This year’s winners of the Nobel Memorial Prize in Economic Sciences are a win for entrepreneurship, with Joel Mokyr awarded it for showing how the Industrial Enlightenment made growth possible through ideas and openness, and Philippe Aghion and Peter Howitt recognised for their explanation of how creative destruction keeps economies advancing.
On Mokyr, Dr Anton Howes, author of many of our reports, wrote the definitive reaction post following his win. As Anton notes, Mokyr put entrepreneurs and innovation at the heart of the story of how our species went from near-universal poverty to relative prosperity:
“Whereas most of the public, and even many historians, think of the causes of modern economic growth – the beginnings of the Industrial Revolution – as being rooted in material factors, like conquest, colonialism, or coal, Mokyr tirelessly argued that it was rooted in ideas, in the intellectual entrepreneurship of figures like Francis Bacon and Isaac Newton, and in the uniquely precocious accumulation in eighteenth-century Britain of useful, often mechanically actionable knowledge. Britain, he argued, through its scientific and literary societies, and its penchant for publications and sharing ideas, was the site of a world-changing Industrial Enlightenment – the place where progress was thought possible, and then became real.”
This worldview aligns with one of our core tenets: to elevate the status and champion the role of entrepreneurs across society. From our reports, it shows itself most clearly in Anton’s Blueprint for a New Great Exhibition, which makes the case for why we need to recreate the Great Exhibition of 1851, to both inspire innovation and foster a culture of improvement among frontier entrepreneurs and the general population. More broadly, it’s the reason behind every meeting and every event we host.
Turning to Aghion and Howitt, the name of this very Substack, Perennial Gale, isn’t a reference to Britain’s inclement weather, but a quote from Joseph Schumpeter’s description of capitalism as “the perennial gale of creative destruction.” His observation in 1942 was that our economic system is neither stable nor static, but constantly shaped by innovation, entrepreneurship and change. Entrepreneurs are central to this, driving forward economic progress by disrupting existing systems.
Aghion and Howitt put some numbers on the theory. As the Royal Swedish Academy of Sciences stated in its press release:
“In an article from 1992, they constructed a mathematical model for what is called creative destruction: when a new and better product enters the market, the companies selling the older products lose out. The innovation represents something new and is thus creative. However, it is also destructive, as the company whose technology becomes passé is outcompeted. In different ways, the laureates show how creative destruction creates conflicts that must be managed in a constructive manner. Otherwise, innovation will be blocked by established companies and interest groups that risk being put at a disadvantage.”
As backers of upstarts over incumbents, you can see why we’re so keen on the winners.
Aghion and Howitt’s work also highlights an emerging challenge: the growing productivity gap between frontier firms and laggards. The best business models and innovations aren’t diffusing as rapidly as they once did. This raises familiar, but no less urgent, questions like: What barriers prevent promising startups from scaling? Why aren’t successful innovations spreading to more firms? How can policy accelerate knowledge transfer while preserving the competitive dynamics that reward innovation?
We exist to answer these questions, but we also need insights from the frontline of entrepreneurship. Answers on a postcard (or email).
Table Matters
On Wednesday, we will host a roundtable lunch with Alex Depledge MBE, Entrepreneurship Adviser to the Chancellor of the Exchequer.
This one will be focused on scaling businesses with either £10 million in annual revenue or that have raised over £10 million in venture capital funding. If that’s you, we might still be able to squeeze you in – please request a place here.
I know Alex has been tirelessly hosting roundtables like this with businesses at various sizes and stages up and down the country, but if you haven’t had the chance to chat with her, please get in touch with me before Wednesday with what you think the Chancellor needs to know going into the Budget, and I’ll pass it on directly to her.
Oxford Come ’ere
Since our very first Ecosystem Builders event, the positive feedback has been supplemented with a fair critique: what about the rest of the country? Well, we’ve listened, so I’m delighted to announce that we’re going to Oxford, courtesy of our co-hosts Dr Fabio Bianchi (Oxentia) and Meric Sevgi Eren.
Oxford Edge has a workspace you’ll be able to work from, so we’re encouraging people to make a day of it. Find out more here.
Our sights are also set on Birmingham, Leeds, Cardiff, Manchester, Cambridge and Edinburgh, so watch this space for more information. And get in touch if you’re happy to host a bunch of energetic ecosystem builders in your city.