What Creates Wealth?

Let me begin with what sounds like a very
simple question: What is the most essential ingredient in wealth creation and economic growth? Almost everyone would answer: Money. Or having a lot of natural resources. But
the real answer is . . . knowledge. It’s easy to prove. What is the difference between us
and a cave man? The only difference is that we know a lot more. Biologically we’re the
same. The neurons in our brains are the same. The physical world is the same. But our lives
are infinitely better. Why? Because of knowledge. You don’t have to go back to the cave man
to prove this point. You could go back fifty years. New knowledge, say the discovery of
penicillin or new algorithms that leads to a better search engines — always comes as
a surprise. We call these surprises innovation because they are inherently unpredictable. New products burst on the scene seemingly out of nowhere. Suddenly, there’s electric
light or an automobile or an iPhone. Now, of course, these products didn’t come from
nowhere; they came from the synthesis of accumulated knowledge which led to these innovations,
these surprises. By definition, then, innovation can’t be planned, it involves dislocation. The makers of buggy whips did not have a great future when Henry Ford introduced the first Model T and it always points to the future. Innovation — new knowledge — leads to not
only new products but new companies, and whole new industries. And innovation creates wealth;
wealth that is ultimately distributed all through an economy. Here’s how it works. More freedom, more knowledge,
more innovation. And more innovation leads to dynamic economic growth. Less freedom, less knowledge, less innovation, — less economic growth. So, if freedom promotes knowledge
and innovation, which leads to economic growth, why don’t all people and governments embrace
it? To understand that we have to return to what I said earlier about innovation being
a surprise, being unpredictable. This unpredictability makes many people uncomfortable. Their goal is to eliminate surprise. One finds this is in all utopian visions from communism to socialism to the belief that through complex insurance packages bankers could protect themselves
from a catastrophic mortgage meltdown. In Europe with its failing welfare states and
more and more in the U.S., we see this desire to eliminate surprise in the ever expanding
role played by government, bigger bureaucracies, more rules, more regulations. Every new crisis,
real or imagined, brings ever more laws. A corrupt energy conglomerate, Enron, implodes
in 2001. A year later the Sarbanes-Oxley Act is passed, adding thousands of new pages of
regulations to the federal registry. In 2011, the 2,300-page Dodd-Frank Act is written in
response to the 2008 financial crises. It has since grown to more than 8,000 pages. Most of these new regulations simply impede freedom and the therefore impede the growth and distribution of knowledge. They divert the entrepreneur’s energy and resources away from innovation and toward compliance. They create uncertainty about the future. And they raise the barriers of entry for new entrepreneurs. Ironically, the ones who most benefit from all these regulations are big corporations
and their teams of lawyers, lobbyists and accountants — they’re the only ones who have
the resources to untangle the mess and survive in it. But this drift away from freedom can
be reversed, and quickly; within a matter of a few years, in fact. There are numerous recent examples: in the United States during the Reagan Administration, in Chile in the nineteen seventies, in Eastern Europe after the fall of Communism, in New Zealand and Israel in the nineteen eighties, in China and India in the nineteen nineties, in Canada
in the first decade of the 21st century. Because it’s an economy of mind, the future can change as fast as minds can change. Whenever intrusive government retreats, knowledge expands and new prosperity follows. The opportunity for dynamic growth exists not only in the United
States, but all over the world if we are only courageous enough and free enough to seize it. I’m George Gilder
for Prager University.

100 thoughts on “What Creates Wealth?

  • Today's programming was brought to you by the letter Knowledge and the number Freedom. I feel like I'm watching freaking Sesame Street… its incredible how dumbed down this political propaganda is….no numbers, statistics, studies, sources….nothing just some memorizing graphics and Mr. Rogers guiding you closer to the one true way.

  • 4:36 Eastern Europe is consisted out of Russia (European part), Ukraine and Belarus.
    In this map (4:36) Germany, Slovenia, Croatia and a lot of other Central and Souther European countries are more west than Finland, but Finland is always reffered to as Northern Europe. If saying 'Eastern Europe' but meaning ex-communist Europe than one part (eastern) of Germany should be in red not the complete unified country.
    It is also unclear why are Bulgaria and Macedonia not in red when being more east than say Croatia and Slovakia and also ex-communist countries?

  • His list of corrupt regimes contributions to stifling freedom could easily have included Obama's Fascist State. Interesting that his conclusion served to predict the rise of Trump as a way to revitalize wealth creation and innovation in America.

  • I have the same opinion… However I am unable to reverse the situation… Like we have minds restricted or used by economy which are big… How to bring these minds to lower level with more flexibility?… Like more people are moving to major cities for jobs, better opportunities etc… How to reverse this trend?

  • Man, this is so good. SO GOOD. I love that it's not all doom and gloom, too. I agree, things can change for the better very quickly. They must.

  • This guys voice is horrible , imagine he was your dad or grandfather, or even worse if he was your teacher, having to listen to that whiny old over exemplified voice for a whole hour or more at s time, I would kill myself

  • One thing I'd like to add – Is that knowledge not only makes you personally more financially well off, it can give you a more enjoyable life.  Stephen Hawkins is a great example, physically, he's trapped in a failing body, but mentally he's been able to live "beyond the bounds of his earthly chains", imagine a cave man in his predicament, he'd have been shunned and left for dead.

  • Excellent video. The information is precise, clear and profound. Amazing how beautiful simplicity and the truth are explained.

  • As a eastern european I've seen the raw freedom with it's basic regulations and I'v also seen how half a dozen banks collapse robbed by their very management because of inadequate regulations. So I'd say that those "freedom denying" regulations are in most cases are just writing down bad experiences and trying to avoid them.

  • Big business is just as bad about eliminate surprises they just call it risk management. But he is correct this is a slippery slope.

  • oh wait, I've heard it somewhere else…"Here in my garage with my new Lamborghini, you know what I like more than materialistic things….KNAWLEDGE"

  • Not logical. Knowledge improves quality of life but, even if we still had no more knowledge than the caveman, we would still have economic growth and wealth creation.

  • What Creates Wealth? Well, it ain't the heretical prosperity message, I know, I was embarrassingly involved with it for forty years. I believed in something that common sense should have told me otherwise, unfortunately, the common sense did come around but tolate

  • hey ,if anyone else wants to learn about the secret of abundance try Morundan Amazing Mental Mastery (do a google search ) ? Ive heard some incredible things about it and my partner got great success with it.

  • You sound like the living embodient of beige. I'm sorry, just couldn't get the thought out of my head

  • When you are asleep your rivals are awake

  • Hard work creates wealth but I would never expect a college professor to know that. You can have all the knowledge in the world but without hard work it doesn't mean shit

  • No. The way you create wealth is by giving money to normal and poor people, through raising the minimum wage. The reason being that poor people spend their money back into the economy, providing higher surplus for small and local business. The economic reality is that money at the bottom is recurculated, while money at the top is paralyzed in banks, and sent to banks in Panama.

  • infinitely better? surrrre… infinitely more convient… definitely. better? that's definitely not so. there is no better. only different.

  • Bunch of hogwash. This guys does not support his claims which are baseless. Freedom = knowledge? Very weird thought to place these as if they are casually related. Progress (knowledge) is more related to investment into education and promotion of development. The more freedom there is, the more chaos there is, that's a more direct relationship between variables. Also, educational and scientific progress can be artificially induced through heavy regulation and selective promotion of educational programms. Take Sovie Union as an example. A lot of knowledge but not a lot of freedom. Again, this guys is not logical.

  • Jammu & Kashmir should be shown as part of India in the map. How would you mind if your mother is divided, the motherland is divided and your nation is Divided?

  • As much as I would love to agree with this video, unregulated banks is what led to the economy to crash in 2008.

  • but we fight anyone having the equipment to accumulate and understand and put in practice knowledge:

  • Absolute nonsense! The factors of production are land, labor, capital, and entrepreneurship. Just look at any basic economics book. Knowledge is cheap! If you have money you hire a bunch of super talented PhDs and the patents of whatever they come up with belongs to you! Shame on you PragerU for your pernicious videos.

  • 4:41 You just shown a wrong map of India.😤😤😤😤😤😤 This simply shows how less research you do before making the videos and how poor quality information you provide to your subscribers. First do proper research on any topic before make the video on it.

  • great video. The guy talking sounded really good, but at the end there was a pause between him saying his name and,"for prager university," it made it sound like he was an evil cartoon villain lol.

  • I like PragerU a lot, so I am not trying to dis you guys. I also like capitalism…… But I don't agree with everything here. Namely that ALL innovation is NOT planned….. As a marketing major, I disagree. All those example you laid out did have a plan. The plan begins when innovates see a PROBLEM in the market, and then they use this knowledge to create a better solution.

    Innovation without a plan is never as successful as innovation with a market plan. You can invent a wacky ass product, but if no one WANTS or NEEDS this product or service, then how would it create wealth?? Some innovations do appear by accident and without a plan…. for example kevlar…. Yet, not all innovations are this lucky.

  • The answer in my head was "innovation" and sure enough, a minute in ! Perhaps not everybody likes the conclusions that PragerU draws, but they are rarely wrong about the observable facts. (If they left religion out, I'd like the their videos even more, but most of these videos are hard to refute). It's sort of like listening to your parents when you're a teenager. You might think it's pointless or a pain in your ass, but as you learn and grow older you realize that their perspectives were right all along, and you end up embracing them and repeating the same cycle with you own kids, and their kids. etc.. 😄

  • Most innovation is not productive or useful or good.
    The motive for most people is not productive innovation, but higher profits (primarily, lower costs).
    An "innovation" would be an idea to dump toxic wastes by using a valve behind a truck and spill it while driving.
    It's innovative ! no doubt. it lower costs and increases profits. yes.
    Is it something we want ? NO
    What is the solution ? regulations and laws.
    Many regulations are too long and complex because of industry "input" in crafting exceptions and special conditions.
    Industry wants loop holes to be available.
    Industry wants very narrow definitions.
    Most regulations would only be a few pages otherwise.

  • We do not have pure Capitalism, and we do not have pure Democracy. A Democracy is two men and a woman voting on who gets raped. The original powers of the Federal Government were few and defined! FDR and LBJ forced tax slavery on those who work and earn more than average income. So they could buy votes with tax money to fund leach programs.

  • Many thanks, I have been researching "grow wealth" for a while now, and I think this has helped. Have you heard people talk about – Xiyannah Lansaiah Theorem – (do a google search ) ? Ive heard some pretty good things about it and my partner got excellent results with it.

  • This was great, I have been researching "wealth creation book" for a while now, and I think this has helped. Have you ever come across – Xiyannah Lansaiah Theorem – (just google it ) ? Ive heard some super things about it and my neighbour got amazing success with it.

  • I think the fall of The Iron Curtain is a bad example (at least if it comes to Bulgaria) because the people were wealthier and could afford more during communism than today. Almost everyone lost their jobs, the 90s was a decade of financial insecurity, basic needs were unfulfilled and all in all no one could not afford anything. I admit, yhings have changed to the better but some regions and groups of people haven't recovered yet. Asking a lot of people a great part of them will probably tell you that they liked the former political form. I am of course not speaking for everyone.

  • There are probably potential innovators somewhere in the world but end up passing away without their ideas turned to reality because they don't have the necessary equipment and material to do so

  • The key is being able to free up your time to actually innovate. It is getting SO hard to extract wealth from the market to actually innovate without exchanging MASSIVE amounts of your time for VERY small capital.

  • Regulation creates more wealth that is true but the wealth is built up on scams and bad thing like the drug industry or 418 scams. Enron scammed loads of people the the government brought in regulation to stop it happening in the future. If the regulations were that bad he would and should of mentioned it. But he only mentioned the pages it contains which is pointless.

  • Is PragerU Leftist or is Bernie Sanders a conservative? Let me explain

    Free College for All:

    – would lead to more knowledgable workforce
    – would result in a better-educated population
    – innovation, scientific inquiry, and technological development in college laboratories which will later be released in the market
    – knowledge liberates and frees people from ignorance. I'm talking about liberty from constraints created by ignorance not necessarily government regulation
    – the more readily knowledge and understanding are available to everyone the more societal freedom there is
    – end result: economic growth

    Knowledge + liberty + innovation = Economic growth Right?

    Bernie2020 Free College for All!

  • Innovation and new knowledge created wealth. Politic is nothing to do with number . You can't fake number

  • Prayer u is so wrong about everything if u wanted the truth just take the opposite of everything they say

  • 3:42 when you have experienced the unnessesary burden of regulations and completely relate to what he says… Great video

  • This is why the Chinese are running out of other people's innovation. They don't allow invention from their people because they don't like new and the inherent dangers.

    However, when the Chinese OBSERVE successful, proven inventions, then they harvest and steal the IP from our corporations. Duh.

    If you notice, the Chinese military is always trying to copy things and are less successful because military innovation is more difficult to extract.

    They can make a jet that looks like a western fighter and buy a junk Russian engine stuck in the back. But they don't have innovative people because it is not from their people.

    They are trying to copy capitalism, but now they are running out of cheap labor, cheap money, and they resisted letting the chains off in the first place.

    What has China invented?

    I remember 25 years ago China was copying exquisite furniture from the Europeans. But the stuff fell apart because they didn't copy the science of the wood grain, types of wood, glue, temperatures, humidity, varnishes.

    They could copy what they see VERY effectively. But they had no entrepreneurs or inventors to figure out how to make good furniture that appropriates European design.

  • Concerning Capitalism.

    There is always room for improvement. But there is WAY more room to ruin everything. History tells is so. When a few powerful people try to control invention, it dies.

    We are on the edge of a technological, science, and medicine explosion that will make our historical past look much closer to the cavemen, than to humanity in the next ten years … IF we can protect innovation and require it to succeed in the open market of ideas.

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