The death of innovation, the end of growth
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0:01 - 0:03That's how we traveled in the year 1900.
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0:03 - 0:06That's an open buggy. It doesn't have heating.
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0:06 - 0:07It doesn't have air conditioning.
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0:07 - 0:09That horse is pulling it along
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0:09 - 0:12at one percent of the speed of sound,
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0:12 - 0:14and the rutted dirt road
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0:14 - 0:18turns into a quagmire of mud anytime it rains.
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0:18 - 0:21That's a Boeing 707.
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0:21 - 0:23Only 60 years later, it travels
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0:23 - 0:25at 80 percent of the speed of sound,
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0:25 - 0:28and we don't travel any faster today
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0:28 - 0:31because commercial supersonic air travel
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0:31 - 0:33turned out to be a bust.
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0:33 - 0:35So I started wondering and pondering,
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0:35 - 0:38could it be that the best years of American economic growth
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0:38 - 0:40are behind us?
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0:40 - 0:45And that leads to the suggestion, maybe economic growth
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0:45 - 0:47is almost over.
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0:47 - 0:51Some of the reasons for this are not really very controversial.
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0:51 - 0:53There are four headwinds that are just hitting
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0:53 - 0:55the American economy in the face.
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0:55 - 1:00They're demographics, education, debt and inequality.
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1:00 - 1:04They're powerful enough to cut growth in half.
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1:04 - 1:08So we need a lot of innovation to offset this decline.
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1:08 - 1:11And here's my theme: Because of the headwinds,
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1:11 - 1:14if innovation continues to be as powerful as it has been
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1:14 - 1:18in the last 150 years, growth is cut in half.
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1:18 - 1:20If innovation is less powerful,
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1:20 - 1:23invents less great, wonderful things,
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1:23 - 1:27then growth is going to be even lower than half of history.
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1:27 - 1:30Now here's eight centuries of economic growth.
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1:30 - 1:34The vertical axis is just percent per year of growth,
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1:34 - 1:37zero percent a year, one percent a year, two percent a year.
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1:37 - 1:40The white line is for the U.K., and then the U.S.
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1:40 - 1:42takes over as the leading nation in the year 1900,
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1:42 - 1:44when the line switches to red.
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1:44 - 1:46You'll notice that, for the first four centuries,
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1:46 - 1:50there's hardly any growth at all, just 0.2 percent.
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1:50 - 1:51Then growth gets better and better.
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1:51 - 1:54It maxes out in the 1930s, '40s and '50s,
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1:54 - 1:58and then it starts slowing down, and here's a cautionary note.
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1:58 - 2:00That last downward notch in the red line
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2:00 - 2:03is not actual data.
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2:03 - 2:06That is a forecast that I made six years ago
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2:06 - 2:08that growth would slow down to 1.3 percent.
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2:08 - 2:10But you know what the actual facts are?
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2:10 - 2:12You know what the growth in per-person income has been
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2:12 - 2:15in the United States in the last six years?
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2:15 - 2:17Negative.
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2:17 - 2:20This led to a fantasy.
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2:20 - 2:25What if I try to fit a curved line to this historical record?
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2:25 - 2:29I can make the curved line end anywhere I wanted,
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2:29 - 2:32but I decided I would end it at 0.2,
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2:32 - 2:37just like the U.K. growth for the first four centuries.
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2:37 - 2:40Now the history that we've achieved is that we've grown
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2:40 - 2:44at 2.0 percent per year over the whole period,
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2:44 - 2:471891 to 2007,
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2:47 - 2:51and remember it's been a little bit negative since 2007.
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2:51 - 2:53But if growth slows down,
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2:53 - 2:57instead of doubling our standard of living every generation,
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2:57 - 3:02Americans in the future can't expect to be twice as well off as their parents,
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3:02 - 3:05or even a quarter [more well off than] their parents.
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3:05 - 3:09Now we're going to change and look at the level of per capita income.
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3:09 - 3:13The vertical axis now is thousands of dollars in today's prices.
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3:13 - 3:15You'll notice that in 1891, over on the left,
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3:15 - 3:17we were at about 5,000 dollars.
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3:17 - 3:20Today we're at about 44,000 dollars of total output
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3:20 - 3:22per member of the population.
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3:22 - 3:25Now what if we could achieve that historic
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3:25 - 3:28two-percent growth for the next 70 years?
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3:28 - 3:29Well, it's a matter of arithmetic.
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3:29 - 3:33Two-percent growth quadruples your standard of living in 70 years.
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3:33 - 3:37That means we'd go from 44,000 to 180,000.
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3:37 - 3:40Well, we're not going to do that,
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3:40 - 3:41and the reason is the headwinds.
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3:41 - 3:43The first headwind is demographics.
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3:43 - 3:45It's a truism that your standard of living
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3:45 - 3:49rises faster than productivity, rises faster than output per hour,
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3:49 - 3:51if hours per person increased.
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3:51 - 3:54And we got that gift back in the '70s and '80s
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3:54 - 3:56when women entered the labor force.
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3:56 - 3:59But now it's turned around.
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3:59 - 4:01Now hours per person are shrinking,
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4:01 - 4:04first because of the retirement of the baby boomers,
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4:04 - 4:08and second because there's been a very significant
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4:08 - 4:12dropping out of the labor force of prime age adult males
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4:12 - 4:16who are in the bottom half of the educational distribution.
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4:16 - 4:18The next headwind is education.
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4:18 - 4:21We've got problems all over our educational system
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4:21 - 4:22despite Race to the Top.
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4:22 - 4:26In college, we've got cost inflation in higher education
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4:26 - 4:29that dwarfs cost inflation in medical care.
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4:29 - 4:33We have in higher education a trillion dollars of student debt,
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4:33 - 4:36and our college completion rate
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4:36 - 4:43is 15 points, 15 percentage points below Canada.
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4:43 - 4:45We have a lot of debt.
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4:45 - 4:50Our economy grew from 2000 to 2007
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4:50 - 4:54on the back of consumers massively overborrowing.
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4:54 - 4:57Consumers paying off that debt is one of the main reasons
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4:57 - 4:59why our economic recovery is so sluggish today.
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4:59 - 5:01And everybody of course knows
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5:01 - 5:03that the federal government debt is growing
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5:03 - 5:06as a share of GDP at a very rapid rate,
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5:06 - 5:10and the only way that's going to stop is some combination
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5:10 - 5:15of faster growth in taxes or slower growth in entitlements,
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5:15 - 5:17also called transfer payments.
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5:17 - 5:19And that gets us down from the 1.5,
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5:19 - 5:22where we've reached for education, down to 1.3.
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5:22 - 5:25And then we have inequality.
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5:25 - 5:27Over the 15 years before the financial crisis,
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5:27 - 5:31the growth rate of the bottom 99 percent
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5:31 - 5:34of the income distribution was half a point slower
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5:34 - 5:37than the averages we've been talking about before.
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5:37 - 5:39All the rest went to the top one percent.
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5:39 - 5:41So that brings us down to 0.8.
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5:41 - 5:45And that 0.8 is the big challenge.
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5:45 - 5:47Are we going to grow at 0.8?
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5:47 - 5:49If so, that's going to require that our inventions
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5:49 - 5:52are as important as the ones that happened
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5:52 - 5:55over the last 150 years.
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5:55 - 5:59So let's see what some of those inventions were.
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5:59 - 6:02If you wanted to read in 1875 at night,
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6:02 - 6:05you needed to have an oil or a gas lamp.
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6:05 - 6:08They created pollution, they created odors,
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6:08 - 6:10they were hard to control, the light was dim,
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6:10 - 6:12and they were a fire hazard.
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6:12 - 6:17By 1929, electric light was everywhere.
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6:17 - 6:21We had the vertical city, the invention of the elevator.
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6:21 - 6:24Central Manhattan became possible.
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6:24 - 6:28And then, in addition to that, at the same time,
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6:28 - 6:31hand tools were replaced by massive electric tools
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6:31 - 6:34and hand-powered electric tools,
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6:34 - 6:37all achieved by electricity.
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6:37 - 6:41Electricity was also very helpful in liberating women.
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6:41 - 6:44Women, back in the late 19th century,
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6:44 - 6:46spent two days a week doing the laundry.
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6:46 - 6:48They did it on a scrub board.
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6:48 - 6:50Then they had to hang the clothes out to dry.
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6:50 - 6:52Then they had to bring them in.
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6:52 - 6:55The whole thing took two days out of the seven-day week.
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6:55 - 6:58And then we had the electric washing machine.
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6:58 - 7:01And by 1950, they were everywhere.
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7:01 - 7:04But the women still had to shop every day,
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7:04 - 7:06but no they didn't, because electricity
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7:06 - 7:09brought us the electric refrigerator.
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7:09 - 7:13Back in the late 19th century, the only source of heat in most homes
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7:13 - 7:17was a big fireplace in the kitchen that was used for cooking and heating.
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7:17 - 7:19The bedrooms were cold. They were unheated.
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7:19 - 7:22But by 1929, certainly by 1950,
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7:22 - 7:26we had central heating everywhere.
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7:26 - 7:29What about the internal combustion engine,
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7:29 - 7:31which was invented in 1879?
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7:31 - 7:35In America, before the motor vehicle,
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7:35 - 7:39transportation depended entirely on the urban horse,
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7:39 - 7:42which dropped, without restraint,
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7:42 - 7:4525 to 50 pounds of manure on the streets every day
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7:45 - 7:47together with a gallon of urine.
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7:47 - 7:51That comes out at five to 10 tons daily
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7:51 - 7:53per square mile in cities.
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7:53 - 7:59Those horses also ate up fully one quarter of American agricultural land.
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7:59 - 8:01That's the percentage of American agricultural land
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8:01 - 8:04it took to feed the horses.
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8:04 - 8:07Of course, when the motor vehicle was invented,
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8:07 - 8:11and it became almost ubiquitous by 1929,
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8:11 - 8:14that agricultural land could be used for human consumption
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8:14 - 8:15or for export.
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8:15 - 8:19And here's an interesting ratio: Starting from zero in 1900,
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8:19 - 8:24only 30 years later, the ratio of motor vehicles to the number of households
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8:24 - 8:30in the United States reached 90 percent in just 30 years.
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8:30 - 8:33Back before the turn of the century,
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8:33 - 8:35women had another problem.
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8:35 - 8:39All the water for cooking, cleaning and bathing
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8:39 - 8:44had to be carried in buckets and pails in from the outside.
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8:44 - 8:46It's a historical fact that in 1885,
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8:46 - 8:49the average North Carolina housewife
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8:49 - 8:54walked 148 miles a year carrying 35 tons of water.
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8:54 - 8:58But by 1929, cities around the country
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8:58 - 9:02had put in underground water pipes.
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9:02 - 9:05They had put in underground sewer pipes,
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9:05 - 9:10and as a result, one of the great scourges of the late 19th century,
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9:10 - 9:14waterborne diseases like cholera, began to disappear.
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9:14 - 9:18And an amazing fact for techno-optimists
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9:18 - 9:21is that in the first half of the 20th century,
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9:21 - 9:23the rate of improvement of life expectancy
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9:23 - 9:26was three times faster than it was
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9:26 - 9:29in the second half of the 19th century.
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9:29 - 9:34So it's a truism that things can't be more than 100 percent of themselves.
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9:34 - 9:36And I'll just give you a few examples.
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9:36 - 9:39We went from one percent to 90 percent of the speed of sound.
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9:39 - 9:43Electrification, central heat, ownership of motor cars,
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9:43 - 9:45they all went from zero to 100 percent.
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9:45 - 9:49Urban environments make people more productive than on the farm.
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9:49 - 9:52We went from 25 percent urban to 75 percent
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9:52 - 9:56by the early postwar years.
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9:56 - 9:58What about the electronic revolution?
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9:58 - 10:00Here's an early computer.
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10:00 - 10:04It's amazing. The mainframe computer was invented in 1942.
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10:04 - 10:08By 1960 we had telephone bills, bank statements
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10:08 - 10:10were being produced by computers.
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10:10 - 10:13The earliest cell phones, the earliest personal computers
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10:13 - 10:16were invented in the 1970s.
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10:16 - 10:19The 1980s brought us Bill Gates, DOS,
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10:19 - 10:22ATM machines to replace bank tellers,
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10:22 - 10:26bar code scanning to cut down on labor in the retail sector.
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10:26 - 10:28Fast forward through the '90s,
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10:28 - 10:29we had the dotcom revolution
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10:29 - 10:32and a temporary rise in productivity growth.
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10:32 - 10:35But I'm now going to give you an experiment.
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10:35 - 10:38You have to choose either option A or option B.
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10:38 - 10:40(Laughter)
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10:40 - 10:44Option A is you get to keep everything invented up till 10 years ago.
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10:44 - 10:47So you get Google, you get Amazon,
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10:47 - 10:50you get Wikipedia, and you get running water and indoor toilets.
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10:50 - 10:52Or you get everything invented to yesterday,
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10:52 - 10:54including Facebook and your iPhone,
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10:54 - 10:56but you have to give up, go out to the outhouse,
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10:56 - 10:59and carry in the water.
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10:59 - 11:02Hurricane Sandy caused a lot of people to lose the 20th century,
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11:02 - 11:04maybe for a couple of days,
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11:04 - 11:06in some cases for more than a week,
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11:06 - 11:09electricity, running water, heating, gasoline for their cars,
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11:09 - 11:12and a charge for their iPhones.
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11:12 - 11:16The problem we face is that all these great inventions,
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11:16 - 11:19we have to match them in the future,
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11:19 - 11:22and my prediction that we're not going to match them
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11:22 - 11:25brings us down from the original two-percent growth
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11:25 - 11:30down to 0.2, the fanciful curve that I drew you at the beginning.
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11:30 - 11:33So here we are back to the horse and buggy.
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11:33 - 11:35I'd like to award an Oscar
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11:35 - 11:39to the inventors of the 20th century,
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11:39 - 11:41the people from Alexander Graham Bell
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11:41 - 11:43to Thomas Edison to the Wright Brothers,
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11:43 - 11:45I'd like to call them all up here,
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11:45 - 11:47and they're going to call back to you.
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11:47 - 11:50Your challenge is, can you match what we achieved?
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11:50 - 11:52Thank you.
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11:52 - 11:57(Applause)
- Title:
- The death of innovation, the end of growth
- Speaker:
- Robert Gordon
- Description:
-
The US economy has been expanding wildly for two centuries. Are we witnessing the end of growth? Economist Robert Gordon lays out 4 reasons US growth may be slowing, detailing factors like epidemic debt and growing inequality, which could move the US into a period of stasis we can't innovate our way out of. Be sure to watch the opposing viewpoint from Erik Brynjolfsson.
- Video Language:
- English
- Team:
- closed TED
- Project:
- TEDTalks
- Duration:
- 12:14
Morton Bast edited English subtitles for The death of innovation, the end of growth | ||
Morton Bast edited English subtitles for The death of innovation, the end of growth | ||
Thu-Huong Ha approved English subtitles for The death of innovation, the end of growth | ||
Thu-Huong Ha edited English subtitles for The death of innovation, the end of growth | ||
Thu-Huong Ha edited English subtitles for The death of innovation, the end of growth | ||
Morton Bast accepted English subtitles for The death of innovation, the end of growth | ||
Morton Bast edited English subtitles for The death of innovation, the end of growth | ||
Joseph Geni added a translation |