Why Technology Matters For Growth

Going from "zero to one" is an imperative

In the book Zero to One, investor and entrepreneur Peter Thiel addresses the distinction between globalization and technology. Globalization constitutes “horizontal progress”, he writes, or “taking things that work somewhere and making them work everywhere”; China is the “paradigmatic example” of growth through globalization.

Technology, on the other hand, enables “vertical progress”, which Thiel argues is harder to imagine because it means “doing something nobody has ever done”. Moreover, while technology has for many come to mean information technology, there’s no reason to restrict its definition in this way, since “any new and better way of doing things” can be called technology.

There has been an explosion of entrepreneurship across the world over the last decade - but most of these ventures are pursuing horizontal progress (going “from one to n”, to use Thiel’s expression) and not vertical progress (“from zero to one”). The well-earned success of several internet and software ventures in India and other countries has been achieved by deploying and scaling a proven business model in the domestic market.

But adopting and adapting technologies and business models from advanced economies has its limitations. Can economic growth be sustained and delivered through the globalization model alone? Large populations in Asia and Africa aspire to join the ranks of the middle and upper class; bringing sustainability to so many people will take innovation across a wider range of industries.

There is an enormous amount of latent consumer demand in India and across the developing world that will be difficult to meet without breakthrough innovation. Energy requirements are very large, and using fossil fuel-based technologies would result in environmental degradation, as China’s experience is proving. In healthcare, there is a need for a more cost-effective drug development model, as well as new government welfare mechanisms to deliver medicines to the bottom of the pyramid without violating the intellectual property rights of drug innovators. In finance, tens of millions of people stand to gain by joining the formal financial system. In manufacturing, greater automation is necessary to enhance safety and raise labour productivity. In services, virtualization brings the possibility of local consumer services trade across borders.

The scale of need across these and other industries is such that the globalization approach alone is not sufficient: new technology is an imperative. It is more difficult for entrepreneurs and investors in advanced economies to deliver such innovations because they are not close to the customer. Increasingly, entrepreneurs in emerging markets will need to take the initiative and attempt to do what nobody has done, because the problems in these markets will be problems that nobody has really solved before. These will be problems that advanced economies don’t really have a stake in solving.

In other words, entrepreneurs will need to think of how to go “from zero to one” in myriad industries. This is the great entrepreneurial opportunity of the 21st century.

(A version of this post was originally published by the author for World Economic Forum’s Agenda blog.)