The key to faster progress is increased desire for more. That’s my theory, at least.

In all the commentary on the “Great Stagnation”, much is written about the lack of progress in tech areas like transportation. Commercial airplane speeds, for example, have decreased on average since the ‘70s:

Since 1973, airplane manufacturers have innovated on margins other than speed, and as a result, commercial flight is safer and cheaper than it was 40 years ago. But commercial flight isn’t any faster—in fact, today’s flights travel at less than half the Concorde’s speed. (Airplane Speeds Have Stagnated for 40 Years, by Eli Dourado and Michael Kotrous.)

There are clearly many contributors to this. Regulation is cited in the above post and seems to be most common reason mentioned. Rising energy costs is another major one. The less-talked-about contributor is consumer demand.

Most things are “good enough”

Clayton Christensen’s theory on disruptive innovation shows that as average performance demanded goes up, the performance level supplied by products generally goes up faster, eventually surpassing the majority of the market.

As a technology improves, its performance surpasses most market demand, and things became “good enough” over time. Customers aren’t willing to pay more for better performance. This leaves the market open for disruptors — either on the low-end (good enough performance but cheaper), or by having better performance on a completely different metric.

Back to airline travel. Flying from NYC to LAX in 6 hours became good enough for most people. Sure, less would be better, but not at much more cost. Only high end, richer users truly needed more. So airplane makers moved on to other attributes that weren’t good enough: safety, flexibility, price.

This was true for a lot of tech. Basically the market for that level of performance wasn’t there.

So this was less of a tech problem or lack of ability, more a lack of desire. There is diminishing marginal utility for faster travel times. Cross-country travel in 4 hours instead of 6 doesn’t make a whole lot of difference to most people. (Throw in other issues like car traffic and TSA and the minimum door-to-door travel time is 2-3 hours no matter where you’re going, so a few extra hours over 3,000 miles isn’t a huge deal.)

As Tyler Cowen writes in Average is Over, consumers are more interested in convenience than speed. We don’t want to spend $20,000 on Concorde tickets just to save a couple hours.

Of course, everything moves in cycles and it’s possible that now, after 40 years, needs like safety and prices are oversupplied and speed is finally in demand again.

The U.S. has been pretty good at having a lot of desire for more. We’re a nation of immigrants, a nation of people who are always looking for a better life. That desire has helped us create a lot of new things.

But it’s hard to maintain that level of desire. As societies get richer, they tend to get more complacent. They don’t want to rock the boat. They don’t want to take risks.

We need to increase desire

When consumer demand shifts, capitalism is there to fill in the gap. I believe this is true even despite heavy regulation. If a majority of the population wants something, regulation can be overcome.

If we want more progress, we need more desire for it. If people want more, technology will deliver more.

How do we get more desire?

This is the tricky part. Increasing the demand of a majority of people is . . . hard.

Most entrepreneurial efforts don’t increase demand — they ride on the wave of existing needs, trends, or market arbitrages. Awareness and concern for climate change is one example of a trend that has increased demand over a wide range of technologies.

Some individual companies have pulled it off — Apple and Tesla are the first that come to mind for me. It feels like they truly pulled consumer demand forward much more than it would have been otherwise.[1]

Progress needs better marketing

Increasing desire is well understood in the world of marketing and sales. But it’s also a key driver of innovation.

Marketing is manufactured desire; engineered discontent.

But “marketing” doesn’t just mean viral videos, making YouTube ads, buying Google AdWords, or promoting tweets. These usually only drive short-term desire and nudge someone to buy something they otherwise might not have. Even the most “friendly” marketing is permission-based, like Google AdWords, where the consumer is likely looking for a solution already and they are presented it at just the right time.

Larger, longer-term demand shifts are needed to truly push progress forward.

What does this entail? Some ideas:

  • More inspiration: Optimistic sci-fi visions of the future (or even the present). Sci-fi has a good track record of pushing (particularly young) people’s expectations up for what amazing things the future can bring.
  • Futurism: A more concrete vision of the future. See Eli Dourado’s “Why progress needs futurism” post.
  • Education: Yeah, sure, all marketers are liars. But we can still tell the truth to raise expectations. Help people understand what is possible and why we need it. Make it easier for people to see the potential for more. Show them what is possible with current or future technology.
    • Things can be so much better! For you, your family, your friends, and all those less fortunate in the world.
    • The world isn’t zero-sum. We can have our cake and eat it too!
    • We’ve done amazing things in the past, and we can do them again!
  • What’s in it for me? People are selfish. If it’s not clear how something can directly benefit them personally or their family and friends, why care about radical improvement?
  • Progress memes: Solarpunk, Terrapunk, whatever. Even better if it’s totally exaggerated and unrealistic. It might just push the Overton window enough to drive actual change.
  1. ^

    The De Beers diamond campaign is the best example I can think of for increasing desire on a massive scale, but this was accomplished mainly by convincing people of their rarity. It’s a little different than people wanting better performance from a product or service. Either way I highly recommend reading this article from 1982 on how De Beers did it.

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Historian's perspective: the Industrial Revolution was primarily a supply-side phenomenon. Demand may have helped to geographically focus the concentration of new sectors, but technological change occurred because of the desire of producers to make things better and at lower cost, not because idiot peasants realized that cotton clothes were comfortable. Other factors—science, bourgeois/Protestant ethic, coal/raw materials, skills—are also supply side. 

Neither necessity nor desire is the mother of invention!

Completely agree, and thank you for that perspective. It's a bit of a "chicken vs. egg" problem in that sense, and it's hard to think of anything that is completely supply or demand driven. It does seem like it's more supply driven in general, although I'm happy to put attention on the demand side because I think it's being neglected.

Agree with that last point. Both necessity and desire were around since the dawn of humanity. They didn't create an Industrial Revolution by themselves.

(But you could argue that by the same token, producers also always had the desire to lower their costs / increase quality. It's not just desire, but opportunity.)

Also, wasn't there some significant demand-side stuff going on? Wasn't there a general increase in wealth and consumption levels just before the IR, that was maybe significant in helping to create markets for more/better goods produced by the new manufacturing technology?

Yes, producers have always had the incentive to innovate, and yes, they have always tried to do so (even slave economies were "capitalist"). Only in certain institutional, cultural, and geographical contexts can they be successful. I also think base levels of scientific knowledge are critical (but Anton may disagree in some cases).

As for demand, I refer you to Mokyr's classic piece: http://www.jstor.org/stable/2119351.

So, sort of. Everything is endogenous. Desmet and Parente argue that market expansion leads to longer firm production runs in differentiated goods and lower per unit fixed costs (thus process innovation). But why was there market expansion in the first place? Population growth and foreign trade? In the latter case, I'm going to be working on this for a long time yet. But it's important to note that the UK TOT fell during the IR. Supply was outpacing demand in textiles.

Thanks for the Mokyr ref, had not read that one yet. You are truly an encyclopedia of the econ history literature!

Yes, I'm wondering about the market expansion too. Foreign trade does seem to be a part of it?

Related, see this from Anton Howes which I thought was very interesting (emphasis added):

One possible explanation is that there was some special change in England’s agricultural technology that increased its productivity, requiring fewer and fewer people, and possibly even driving them off the land, so that they were forced to find alternative employment. This thesis comes in various forms, many of which I’m still coming to grips with, but broadly speaking it implies a “push” from the fields, and into industry and the cities. Desperate, and unable to demand high wages, these cheaper workers should have stimulated industry’s growth.

The alternative, however, is that there was nothing very special or innovative about English agriculture, and that instead there was an even larger increase in the demand for workers in industry and services. The thesis implies a “pull” into industry and the cities, causing people to abandon agriculture for more profitable pursuits, and thereby making England’s agriculture de facto more productive — something that may or may not have actually been accompanied by any changes to agricultural technology, depending on how much slack there was in how the labourers or land had been employed.

The push thesis implies agricultural productivity was an original cause of England’s structural transformation; the pull thesis that it was a result. The evidence, I think, is in favour of a pull — specifically one caused by the dramatic growth of London’s trade.

https://antonhowes.substack.com/p/age-of-invention-capital-grains

General note: I find it remarkable how many major developments seem to ultimately trace back to either (1) the Age of Discovery or (2) the printing press. And I find it a remarkable coincidence how those basically happened at the same time.

Ha, I wish. Maybe a children's illustrated encyclopedia. 

Market expansion is definitely an interesting area for research here. Foreign trade shares in the economy were small, but in certain key sectors (i.e. textiles) it was pretty significant. But again, it's important to unravel whether these markets can be considered A) additional demand or B) won by higher-quality / lower-cost production. That's the story of the "New Draperies" in the 17th c. and cottons from the 18th. 

Anton and I have chatted about this a lot, and I agree with most of this. "Labor push" is a thing, but more for 20th-century developing economies than for first-wave industrializers. See Alvarez-Cuadrado, Francisco, and Markus Poschke. 2011. "Structural Change Out of Agriculture: Labor Push versus Labor Pull." American Economic Journal: Macroeconomics, 3 (3): 127-58.

I think you've hit the nail on the head—the fifteenth century is critical in the formation of (early) modernity. David Wootton argues that the Age of Discovery invented the idea of discovery/novelty/invention, and I would love to investigate this idea further. Even beyond the technical challenges of navigation, the notion—which anyone can understand—that there are new things in the world outside the current bounds of human knowledge is critical for getting people to seek out and trust new technologies. 

I agree that we could use more inspiration, futurism, etc.!

I disagree with your comments on business/economics (which maybe weren't the real point though?) I don't think anything about demand explains stagnation.

For travel in particular, it's wrong to analyze it in terms of the trips people currently take becoming shorter. You should look at the trips people are not taking now because they're too long, and consider how much more such trips would happen. E.g., think of SF <> Tokyo as a day or weekend trip.

People don't clamor explicitly for new products and services, but when a business creates something that actually provides much more utility, they flock to it pretty quickly.

Thanks for the thoughts Jason — helped me think a bit more about the idea. 

See my response to @daviskedrosky, but I totally agree that in general it is supply-driven. It's more that I wanted to give more attention to the demand side because it's not talked about as much. It is a chicken-and-egg problem in the end (and my post doesn't really discuss the balance).

In regard to "People don't clamor explicitly for new products and services" I don't think this is totally true, and it is a mix. And I do think that demand is much more important than many believe in driving what gets built (and regulated, etc).

Your comment did lead me to think more about what kinds of innovation are more demand or supply driven though, and given all of your research I'm curious to hear your thoughts on it. 

It seems to me many more incremental innovations are demand driven, while breakthrough innovations are typically supply driven. The only breakthrough innovations I can think of that were more demand driven are the result of large-scale forcing functions, like war or pandemics that radically change the demand for what is wanted and the urgency it’s needed.

Interesting theory here.  I hadn't really thought about how to increase the demand side of the equation.  I certainly think it's generally important to have a population that's hopeful about the future, open to try new products, and supportive of new, whacky ideas.

That being said, I'd encourage you to consider the supply side (new products/ideas) more deeply.  What business factors contribute to a dearth of creative ideas?  One might argue that the ad revenue model, which requires enormous amounts of attention, creates a certain kind of incentive structure, creating a very particular opportunity space.  If that's the case, how to invent new business models?  

Also, I might look at capital that goes towards innovation.  VC and other kinds of early stage capital typically steers clear of scary science projects, where I believe there's a ton of opportunity.   They tend to look for established business models like SaaS and advertising. 

Finally, it's worth noting that there's still a ton of innovation out there.  Uber, AirBnB, Tesla, Apple, Netflix, and many smaller companies are pushing the boundaries of what can be done with our current web and mobile infrastructure; and I see many opportunities now that Web3 is unlocking new ways of organizing human beings.

I think it worthwhile to take a moment to theorize about demand. I think we are all supply-siders in some way.

Aren't you trying to manufacture demand to consider the supply side? What's the theory of demand that increases the supply-side?

The selfishness motive for increasing demand is actually weaker than you might think. In the three examples you chose, climate change, Tesla, and Apple, I'd make the case that all three, even Apple(?) pulled demand because they are socially desirable at the same time as personally beneficial.

Having thought it about this some more, I think my point actually buttresses your thesis.

Lets imagine that humans are adaptable to the living standards of current circumstances and have finite competition points. Along the dimension of current circumstances there is zero-sum competition for status and relative power. Demand for status, relative power, and group belonging can swamp demand for a brighter, more efficient future.

So under this theory climate change action is an example where demand moved from the scientific community who identified a negative externality from carbon emissions to a marker of group solidarity and desirability. In this case, the competition to do something about it is probably net-good (although the anti-natal doomerism is a pretty high cost already, if that birth-rate effect is real), since many climate actions are productive.

So a model for boosting demand would be something like:

  1. Identify goods where when demand increases there are long term positive effects. Thinkers and prophets.
  2. Produce media content and communities around those effects. Enthusiasts and fandoms.
  3. Create institutions that actually facilitate those effects. Innovators and political possiblity.

Each of these points requires a population that is not stuck trying to find ways to conform to their dis-innovative peers full time. "Freedom for alternative demand," you might call it.

(This reminds me of Tyler's comment on dentists. The marginal dentist doesn't create much in the way of public goods. But the marginal innovative firm changes the equilibrium of society.)

Thanks Sebastian. I think this is a good way to think about it. "Nudging" demand away from the more zero-sum endeavors and toward productive ones.

Awareness and action on climate change is an especially good case study. Of course as other things, climate-related tech is both demand and supply driven, but there's no doubt that overall climate awareness has pushed sales of things like solar, EVs, plant-based meats, etc. "goods where when demand increases there are long term positive effects" is a good way to put it.

Your steps 2 and 3 are obviously less clear how implement in practice. Especially finding ways to measure these effects. I mean, it's pretty hard to measure how much good sci-fi has affected tech progress but long-term I think it's clear it has.

Regarding the 'demand cycle', I thinkTechnological Revolutions and Financial Capital by Carlota Perez is relevant here. Basically technological progress goes through two broad phases of installation and deployment, each with two parts. Installation seems to relate to your 1 and 2 above, while deployment is #3, and it seems to me where progress has stalled. When the progress we have made and the demand we've created for that progress is deployed in a way that seems arbitrary or lackluster, the problem goes from stagnation (agent-less) to strangulation (agent-driven).

Perez frames the deployment period as a golden age of synergy that leads to maturity, where the cycle starts over. If that golden age is poorly distributed, then maturity looks less like well-earned growth and more like ossification. Related is the literature on the psychological effects of unfulfilled desire, including being unable to complete things, the inability to acquire, realize gains, pull things in and compose with them.

To take two examples from above, Apple and climate change have both successfully injected demand across the cycle, rather than just frontloading it and letting the chips fall. Apple's deployment as a firm is much more 'orderly' than climate change (a broad movement), whose deployment ranges from dematerialization to anti-natalism to summits with world leaders. Satisfying our desire for Apple products is pretty straightforward, while satisfying our desire to prevent the worst of climate change is much more complicated.