Innovation impact: what we can learn from 50 core inventions of our economy

Innovation is about much more than inventing things. It is also about business models, design, regulation and ecosystem partnerships, as this entertaining new book shows.

While much media discourse about innovation understandably focuses on the digital future, there are valuable lessons to be learnt from our vast ‘analogue’ history well, as covered in the book Fifty Things that Made the Modern Economy.

Tim Harford is the author of The Undercover Economist, Messy, Adapt, and The Logic of Life. He is a columnist for the Financial Times, presenter at BBC, and visiting fellow of Nuffield College at Oxford University.

The informative and enjoyable book traces the impact of many inventions we take for granted, and shows how several of them have come to life only after decades of work and as a connected set of developments. “Real innovations don’t come in a glossy brochure: they shape our world whether we buy them or not,” says Tim.

The 340-page book also unearths the unintended and even unwelcome consequences of many inventions, including creation of new winners and losers. “Whenever a new technology emerges, it’s worth trying to ask who will win and who will lose out as a result. The answer can often surprise us,” observes Tim.

Many inventions were not originally seen as solutions to problems – use-case scenarios emerged only later. And while some problems were solved, new problems were created as side-effects as well. “The challenge now – as with so many inventions – is to enjoy the benefit without also suffering the cost,” rues Tim.

Each chapter brings out the human, social and economic impact of the inventions, with stories of perseverance and even failure. There is plenty of wit and humour as well, making for a lively read for a broad audience – just the kind of book we wish we had in college.

The material is thoroughly researched, with over 35 pages of references. Here are my ten clusters of takeaways from this book; see also my reviews of the books Wide Lens Innovation, The 10 Objects that Power the Global Economy, and The Inevitable. (Another book to be reviewed shortly is Sapiens: A Brief History of Humankind.)

Basics and foundations

The plough helped kickstart agricultural societies, which allowed a fifth of the population to grow food for everyone. This freed up the rest of the population to specialise in other professions, while also creating more social inequality than in the hunter-gatherer era. The mouldboard plough, invented in China, required community involvement and led to the manorial system in Europe.

Paper was first used in China for writing as well as wrapping objects. Europeans used paper made from pulped cotton and used garments, before switching to wood and recycled paper. The Gutenberg press further changed the world. Though global paper consumption has been declining since 2013 due to the rise of digital, paper will endure -- just like pencils, candles and bicycles. (The fax machine has become obsolete, thanks to digital – but the inefficient QWERTY keyboard remains!)

Alexander Cumming patented the S-bend flush toilet in 1775, helping overcome ‘The Great Stink’ in London due to sewage flushed into the Thames river. Improved sanitation calls for separation and treatment of sewage, but less than half the world’s population today has access to such sanitation systems.

The light bulb is literally the icon for a new idea, thanks to its vast impacts. It has replaced thousands of years of other inventions like campfires, candles, oil lamps, and gas lamps. LED lights are clean, fire-safe, controllable, flicker-free, and devoid of stink compared to earlier counterparts. Artificial illumination has freed our work, play and study from the limits of dark nights.

Joseph Gidden’s barbed wire helped the US settlers fence their territories in their westward expansion in the late 1880s. Digital rights management is now trying to create “digital barbed wire” for online services.

The dynamo helped reconfigure steam-powered factories in the 1900s, but tapping its full potential required a radical design of the manufacturing process, shafts, belts, ventilation and even the workforce itself. A century later, digital media also are reconfiguring industries, but their true benefit is realised not as component replacement but via entire system re-design.

Rudolf Diesel’s engines were more expensive than petrol engines but more economical to run. The first diesel engine trucks appeared in the 1920s, and trains in the 1930s. Today, they power enormous ships that drive global trade. But concerns arise about the “path dependency” on fossil fuels, and when alternative fuels will become feasible at scale.

The Haber-Bosch process for creating ammonia spurred the global use of fertilisers. However, ammonia is also used to make bombs, and there are concerns over carbon emissions, greenhouse gases, and contamination from nitrogen compounds.

Cheap farm antibiotics have been used to keep animals healthy – but they also fatten them, and their overuse raises the risk of antibiotic-resistant bacteria. “This is a classic example of the tragedy of the commons, where individuals rationally pursuing their own interests ultimately create a collective disaster,” warns Tim.

Tinkering in his New York home lab, Leo Baekeland invented synthetic Bakelite plastic in 1907. It does not burn or melt and is a good insulator – perfect for switches, seats and even toothbrushes. Unfortunately, some plastics like Bakelite cannot be recycled, leading to serious environmental concerns over how to treat such materials or use them responsibly.

The work of Italian scientists Luigi Galvani and Alessandro Volta led to the invention of the electric battery in the early 1880s, followed by the rechargeable battery in 1859 (used in cars today as well), dry cells in 1886, and lithium-ion battery in 1985 (by Akira Yoshino in Japan). Batteries can be used within electric grids as well as off-grid, and can help store and distribute solar energy. “The biggest impact of Alessandro Volta’s invention may be only just beginning,” says Tim.

Much of the rise of the software era lies in the invention of the compiler by Grace Hopper. With experience as a naval mathematician during World War II, she developed a collection of sub-routines that grew in the 1950s, thanks to contributions from other programmers around the US (long before the term ‘open source’ was coined). Compilers freed programmers from thinking of hardware switches and wires, and focus instead on concepts and algorithms.

Encryption was in the domain of academia, military and even criminals – but public key cryptography today enables online banking, secure email and online shopping. Debates continue to rage over the tradeoff between privacy and national security, and tech developments like quantum computing could make it faster to crack codes.

Entertainment

In the mass media age, the gramophone helped popularise music. But it also led the way to a “winner-take-all dynamic in the performing industry.” Satellite TV took sports to audiences of billions – while also leading to the super-rich superstar phenomenon.

Cassettes, CDs and DVDs maintained the economic model of the gramophone - but MP3s, the internet, free music sites and streaming media changed all that. “You’d better be prepared for doing a lot of touring because that’s really the only unique situation that’s going to be left,” David Bowie warned fellow musicians.

In its early years, computing was restricted to sectors like military and banking – but academic and student access from the 1960s opened up the hacker and gaming culture. “Computer games now rival the film industry for revenue,” says Tim.

Markets

One of the biggest enablers of global markets is the shipping container: it has improved shipping efficiency and worker safety across maritime and land routes. Its inventor, Malcolm McLean was actually a trucker, who pushed through his invention by gaining control of a shipping company as well.

Another link in the global supply pipeline is the cold chain, invented by African-American engineer Frederick McKinley Jones in the 1930s. It revolutionised healthcare (eg. vaccine delivery) and food (supermarkets, domestic consumption).

In 1948, graduate student Joseph Woodland came up with the idea of the thin and thick lines for barcodes. He got this insight while observing lines in the sand as he was playing on a beach. Computers and lasers brought this invention to stores, along with the need for standardised codes by grocery and food chain associations.

This led to efficiencies in large stores, as well as customer databases and loyalty programmes – while also leaving out smaller stores who could not afford the scanners. “The barcode isn’t just a way to do business more efficiently; it also changes what kind of business can be efficient,” cautions Tim.

Harry Gordon Selfridge first promoted open aisle displays in stores, and infused elements of sight-seeing to shopping in the early 1900s; he even introduced lavatories for ladies. Alexander Turney Stewart introduced “free entrance” (without hassling of customers by sales staff), and A.T. Stewart & Co. practised clearance sales. Department stores promoted the concept of “total shopping.” Malls and e-commerce have also emerged since then.

The sharing economy of eBay, Uber, Ola, TaskRabbit and other platforms has taken off because of features like seller feedback, which was difficult to scale in the analogue era. However, fraudsters have also found ways to hack reputation capital, and there are concerns over lack of minimum wage regulation (see my book review of The Sharing Economy).

Multiple business models

Some inventions can start off with one business model, and then open the door to a range of new possibilities. The founders of Google started off by ranking sites based on links (as in the model of academic citations), and stumbled onto pay-per-click advertising. Search eventually made it easier for consumers to do comparison shopping, and for entrepreneurs to market niche products.

King Camp Gillette, inventor of the disposable razor blade, ended up spawning the two-part pricing business model appropriately called ‘razors and blades,’ with a cheap holder and expensive blade. It is now used by the inkjet printer industry (expensive ink cartridges), Nespresso (expensive coffee pods), and Sony PlayStation 4 (expensive games). See also my book review of Cross-Industry Innovation.

A Vodafone-DFID partnership in Kenya led to Safaricom’s creation of M-Pesa as a way for microfinance loan payment via mobiles. Project leader Susie Lonie discovered that Kenyans were using it also for remittances, service payment, and even depositing money before journeys to keep it safe.

“M-Pesa is a textbook ‘leapfrog’ technology where an invention takes hold because the alternatives are poorly developed,” explains Tim. Its use to pay salaries for Afghanistan’s policemen also led to reduced revenue siphoning and corruption.

Inventions and government

It is hard to believe that passport-free international travel was the norm – until 1920, when the League of Nations set the size specifications for passports. Today, the status of the passport is at the heart of the migration and refugee crisis.

From the days of Bismarck and Roosevelt, governments have rolled out different versions of the welfare state – including minimum wage, unemployment benefits, and pensions for the elderly. Critics have countered with arguments about such benefits becoming too generous or governments being over-protective.

The US government has funded research, which led to inventions like GPS, internetworking protocols, fast-Fourier-transform algorithms, and Siri. Europe’s CERN funding helped create inventions like the World Wide Web and multi-touch technology. Many of these technologies were commercialised by private firms, and would eventually end up in the most profitable product in history: the iPhone. 

The British and the US governments developed radar during World War II, which now underpins safety in the aviation and shipping industry. New challenges arise in how to make ‘sense and avoid’ technology for drones.

“Sometimes the state provides the foundation for new ideas; sometimes it’s the obstacle. The dance between the state and the market continues to fascinate,” Tim observes. Sectors from banking to the sharing economy reveal some of these tensions over regulation.

At the same time, some unscrupulous players in the private sector are to blame for funding research to justify dubious and biased claims, and delay regulation about products like asbestos, tobacco and leaded petrol.

Home and family

“Infant formula changed what it meant to be a mother, and TV dinners changed what it meant to be a housewife. But the contraceptive pill changed both – and more besides,” explains Tim.

Nutritional science was pioneered by young chemist Justus von Liebig in Germany. He invented infant formula, which became widely used by working mothers. Overzealous advertising by some companies in the 1970s led to backlash and boycotts in some countries, which advocated breast milk as the best option.

The Swanson company worked on processed food packaging for the US army during World War II, and bacteriologist Betty Cronin built on that model to create frozen TV dinners. Unfortunately, such packaging trends for home consumption also led to increased potato consumption and even obesity.

The contraceptive pill became popular in the US from the 1970s onwards. This allowed women to take control of their professional careers and higher education, and postpone marriage and motherhood to a time of their choice. In contrast, Japan did not pass regulatory approval of the pill till 1999 (though it approved Viagra just a few months after the US!).

Work and habitat

Elisha Otis first demonstrated the safety elevator at the 1853 World’s Fair in New York. Along with reinforced concrete, modern glass, and air-conditioning, it would revolutionise urban design via skyscrapers. Such design also needs subways for effective movement of people. Urban clusters today have become major startup centres and creativity hubs.

Cement has been around for centuries, but reinforced concrete (with steel) was invented by French gardener Joseph Monier in the 1860s. He first used it for flower pots, then other applications like building slabs.

“China poured more concrete in the three years after 2008 than the US poured during the entire twentieth century,” says Tim. Unfortunately, concrete takes lots of energy to create, and can’t be reused; water can seep in through cracks and eventually rust the metal core.

The invention of air conditioning by Willis Carrier for Buffalo Forge was first applied to control humidity in factories, and only later on to theatres, homes and vehicles. It has improved productivity and comfort – but also increased city temperatures and leaked greenhouse gases.

Designed in 1978 by Gillis Lundgren, Ikea’s basic Billy bookcase is in offices and homes around the planet. Frugal design, manufacturing at scale, and the use of factory robots have helped keep its cost low. Creative customers have come up with new ways of using the bookcases for other purposes (see the site IkeaHackers).

Innovation is not just about new fancy objects but multiple-use components and efficient production, Tim stresses. See also my book reviews of 10 Types of Innovation and 15 Paths to Disruptive Innovation.

Robotics and artificial intelligence (AI) are reshaping the nature of work, right from the days of General Motors’ Unimate robot in 1961 and the Dartmouth College AI conference of 1956. “The robot birth-rate is almost doubling every five years,” says Tim.

Domain-specific “narrow AI” in bookkeeping, law, finance, and customer service is accelerating, but “artificial general intelligence” is still some decades away (see my book review of Life 3.0: Being Human in the Age of Artificial Intelligence).

The Knowledge Economy

Market research was pioneered by Charles Coolidge Parlin, to assess advertising impacts for the US automobile industry in the 1910s. George Gallup pioneered opinion polls in the 1930s, and Robert Merton launched focus groups in 1941. Public relations and propaganda were pioneered by Edward Bernays (Sigmund Freud’s nephew). These industries, however, have come under strict scrutiny for their role in scandals like unscrupulous tobacco advertising.

The practice of management consulting was kicked off in the 1930s by James McKinsey, whose consultants were sometimes described as a “SWAT team of business philosopher-kings.” Consultants have helped companies manage change and growth, but some consultants have also fallen into disrepute over trying to leech onto clients (“land and expand”), and charges like insider trading.

The concept of intellectual property originated in fifteenth-century Venice, whereby inventors would receive patents for a specified period of time. Debates continue over the duration and breadth of patents, and the need to balance protection with further innovation. In its early years, the US economy was in “full-blown copying mode” before creating IP of its own; similar patterns have emerged in the rise of China.

Finance and accounting

From the tally stick and cuneiform contracts to paper money and cheques, a range of financial inventions have helped create the foundations of the global economy. Other inventions include written contracts, private money, banks, double-entry bookkeeping, property registers, limited liability companies, index funds, insurance, and tradeable debts (micro-finance and venture capital don't seem to figure in the book). More unusual inventions include the rise of tax havens like Bermuda and Luxembourg!

“Accountancy is a powerful financial technology – but it does not protect us from outright fraud, and it may well lure us into complacency,” cautions Tim, pointing to the rise of financial scandals and scams.

The road ahead

The book also shows how some inventions were created as the result of challenges, competitions and awards – such as Englishman John Harrison’s clock, which improved on the accuracy of Dutch Christian Huygen’s mechanical clock (1656). Atomic clocks and GPS satellites have brought accurate time across the world today.

DARPA’s Grand Challenge for self-driving cars, UK innovation agency Nesta’s prize for better antibiotics, and the Gates Foundation’s challenges for better sanitation design are recent examples of spurring innovation.

The book ends with an unexpectedly brief chapter on innovation trends and implications. “With any new invention, it makes sense to at least ask ourselves how we might maximise the benefits and minimise the risks,” urges Tim. Blunders and missed opportunities will continue.

It is also important to continue to fund basic research, and not just focus on immediate applications: it may actually take others to spot use cases. People should also indulge their curiosity, without always having a clear idea of where it may lead.

Worrying trends are whether the rise of protectionist barriers will hamper migration and international cooperation for innovation. “Bigger long-term pressures always come from technological change,” cautions Tim.

In sum, the book makes for an illuminating and entertaining read. It would be great to see a subsequent book on how the digitally-connected global real-time economy is transforming the creation and adoption of the next wave of inventions.