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How Entrepreneurs Are Transforming The Global Economy

Philip Auerswald’s new book discusses the power of distributed technologies—like cell phones and the Internet—and the businesspeople behind them to create change.

Imagine sometime in the foreseeable future, a Fortune 500 CEO gets up in front of the graduating class from her alma mater to give the greatest and shortest commencement speech of all time: "Put my company out of business. I dare you."

That world—one in which established companies do not fear the disruption to come, and in fact challenge the next generation to bring it on—is one conjured by Philip Auerswald’s The Coming Prosperity: How Entrepreneurs are Transforming the Global Economy. An economist and professor at George Mason University’s School of Public Policy, Auerswald also co-founded and edits the journal Innovations, which provided much of the inspiration for his book.

I spoke with Auerswald about Philip Auerswaldy shortly before the beginning of his summer semester class, "Entrepreneurship and Globalization," which is also offered online for free (sans official class credit) as Ashoka’s first #AshokaUOnline course. (Disclaimer of sorts: I am participating in the free course. It started already but anyone can audit or follow along at #AshokaUOnline.)

Co.Exist: Your book starts out debunking some of the typically over-simplified "cable news debates" of our time. Why begin by emphasizing a more nuanced view of global issues?

Philip Auerswald: When you look at markets for information, you see a couple of things. First, extreme stories sell better than moderated stories; and second, people tend to be more interested in negative stories than in positive ones. So that means you see a lot of people selling fear. Since the professional "communicators" employed by incumbent political and economic interests are well aware of these linked facts regarding markets for information, they invest in the propagation of stories intended to make people fear change. It gets to a point where people just believe the fear stories about China or immigration or the "demise of America" and don’t think critically about why those stories are out there to begin with—to protect incumbent interests. So that’s why I’ve been saying that my intention with this book—regardless of what one might think given the title The Coming Prosperity—isn’t selling optimism. It’s shorting fear.

You discuss historical examples of innovations that disrupted societies but always ended up improving lives in some way. Was telling those stories part of your strategy to "short fear"?

Definitely. We can see the beneficial impacts of disruption when we see then from a distance. Sort of like looking back on your life when you were a teenager. Makes more sense in retrospect than it did at the time!

I can see that! Can you tell me a little about watches and imperial China?

So clocks and watches were the first distributed technology of coordination that allowed a synchronization of economic activity on a large scale. They opened the door to collaboration in a way that is similar to what Internet and mobile communications are doing today.

What’s interesting is that the first mechanical clocks were developed in China, but they developed differently there than they did in Europe, much later. In China, clocks were massive, complex instruments created under imperial mandate. They provided the emperor with a tool to develop imperial calendars—really more like almanacs—which were a central means of projecting imperial power. The harmony of the emperor with nature was manifest as an ability to predict and coordinate planting and harvesting seasons, among other activities.

In the West, clocks and watches developed very differently. From the beginning, they were municipal and commercial technologies. They were relatively small scale, and widely distributed.

Ironically, though mechanical timekeeping was invented in China, the arrival of western-style clocks there in the 17th century signaled the decline of Imperial China that was to come.

So really, entrepreneurs and innovation can disrupt much more than just economies, they can disrupt politics as well.

Exactly. The mobile phone is the most rapidly spreading technology we’ve ever seen, and consequently the scale and efficiency of change has never been greater than it is today. As new technologies like mobile phones, the Internet, and applications created on those platforms spread, the economic power they bring with them also creates new possibilities for political and social power because of the new interactions those technologies make possible and the new information that gets conveyed along those networks. For centuries those possibilities we limited to a select few countries. Clearly, that’s changing.

That reminds me of the first time I saw [i]Innovations Co-Founder Iqbal Quadir speak. It was a few years ago during Global Entrepreneurship Week, and he told the story of how he came to realize from events in his life that diffusing economic power leads to the diffusion of political and cultural power.[/i]

I hope it’s clear enough in the book how much I owed Quadir in developing this line of thought. When we first met at the Harvard Kennedy School about 10 years ago I had some of these thoughts and intuitions in my head but I was just this guy who grew up in Washington, D.C., and lived in academia. Iqbal had lived this story and rightly deserves a lot of credit for seeing the power of mobile phones way back in the mid 1990s—when only one in a hundred people in the U.S. had mobile phones—and for building the first large-scale mobile telephony company in a developing country. When Iqbal started working on Grameenphone the notion that mobile phones would have any kind of market in a place like Bangladesh was not at all obvious. So what’s the next thing we’re looking at now that just doesn’t look like it will ever do well in a $2 per day economic environment and 15 years from now will be ubiquitous?

Is there such a thing as too much change?

The historical record is that change has, overall, been for the better. Of course people and societies go through tough times—even brutal times that last for decades—but in a longer time frame those episodes have turned out to be transients in a strongly positive trend. Think about China or Germany. Hardly a smooth ride. But the overall trajectory of things is that change has turned out to be positive, and more positive when and where people have allowed change to happen.