Audacious, mesmerizing, and controversial.
The thesis of The Rational Optimist book doesn’t revolve around a single subject but a collective idea. To present his argument, Matt Ridley draws on a broad range of sources—economics, ancient history, philosophy, evolutionary biology, and more.
Collective brain -> exchange -> specialization
Ridley begins by laying out the foundation for his thesis: the collective brain, exchange, and specialization.
His question mirrors what intellectuals have been asking throughout history—why us? What made homo sapiens so dominant on this planet? Culture alone doesn’t explain it, he argues. Cultural economics holds the key.
Why us and not killer whales? To say that people have cultural evolution is neither very original nor very helpful. Imitation and learning are not themselves enough, however richly and ingeniously they are practised, to explain why human beings began changing in this unique way. Something else is necessary; something that human beings have and killer whales do not. The answer, I believe, is that at some point in human history, ideas began to meet and mate, to have sex with each other (page 6).
Cultural evolution can be seen through the lens of exchange, just as biological evolution can be seen through the lens of sex. Through exchange, humans discovered the division of labor—the specialization of efforts and talents for mutual benefit.
We all get richer when more people join the global division of labor. They specialize, they exchange, and everyone benefits. That’s exactly what we’ve been doing for the past half millennium, while other species could only survive on their own.
Still, not every argument about getting richer over time holds up under scrutiny.
According to Ridley:
Today, of Americans officially designated as ‘poor’, 99 per cent have electricity, running water, flush toilets, and a refrigerator; 95 per cent have a television, 88 per cent a telephone, 71 per cent a car and 70 per cent air conditioning (Page 29).
At the risk of sounding too conservative, facts like these make you wonder: What does it really mean to have all these conveniences? They make life easier, sure—but do they make life better?
A typical person could fix their own car in the 60s if it broke down in the garage. But cars today are far more complex, packed with electronics. They make life easier than ever, but you can’t fix them yourself unless you specialize in that field.
True, we can exchange time for money. But we have to earn that money somewhere too, so it goes both ways.
Here’s one way to think about poverty and wealth. You’re poor if you can’t sell your time for enough money to buy the services you need. You’re rich if you can afford not only what you need but what you want.
It all comes down to one question: are people getting richer over time? The answer is yes. The average person today can buy things that used to be available only to the rich.
However…
Is it possible that not just the recent credit boom, but the entire postwar rise in living standards was a Ponzi scheme, made possible by the gradual expansion of credit? It is also true on both sides of the Atlantic that your state pension will be funded by your children’s taxes, not by your payroll contributions as so many think.(Page 29)
By laying out the evidence, Ridley gets you to see things more optimistically. The glass is at least half full. And who knows what technology will bring tomorrow?
With technology growing exponentially, optimism makes more sense than pessimism.
When you meet one of those people who go so far as to say they would rather have lived in some supposedly more delightful past age, just remind them of the toilet facilities of the Pleistocene, the transport options of Roman emperors or the lice of Versailles.(page 45)
Trade is the cornerstone of cultural evolution
According to Ridley, trade is the backbone of human evolution—not language, as others believe. He asks: if language is the key to cultural evolution, then why did Neanderthal toolkits show so little cultural change?
At some point, after millions of years of reciprocal back-scratching of gradually increasing intensity, one species, and one alone, stumbled upon an entirely different trick. Adam gave Oz an object in exchange for a different object (page 59).
According to Yuval Noah Harari, the author of Sapiens, language made all the difference. Ridley rejects that theory.
But Harari’s views aren’t the polar opposite of Ridley’s, as you can see in his book…
“You could never convince a monkey to give you a banana by promising him limitless bananas after death in monkey heaven.”
-Sapiens(Yuval Noah Harari)
Ridley argues that human evolution has more to do with economics than culture. But this raises a question: how was exchange possible without proper communication?
Maybe Harari and Ridley are both right. Human beings became superior to other species because of their ability to communicate and their economic prowess.
But this is a chicken-or-egg situation. You can’t say which skill came first. Both skills likely built on each other in an upward spiral.
Trade brings people together
As Ridley lays out the groundwork, he moves forward with the premise that trade has been a really important factor for our prosperity. He introduces optimism as part of the argument, and he does it rationally.
But the even more surprising lesson is that the more people are immersed in the collective brain of the modern commercial world, the more generous they are.(page 86)
The argument here is simple: to sell anything, you first need to win the customer’s trust. Trades won’t happen if organizations can’t build trust with their customers.
How do you build trust? You deliver good products consistently over time.
When people trust each other, mutual service can evolve with low friction. When they don’t, prosperity erodes.
This is why you see rapid increases in quality of life in areas where free trade is possible. Organizations need customer trust to make a profit, so they work to earn it.
‘This isn’t about auctions,’ said Meg Whitman, the chief executive of eBay, ‘in fact it’s not about economic warfare. It’s the opposite.’ It was survival of the nicest. (page 114)
Organizations constantly battle over who’s the nicest. Conservatives and liberals see this struggle very differently.
Conservatives embrace economic change but hate its social consequences. Liberals love the social consequences but hate the economic source.
Both viewpoints are essential to a nation’s growth.
Agribusiness fuels human development
Ridley argues that people invented agriculture to keep trade going—not the other way around, as many intellectuals believe. After experiencing the benefits of trade, they needed a way to sustain it.
Eventually, farming replaced gathering. Herding replaced hunting.
Trade comes first, not last. Farming works precisely because it is embedded in trading networks (page 128)
Agriculture ignited human development—both culturally and technologically. It forced the world to improve healthcare. The quest for fossil fuels brought about the industrial age.
Free markets allow people to travel and exchange ideas, which stimulates economic growth
People gathered in cities, helped by agricultural advancements made possible through trade. Trade gained even more traction when people started exchanging ideas—a process the free market made possible.
In these Bronze Age empires, commerce was the cause, not the symptom of prosperity. None the less, a free trade area lends itself easily to imperial dominance (page 166)
Economic prosperity grounded in free trade has been well known among economists since Adam Smith published The Wealth of Nations in 1776. Ridley is trying to reinforce this idea with historical examples.
When European countries opened their borders for free trade, Asian countries were severely monopolized. The result? Economic and cultural decline in Asia while Europe quickly gained traction.
The message from history is clear: free trade leads to mutual prosperity. Protectionism leads to poverty.
This idea aligns with the constrained vision. This is one of the concepts Thomas Sowell introduced in his book, A Conflict of Visions.
Economic freedom stabilizes the population
But what if the difficulty of exchanging leads to a decline in specialization? The civilization becomes self-sufficient, and with a growing population, that leads to a depressing era. This is called the Malthusian trap.
So the question arises: is self-sufficiency declining in modern times? We learned our lesson from self-sufficiency, especially in the early 18th century when Asia failed. Even in the 19th century, Germany industrialized rapidly and saw a huge increase in birth rate. But a flood of emigrants to the United States prevented the division of land among multiple heirs—and the return to poverty and self-sufficiency that had hit Japan two centuries earlier.
The statistics suggest a satisfying conclusion. If we save children from dying, people have smaller families. The more interdependent and well-off we all become, the more the population will stabilize within the planet’s resources.
We’re well prepared to escape the Malthusian trap in the 21st century.
There is no need to impose coercive population control measures; economic freedom actually generates a benign invisible hand of population control (page 211).
People are getting freed from physical labour
Another reason to be optimistic is that the technological advances are making it possible to reduce the physical labor needed to earn a decent living.
Even more optimistically, we might not run out of power sources in the future—despite what most media claims.
Coal not only did not run out, no matter how much was used: it actually became cheaper and more abundant as time went by, in marked contrast to charcoal, which always grew more expensive once its use expanded beyond a certain point, for the simple reason that people had to go further in search of timber (page 216).
Civilization grows exponentially through the exchange of ideas that spark innovation
Why can we believe we won’t run out of natural resources? Because of one particular idea—that is, innovation itself.
The way to keep your customers, if you are Michael Dell, Steve Jobs or Bill Gates, is to keep making your own products obsolete (page 264)
In the modern world, prosperity is driven by accelerating knowledge generation. Take bicycles, for instance. Having one bicycle is very useful. Having two or three isn’t much more advantageous. Diminishing returns.
But the concept of a bicycle? That remains valuable. You can explain how to make or ride a bicycle a thousand times, and the idea never becomes stale or useless.
Turning points are unpredictable, because innovation is unpredictable
The book beautifully conveys this idea: even though we’re consuming natural resources at an increasing rate, the efficiency of that consumption is also increasing exponentially.
This has been proven both technologically and economically. It’s obvious to anyone paying attention.
Yet the modern world is driven by pessimism on issues like this. People collectively wish to deny that life is improving. For some reason, this mental friction is what gets them going.
Government politics is a major contributing factor.
Disregard for the preferences and interests of individuals alive today in order to pursue some distant social goal that their rulers have claimed is their duty to promote has been a common cause of misery for people throughout the ages (page 288).
No journalist ever got the front page by telling his editor that he wanted to write a story about how disaster was now less likely. Good news is no news, so the media megaphone is at the disposal of any politician, journalist or activist who can plausibly warn of a coming disaster (page 295).
Conclusions
One of the most compelling qualities of this book is that Ridley isn’t trying to convince you that today is some kind of utopia.
It’s true—there’s no silver bullet in his premise. Logically, there can’t be one.
But the book helps you change your perspective. You start seeing the glass half full, not half empty.
So the human race will continue to expand and enrich its culture, despite setbacks and despite individual people having much the same evolved, unchanging nature. The twenty-first century will be a magnificent time to be alive (page 359)