The Origin of Wealth summary

Like many, you probably consider yourself to be a rational person who makes decisions based on sober, objective analysis.

But are you really? How do you react, for example, when someone pushes you out of anger? Do you rationally consider your emotions and the situation, and try to calm things down? Or do you push right back?

Economies are very much human inventions. So, if we want to to understand the economy, we need to tie it to human history. Just like the evolution of life and humanity, economic development has been a long and slow process. In fact, it’s taken humanity almost 2.5 million years to reach the level of wealth we have today.

It all started with the first stone tools around 2.5 million years ago, then continued with the hunter-gatherer lifestyle developed around 15,000-35,000 years ago. Within the last 250 years, the development of steam machines, electricity and the beginnings of globalization have led to a dramatic increase in complexity and wealth of the global economy.

Why is it that some countries and economies are so much more stable than others? How is it that some thrive in difficult settings while others merely wither away? One way we can answer these questions is by using complexity theories.

Rather than viewing the economy as a rational, predictable system, these theories recognize it as a complex network influenced by a number of factors – some of which even lie outside economic systems themselves. And it is the interaction between these various factors that determines whether the economy will thrive.

How easy is it to tell if someone is rich? Pretty easy, right? Obviously, wealthy people wear designer clothes and drive fancy cars! Yet, although this may be your idea of what wealth looks like, it won’t be the same for everyone.

In fact, wealth is measured differently across cultures. In most Western societies, your wealth is measured by what you can buy based on the digits in your bank account – things like food, a house or even a bright red sports car. If you can't afford any of these things, or if your account balance is in the red, then you’re considered “poor.”

So, how do we increase wealth in our societies? The most effective way is to create products and services that best suit the needs of our society. If such a product is created, the chances are it will make someone wealthy!

Wealth creation follows the three basic rules of evolution: differentiate, select and amplify.

Although some might find it complicated and boring, there’s a good reason that the economy gets so much coverage in the media. This is the direct result of the enormous importance the economy has on wider society, and, as such, it’s worth trying to understand.

For starters, the economy plays an important role in national politics. One of the most important responsibilities of governments is, without doubt, fostering and ensuring economic development and improvement.

The key message in this book:

Traditional approaches to economics are too static, outdated and escapist to truly represent the complexities of economic developments. In order to understand our economy, we must look at it as a complex, adaptive, evolving system that influences society and politics.