The Same Stories, Again and Again

Author: Morgan Housel
Source: Collaborative Fund (https://www.collaborativefund.com/blog/the-same-stories-again-and-again/ )

History may not repeat but certainly rhymes is a corollary of the cliched take on how repetitive events in the world are. Especially in the field of economics and financial markets, understanding financial history can help keep calm and make rational decisions. In this piece, Morgan Housel is at his best, pulling out stories from the past and narrating them with context that helps take away a lasting lesson for all of us. We reproduce one of the three lessons here…
“3. Innovation is hard to predict and easy to underestimate because so much occurs by accident, when several boring discoveries compound into something extraordinary.
A common story through history is that past innovation was magnificent, but future innovation must be limited because we’ve picked all the low-hanging fruit.
On January 12th, 1908, the Washington Post ran a full-page spread called “America’s Thinking Men Forecast the Wonders of the Future.”

Among the “thinking men” buried in the fine print was Thomas Edison.Edison had already changed the world at this point, becoming the Steve Jobs of his time.
The Post editors asked: “Is the age of invention passing?”
Edison’s answer was predictable:
“Passing?” he repeated, in apparent astonishment that such a question should be asked.
“Why, it hasn’t started yet. That ought to answer your question. Do you want anything else?”
“You believe, then, that the next 50 years will see as great a mechanical and scientific development as the past half century?” the Post asked Edison.
“Greater. Much greater,” he replied.
“Along what lines do you expect this development?” they asked him.
“Along all lines.”
This wasn’t just blind optimism. Edison was successful because he understood the process of scientific discovery. Big innovations don’t come at once, but rather are built up slowly when several small innovations are combined over time. Edison wasn’t a grand planner. He was a prolific tinkerer, combining parts in ways he didn’t quite understand, confident that little discoveries along the way would be combined and leveraged into more meaningful inventions.
Edison, for example, did not invent the first lightbulb; he just greatly improved upon what others had already built. In 1802 – three-quarters of a century before Edison’s lightbulb – a British inventor named Humphry Davy created an electric light called an arc lamp, using charcoal rods as a filament. It worked like Edison’s lightbulb, but it was impractically bright – you’d nearly go blind looking at it – and could only stay lit for a few moments before burning out, so it was rarely used. Edison’s contribution was moderating the bulb’s brightness and longevity. That was an enormous breakthrough. But it was built on the back of dozens of previous breakthroughs, none of which seemed meaningful in their own right.
That was why Edison was so optimistic about innovation.
He explained:
You can never tell what apparently small discovery will lead to. Somebody discovers something and immediately a host of experimenters and inventors are playing all the variations upon it.
He gave some examples:
Take Faraday’s experiments with copper disks. Looked like a scientific plaything, didn’t it? Well, it eventually gave us the trolly car. Or take Crooke’s tubes; looked like an academic discovery, but we got the X-ray from it. A whole host of experimenters are at work today; what great things their discoveries will lead to, no one can foretell.
“You’re asking if the age of invention is over?” Edison asked. “Why, we don’t know anything yet.”
This, of course, is exactly what happened.
When the airplane came into practical use in the early 1900s, one of the first tasks was trying to foresee what benefits would come from it. A few obvious ones were mail delivery and sky racing.
No one predicted nuclear power plants. But they wouldn’t have been possible without the plane. Without the plane we wouldn’t have had the aerial bomb. Without the aerial bomb we wouldn’t have had the nuclear bomb. And without the nuclear bomb we wouldn’t have discovered the peaceful use of nuclear power.
Same thing today. Google Maps, TurboTax, and Instagram wouldn’t be possible without ARPANET, a 1960s Department of Defense project linking computers to manage Cold War secrets that became the foundation for the Internet. That’s how you go from the threat of nuclear war to filing your taxes from your couch – a link that was unthinkable 50 years ago, but there it is. Facebook began as a way for college students to share pictures of their drunk weekends and within a decade was the most powerful lever in global politics. Again, it’s just hard to connect those dots with foresight. And that’s why all innovation is hard to predict and easy to underestimate. The path from A to Z can be so complex and end up at such a strange point that it’s nearly impossible to look at today’s tools and extrapolate what they might become.
There’s a theory in evolutionary biology called Fisher’s Fundamental Theorem of Natural Selection. It’s the idea that variance equals strength, because the more diverse a population is the more chances it has to come up with new traits that can be selected for. No one can know what traits will be useful; that’s not how evolution works. But if you create a lot of traits, the useful one – whatever it is – will be in there somewhere.
It’s the same thing with innovation. At any given moment it’s easy to look around at what startups are building or what scientists are discovering and think that what we’re working on is maybe neat – at best – but pales in comparison to what we did yesterday. Since we never know how multiple innovations will collide, the path of least resistance is to conclude that our best days are behind us while ignoring the potential of what we’re working on.
On January 12th, 1908 – the same day the Post ran their column with Edison – the first long-distance wireless message was sent in France.
No one could foresee the inventions it eventually seeded, including helping you read this article 113 years later.”