3 November 2025

AI Needs Its Complements: Investing in the Next Wave of Innovation

Matt Pearl and Kuhu Badgi

During the British Industrial Revolution of the late eighteenth and early nineteenth centuries, the United Kingdom experienced an unprecedented time of innovation, technological advancement, and economic growth. The most noteworthy invention during this time was the steam engine, which turned coal and boiling water into motion, pushing pistons, turning wheels, and for the first time, supplying reliable power on demand. This invention, however, was insufficient on its own to advance the British economy. Steam engines enabled reliable power generation independent of natural forces such as wind or water currents. Still, they were limited in their utility because of their great expense and the imperfect fit between all the cylinders and components. Beyond these limitations, the engines also had external effects that needed to be mitigated, such as coal-fired boilers that consumed enormous amounts of fuel, polluted waterways, and contributed to urban smog.

Improvements in manufacturing processes—such as the creation of the cylinder boring machine—created stronger and cheaper steam engines. At the same time, pollution was addressed by furnaces capable of better combustion, efficient steam boilers, and safer engineering standards. To make the steam engine scalable, however, incremental improvements were not enough: The United Kingdom ultimately relied on new complementary technologies, such as improvements in metallurgy that created better rails and the development of the mechanized factory system.

Thus, the steam engine did not singlehandedly achieve a technological revolution. Instead, it was also the ability of Britain to harness this technology, make gradual improvements to it, mitigate any problems it created, and combine it with other technological breakthroughs that led to their success. This last factor was critical: the British Industrial Revolution was not marked by one technology alone, but by synergies between several supporting technologies. While today’s technologies have advanced far beyond steam engines, the principles of cross-technological integration and diffusion remain just as critical.

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