For most of human history, material progress was negligible. Hunter-gatherers roamed,
empires rose and fell, yet the ordinary person’s lot remained a precarious grind. Stagnation reigned for millennia. Then, abruptly, sustained growth emerged. This dramatic shift has long puzzled economists, historians, and armchair theorists alike: how did Homo sapiens finally crack the code to prosperity, and why did it take so long?
Most theories on the origin of growth have traditionally focused on one key factor. A prime example is "Guns, Germs, and Steel," where Jared Diamond argued that geography and environment were decisive in explaining long-term development. His insights into geography's critical role were invaluable, contributing to his book becoming a bestseller. (1) However, geography alone cannot explain the onset and timing of sustained growth's emergence in the late 1800s—the very core of the growth enigma. More recent work has surveyed all known leading theories, making a compelling argument that no single factor can unlock this puzzle. Instead, explanations must encompass multiple factors and their interactions. (2)
Several authors have proposed frameworks combining a handful of factors. Some appear repeatedly in such analyses—knowledge (and science), technological innovation, money, trade, and property rights. Others less frequently—the demographic transition, the corporation, geography, colonization and exploitation, the influence of culture, religion, or even the Black Death. How does one distill the essence of economic takeoff from this bubbling mixture of plausible causes?
To do so, I contend we must also consider what makes us human and sets us apart as a species. As I argued in Part I: What Is It about Sapiens?, what makes us special is our capacity to Learn, Cooperate, and Innovate - and to do so at Scale. These key strengths, when combined, catapulted us from humble villages to bustling cities. Sift through the research on the origins of growth with a focus on unleashing our human potential, and a clearer picture emerges.
The Human Edge: Learn, Cooperate, Innovate—At Scale
What lifts humans above the pack isn’t just our knack for chatter—though that helps—but our ability to build on the past, team up in droves, and conjure up new tricks. When amplified by large-scale networks, these ignited economic growth. Let's examine each of these uniquely human capabilities in turn, starting with our ability to learn and build on accumulated knowledge.
The acquisition and diffusion of knowledge distinguish Homo sapiens from all other species. Unlike other animals, which largely rely on genetic evolution, we possess the remarkable ability to share and build upon the insights of those who came before us. This cumulative knowledge, passed down through stories, texts, and now, the internet, is the bedrock of our progress.
The scientific method institutionalized this process, allowing knowledge to be validated, refined, and advanced. Before the scientific method, brilliant ideas and complete nonsense often enjoyed equal status. Aristotle's genuine insights about logic lived comfortably alongside his conviction that heavy objects fall faster than light ones, and that women have fewer teeth than men. His pronouncements sat unchallenged for centuries, a testament to a tradition of conflating insight and dogma. Empiricism, by contrast, created a self-reinforcing cycle of discovery, application, and improvement—fueling everything from Newtonian physics to the digital revolution. As important, we began to apply empirical thinking to every aspect of human activity, from farming to manufacturing.
The diffusion of knowledge mattered as much as gathering it. Rare manuscripts, Gutenberg’s press, pamphlets and pixels each step enriched the collective mind, turning isolated genius into shared fuel. Without it, even the brightest ideas would’ve stayed locked in ivory towers—or in dusty monasteries.
Knowledge is only potential. Cooperation to get things done makes it real. Cooperation isn’t new—empires and religions rallied millions long before profits entered the picture. But for economic growth, the corporation changed the game. The Dutch East India Company (VOC), formed in 1602, flaws and all, proved the concept —spanning oceans, shifting spices, and occasionally dabbling in pirate-worthy antics. Progress isn’t always polite.
It solved a fundamental puzzle: how to mobilize resources for ventures too big for individuals yet too specialized for states. With perpetual life, tradable shares, and limited liability, it gave rise to a commercial colossus - minting coins, waging wars, and cutting treaties from Cape Town to Nagasaki.
From there, the corporate experiment took off. What often began as state-sponsored
monopolies sprawled into all fields, reconfiguring science, warfare, the arts, and everyday life. The British East India Company governed millions with fewer staff than a modern supermarket. The Hudson's Bay Company shaped Canada, while the Mississippi Company's spectacular crash demonstrated that innovation carries both opportunity and risk. Corporations drove economic progress and catalyzed societal evolution. They financed industrialization, laid continental railways, and developed life-extending medicines—a technology built not of steel or silicon, but of legal concepts and imagined realities.
Today, modern corporations from Apple to Alibaba are the beating heart of economic life, turning individual grit into collective gold. It's teamwork, but with stock options. As J. Micklethwait and A. Woodbridge wryly note, "any young Napoleon who yearns for global conquest would be better off joining a company than running for office or joining the army.(3)
In spite of the above, the importance of the corporation has often been overlooked by historians, who traditionally focused on states and wars. Among the major works examining the growth enigma listed in the addendum, only one—DeLong's "Slouching Towards Utopia"—identifies the modern corporation as a key driver, whereas knowledge and innovation appear as recurring themes across the board. Interestingly, there are numerous books about the history and importance of the corporation, though these works seem confined to a different wing of the academic library—one frequented by aspiring executives rather than aspiring professors, with surprisingly little foot traffic between the two. Yet the humble joint-stock company has arguably done more to reshape people's daily lives than many of history's celebrated political revolutions, transforming how we work, live, and organize on unprecedented scales.
Innovation is the lifeblood of economic growth. Land, labor, and capital are important, but they are subject to the law of diminishing returns. We can only squeeze so much wheat from a field, or so many widgets from a factory. Innovation, on the other hand, is limitless. Ideas are infinitely replicable and combinable. They are the magic ingredient that allows us to transcend the limitations of the physical world.
Innovation comes in two flavors: incremental and disruptive. Incremental innovation involves making existing products and processes better, faster, cheaper. It’s the steady, methodical improvement that drives efficiency and productivity. Disruptive innovation, on the other hand, is the revolutionary kind. It’s the invention of the automobile, the personal computer, the internet – breakthroughs that transform entire industries and reshape the way we live. While incremental innovation is essential for maintaining momentum, disruptive innovation is what allows us to leapfrog to new levels of prosperity. Without it, we’d still be haggling over the last scraps of coal instead of debating AI ethics.
It all sounds great, except for one issue: Innovation is inherently fragile, facing both inertia and opposition from entrenched systems and vested interests—guilds, elites, and ironically corporations—whose power is threatened. History is littered with stifled ideas. The printing press, steam engine, and personal computer, now symbols of progress, once faced fierce opposition from those who stood to lose influence, revenue, or status.
The capacity for reinvention requires more than chance; it demands a fertile and supportive environment: a belief in progress, fueling curiosity and risk-taking; intellectual openness, fostering the collision of ideas; tolerance for unconventional thinkers, even those deemed eccentric; and diverse perspectives, widening the scope of discovery. These interconnected elements are essential for innovation. When they erode, even the most inventive cultures can stall. Progress is not inevitable; it is cultivated. Societies must nurture this environment, lest it become a forgotten relic.
Learning, cooperation, and innovation plant the seeds, but scale - vast, sprawling, world-shrinking scale - makes them bloom. A lone inventor might dream up a steam engine, but without vast networks to build, fund, and spread it, it’s just a sketch on a napkin. Three unsung levers make scale happen: Money, Trade, and the Rule of Law.
Money: The Best Story Ever Told
Money is perhaps humanity’s most ingenious invention. Money is a tale we all buy into, a shared myth that allows us to trust and transact with people we will never meet. It lubricates the wheels of commerce, facilitating the exchange of goods and services across vast distances and between countless individuals. Money allows us to quantify value, to compare apples and oranges, and to allocate resources efficiently.
Crucially, money funds innovation—venture capitalists, stock markets, and banking systems allocate resources to risk-takers, making possible everything from steam engines to space travel. Gold-backed, fiat, digital—whatever its form, money remains the lubricant of progress. Bankers may not be as glamorous as tech entrepreneurs, but without their storytelling, our economic rocket would never leave the launchpad. It’s the venture capitalists of today, tossing millions at scrappy startups, who keep the wheel spinning—sometimes hitting gold, sometimes just buying expensive lessons.
Trade: The Expanding Pie
Trade is as old as mankind - wherever we look in history, people exchange know-how, favors, and goods. Trade is a form of cooperation that extends beyond immediate groups, fostering survival and prosperity.
At the core trade is a non-zero-sum-game - it makes for a bigger pie overall. Trade is like economic alchemy – it can create value out of thin air by moving things from where they're less valued to where they're more valued. By specializing in what we do best and exchanging it with others, we can prosper more from what we produce. Trade provides expanded markets, increases competition, and fuels innovation. The Silk Road didn’t just move silk; it moved ideas, spurring innovation from Baghdad to Beijing. Fast-forward to container ships crisscrossing the globe, linking Shenzhen to San Francisco in a web of overall mutual gain - expanding market, stirring competition, and breeding ingenuity.
That's the theory, anyway. It is an economically sound one, with one often overlooked detail: while on average everyone wins from trade, some groups find themselves on the losing end when their businesses are adversely impacted by cheaper imports. In theory, since there is more to go around for everyone, societies can tax the winners to help compensate and retrain the losers. But this leaves the losers at the whim of the political process, an uncomfortable position to say the least.
Managing trade is a tightrope - the benefits are widespread and hard to quantify, whereas the pain is specific and very visible. Tariffs hurt the overall economy, but the push to use them to protect certain businesses and employees is hard to resist. One tariff too many and the edifice crumbles; but when it works, it's gold. The Dutch figured that out early, turning a soggy corner of Europe into a trading powerhouse while others were still counting sheep. A world without trade is a world condemned to stagnation, like an isolated medieval village stuck surviving on its own potatoes.
The Rule of Law: Setting the Rules of the Game
Innovation is exhilarating, but chaos is not. For economies to thrive, rules must be established—property rights must be protected, contracts enforced, and monopolies tamed. Without that, innovation becomes too risky, cooperation becomes too uncertain, and scale becomes impossible.
The Rule of Law sets the rules of the game, ensuring that everyone plays fair and that property rights are protected. It is particularly crucial for disruptive innovation. Entrepreneurs need the confidence that their ideas and investments will be protected, that they will be able to reap the rewards of their efforts.
Governments must strike a delicate balance, supporting existing businesses while also allowing new disruptors to challenge the status quo and create the industries of the future. This is another tightrope walk, requiring a delicate touch and a keen understanding of the dynamics of innovation (a lot to ask, I know). This delicate dance is the difference between an economic system that encourages dynamism and one that calcifies into crony capitalism.
Britain’s industrial leap owed much to its legal scaffolding—patents spurred invention, courts settled disputes, and the government (mostly) resisted the urge to meddle too much. Contrast that with empires where whims trumped rules, and stagnation reigned. Silicon Valley’s rise owes a debt here too—clear IP laws and contract enforcement let tech companies build empires without fear of sudden confiscation. It’s not sexy but try innovating when the sheriff’s mood swings decide your fate. (4)
The Alchemy of Growth: Synergy and Timing
These six forces— knowledge, corporations, innovation, money, trade, and the rule of law—aren’t new concepts. Historians and economists have name-checked them before, be it in isolation or in sprawling laundry lists. In fact, five of the factors are the ones most often cited in key works on the growth enigma. (5) The corporation, curiously, gets less credit than it deserves.
My contention is that all six forces are required: Learning and scientific inquiry fuel innovation, cooperation through corporations turns ideas into reality, trade expands markets, money bankrolls ambition, and law keeps the machine from seizing up. If any single force is missing or weakened, the entire growth engine sputters. It took crucial changes in the late 19th century to finally strengthen these growth forces and amplify their interplay—resulting in sustained economic growth for the first time in history. (6)
Japan’s remarkable Meiji era is a case in point. Western science poured in (learning), new corporations sprang up (cooperation), railroads and telegraphs rewrote the economy (innovation), foreign trade boomed (trade), a modern banking system took root (money), and a shiny new legal code set the stage (rule of law). In mere decades, a feudal backwater became an industrial power.
Why did it take so long to unlock sustainable growth? For millennia, these ingredients simmered in isolation. Ancient Rome had trade and law but lacked science. Medieval China innovated brilliantly but hoarded knowledge rather than diffusing it. As we shall see, it was only in the late 19th century - when significant changes took place, and all six aligned and reinforced each other —that the growth engine roared to life. Timing, as they say, is everything, even if we were fashionably late by a few thousand years.
The Enigma Unraveled?
So, have we cracked the growth enigma? Not entirely—it’s a puzzle with edges still fuzzy. Culture, geography, and sheer luck surely played their parts, and the cynics will note that this tidy sextet glosses over some mightily messy bits: slavery, exploitation, environmental plunder. All true, as unfortunately history has its share of grievous injustices and unintended consequences. But as a framework, these six factors offer a lens to see why sapiens, after millennia of dawdling, finally hit the growth accelerator.
The implications stretch beyond the past. If growth hinges on this delicate mix, what happens when one part weakens or stumbles? Artificial intelligence might turbocharge learning and innovation, but can cooperation and law keep pace? Trade is faltering under populist winds—will money and markets adapt? Picture China’s new EV carmakers: innovative products at attractive prices, but tariffs and state subsidies could clog the works. As critically, how do we manage the transition to an economy that is sustainable environmentally?
Having spent 200,000 years figuring out how to create sustained prosperity, it would be a shame to stall it just as we've begun to understand how it worked until now. The growth enigma isn’t just how we got here—it’s whether we’ll adapt and keep the momentum going or, in a twist of sapiens irony, let the spark fizzle out.
Addendum to the Growth Enigma: notes on key books on the subject
Next Article: Coming Soon
(1) Diamond, Jared. Guns, Germs, and Steel: The Fates of Human Societies. 2005.
(2) Koyama, Mark and Rubin, Jared. How the World Became Rich: The Historical Origins of Economic Growth. 2022.
(3) Micklethwait, John; Wooldridge, Adrian. The Company: A Short History of a Revolutionary Idea.
(4) A valid question is whether the US Government has let large tech groups accumulate too much market power, thereby harming disruptive newcomers.
(5) See Addendum to The Growth Enigma for a table summarizing key factors
(6) As we will see in the next chapters, he changes that occurred around 1870 are a very important piece of the puzzle in explaining why we finally figured out how to sustain growth.