There was a guy that was the head of the smithsonian and a distinguished astronomer and he would often seek to build a machine that was going to leave to the first attempt and he didnt talk to other people when it was launched and there was humiliation. Ten days later on an island off north carolina, to bicycle mechanics from dayton ohio that tested the components separately again and again and talked to as many people as they could around the world and they have used wind tunnel experiments and shared ideas with as many people as possible, but in front of no crowd at all they got on an airplane into the hands. They went to the u. S. Government and said we really cannot give you a fantastic technology and they said weve been there. Weve turned our fingers with mr. Langley. So the record in this area is not pleased. There is some truth in that but it relied on a lot of the private sector input and even when it came out it needed to go through a huge amount to turn into what we have now. Towards the end of the book you do talk about the sort of innovation. If we look at the statistics thursday downshifted productivity growth and it never really rebounded. We look at the productivity numbers. We didnt see what he saw in the 1950s and 19. We saw this downshifted productivity that has been written about more famously in the book american growth. What do you think happened that never really came back . I hesitate to get into an argument about the statistics but i think when you take into account the sizes of households in all these kind of things you are correct for that. There is still the productivity improvement, but there isnt as much as one would expect. We had a pure co enormous innovation. We wanted flyin the flying carsd about 140 characters. Most of the innovation has ended up being digital. They make the argument that its to go out and start a business because you dont need anyones permission to just get out there and start doing it. Weve diverted into Digital Innovation rather than those structured and we did it quite explicitly that very much were permissive to these comments. They deliberately made it possible to Start BuildingOnline Retailing communications. But that worked very well. Weve diverted our Energy Online and im not sure that is what innovation is going to look like in the next few decades. We might turn to biotechnology innovation as being the big wave coming next. But i feel the america of 2020 is no better than the america of 1970. I cant see that argument. The quality of life is extraordinarily better. People are working shorter hours and living longer lives and eating her food handle these kind of thing. I think we are seeing the fruits of innovation. Its just they are not showing up particularly in the statistics. They see the prosperity in the last 20 years. That explanation, the one that you gave made it harder to do that innovation. I love that explanation too much. Its such a comfortable explanation that is so totally conformed to the. Could the government be spending less or if somethin on if sometd with schools that it really isnt that some other explanation . We saw no changes in the communication and computing. I would like to show a cartoon but life would be like in the 21st century and its someone delivered in perfectly ordinary letters but with a bucket on his back and that is the wrong way in both cases they are not using letters much we are using letters but they dont have rockets on the backs of individuals. So, we got the future wrong in that sense and didnt understand where it was coming from. Was that because of the governmengovernmentregulation ae it hard to do it i dont think it was. There were some physical limits that were hard to preach in the efficiency of. The supersonic airliner is possible to but it isnt very efficient. Some of the reasons why innovation shifts from one to another is not about the instruction of bureaucrats were things like that. But some of them are and by the way, if you say we havent seen improvements in the transport, one of the most spectacular we have seen in the recent years is actually just not in speed safety. If you look at the commercial passenger jets, theyve gone up by some gigantic amount in the last 30 or 40 years per million kilometers theyve gone from about 3,000 a year to about 50. That is an unbelievable change and then we had a year with zero fatalities. That is extraordinary when you think how many were flying around the world in a million. We are seeing improvements, but they are not necessarily showing up in the pocket books. They are showing up in other aspects of safety. Whenever i write about this and whats gone wrong in the past people start pointing out a cultural reason maybe we just are not a future thinking or future oriented society. How many portray or tell a story that technology could lead to a Better Future for us as a future of the ruined planet or a guy taking over the dystopian scenario i have to sit down and write out a bunch of optimistic movies would be easier to write where we should fear the future. This is something i would be complaining about for years. I just cannot remember a hollywood film in which a businessman is portrayed positively. There are these strange obsessions. Weve alway always taught ourses the future is going to be terrible, and its always been fine. But im quite passionate about this. When i was 12 or 13yearsold i was interested in all this. The population was unstoppable etc. It went on and on and i thought its been nice but now when the 1980s came around and started prospering i was genuinely shocked to. The day are telling you that you have the future. Even the Climate Change projections show we are going to get richer in this century we just might not get quite so rich if we have Climate Change as if we dont. Spin it i wonder if it matters. Particularly people seem to be really worried that it is about to take all of our jobs. We just spent ten minutes talking and theres been a downshifted at the same time we were never worried into the rest of us will be living on universal basic income. The idea of automation and innovation still has dropped its an old idea and its been wrong all along. We have said throughout this pure co but its going to kill jobs. It didnt happen. We now have more people than before this Current Crisis i should say. Thats because what innovation does is it creates new jobs, new opportunities and prosperity with which the consumers by these new services from other people and there will always be things we want other people to do for us if we are consumers and we can acquire it but its also worth considering i think that we are working less hard. If you take someone where Life Expectancy was less than 60, there was no such thing as retirement, most people left school at 14, 15 u. Didnt get much holiday. They were spending 25 of their entire life on the planet at work. The rest were sleeping or eating or weekends. Today less than 10 . If they are working five days a week or eight hours every day is a wonder everyday and taking normal holidays and so on, it is less than 10 of the life that they will spend at work. So, for 10 of your life, you could earn enough to support your life and to give other people is living. That is with technology and innovation has done for us and we have not gotten to the point where people are working incredibly hard and other people are not. The current is a surprisingly sort of upper middleclass worry. In other words the reason we are hearing so much about it at the moment is because in the past of this just farm laborers. Now its lawyers and doctors for Goodness Sake who might be automated. Thats really scary. [laughter] this almost puzzles me is this idea that they are about to take all the jobs and at the same time that theres been enough innovation. Whenever i read about europe and the european economy they seem to be desperate to get more technology. I dont know how many white papers ive seen about the deficit and now they spend a lot on innovation and we sort of have a very mixed view about them. Imagine earlier talking about how we havent had all of the innovations they would like but some blame Silicon Valley. They say Silicon Valley has failed us and the reason we dont have flying cars is because all they want to do is kind of modified to consumer services. Is that a problem but it just doesnt dream is big enough for whatever reason . Cynic i think the seeing from your Silicon Valley has been a spectacular success and if you are grumbling about the fact you have a spokane amazon an facebod google in your backyard delivering extraordinary benefits, online shopping, whatever it might be, we would kill for a bit of that in europe. They failed to produce a single digital giant to rival facebook, amazon, google, or their rivals. We have a very centralized system that tells them what to do and we pick fights with big Silicon Valley companies all the time. They are constantly trying to take them down a peg. And it turned out the manufacturers didnt want the regulation to favor dysons product which works fine with dustin it. It was designed to increase that power usage they didnt want to have to reveal the fact so they lobbied for this regulation which is different elsewhere in the world so dyson goes to court the court found against him with the freedom of information act to find out who was lobbying and sure enough that the appalling corporate lobbying regulations were struck down now five years had passed that is the straitjacket within which european innovators have to work and that by the way is one of the reasons why dyson was one of the leaders of the campaign for brexit. Instead of using those european standards and competitive and open and free trade system thats a were planning to do next year when we are out of the european union. That story that you just said is that one of my concerns is the recent enthusiasm of russia policy they assume this selfless bureaucrats and the new department of technology to make these decisions about what technology is defined. That history of politics that is not how it will work. It will be logging from the government forget about the making the wrong decisions to be hard to make the right decisions much less of politics. That captured economy things like regulation and independent Properties System and occupational licensing. And barriers to entry that help the incumbent businesses and dont help insurgent businesses. And this is an increasing problem in the us but also in the uk. And we need to find ways to encourage other businesses. I make this point in the book. If you look at kodak they actually invented digital photography at one point it didnt look very efficient and they didnt want to disturb the film which was their own monopoly. Likewise no kia was the Biggest Phone Company in the world more r d with the rest of industry put together in enormously successful, then it was so invested invoice it didnt see the Data Revolution coming and didnt want to know about it and then passed by apple and sold for a pittance years later. We need to al