On the Cumulative Power of New Ideas and How It Powers the Economy

In this week's Rule Breaker Investing podcast, Motley Fool co-founder David Gardner brings his listeners a special treat: an interview with Dr. Steven Pinker of Harvard University. He's a psycholinguist, award-winning researcher, and, according to Time magazine, one of "The 100 Most Influential People" in the world today.

He's also the author of a number of books -- among them The Stuff of Thought, The Blank Slate, Words and Rules, How the Mind Works, The Better Angels of Our Nature, and The Language Instinct --  but here's how Bill Gates described his latest, Enlightenment Now: The Case for Reason, Science, Humanism, and Progress. "My new favorite book of all time."

In this segment, they talk about why the chart of the U.S. stock market over the past century writ large is a fairly steady uphill climb, what it reflects broadly about our society, and what will direct it for the next century.

A full transcript follows the video.

This video was recorded on March 7, 2018.

David Gardner: Steven, I want to start with a graph. Now your book, Enlightenment Now, is full of graphs and many of them start in the upper left and go down to the lower right. But this is one that you don't talk as much about, but we think a lot about here at The Motley Fool, and that's the graph of the Dow Jones Industrial Average, or the S&P 500 over the last century or so. That one starts in the lower left and goes to the upper right. I know you're familiar with it. Why?

Steven Pinker: Why has it increased?

Gardner: Why?

Pinker: Well, there are more of us. The simplest answer is population has increased. But I think more to the point, productivity has increased. We -- meaning advanced industrial society -- ideas of how to get more stuff out of the same number of hours and inputs. I assume that that's the main reason and the discoveries that allow us to get more stuff out of the same number of hours and materials accumulates.

So we don't forget. We replace inefficient means of doing things with more efficient things, and so it goes up not exactly monotonically, because there are 1987 and 2008, and so on, but with an overall increasing trend.

Gardner: And I love that graph because it shows 100 years. It's not just the last two years, and it's such an obvious, to me, conceit that it would or should. Innovation -- which you talk so much about in your book Enlightenment Now -- just the improvement. The average people working worldwide, every day, to make the world a little bit better. It makes sense to me that it would go from the lower left to the upper right.

Pinker: Let me add something, because it is a theme of the early chapter of the book, which tries to give the big picture of the arc of human history, and which ties into my own specialty as a cognitive scientist, which is that these innovations are based on ideas, and we're a species that more than any other species lives by thinking up ideas. Sharing them by language.

Ideas, unlike physical stuff, can accumulate. You don't lose them when you share them. I use the lovely phrase from Thomas Jefferson that when I share an idea, I am not deprived of it in the same way that if I light your candle with my candle, I haven't lost anything from my candle. He said it more eloquently.

But the reason that this cumulative growth of innovation is possible is that ideas once conceived are out there for everyone to share. They can accumulate. They don't need to use up lots of stuff to have more ideas. You don't need lots of room to store them. They are information and knowledge, which is what our species thrives on, is what has powered largely, maybe even exclusively, this continuing expansion.

Gardner: Is it your expectation that over the next century you'd expect to start somewhere where we are now on the lower left, and 100 years from now be in the upper right?

Pinker: Yes, barring the low probability but high-impact potential for catastrophes. Unless there is nuclear war. Climate change is catastrophic if we don't do anything in time. There are always possibilities for terrible things to happen.

In the past we have recovered from them, and there have been terrible things such as the Spanish flu epidemic in 1918-1919. Economically, the Great Depression. In terms of human life, World War II. Aids in Africa. I mean, there are downward jags. So far, we've managed to recover from all of them and I like to think that we will in the future but, of course, you can never be certain.