Beinhocker's Origin of Wealth

Technology Evolution

Innovation isn't magic -- it's combinatorial search on a rugged landscape. Every technology is a recipe: a combination of components, processes, and ideas. A small change can make it slightly better, or completely useless.

This is Kauffman's NK fitness landscape. N dimensions define the technology; K interdependencies make the landscape rugged with peaks and valleys. Firms search this landscape using different strategies: cautious hill-climbing, bold long jumps, or recombination of existing ideas.

Beinhocker's key insight: economic evolution is a search algorithm. Markets are massively parallel experiments in technology space, and creative destruction is the mechanism that prunes failures and amplifies successes.

Technology Evolution

Tick 0
Best 0
Mean 0
Firms 0
Diversity 0
Innovations 0

Simulation

Speed

30 ms

Preset Experiments

NK Landscape

4

Firms

0.05
0.30

Strategy Mix

15%
40%
25%
20%

Legend

Random
Local
Long-jump
Recombination
Emerging
Mature

Beinhocker's Insight

The economy is not an equilibrium system but an evolutionary one. Technologies are "designs" -- recipes that compete for survival. The number of possible designs is astronomically large (2^N for N binary choices), making exhaustive search impossible. Markets solve this through massively parallel, decentralized search using diverse strategies. This is why diversity of approaches matters more than any single "optimal" strategy.

Exploring

What's Happening

The technology landscape is ready. Press Start to watch firms search for innovations.

Fitness Over Time

The best fitness climbs in bursts -- an S-curve pattern. Long plateaus where hill-climbers get stuck on local peaks, then a long-jump or recombination finds a higher peak.

Technology Diversity

Average Hamming distance between firm technologies. High = many different approaches being tried. Low = convergence (everyone copied the winner).

Firm Population by Strategy

Which search strategies survive? On smooth landscapes, hill-climbers dominate. On rugged landscapes, long-jumpers and recombiners thrive.

S-Curve Transitions

Technologies move through phases: emerging, growing, maturing, then declining as better innovations arrive. Each bump represents a wave of creative destruction.

Innovation Fun Fact

The number of possible technologies with just 20 binary dimensions is over 1 million. With 50 dimensions, it exceeds the number of atoms in the universe.