The Most Powerful Idea in the World: The Story of Steam, Industry and Invention
by William Rosen (University of Chicago Press 2012), 376 pages.
This is the story of an important microcosm of the Industrial Revolution: the development of the railroad. Although the story is one of personalities — and the book is engaging and a good read as a result — an important theme runs through the book. Building a railroad is not just a matter of some genius saying, “Let’s take this steam engine of James Watt and stick it on something with wheels.” A railroad has a lot of ingredients — none of which existed in the 18th century. First, you have to have the right kind of steam engine — the early steam engines were low-pressure — driven by a vacuum that lifts the piston — and as a result generate far too little power relative to the weight of the machine to be mobile. What was needed was a high-pressure engine, with the pistons driven directly by the steam. In order to build such an engine proper materials are needed — strong-enough and light-enough metal — and precision engineering — tolerances have to be fine enough to prevent catastrophic leaks (something that was not the case with the U.S. space shuttle). Hence developments in metallurgy and manufacturing are as important to building a steam train as the idea of a steam engine — and of course a railroad needs the right kind of tracks to run on as well. So the story of this microcosm of the Industrial Revolution is not a story of isolated geniuses and eureka moments, but rather one of the effort of a great many people — some famous, some not, some working in collaboration and some working independently.
So far so good — it is an interesting and important tale and well told: we learn about Torricelli, Boyle, Hooke, Papin, Savery, Newcomen, Calley, Coke, Thompson, Watt, Darby, Huntsman, Cort, Wilkinson, Bramah, Kay, Trevithick, Stephenson, and others — some were gentlemen, some scoundrels, but all contributed in important ways to the development of the railroad. There is, however, a deeper theme of the book and that is the question of what made Britain special — why did the Industrial Revolution happen there at that time and not somewhere else at some other time? Here the answer given in the book is roughly, “Britain had patents.” Unfortunately the evidence of the book contradicts that idea, and indeed suggests rather different ideas.
Limiting competition
The book is honest in its history. It does not pretend that patents played a role when they did not, nor does it overlook the fact that patents often played a negative role. So the story of Thomas Savery — a man who developed at government expense a useless engine and then sued and hindered Newcomen and Calley, who built a quite different and useful engine — is told and told well. So is the fact that James Watt’s separate condenser was a technological dead end and that he used his patent to prevent the development of steam engines generally and high-pressure engines in particular. We have the story of the steel-making innovations by Benjamin Huntsman — who did not patent his techniques. There is the story of Henry Cort — “the father of the iron trade,” who financed his work by embezzling funds from the Royal Navy. There is the story of Matthew Murray — who was sued by Boulton and Watt over a technicality in one of his patents and after losing soured on the patent system and rarely filed patents subsequently. And there is the story of Richard Arkwright, who patented the spinning machine — a device developed for him by John Key, who stole the design from Thomas Highs. All in all it is hard to find any evidence of the efficacy of patents in promoting invention in the book.
What then is going on? Rosen’s perspective is that innovation was hindered prior to the Industrial Revolution: “Throughout most of human history, successful inventors, unless wealthy enough to retain their amateur status, have depended on patronage.” This he illustrates with the story of the Greek Heron, who invented the first steam engine, and Torricelli, who discovered the vacuum in Florence in 1644. About Torricelli he writes, “At the behest of one of his patrons, the Grand Duke of Tuscany, whose engineers were unable to build a sufficiently powerful pump, Torricelli designed a series of apparatuses….”
Let’s step back and take a look at those assertions. Heron’s engine, while driven by steam, was totally useless — and even if it had been useful, was a solution to a problem that did not exist at that time — water in mines was not a big problem in ancient Greece. We can say that Torricelli depended on patronage if we like — but how is the Grand Duke of Tuscany’s employing him to do research into a practical commercial problem any different from, say, IBM’s hiring a computer engineer to write a computer program, and what does that have to do with patents?
Finally, Rosen points to Edward Coke and the famous Statute of Monopolies, which established the patent system in Britain, to argue that it triggered the Industrial Revolution. Except that — as Rosen says in his clear and straightforward prose — the Statute of Monopolies did no such thing. Patents existed before the Statute of Monopolies — for inventions — and practically everything else. What the Statute of Monopolies did was to restrict patents only to inventions. Hence — insofar as the Statute was of key importance in the Industrial Revolution — it was the elimination of noninventive monopolies that did the trick, not the introduction of inventive monopolies, since they already existed.
From an economic perspective, the elimination of legal monopolies probably did play an important role in the Industrial Revolution. By limiting the ability of competitors to interfere with innovators (except to the limited extent allowed by patents over innovations) it became possible to build a business around innovation. And make no mistake — a lot of the important figures in the book made a lot of money — and the fact that they were able to do so played an important role in the Industrial Revolution. But all those who became wealthy — including Watt and Arkwright — did so by being first to the post and building a business around their innovations. They perhaps picked up a few extra pounds because of their patents, and no doubt prolonged the amount of time over which they were able to earn their riches — but they would have become wealthy with or without patents (and of course some of the figures in the book did exactly that). Rather, these patent-protectors each seems more like an old-time Steve Jobs — suing rivals not because it made commercial sense, but out of a misplaced sense of self-importance.
Indeed — if we were to tell the story of the Second Industrial Revolution — the revolution that took place a hundred years later in Germany in the chemical industry — the revolution of systematically applying scientific principles to practical commercial problems — we would find that that revolution took place with a vastly weaker patent system than the British one — and indeed, that innovation fled from Britain to Germany to escape the heavy hand of patent holders. The way that the world really works is that the scientists earn a living through the transmission of knowledge (mostly through teaching), inventors who have simple ideas that revolutionize the world do not exist, and engineers who build complicated and useful things either rent their skills or become entrepreneurs and build big businesses. None of that requires or benefits from patents.
The role of freedom
What does emerge from reading the book is the idea that profiting from the commercialization of ideas, along with the ability to raise funds, played a key role in the Industrial Revolution. The perhaps more surprising picture that emerges is that one great advantage that Britain had — for example over France — was not the patent system, but rather religious tolerance and open borders. As you read through the stories of the many important figures in the book, you will discover that a surprisingly large number of them were religious dissenters of some variety. Those who lived in France — such as Denis Papin — fled to Britain because of religious persecution — while those who lived in Britain — such as Thomas Newcomen (whose work was financed by a religious bank) or John Wilkinson — had no reason to flee and remained in Britain.
It seems that the same ingredients remain important for innovation today. If we look at the Forbes 2013 list of the 31 billionaires under the age of 40, we find that 14 of them inherited their money — one American and nine from Germany, Switzerland, and France. Two Americans from upper-class families made a fortune through investment activities. The remaining 15 all made their money as entrepreneurs and innovators. Ten of those 15 are Americans — and two of those Americans were born in foreign countries. All of them made their money by building new products and organizations against fierce competition — and there is no evidence that patents played a role in their success. The story of one slightly older — 43-year-old — entrepreneur is especially instructive. Elon Musk emigrated to the United States from South Africa at the age of 21. He has achieved wealth and commercial success in two industries — neither related to the Internet — the automobile industry, where he competes with the huge well-established automobile companies, and the rocket-ship industry where he competes with governments. How important are patents to his success? In June 2014 Musk announced that his automobile company “will not initiate patent lawsuits against anyone who, in good faith, wants to use our technology.” His rationale is instructive:
The market is enormous. Our true competition is not the small trickle of non-Tesla electric cars being produced, but rather the enormous flood of gasoline cars pouring out of the world’s factories every day. We believe that Tesla, other companies making electric cars, and the world would all benefit from a common, rapidly evolving technology platform.
It was as true during the First Industrial Revolution as it is today that using patents to fight over share in a nonexistent market is self-defeating. The First Industrial Revolution steamed into history only when the Watt patents expired and entrepreneurs stopped fighting with each other and started to exponentially expand their markets by fighting against the old technology.