Book Summary: The Rational Optimist by Matt Ridley

My Personal Summary

This book is about why human prosperity is likely to continue in the future.

Basically, specialization and trade drive prosperity and it has always grown historically and is likely to continue to grow in the future.

The central idea here is that person A can specialize in task A and person B can specialize in task B and then by trading, both people can get the really great product from those tasks while only actually knowing how to do one task.

Multiply this by millions of people and modern day humans get to enjoy tons of great technology, food, and products while enjoying an insanely high quality of living.

Economic growth relies on innovation and it turns out that innovation relies on the exchange of ideas and it turns out that this exchange has been rapidly increasing over the past 200 years as communication of information has become faster and easier. Ideas can now cross-pollinate faster than ever before in history.

Book Notes

  • The exchange of ideas between people is what drives technological progress and breakthroughs. This occurred due to the division of labor which lead to people specializing in different skills and becoming masters at different things. This doesn’t occur in any species besides humans.
  • “The more people are drawn into the global division of labor, the more people can specialize and exchange, the wealthier we will all be.”
  • People who idolize “simpler times” from a couple hundred years ago forget about the poverty, high infant mortality rates, widespread diseases, lack of clean water, and general shit living conditions of the time.
  • The diversity of foods available to you at a grocery store dwarfs the diversity of food available even to kings from a couple hundred years ago.
  • The essay “I, Pencil” by Leonard Read describes an example of how it takes the efforts of thousands of people across the globe doing various work with materials and services to create pencils that you can buy. This is the power of global division of labor.
  • As an individual, you get to benefit from all of the inventions of history, even if the inventors themselves are dead.
  • Historically people produced a ton of stuff (e.g. their own food, shelter, clothing) and consumed very little. Now people produce one specific thing (e.g. food, clothing, software, materials, services) and consume a ton (e.g. software, internet, television, a variety of foods, travel, entertainment, etc.).
  • Barter is the act of exchanging different objects between individuals and humans are the only species to partake in it. This has been the fundamental act that has lead humans to achieve material prosperity.
  • Developing fire was a game changer because it enabled humans to consume cook food which lead to them eating more food and spending way less time chewing. “Wild chimps spend 6 hours each day just masticating their food.”
  • Barter enabled people to divide their labor and specialize in tasks. For example, instead of person A splitting their time between hunting AND fishing, they can just get really good at hunting and let person B get really good at fishing, then the two can trade food with each other.
  • The first ever example of division of labor was likely food gathering between men and women. Men hunted game while women gathered plants and berries.
  • Innovation occurs from one person improving upon a specialization that another person is really good at. Naturally innovation accelerates with larger populations as there are more skills to specialize in.
  • Humans are the only species that exchange goods and services between strangers at scale. No other species does this because groups turn violent with other groups they don’t know.
  • Markets turn individual motives (e.g. an individual selling more goods for more income) into collective good.
  • Increased commerce and the rise of capitalism led to better public benefits like libraries and sewage systems.
  • The invention of agriculture spurred new technological advancements because it generates surpluses of food and allowed more people to spend their time on things that didn’t involve gathering food.
  • Three crucial inventions that allowed more crops to be harvested from less land were the tractor (replaced horses and the need to waste land on feeding horses), fertilizers, and cross breeding of more resilient and higher yielding crops.
  • “In 2005, twice as much grain was produced from the same acreage as in 1968. That intensification has spared land on a vast scale.”
  • “Cities exist for trade. They are places where people come to divide their labor, to specialize, and to exchange. They grow when trade expands.”
  • The first ever cities emerged in Mesopotamia, which is now modern day Iraq. They popped up as places of trade where people could exchange goods and services. By living in tight quarters, traders could maximize information flow and minimize costs.
  • Cities were the natural result of trade because they were places where, for example, people from a coastal village could exchange fish for cotton nets made by people in a village further inland. By specializing in the production of certain goods and trading their products, the people from both villages were better off.
  • The development of larger ships allowed more goods to be transferred faster and further, thus enhancing trade and commerce.
  • Free trade between countries leads to increased prosperity. “There is not a single example of a country opening its borders to trade and ending up poorer.”
  • Population growth is actually slowing worldwide. The World Bank predicts that the global population will never exceed 10 billion. Many scientists think the earth can support a population of 15 billion or more so running out of food/resources is highly unlikely ever.
  • Fossil fuels made slavery uneconomic. The cotton industry became more reliant on coal, which could produce far more output at a higher rate than slaves could. “Capitalism exterminated slavery.”
  • The historical story of energy: people, then animals, then water, then wind, then fossil fuels.
  • Fossil fuels have been the main driver of massive economic growth and overall increases in standard of living, and Ridley argues that there’s plenty of it left to use that humanity will likely find a cleaner source of energy to power future growth before we run out of it.
  • Many of the greatest inventions in the early 1800s came from British men, not because they were unusually smart but because they were in an environment with freedom, education, resources and capital that made for ideal conditions for inventing things. The same could be said of Silicon Valley today. [this is similar to the idea from Guns, Germs, and Steel – there are brilliant people everywhere, but environment plays a massive role in allowing these people to invent stuff]
  • A free capitalist market encourages people to look for ways to increase their productivity because it means they can increase their income. Incentives drive progress.
  • “Coal makes the electricity that lights your house, spins your washing machine and smelts the aluminum from which your airplane was made; oil fuels the ships, trucks and planes that fill your supermarket; gas heats your home, bakes your bread and makes the fertilizer that grows your food.”
  • Economic growth relies on innovation and it turns out that innovation relies on the exchange of ideas and it turns out that this exchange has been rapidly increasing over the past 200 years as communication of information has become faster and easier. Ideas can cross-pollinate faster than ever before in history.

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