Gary Shapiro has had a long career at the intersection of consumer technology and the government rules that govern it. As the CEO of the Consumer Electronics Association, he has been both a cheerleader and defensive coordinator when it comes to the companies that make the gizmos, appliances, and computerized wonders that fill our lives. His recent book, Pivot or Die: How Leaders Thrive When Everything Changes, is ostensibly about how to make the most out of challenging situations, whether it be Covid-19 or a software product flop. His story also reinforces, however, the truth that when it comes to new technology and consumer goods, government rules and planning are more likely to stand in the way of success than pave the way for it.
Shapiro lays out several anecdotes about famous companies and entrepreneurs that failed multiple times before they eventually succeeded. From Elvis Presley bombing when he performed in Las Vegas in 1956 to the four failed companies Max Levchin started before hitting it big with PayPal, we see that even many talented, hard-working, and charismatic entrepreneurs could have been counted out by informed observers early in their careers. Any formal process to groom the “best and brightest” for future success would almost certainly have left behind many of the impressive innovators of modern times. Only in a world where they didn’t have to ask anyone’s permission to start over were they able to reach their potential.
Overcoming failure can make for an emotionally resonant story, but Shapiro also details companies that succeeded in a different way, by overcoming mediocrity. There are many famous firms today that found modest, though uninspiring, success in one field only to leave that safe haven behind and risk it all on something bigger. Gamers may know the history of Nintendo, which at various times manufactured playing cards, ran a taxi service, and even operated a chain of Japan’s infamous “love hotels” before helping to create the modern video game industry. Jeff Bezos also ran a reasonably successful online bookstore out of his garage in Bellevue, Washington, before making it into the world’s biggest online retailer and web services company.
These stories teach a clear lesson. The changes that the modern world’s most successful enterprises and technologies went through not only could not have been planned by an outside authority; they could not have even been anticipated by the innovators themselves. The lessons for political economy are significant. Every politician and pundit with an economic plan takes it for granted that his own analysis and heartfelt concern will provide a better future than the supposed chaos of market action. But no industrial policy, however brilliantly conceived, can manage demand for products and services that haven’t yet been invented.
The experiment of central planning played out over the 20th century. Back in the 1920s, there was a debate over whether the economic planners of the new Soviet Union would be able to direct an entire economy more efficiently than nations with a (mostly) market-based system. Ludwig von Mises famously argued, in his 1920 essay “Economic Calculation in the Socialist Commonwealth” and elsewhere, that an economic system lacking private property and a price mechanism cannot efficiently allocate resources. The information necessary to organize such a system is too dispersed and contextual to be both collected and deployed efficiently across all of the goods and services of a modern economy.
The Soviet Union and its fellow-traveler friends in the West claimed that Mises and other critics were wrong about what was known as the “knowledge problem” or “calculation debate.” They generally continued to defend communist economic planning right up until the moment when the USSR collapsed at the end of the 20th century, and the truth of its weak economy was finally exposed—much to the consternation of those Western intellectuals who thought the Eastern Bloc economies were on the same level at least as the West.
But recent developments of AI have led some to think planning could win the argument, this time. The impressive acceleration of computing power has inspired modern-day Bolsheviks to suggest that current artificial intelligence applications could close the data processing gap that existed back in the 1920s and overcome the deficiencies pointed out by Mises and his friends. But, as Shapiro’s many stories from the world of tech and consumer retail teach us, an economy doesn’t just evolve based on current, observable data. Tomorrow’s technological advances hinge on unplanned and unpredictable pivots by a widely distributed network of innovators, each pursuing their own version of success.
Even the smartest and best-funded government analysts struggle to understand what has happened in the economic life of the nation over the last few years. Anyone who has ever tried to use government data sets for research often runs into the phrase “the last year for which there is complete data,” which may be multiple years in the past.
To do meaningful future economic planning—in the way that advocates of such plans have always claimed to—planners would need access not only to perfectly accurate, real-time data about every current transaction in the economy; they would need access to data that simply doesn’t exist yet. Market prices contain and communicate valuable information. But those price signals don’t exist until a producer decides to put a number on a shelf next to a product, and a customer sees that number and decides whether or not to buy. Predicting those choices is hard enough with a given set of products known in advance. Doing it when even the producers themselves aren’t sure what their next technology or product is going to be is impossible. No amount of computing power can see around that corner.
Nonetheless, Shapiro is impressively measured in his annoyance with the government intervention that burdens, frustrates, and holds back the designers and engineers that he represents. One suspects that his descriptions of the meddlesome bureaucrats and politicians he’s encountered in his career might have been even more colorful if he didn’t need to keep engaging with them as part of his day-to-day work.
Pivot or Die concludes with a miniature manifesto of how the United States itself must pivot in order to be successful in the future, including ideas like reducing the national debt, supporting STEM education, reforming antitrust enforcement, and committing to free trade. Shapiro’s policy recommendations are fairly conventional for a centrist thinker coming out of corporate America, though that also means that they are also somewhat out of step with the current populist movement represented by the Trump–Vance White House. Ultimately, his book’s most important contribution may be its description of how innovation actually happens in the modern economy, and how rarely directives from government officials contribute to it.
