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What Diamond means is that we do not properly understand how societies develop and use innovations. We think that "necessity is the mother of invention." That is, we think that inventors see unmet needs and invent things to fill those needs. But this is not, Diamond says, how things really work.
Diamond says that invention is really the mother of necessity in most cases. He says that inventors invent things because they simply love to tinker and experiment. Once they invent something, they start to look for some use for the thing. Society can take their invention and find a use for it (Diamond uses the phonograph as an example of this) rather than having the inventor invent the thing in order to fill a preexisting need.
So, Diamond is saying that we usually think that necessity is the mother of invention when the truth is often the opposite of this.
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