Would Bogie Wear Gore-Tex?
The next big thing often consists of lots of little things.
The Wall Street Journal, "Commerce & Culture" , February 12, 2011
The hardest economic question is, What comes next? What, in other words, are the new sources of economic value? How can businesses grow and our standard of living rise?
Sometimes the answer is simply more of the same. Growth comes from rolling out existing goods and services to new markets, until there's a chicken in every pot and a car in every garage. This kind of progress may be hard to achieve, but you at least start with a clear notion of what it would look like.
That's why catch-up economies like China today or South Korea in the past can grow so fast. Their businesses don't have to figure out what to make or sell. They know what's possible by looking abroad, and have a reasonable idea of what consumers, local or international, want to buy. Refrigerators and air conditioning are popular; so are shampoo and disposable diapers.
At the economic frontier, the hardest question gets much harder. You no longer have a clear vision of the future. You know neither what's possible nor what people want. You can only guess. Starbucks or FedEx may sound obvious in retrospect, but they were once crazy ideas.
This challenge makes it harder for advanced economies like the U.S. to grow. It also explains a strange cultural phenomenon: our nostalgia for the future.
A half century ago, "the future" seemed specific and tangible. Progress meant either big increases in what we already had—houses, cars and appliances for everybody—or exciting new ways to provide the same broadly defined goods—jet packs, flying cars and superhighways for transportation, nuclear power for electricity, videophones for communication. Either way, progress was something you could easily visualize. Nowadays those mid-century illustrations representing "the future" generate a mixture of amusement and longing, even in people too young to remember the original context.
We still tend to equate progress with engineering projects providing familiar, easily visualized goods. All those new highways, railroads and skyscrapers in China mimic our past, but we see them as the future. Or witness the State of the Union address, in which the president invoked the space race and interstate highway system—the futurism of the mid-20th century—to promote their contemporary equivalents: clean energy, electric cars and high-speed rail. That's progress you can picture.
But at the economic frontier, the big advances rarely look like that. There are occasional headline grabbers, of course, like the Web browser and all the disruptive enterprises that followed from it. Even these are surprises. The president could extol Google and Facebook as examples of American innovation only because they're already everyday experiences. Nobody saw them coming. The same is true of Starbucks and FedEx, hip-hop and Nike, Wal-Mart and Pixar. They aren't the future we imagined.
More often, the next big thing is actually a lot of little things. Like compound interest, small improvements add up over time. Surgical techniques get better, cars more reliable, ATMs more convenient, upholstery more durable, running shoes more supportive, entertainment options more abundant.
Though it's produced much of the growth in U.S. living standards over the past few decades, this kind of progress is so incremental that industry insiders are often the only ones keeping track of it. Strike up a conversation, however, and you'll soon hear examples. That's what happened when I talked with Bill Inman, the apparel business director for Wolverine World Wide Inc.'s Merrell brand (and, not coincidentally, my brother).
His example was raincoats. A trench coat, like Humphrey Bogart's in "Casablanca," might look good, but it wouldn't keep you dry for long in a storm. A rubber slicker might hold off the rain, but it lacked style and made you sweat. Either way, you wound up wet. Since Gore-Tex was introduced three decades ago, rain gear has gotten ever more waterproof, breathable and affordable.
Gradual improvements in fabrics and construction, he said, mean that an outdoor jacket that would have cost $250 20 years ago runs just $100 today—and works better. Now fabrics once reserved for athletic apparel are making their way into fashionable garments. Unlike Bogie, said Bill, "you can wear something reminiscent of a classic trench that will actually keep you dry in the rain, instead of just kind of keeping you dry." That's progress, frontier-style.