Is growth just luck? Fortune favours the diligent
If you came of age in the 1990s, you might have taken growth for granted. The Cold War was over. The world felt young. Generation X had the future at its feet. Yet those halcyon days were an outlier, not the norm.
Growth itself is probably a modern phenomenon. GDP data in most countries has been collected only since World War II. Yet, by using various other sources of data, historians can estimate trends in the global economy back to 1000 bc. The findings are intriguing. Growth in GDP per head – a measure of living standards – only really took place from around 1750. For around 3,000 years, it was minimal – or nonexistent.
What happened in 1750 to break the mould of three millennia? The coming of the machines. The Industrial Revolution transformed transport and manufacturing. It delivered the steam engine and the spinning jenny. Over a century later, electricity arrived in the UK: in 1881 the world’s first public electricity supply for street lighting went live in Godalming, Surrey, using hydroelectric power. By the 1950s, the arrival of IT became an economic catalyst. It continues to drive growth today. Since 1750, GDP per head in the world economy has expanded by an average 1.5% a year – compared with approximately zero in the preceding period.
What drives growth?
The generation and circulation of ideas has a profound bearing on growth, as the innovation examples above demonstrate.
One might consider innovative breakthroughs happy accidents: the spoils of good luck. Yet the likelihood of invention can be increased by private and policy choices. Harvard Business School observes that most innovations result from the purposeful search for innovation opportunities. These typically arise from unexpected opportunities (yes, luck), incongruities, process needs, and industry and market changes. Inspiration and opportunity can arise from many places. But meeting new people – through foreign direct investment, trade, migration, job changes and of course networking via IoD membership! – has a good track record in delivering innovation and productivity growth.
The history of the UK is littered with shocks that have stopped growth in its tracks: wars, pandemics, financial crises, energy price shocks and government policy errors have all impacted economic advance. But, in all these areas, it is wrong to ascribe the outcomes purely to bad luck. The financial crisis was ultimately caused by too much deregulation, inexplicit government guarantees, and an increase in financial instrument complexity, among other factors. The pandemic was, perhaps, unpreventable. Yet UK GDP shrank by 20% in Q2 2020. In Sweden, in the same period, it fell by just 8%. This disparity demonstrates the implications for growth of different policy choices.
Uncertainty plays a role in growth too – often a negative one. It is defined by a wide range of expected outcomes. It is also determined by the difficulty with which probabilities can be assigned to any of those outcomes. The wider the range; the more difficult the calculation of probabilities; the greater the uncertainty.
Take the globe’s current situation. There is a huge range of potential developments (Ukraine/Russia war, Israel/Hamas conflict, climate change, US tariffs) where both the range of potential impacts, and the probabilities of any one of those impacts crystalising, is incredibly uncertain. For businesses, these issues tend to delay decisions – particularly investment and hiring decisions. The European Investment Bank estimates that high uncertainty leads to a one percentage-point drop in employment growth and a three percentage-point fall in investment rates. It has a similar effect on consumers: individuals tend to increase their precautionary savings during times of heightened uncertainty.
But some forms of uncertainty can be beneficial. Consider AI. There is huge uncertainty about what its potential impact on the economy will be; when that impact will be experienced at scale; and how it will affect jobs. There is concern that it may exacerbate vulnerability to cyberattacks and cause substantial job losses. Yet it is chiefly viewed as a huge opportunity to reduce costs and expand services. As such, it is spurring substantial investment flows and technology valuations.
Government can of course influence growth, as we know only too well. The uncertainty generated ahead of the October 2024 Budget – and the policies themselves – have slowed the economy significantly. But the overall role of government in the world’s growth story is huge. Property rights, the rule of law, independent central banks, the delivery of public services (including health and education), the setting of regulatory standards, and the funding of major infrastructure, all support economic performance. Meanwhile, government systems such as capitalism, socialism, communism and collectivism have all had profound effects
on growth.
What is growth anyway?
Growth is shorthand for economic growth – the increase in gross domestic product (GDP) over time. The two most familiar methods for calculating GDP are: the total of all goods and services produced in an economy (the ‘output measure’ – e.g. construction, manufacturing output); or the total of all spending in the economy (the ‘expenditure measure’ – e.g. consumer spending, business investment).
One factor which will tend to increase GDP is population growth. If a country’s population expands, its economy likely grows too. But that does not mean individuals become richer: if GDP grows more slowly than the population, then the average individual becomes poorer.
The diligence dividend
The dinosaurs might reasonably have considered their demise bad luck. But humans are largely authors of our own destiny. For the most part, growth is more hard work than luck.
Benjamin Franklin, one of the United States’ founding fathers, is credited with saying, “Diligence is the mother of good luck.” A similar aphorism, “The harder I work the luckier I get” has been credited to everyone from former US President Thomas Jefferson, golfer Gary Player, and film-maker Samuel Goldwyn. It’s a hackneyed quote but, like many hackneyed quotes, there is some truth in it.
Luck does have some part to play in most strands of life – otherwise why buy insurance? But, overall, boring old hard and consistent work delivers the goods.

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