Building Institutions That Go From 0 to 1

Going from zero to one is creating something that is fundamentally new. While creating another software-as-a-service company could be extremely lucrative, it is something fundamentally different from going zero to one, as it is more like going from 28,332 to 28,333. Business ideas that already exist can be optimized and maximized by clever people but are something fundamentally different from going zero to one. Apple created an entirely new market. Microsoft created a fundamentally new product that shaped the formation of the digital world. These companies and countless like them are the most significant engines of economic progress and human flourishing. While optimizers of technologies and businesses that already exist can create some growth, these fundamental innovations allow for the sort of dramatic growth experienced since the industrial revolution. It is in the best interest of everyone to ask what sort of institutions are most conducive to zero to one processes. All parts of society can be made better through these breakthroughs. Civilizations that have more of them will be able to better preserve their way of life and become more powerful than those who do not.

Zero to one processes can occur most easily when societal conformity is deprioritized. Countries like China, with a high degree of cultural pressure to conform, have dramatically less zero to one transformations than America does— even given their far more abundant natural resources, and larger base for research capacity. They excel at optimizing American ideas, yet they are rarely ever able to do something genuinely novel. Some American communities push conformity above all else and as a result, must content themselves by tinkering with technologies that have already been created. The Midwest prizes normalcy above all else, and as a result, they have a meager share of significant startups. California is known for its consistent vast variety in ideologies and large cultural shifts, and while this has been damaging in many ways, the state has produced a huge proportion of the world’s most significant new startups. The promotion of zero to one creation requires that institutions look at their laws and ask whether they are rewarding normalcy at the expense of creation. Homogenized education and restricted zoning are two examples of how regulations can enforce the prioritization of ideological conformity. While conformity is not all bad, legislators must be on high alert for anything that increases the chance of suicidal conformity pressure without a large benefit.

Zero to one businesses inherently require some level of faith. They are definitionally not comparable to other businesses, and are even more difficult to gauge financially. A country’s financial system must avoid institutional ossification for zero to one to be possible. Every line of financial legislation is created to address the problems of a past world. No matter how frequently the legislation is updated, it cannot account for the financial structures and risks of entirely new markets. The more financial regulation that exists, the greater the probability that some element of a zero to one business will be damaged. While the analysis of safety and freedom was done for the important businesses that already existed, any old financial regulation could have large effects on innovative businesses freedom without the gains to safety that they were originally written for when considering other businesses. In the same way, new markets may have an unfair advantage if a regulation is poorly structured. The financial system must be flexible, lightly regulated, and free to be robust to the countless potentialities that could arise in breakthrough businesses, for the good of the businesses and of the people.

A region should be global in trade yet local in regulation to create the best situations for anomalous companies.  If a local area blocks themselves off from the outside world, they risk not experiencing the benefits of other countries’ zero to one innovations and the following iterations of optimization. However, when international governing bodies gain too much power over how business is done in a locally governed area, there is a great risk of economic stagnation. International governing bodies must make rules that protect against such a wide range of localized risks that they cannot fully understand how they might be limiting the next world changing company. The instinct towards safety and extensive regulation in all governments only becomes worse when the government is further from the people and understands a local culture and government at arm’s length. States must be extremely independent yet in constant contact with the rest of the world to avoid the slowing of their most important contributions to the world’s flourishing.