A provocative question that I ask quite often, “what important truth causes others to disagree with you?” My answer to this question is that we will soon (eventually) live in a world where one’s basic needs are met through technology, eliminating one’s need to work.
The reason this is so controversial is because the purpose of “work” derives from the need to create output in order to provide food and shelter for one’s family and oneself. If technology makes it increasingly cheaper to provide for basic needs, then the need to work becomes increasingly less vital. This concept is antithetical to everything we know about labor and capital. This concept is not congruent with anything we know about life in 2021.
The majority of jobs are derived from waste: from information asymmetry and inefficiency. Think about it hard enough, and even the most esteemed jobs could be replaced with enough technology advancement. The cost of yesterday’s economic growth weighs heavily on the promise of the future.
The irony, as you will read, is that some envisage a brighter reality through fiscal & monetary policy. Others, myself included, believe that technology will light the way.
I am talking my book here, but technology is the most powerful force in the world. Technology makes it possible to increase efficiency beyond our wildest dreams. Anything that man can do today, technology will make it better, faster, and cheaper tomorrow. Technology cuts out middlemen, it eliminates information asymmetry, and it constantly creates progress.
Technology is deflationary in nature because it drives the costs of goods and services down for consumers. Bigger, cheaper, sharper televisions. $0 stock trades. $5 rotisserie chicken at Costco. A friend recently told me he upgraded his bedroom television. He replaced a 44 inch TV, purchased in 2009 for $600, with a 50 inch TV for half the price.
These are amazing advances. There’s the tired trope that supercomputers used to fill entire rooms and now they fit in your front pocket. We cannot ignore that the latest technological advances used to only be available to the wealthiest, and now they are seemingly accessible to all.
If technology makes everything cheaper, then why is wealth inequality rising at alarming rates? Why are there housing shortages, rising costs of living, and calls for more stimulus from the government?
I have frequently been critical of the recent acceleration in expanding money supply. The US economy has now become inexorably attached to an inflationary environment, driven by debt and low interest rates.
The optimist in me has noted that the era of free money means abundant capital to drive early stage companies and compounding innovation. Cheap debt and rising asset prices make funding for early stage ventures more abundant. Ventures that are typically not profitable for many years. Ventures that often create foundational innovations upon which future innovations can be built more quickly.
The pessimist in me fears that wealth inequality is being driven to dangerous levels. I have struggled to reconcile these competing ideals, which is why my interest was so piqued when I first discovered "The Price of Tomorrow" by Jeff Booth. This book, as it turns out, perfectly represents the two most vital (and competing) forces in the economy. The author leaves some room for interpretation on how these forces will play out, but he aptly describes the zeitgeist of the era, and I highly recommend the read.
Booth makes arrives at three central theses, all of which align to my thinking.
The author makes salient points with layman’s language, and the book is still sophisticated in depth. The call to action, however, was fairly ambiguous. If we know that technology is deflationary, but that our economic system is not, we must plan for the future that we want to create.
The truth is that it will take much more than a new economic system to create the future that I am describing. Unfettered financial systems almost always lead to zero sum games and unintended consequences. We can presume that as long as governments and societies exist, there will be some limitations on affecting change through financial systems.
Whilst consumer startups seems to attract much of the attention, a large portion of the smart VC money has actually poured into enterprise technology in the last decade. These investments are important because the next wave of consumer startups will have been possible by the incredible leaps made in hard tech. Hardware advances, proliferation of the cloud, distributed computing, containerization, all make rapid development of web-scale apps possible.
The path to the future of abundance will require commensurate leaps in the physical realm. The key to that future is not merely in accepting new economics, but in advancing innovation in areas that have historically not seen the same deflationary benefits of technology.
If the price of televisions has halved in under a decade, what is the effect of rising prices in other goods? The issue is that the costs of basic needs (food and shelter) have only accelerated. Houses are built upon land, which is in fixed supply, which means prices will tend to only go up over time. At the same time, innovation in homebuilding (and more friendly zoning / regulation), could actually be an opportunity to drive down the cost of shelter.
The supply of food is theoretically constrained by the cost, time, and land required. Thusly, it is difficult to reduce the cost of food in the face of rising demand. The same point can be made for land, for housing, and for many physical goods that are not technology products.
As I said, an expanding money supply will inflate the prices of hard assets and of goods where deflationary innovation has not taken hold.
It has became infinitely easier to consume: television, news, social media, goods & services. However, the rising tide of an inflationary environment makes it more difficult to procure the most valuable and basic sustenance. Our only weapon is to innovate. Innovation in the physical realm is the way up and onward.
I frankly cannot further articulate this point better than a16z did in the wake of the supply chain disruption and medical pandemonium of the COVID-19 crisis. The time to make physical goods and complex processes better, faster, and cheaper is now.
I will be looking to the future of 3D printing, travel, food production, medicine, energy, and more.
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