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Dialogue: 0,0:00:00.52,0:00:03.52,Default,,0000,0000,0000,,♪ [music] ♪
Dialogue: 0,0:00:14.00,0:00:17.85,Default,,0000,0000,0000,,- [Alex] In our previous videos, we've\Ncovered how capital accumulation can spur
Dialogue: 0,0:00:17.85,0:00:22.39,Default,,0000,0000,0000,,catch-up growth, but capital accumulation\Nbecomes less potent as countries grow
Dialogue: 0,0:00:22.39,0:00:27.43,Default,,0000,0000,0000,,wealthier. Countries on the cutting edge\Ngrow by developing more and better ideas,
Dialogue: 0,0:00:27.43,0:00:33.64,Default,,0000,0000,0000,,but how? How do we get more and better\Nideas? Individually, a good idea - it might
Dialogue: 0,0:00:33.64,0:00:38.12,Default,,0000,0000,0000,,seem sort of random. Maybe it pops into\Nyour head while you're in the shower or
Dialogue: 0,0:00:38.12,0:00:43.96,Default,,0000,0000,0000,,just before you go to sleep at night. But\Nwhen we step back and look at the creation
Dialogue: 0,0:00:43.96,0:00:49.38,Default,,0000,0000,0000,,of new ideas at a macro level, it's\Ndefinitely not random. There are key
Dialogue: 0,0:00:49.38,0:00:55.18,Default,,0000,0000,0000,,ingredients that spur more ideas. Ideas\Ndon't fall from the sky like manna from
Dialogue: 0,0:00:55.18,0:01:02.07,Default,,0000,0000,0000,,heaven. They grow in the soil of good\Ninstitutions. Let me give you a story to
Dialogue: 0,0:01:02.07,0:01:06.25,Default,,0000,0000,0000,,help illustrate this point. You might\Nnever have heard of the flying shuttle,
Dialogue: 0,0:01:06.25,0:01:11.26,Default,,0000,0000,0000,,but it was one of the most important\Ninventions in the industrial revolution.
Dialogue: 0,0:01:11.26,0:01:15.32,Default,,0000,0000,0000,,The flying shuttle improved looms,\Nmaking it easier to make fabric
Dialogue: 0,0:01:15.32,0:01:19.91,Default,,0000,0000,0000,,quickly and cheaply, and that made it\Npossible for people around the world to
Dialogue: 0,0:01:19.91,0:01:26.31,Default,,0000,0000,0000,,have new clean clothes. For the very first\Ntime, fashion became something that wasn't
Dialogue: 0,0:01:26.31,0:01:33.43,Default,,0000,0000,0000,,just for the very, very rich. The flying\Nshuttle was invented by John Kay. And what
Dialogue: 0,0:01:33.43,0:01:38.00,Default,,0000,0000,0000,,did Kay get for his efforts? Weavers who\Nthought that Kay's invention would put
Dialogue: 0,0:01:38.00,0:01:43.55,Default,,0000,0000,0000,,them out of work, they smashed the new\Nlooms, and they burned Kay's house to the
Dialogue: 0,0:01:43.55,0:01:49.18,Default,,0000,0000,0000,,ground. Despite creating one of the most\Nimportant inventions to launch the
Dialogue: 0,0:01:49.18,0:01:55.06,Default,,0000,0000,0000,,Industrial Revolution and improve the\Nworld, Kay, in fear for his life, fled to
Dialogue: 0,0:01:55.06,0:02:00.11,Default,,0000,0000,0000,,France, where he ultimately died a poor\Nman. I don't know about you, but if I saw
Dialogue: 0,0:02:00.11,0:02:05.57,Default,,0000,0000,0000,,what happened to John Kay, I might not be\Ntoo eager to pursue my invention. Let's
Dialogue: 0,0:02:05.57,0:02:11.05,Default,,0000,0000,0000,,contrast Kay’s story with a great innovator\Nfrom recent times, Steve Jobs. For his
Dialogue: 0,0:02:11.05,0:02:16.88,Default,,0000,0000,0000,,Innovations, not only did he earn lots of\Nmoney, but also cultural awards. Jobs
Dialogue: 0,0:02:16.88,0:02:23.03,Default,,0000,0000,0000,,became an icon that people want to\Nemulate. This goes back to institutions
Dialogue: 0,0:02:23.03,0:02:27.87,Default,,0000,0000,0000,,and incentives. The institutions today in\Nthe United States have enabled an amazing
Dialogue: 0,0:02:27.87,0:02:34.23,Default,,0000,0000,0000,,environment for entrepreneurs to thrive\Nand create new ideas. If you have a great
Dialogue: 0,0:02:34.23,0:02:38.77,Default,,0000,0000,0000,,idea in the United States, in America,\NAmerican institutions create good
Dialogue: 0,0:02:38.77,0:02:43.77,Default,,0000,0000,0000,,incentives to pursue that idea. You'll\Nfind incubators and venture capitalists
Dialogue: 0,0:02:43.77,0:02:48.91,Default,,0000,0000,0000,,who can help you start your business, laws\Nto protect your idea, a culture that
Dialogue: 0,0:02:48.91,0:02:55.66,Default,,0000,0000,0000,,idolizes innovators, and markets who will\Nreward you handsomely should your idea be
Dialogue: 0,0:02:55.66,0:03:01.24,Default,,0000,0000,0000,,attractive to consumers. John Kay could\Nonly dream of the sort of world where he
Dialogue: 0,0:03:01.24,0:03:05.76,Default,,0000,0000,0000,,could profit from his work. In the United\NStates and in most of the world today,
Dialogue: 0,0:03:05.76,0:03:11.16,Default,,0000,0000,0000,,ideas are produced for profit. Seventy\Npercent of the research and development
Dialogue: 0,0:03:11.16,0:03:15.94,Default,,0000,0000,0000,,expenditures in the United States are\Nfunded by the private sector, and an even
Dialogue: 0,0:03:15.94,0:03:20.93,Default,,0000,0000,0000,,higher percentage are funded privately in\Nplaces like Japan. So while an individual
Dialogue: 0,0:03:20.93,0:03:27.25,Default,,0000,0000,0000,,idea might seem sort of just like good\Nluck, we see that ideas spring from places
Dialogue: 0,0:03:27.25,0:03:32.48,Default,,0000,0000,0000,,that have the right institutions in place\Nto create new ideas and pursue those
Dialogue: 0,0:03:32.48,0:03:38.71,Default,,0000,0000,0000,,ideas. In the next video, we're gonna look\Nat one particular institution which is
Dialogue: 0,0:03:38.71,0:03:44.27,Default,,0000,0000,0000,,important for the production of ideas,\Npatents. We'll also discuss the trade-offs
Dialogue: 0,0:03:44.27,0:03:50.97,Default,,0000,0000,0000,,of protection versus the sharing of ideas,\Nand what role can governments play in the
Dialogue: 0,0:03:50.97,0:03:53.14,Default,,0000,0000,0000,,production of new ideas?
Dialogue: 0,0:03:54.00,0:03:58.89,Default,,0000,0000,0000,,- [Narrator] If you want to test yourself\Nclick "Practice Questions." Or, if you're
Dialogue: 0,0:03:58.89,0:04:06.02,Default,,0000,0000,0000,,ready to move on, you can click "Go to\Nthe Next Video." You can also visit
Dialogue: 0,0:04:06.02,0:04:10.68,Default,,0000,0000,0000,,MRUniversity.com to see our entire library\Nof videos and resources.