October 9, 2012

The One Chart You Must Understand

1. Post industrial revolution growth rates are an anomaly

2. 1300-1800 (500 years): per capita real GDP doubled; 1929-1957 (28 years): per capita real GDP doubled. In other words, throughout much of human history growth has been very slow.

3. The 250 years of growth post 1750 was highly dependent on 3 base resources/discoveries: coal, oil and the microchip. Out of these base resources/discoveries came a couple base technologies (electricity, steam engine, combustion engine, plastics, telecom, computers, Internet). From these few, but highly impactful technologies came thousands of other developments that were really extensions of each other. So the ‘success’ of the past 250 years is really dependent on getting a couple big things right and then squeezing every drop of productivity by applying the technology across many different platforms.

4. Today, real productivity growth is falling. Today’s inventions are less about productivity and more about entertainment and convenience.

1. We’re super-dependent on very few base resources/discoveries and technologies. Take one away and our standard of living plummets.

2. Without a new base resource/discovery or technology to jump start a new wave of productivity growth, real growth will continue to converge to natural (i.e. pre-1800) levels.