The Great Acceleration?

Over the past year a Portuguese named Bruno has brought creativity, inspiration and flair to an arena where we had become accustomed to see slow, staid and sleepily conventional performances. No, I am not speaking of Bruno Fernandes’ impact at Old Trafford, but Bruno Maçães’ impact on the European public sphere.

I have to admit that when I picked up Maçães’ book “History has begun”, it was with the suspicion that he was something of a charlatan. A European Tom Friedman spouting banalities like “The World is Flat” and other prophetic pronouncements perfected for the slick format of a TED talk or Davos panel.

How wrong I was. Maçães is no (in Talebian terms) Intellectual Yet Idiot at all. Rather the antidote. “History has begun” is one of the most interesting, refreshing and reflective geopolitcs books I have read in a long time – especially interesting on the increasingly blurred lines between fact and fiction as well as the increasingly diverging paths of the American and European continents – and has convinced me I will have to read his prequels “The Dawn of Eurasia” and “Belt and Road” as well. Even if you disagree with Maçães’ upbeat case for a bright American future, the book is thought-provoking and definitely worth reading.

In the course of the Covid-19 pandemic Maçães has become one of the main Twitter accounts I turn to for hot takes on the turn of global events. He has been a pertinent observer of the vaccine wars and (in spite of past allegiances as Portugal’s Secretary of State for European Affairs) a vocal critic of the EU’s bungled vaccination roll-out.

In a recent piece Maçães argues that the pandemic is finally ushering in the Great Acceleration that technology optimists have been waiting for since the collapse of the Dotcom bubble.

Maçães starts off in agreement with the Cowen/Gordon premise that we find ourselves in a Great Stagnation, from which only a major societal shock can shake us off and unleash the next leap in economic growth.

The question is if Covid is the requisite shock to kickstart the future? This is where I believe Maçães overplays his hand.

There is no doubt that the pandemic has led to an unprecedented burst in digitisation, that would otherwise have taken many more years to pan out. But the growth and (un)employment implications of this accelerated shift from physical to digital remain far less clear. Yes, the future has become more evenly distributed, but it has not necessarily become faster.

Maçães argues that “we have realised that time is actually scarce” – though it is unclear if the EU has reached the same conclusion. It is true that vaccines have been developed quite fast – thanks in part to government programmes such as the Trump administration’s Operation Warp Speed. And in the UK the government’s Vaccine Taskforce led by venture capitalist Kate Bingham (who was much mocked upon being given the post) has showed public/private partnership at its best and most effective – an exceedingly rare phenomenon in modern times.

The pandemic league of nations table looks very different today from one year ago. Back then the US and the UK were derided for being to slow to react to the spread of the virus, whereas the European countries promptly locked down their societies. But while the US and the UK failed in the early phase of the pandemic, they did so for the right reasons – putting a higher premium on the preservation of liberty than continental European or Chinese politicians tend to.

Now the tables have turned. The same higher risk-willingness that made the US and the UK slower to react to the pandemic, is enabling them to escape from the pandemic faster, whereas the risk-averse EU has been left miles behind in the vaccination race.

So Maçães’ claim that “[w]e tend to be more open to risk and disruption when they are present all around us, and the success of the new vaccines is making everyone more positive on technological development and its obvious achievements,” must probably be qualified. Yes, that might be true for the Anglo-Saxon countries, it seems less true for the EU bloc.

To me the pandemic illustrates the logic of a new world order where a post-Brexit Britain forms closer ties with the US and the other Five Eyes countries in a dynamic and entrepreneurial Anglosphere, whereas the EU likely will turn itself into an increasingly insular Neo-Napoleonic empire whose delusions of grandeur will be challenged by the hard realities of economic decline. Certainly, the election of the anti-British Joe Biden was a shot across the bow for a tighter “special relationship” between the US and the UK, but the logic of this concept will outlive Biden.

Maçães cites Peter Thiel, the Silicon Valley investor who (like several others for different reasons) has labelled 2020 as the new year 0:

“I keep thinking the other side of it is that one should think of Covid and the crisis of this year as this giant watershed moment, where this is the first year of the 21st century. This is the year in which the new economy is actually replacing the old economy.”

There is truth to this. But it needs to be qualified. While the pandemic has undisputably accelerated digitalisation, few if any truly novel technologies have emerged in its wake. One much-touted hypothesis at the outset of the pandemic was that the closing down of societies would unleash a creative explosion. That may still bear out, but so far this prediction has been as wide off the mark as the prophesy of a covidian baby boom. Maçães mentions the usual examples of progress in AI and autonomous vehicles, but have these developments truly been accelerated as a direct result of the pandemic? Or just progressed at their usual pace regardless of it? I would bet the latter.

In fact, the economic consequences of the pandemic that have solidified at this stage are all rather bleak. At the national level the balance of power between China and the Western countries has shifted by leaps and bounds in China’s favour; At the corporate level the oligopolistic market dominance of the tech giants (the FAANG’s of the world) has reached unprecedented levels, at the expense of small- and medium-sized businesses; and at the citizen level the gap between the haves (who have enjoyed a comfortable countryside pandemic) and the have-nots has become ever-wider.

Maçães also touches on Bitcoin, which started its parabolic rise in the wake of the massive fiscal and monetary stimulus measures governments instituted to combat the economic fallout of the pandemic. While I certainly agree with Maçães that the cryptosphere holds great promise – I would go so far as to say the last hope for another economic revolution – it is worthy to point out that the founding premise of Bitcoin was not particularly optimistic. On the contrary, the inception of Bitcoin provided an escape valve for those who had lost hope in the system that collapsed under the financial crisis of 2008/09 – a monetary equivalent to the misfits who gave up and left a dystopian future in the old world for a Utopian future in America. And yes, indeed the price of Bitcoin has reached stratospheric levels, but that is not reflective of investor belief in a bright future. It is reflective of a world with a dearth of productive investment opportunities and where the real yields on bonds are ridiculously low and the (negative) real yields on cash even worse.

The ghost of a long-dead thinker whom Maçães quotes has come back to haunt us: Carl Schmitt, the crown jurist of the Third Reich, who has been made relevant again by the politics of pandemic. In the Schmittian playbook a pandemic provides ideal conditions – a state of exception – for wannabe Dictators to make their move. Be it more explicitly as a Putin or an Orban, who do not even care to hide their motives, or more subtly by democratic governments who dress up their emergency power grabs with assurances that they are for the public benefit and are only temporary in nature.

Perhaps it is not a great acceleration of technology we have in store, but a great acceleration of authoritarianism. Or, as certainly seems to be the case in China, a great Orwellian cocktail of tyranny and technology. Maçães tries to take a more upbeat spin on the Schmittian threat, by saying that: “The way to prepare for the emergency is to develop our powers of reaction well in advance”. That sounds fine in theory. But even in supposedly well-organised and advanced countries like my native Norway, the government has made a complete mockery of preparedness planning, despite being specifically warned of heightened risk of a pandemic in advance. Now I do not believe that Erna Solberg will turn Norway into a Dictatorship, but that is more due to the fact that politicians like her tend to respect democratic norms, rather than waterproof institutional safeguards against executive overreach.

Despite falling well short of Dictatorship in any meaningful sense of the word the emergency powers that “liberal” governments in many western countries have freely (ab)used, will be very hard to reverse and recover from. As Lord Sumption has made the probably most eloquent and principled argument for, “we cannot switch in and out of totalitarianism at will. Because a free society is a question of attitude, it is dead once the attitude changes”.

My hunch is that Maçães tries to be more positive than he actually is. His case for optimism seems somewhat forced, (more like Bruno Fernandes on one of his few uninspired days) and slightly at odds with the scepticism of his Twitter feed.

Even if we can finally see light in the end of the Covidian tunnel, the political situation, in the EU especially, can still get far worse from here. There is no way back to the status quo ante. Exception is the new normal. With populations suffering from Covid fatigue the last mile of the pandemic will be the longest. On the technology front we will wait for the promised acceleration to show up in the productivity statistics, which there is hitherto little sign of.

How Fast is the Future?

Peter Diamandis & Steven Kotler cherry-pick evidence to paint a Panglossian picture of accelerating innovation, but fail to conceal the gloomy shadows of Secular Stagnation.

I have been reading Peter Diamandis & Steven Kotler’s new book, “The Future is Faster Than You Think”. If you are already familiar with the authors’ previous works, it will come as little surprise that the latest volume in their “Exponential Mindset Trilogy” doubles down on the same arguments made in “Abundance” (2012) & “BOLD” (2015). Basically, that a convergence of accelerating technologies such as Artificial Intelligence (AI) & Augmented Reality (AR) will lead us to a Singular Utopia — much sooner than you would expect.

The book is certainly worth reading end contains numerous enlightening insights about emergent exponential technologies. But, to get that out of the way first, the book’s biggest weakness is that it does not seriously engage with the counterarguments of the Secular Stagnationists; that the future is not so fast.

After all it has been close to a decade since the publication of “Abundance” & for most of the middle-class in most Western countries that has been a decade of stagnation in wages & wealth. For many the authors’ arguments that flying cars are right around the corner & that we will soon be enjoying an abundance of low-cost housing, healthcare & education may thus ring a bit hollow, to put it mildly. For example, what exactly does it mean that “exponential technology is dematerializing, demonetizing, & democratizing nearly every aspect of real estate”? Three funky words starting with “de-“; that will probably go down well in a TED speech. But try telling that to a Silicon Valley employee struggling to pay the rent on his ludicrously expensive San Francisco hut.

The authors do at least acknowledge Peter Thiel’s complaint that: “We wanted flying cars, instead we got 140 characters”. But they interpret Thiel too literally, without taking him seriously. Their retort that flying cars are here already is too clever by half. It is true that Uber plans to launch their aerial ridesharing scheme in 2023 – Uber Elevate – with a long-term goal of achieving lower marginal costs per passenger mile for flying cars than for traditional cars. However, the Covid-19 pandemic has thrown renewed doubt at the feasibility of both those targets.

The book would have been more credible if Diamandis & Kotler had offered a more comprehensive macro rebuttal of the Secular Stagnation story, instead of cherry-picking individual companies & sectors with outsize productivity gains. It weakens the book that the authors are hesitant to confront the decelerating productivity growth in the American (& other Western) economies that has been extensively documented by Robert Gordon & others – most notably in his masterly “The Rise & Fall of American Growth”. The only thing this evasiveness serves is to stoke suspicion that the crowd around Singularity University is turning into a techno-utopian cult.

The human factor is a bit missing from Diamandis & Kotler’s narrative. Throughout the book one often gets the impression that people, far from having any inherent value or free will of their own, are reduced to a pathetically mortal pieces of meat, whose intelligence has been transcended by their Alexa home entertainment system & who can be rocketed around in Hyperloops at 760mph serving some higher Kurzweilian purpose. & if the authors get their way society will soon reach Longevity Escape Velocity – i.e. that for every year you live you will add more than one year of life expectancy. If this is what the future holds, most sane people will probably wish to die before they will have the chance to spend eternity in AI purgatory.

Despite the claims of an “exponential mindset” the authors occasionally fall prey to rather linear, & dare one say shallow thinking. Such as their very linear view of the “time saved” by googling the answer to a question instead of having to look it up in a lexicon or applying your own cognitive faculties. Even Eric Schmidt has recognized the risk that Google – & the Internet more broadly – making us stupid, by producing a tendency toward shallow thinking, at the expense of (for schoolchildren especially) developing the ability to think (& read) deeply about things. Diamandis & Kotler on the other hand, have no such qualms.

There is no question that a lot of interesting stuff is happening in Silicon Valley. But will Avatars ever match the impact of the invention of electricity or Blockchain that of running water? Gordon has demonstrated very thoroughly how hard it is to match the truly life-altering significance of the General Purpose Technologies & subsidiary inventions of the Second Industrial Revolution: the internal combustion engine, automobiles, aircraft, the telephone, radio, “modern” sewage systems, the washing machine & assembly lines. These inventions powered a century of miraculous growth from ~1870 to ~1970. Their impact was so transformative that the feat can hardly be repeated. Diamandis & Kotler wax lyrical about the notion of a Kurzweilian “Law of Accelerating Returns”. But the law of diminishing returns will not easily be turned upside down. Yes it may be true that an iPhone would have cost 110 mUSD in 1980, but how much better is really the iPhone 11 than the iPhone 10? & will the 12 be leaps & bounds better than the 11?

Even if one remains sceptical about Diamandis & Kotler’s grand thesis of accelerating change, their analyses of several industries are spot on. In the retail industry for instance, the changes are obvious to see & have been accelerated by the coronavirus pandemic. The transition from analog to digital has been sped up. Amazon is the big winner. Shopping malls will die. It will be the end of cashiers as automated checkout becomes the new norm. The transition from physical to online retail has profound consequences for the advertising industry as well, as evidenced by the fact that Google & Facebook have gobbled up a combined quarter of ALL global ad revenue – leaving Old Media as the big loser.

The Covid-19 Pandemic has been a Luther moment for the “Higher Education” racket. As lectures have moved from campus to cyberspace it seems to have finally dawned on students that they are indebting themselves for life only to pay exorbitant tuition fees for knowledge that is essentially available for free on the Internet. The authors are right that this relic from the past is no longer fit for purpose (if it ever was – note the disparaging judgments of Oxbridge from the likes of Adam Smith or Edward Gibbon as long as 250 years ago). Peter Thiel has rightly compared modern university diplomas to the indulgence letters of the medieval Catholic Church. But students’ obedient faith in orthodoxy has held up surprisingly long. With Covid – judging for example from reports suggesting that foreign students will not bother with elite educations at prestigious US or UK universities if classes will anyway be held online – the moment when students (& employers) see that the Professor is not wearing clothes may at long last have arrived.

AR, VR & Avatars are all exciting fields, but will they truly transform the lives of common people like the dishwasher did? Or perhaps more likely & more sinisterly; will these technologies provide avenues for resigned people to retreat from reality? A second chance to create in virtual worlds the life they could not have in the real world? At the very least this should bode well for the gaming industry.

Blockchain & Cryptocurrencies are perhaps the emerging technologies with the biggest potential to radically change the way the economy is ordered – by challenging the incumbency-biased hegemony of central banks & fiat currencies. In theory at least. Not that I believe it will happen in practice. The “Fintech” revolution held early promise but has by now been quite effectively co-opted by the legacy banking system, rendering the chances for radical change minimal.

Legacy banks have today become probably almost as big a break on entrepreneurial activity as government regulation. If blockchain, cryptocurrencies, Digital Autonomous Organisations (DAOs) & seasteading perhaps could be combined in a way that would enable people to conduct (legitimate) business across borders without being reliant on legacy financial institutions then it could unlock a new dimension. But for the moment the whole cryptosphere, although it has practical utility, for all intents & purposes remains a casino.

Speaking of money, Diamandis & Kotler claims that entrepreneurs today enjoy easier access to capital than ever before. While that may be true for some tech startups, it is not the everyday reality for most small businesses. Legacy banks have largely abandoned their traditional role of providing finance to new business creation, in favour of loans to big corporates & mortgages to the salaried classes. With the exception of a few much-publicized success stories, the concept of crowdfunding was dead on arrival. At any rate, cheap capital is no magic potion for entrepreneurship. If that had been the case, the Kamikaze monetary experiments of the Federal Reserve & other central banks should have unleashed a Wirtschaftswunder like the world had never seen before. It has not happened. That is because the stagnation we see in Western economies today is due to deeper problems on the supply side, which cannot be solved by funny monetary policies. Or to take a case in point, look at SoftBank’s 100bUSD Vision Fund, which was created with the aim of throwing billions of dollars at Unicorns to accelerate the future, & the best they could find was a Ponzi office sub-letting scheme? Building the future is hard & requires more vision than an abundance of Petrodollars from hallucinating desert princes.

The authors do pay lip service to concerns for rising technological unemployment – concerns that suddenly have become much more acute in the wake of the coronavirus pandemic, as many of the job losses triggered by Covid-19 are unlikely to be reversed. For example, the cashiers that have been rendered obsolete as shopping has migrated online. What are they going to do next? Diamandis & Kotler cite a McKinsey report (congratulations) claiming that the Internet has created 2,6 new jobs for every job it has destroyed. That claim may have been supported by the low pre-pandemic unemployment levels. But, as David Graeber has documented, there has been an awful lot of bullshit jobs out there. What the pandemic has brutally revealed is that society manage to cope pretty well without many of those jobs, (a consequence that can be both encouraging & disheartening, depending on your perspective).

Another trend that the authors are very keen on that is also being challenged by Covid is urbanisation. Are ever bigger cities with ever-taller towers with ever-more people crowded together in tiny closets still the answer to the future? It does not look very appealing to me.

As a matter of formality Diamandis & Kotler go through the list of threats to their thesis – from water woes to climate change in addition to the risk of technological unemployment. But they remain optimistic on all fronts. Politics do not seem to play much of a role in their future – except that: “Governments around the world, encouraged by Estonia’s example, are going digital”. That sounds great, but where is the evidence that digitalization has increased public sector productivity – other than in governments’ tax-collecting arms & citizen surveillance capabilities? When it comes to immigration Diamandis & Kotler still cling to, the rosy-eyed view that: “Migration is an innovation accelerant”, which to a European reader sounds dangerously naive. As if their example of Jews emigrating from Hitler’s Germany holds any relevance whatsoever for the migration flows of today.

All in all, the book is absolutely worth reading, as it is representative of how Silicon Valley’s most Panglossian minds envision the best of all possible futures. But while Diamandis & Kotler have their AR goggles on & are ready to hyperloop into the future, the rest of humankind will be joining them not so fast.

Random Reflections on the World Post-Covid-19

Cole_Thomas_The_Course_of_Empire_Desolation_1836 — Thomas Cole: The Course of Empire — Desolation

The physical world has reasserted itself. With the advent of the coronavirus many of the central assumptions underpinning modern civilisation are being questioned. There are those — not least the President of the United States — who believe that society will rapidly return to it status quo ante, and those who believe the world is forever changed. There are those that see Covid-19 as the final confirmation of all their prior beliefs — “Coronavirus proves that Capitalism/Liberalism/[insert whatever -ism] is dead” — and there are those who, quarantined at home, are increasingly questioning their own unfulfilling jobs (that they may no longer have), boring lives and general reason for being.

We are in the realm of Knightian uncertainty now. Many different paths can be imagined. All predictions must be taken with a big grain of salt. Even the “nowcasts” are missing the mark completely: ever week hundreds of financial analysts (who could have been more productively employed elsewhere) engage in the useless task of guessing the number of initial jobless claims that have been filed in the United States over the preceding week. 99 percent of the time the number fluctuate very little from one week to the next — and the analyst estimates flock closely together. But when an extreme event strikes and precise expert estimates actually would have been useful, the analysts are hitting orders of magnitude out of bounds. In the weeks ending on March 21st and March 28th the numbers came in at 6.648.000 and 3.341.000, in the first case more than double and in the second case almost double the number of the consensus estimate. (Update: another 6,6 million jobless claims filed in the week ending April 4th).

If economists cannot even nowcast the next week, they have no hope of accurately forecasting the next year. Still, economists are now downgrading their estimates for this year’s economic growth on an almost daily basis as the crisis unfolds. It may be slight consolation, but the economics establishment can at least take solace that the medical establishment are doing little better with their widely varying forecasts for how the Covid-19 infection and death curves will develop.

One thing that is certain however, is that Covid-19 has revealed the underlying fragility of modern civilisation. Both governments and businesses have been found woefully unprepared for the pandemic. In the name of Business School (or BS) “efficiency” society has been over-optimised to the degree that there is no redundancy in the system. The supply of welfare services — be it the number of ventilators, intensive care beds or the capacity to process unemployment benefits applications — has only been calibrated to meet “normal” demand. Many companies have similarly been operating with the bare minimum of working capital required in a “normal” scenario, and do not even have liquidity buffers to withstand suspension of operations for 2–3 weeks. This crisis will probably boost sales for Nassim Taleb’s Antifragile, but alas both the public and private sectors have failed to heed the book’s message about building things that gain from disorder — or at least institutions that do not collapse under distress.

Taleb was also one of the few who warned against the risks posed by the coronavirus back in January, in a note published with Joe Norman and Yaneer Bar-Yam. Most governments eventually followed the advice of instituting social distancing policies of varying severity, although the argument stand the damage could have been limited if the politicians had been quicker to act.

In Spain, one of the worst affected countries and where I currently am, the government has extended the society-wide lockdown for a further two weeks until April 26th. The curve for deaths from Covid-19 has fallen from a peak of 950 registered deaths on April 2nd to a daily rate of 6–800 in recent days. With the entire population in lockdown it is so quiet here that you here little else than birdsong. And the degree of compliance with the social restrictions has been notable. But the risk is obviously that the rates of infections and deaths will bounce right up again once the lockdown is lifted.

I cannot claim to have any answers, and neither do I offer any bold or confident predictions. I have only written down some of the questions I find relevant to ask in these times and some of my thoughts around them, on a range of topics in pretty much random order.

Will societies re-open?

This week both the Danish and Norwegian governments have announced plans for a gradual re-opening of society toward the end of this month. (The coronavirus’s epicentre Wuhan, China, has also started a very limited re-opening after 76 days). But if that playbook is anything to go by (for the bigger European countries and the US), it does not look very appealing. There will not be a definite endpoint to the coronavirus crisis. Any restart will be partial, incremental and tentative. To make a permanent escape from social distancing policies by the end of 2020 looks unlikely. A scenario where societies will remain in limbo, with the lockdown becoming a frequent feature of life, looks more likely — and in a way a more demoralising prospect.

How will people deal with extended periods of lockdown?

There are limits for how long people will accept being locked up in their own apartments — especially in city apartments without a garden or even a balcony. In Spain and Italy — both countries in total lockdown — there are signs that people’s patience with the restrictions is getting stretched to its limit. If this state of a affairs continues on and off throughout the year, will people hit the wall? Or, at some point, turn out in the streets?

Is this a turning point in history?

While keeping in mind A.J.P Taylor’s dictum that there were many turning points in history that failed to turn (the 1848 revolutions being the original reference point), John Gray, the British philosopher, in one of the better pieces written on the consequences of the Corona crisis so far, argues convincingly that this is an actual turning point marking the end of the era of Peak Globalisation. That there will be a backlash against over-extended supply chains and the over-reliance on China that has become a central feature of liberal capitalism seems inevitable, the only question is how big the shift will be. That will be both a political and corporate issue. In the business world more critical questions will be asked of MBA types who want to outsource critical functions to China and other low-cost hubs. In politics the growth potential for nationalist economic policies is even bigger now than it was before the emergence of Covid-19.

Of the EU Gray says:

“If the EU survives, it may be as something like the Holy Roman empire in its later years, a phantom that lingers on for generations while power is exercised elsewhere. Vitally necessary decisions are already being taken by nation states. Since the political centre is no longer a leading force and with much of the left wedded to the failed European project, many governments will be dominated by the far right.”

He is right. For all practical purposes the EU is dead. The coronavirus response has made it very clear that the decisive political unit in a time of crisis is the national not the multinational/globalist. The only relevant body of the EU is now the ECB, the central bank which will continue, on an even larger scale, with its money printing schemes that have been going on since the last crisis in the futile hope of breathing fresh life into the European economy. A deep economic depression will in all likelihood not make Italians and Spaniards more happy campers than they already are in a monetary union tied to the same exchange rate as Germany — especially when the Northern Europeans are not even willing to issue common Coronabonds.

The EU’s science chief Mauro Ferrari accurately summed up the state of the union in his resignation statement on Wednesday: “I have been extremely disappointed by the European response to Covid-19. I arrived at the ERC [the European Research Council] a fervent supporter of the EU but the Covid-19 crisis completely changed my views.”

Which companies will die, and which will prosper?

The Corona crisis is a litmus test for businesses; separating the real from the fake and the phony. One thing that has struck me is that the Corona crisis seems to have an outsize negative impact on BS industries. Ponzi startups like WeWork are collapsing. Obviously, many good businesses are being hit too, such as restaurants and hairdressers who normally provide a value but who are being forced to shut down. But they will open again. I am not so sure the same can be said for that strange phenomenon of Late Capitalism, the conference circuit. The conference circus has been one of few really fast-growing industries in recent decades, thanks to the bizarre willingness of public and private organisations alike to spend vast sums on sending huge numbers of people around the world to sit passively and listen in overcrowded auditoria to TED speakers, “inspirational” snake-oil salesmen and other mindful yogis — perhaps followed by a brain-dead brainstorming session — with little value-added to show for the money spent and air-miles flown. Now this whole ecosystem has collapsed instantly. Will it rise again? Perhaps. But certainly, a $500 per attendee conference on the “Future of Work” will not be top of anyone’s list of priorities in a world of 1930s’ levels of unemployment.

As a consequence of the coronavirus many people have less money to spend, but on the other hand they have more time to spend. Naturally this bodes well for all non-sport online entertainment. Even digital newspaper subscriptions appear to be rising, although the rise is being offset by falling advertising income. iGaming, with the obvious exception of sports-betting, stands to profit from the crisis. Players are migrating from sports-betting to online casino. The absence of physical sports may also accelerate the growth of Esports.

In general, it appears that Covid-19 is serving as a catalyst for the transition from analog to digital in a number of industries. Customers who had not yet been pulled in by the allure of online offerings are now being pushed online by Covid-19. While some may return to the physical world after the Pandemic, many late adopters will probably prefer to remain in cyberspace — finding it more convenient than they had expected to order groceries and meals or do shopping online rather than going out. This is probably pushing the online market share of the economy as a whole permanently higher than it would otherwise have been in a world without Covid-19. The resilience of Amazon’s share price through the crisis is an indication of this phenomenon. This will likely have long-term repercussions for the world of retail and for cityscapes in general — will they become permanently (half)-deserted?

The rise of social media has fuelled spending on “experiences” that can be shared virtually. The main beneficiary of this trend has been the travel industry. Now, if people cannot share Instagram stories from airplanes en route to exotic avocado islands, what are they going to do with their lives? The fact that travel opportunities in all likelihood will remain restricted at least to the end of the year, will have a huge impact on social behaviour. Exactly how is harder to foresee.

I expect that there will be, to some degree, a shift from spending on “experience” to spending on “stuff” and “skill”. After all, quarantine, home office or unemployment is a perfect opportunity to learn new skills. Or to just binge watch Netflix series. Being confined at home many will probably upgrade their television sets and sound systems. I would also guess that sales of pianos and other musical instruments.

Is the travel industry facing a temporary or permanent hit?

People’s desire to travel will never disappear. But even if most of the travel restrictions related to the coronavirus should be lifted relatively soon, it will take a long time for the travel industry to recover. In some countries — notably Sweden — airline traffic was already falling mildly before coronavirus, driven by Thunbergian prophecies of impending climatic doom and “flight shame”.

Summer 2020 is already officially cancelled. Even if things should normalize, people who book their summer holidays in advance will not be going on their annual sun-bathing skin cancer fest to the Mediterranean. Perhaps it will not be that much missed. Many will instead have more time to spend on more meaningful pursuits, such as gardening, ornithology or Olympic weightlifting, and will probably come to the conclusion that spending two days in a Ryanair nightmare for lying 12 days on an overcrowded beach surrounded by obese Brits, Scandis and Germans, is further from the idea of paradise than the tour operators present it as.

Will we go back to the office?

One of the businesses I am involved in has just spent a lot of money on new offices — which we cannot use due to the Corona crisis. As Simon Kuper comments in the FT even the British government is now holding Cabinet meetings on Zoom. This unplanned shift from physical to virtual workspaces is far from seamless. But after one month of adaption and adjustments it so far seems to be working much better than feared. Though the question remains if organisations would be able to maintain cohesiveness over time if they ditched the office permanently and worked only remotely? It is after all in the office the esprit de corps is built, and that is harder to do on Skype. So, at least speaking for myself, we will be going back to the office when it will become possible to do so.

Does the crisis mark the return to Tradition?

I may be prejudiced but I believe the coronavirus crisis will reverse the feminization of society associated with Late Capitalism to some extent. Based on my (admittedly very anecdotal) evidence it seems that biological traditional gender patterns are reasserting themselves in this time of real crisis. The Feminists now have the chance of a lifetime to hammer the final nail in the coffin of the oppressive Patriarchy, that they have complained so loudly about and are purportedly so prepared to overthrow. But, interestingly, they don’t seem too keen on actually grabbing the chance to seize power over the commanding heights of the economy for themselves, and have instead gone surprisingly quiet. While (some) men are now outwardly exploring new opportunities and assuming risk in an upended world, most women (and indeed the majority of men too) are seeking the security and comfort offered by the welfare state and/or domestic life.

Many men and women alike will be having second thoughts about modern city lives these days. In a lockdown who will fare the best: a family living in a substantial house with a garden in the countryside or a suburban area? Or a single person or family living in small, overpriced apartments in a metropolis? The answer is quite obvious. I was myself in London until mid-March, when the city was starting to feel like a ghost town. Then the Spanish countryside, even in a state of total lockdown, is way more pleasant.

This crisis is a severe indictment of modern society. In a time like this press conference assurances ring rather hollow from elected leaders trying to evade responsibility for a crisis they were woefully unprepared for and reacted slowly too. Only the words of a true Monarch carry any weight in circumstances like these. The Corona crisis has shown the significance of having a Head of state elevated above the drama and frivolity of day-to-day politics and the arriviste Macrons of the world — executing the dignified part of the Constitution as Bagehot would have it. Queen Elizabeth’s special address to the nation achieved this in a way no speech from a regular Head of government or elected President could — which is precisely why the Queen’s address made the French boil over with Regis envy.

Will the Academy survive?

Peter Thiel has drawn an interesting analogy between the Catholic Church of the early 16th century and universities of today. In the place of exorbitantly priced indulgence letters that will pay off in afterlife we have got exorbitantly priced academic diplomas that will supposedly pay off in this life. This system is obviously a scam. The only surprising thing is how long the illusion has been maintained, even if almost everybody, or at least a whole lot of people, know that the Emperor has no clothes. But now, as for virtual working and online shopping, the coronavirus might be a catalyst for change. Most students are already aware that they can learn more from watching YouTube videos for free than from listening to third-rate lecturers live. But few have been willing to break with orthodoxy. Now that campuses in many countries are closed and education programs are effectively little more than dressed-up webinars, it will become increasingly evident how little educational value students get for their tuition bucks. This may be a Luther moment — but do expect a protracted counter-revolution from the orthodox academic establishment.

Will the social distancing policies unleash a creative explosion?

Studies allegedly indicate that boredom can be a catalyst for creativity. With millions now unemployed, furloughed, quarantined or pretending to continue to work from home we can only hope so. The long-awaited innovation explosion — that the techno-optimists for so long have said is right around the corner — propel us out of our decades-long secular stagnation.

Will wannabe dictators seize the moment?

Why not? Has there ever been a more opportune moment for would-be dictators to have a shot at achieving absolute powers. Governments from Russia to Norway have already used the Corona crisis as a pretext for seeking emergency powers. With the American presidential election coming up in November it would be naïve to expect that President Trump will not try to exploit this extraordinary situation. “Sovereign is he who decides on the exception”, as the controversial German jurist Carl Schmitt said.

Korona, kapitalisme og kreditt

I møte med de økonomiske konsekvensene av Koronaviruset, trekker myndighetene feil lærdommer fra feil krise. Mer radikale tiltak kreves for å forhindre økonomisk kollaps.

Napoleon sa om Louis den 16. at han ville vært en utmerket konge i normale tider. Men under en revolusjon var han verdiløs. Det samme kan si om Erna Solberg: Soldronningen for de gode tider, som helst sitter stille i båten og håper at alt går bra. Men når krisen kommer, kommer hennes regjering til kort.

En vesensforskjell fra finanskrisen i 2007-08 er at myndighetene nå implisitt vil redusere økonomisk aktivitet til et minimum, for å stanse spredningen av koronaviruset. Fra et folkehelseperspektiv, som under en pandemi naturligvis trumfer økonomiske hensyn, gir det mening.

Utfordringen er å forhindre at det villede fallet i økonomisk aktivitet blir midlertidig og ikke irreversibelt. Det er lettere sagt enn gjort. Uavhengig av om korona-pandemien tiltar eller avtar herifra, må vi vente en bølge av konkurser, permitteringer og masseoppsigelser i næringslivet. Også mange solvente bedrifter vil rammes og felles. Flere av dem vil trolig ikke komme seg opp igjen.

“Kick the can down the road”: Kapitalstrukturen må settes på pause

Cluet for å forhindre at den økonomiske kollapsen blir permanent ligger i å, for å si det litt banalt, sette kapitalstrukturen på “pause”. At 2020-regnskapene for bedrifter i Norge og verden over kommer til å bli dyster lesning, er allerede et faktum, som det er lite å få gjort med.

Det man derimot må, og potensielt kan oppnå, er å forhindre at blodrøde regnskaper får sine sedvanlige effekter på bedriftenes balanser, i form av nedgang i likvide midler, økning i kortsiktig gjeld og svekket egenkapital.

Kun staten kan klare dette. Om bedriftene nå skulle handlet rasjonelt etter sin smale egeninteresse, vil det bety å sette alle kluter til for å redusere kostnadsbasen, for å tilpasse seg en ny realitet med drastisk svekket etterspørsel. Fra et samfunnsøkonomisk perspektiv er det verst tenkelig scenario. Bedrifter kan skalere ned raskt, men det vil ikke nødvendigvis gå like raskt, eller være like enkelt å skalere opp igjen, når pandemien forhåpentligvis har gått sin gang. Om ikke myndighetene kommer med radikale tiltak vil koronaviruset bli katalysatoren som sender verdensøkonomien ned i en ny balance sheet recession, og potensiell depresjon som det vil ta mange år å lege sårene fra.

Manglende fantasi

Solberg-regjeringens økonomiske kriserespons bærer vitne om manglende kreativitet og fantasi. Det er langt fra John Maynard Keynes til Jan Tore Sanner. Som Gard Michalsen påpeker i E24, er regjeringens respons for lite og for sent.

Som i 2007-08 setter myndighetene, i Norge så vel som i andre land, igjen for mye lit til at sentralbankene og bankvesenet skal løse krisen. Å tro at massiv likviditetstilførsel fra sentralbankene til bankvesenet skal “kanaliseres” videre til næringslivet og husholdningene er like naivt i dag som det var i 2008. Lærdommene fra finanskrisen og årene siden sier ettertrykkelig at kvantitative lettelser pumper opp prisene på aksjer, obligasjoner og eiendom, men i langt mindre (om noen) grad lykkes å stimulere til økonomisk vekst som kommer små- og mellomstore bedrifter eller vanlige husholdninger til gode.

Likevel følger sentralbankene nok en gang samme oppskrift. Federal Reserve i USA, Bank of Japan, Bank of England og Den europeiske sentralbanken har alle de siste dagene varslet nye likviditetstiltak på flerfoldige hundre milliarder av dollar. Kanskje kan det dempe fallet på børsene, men det vil gjøre lite for å stagge det økonomiske utfallet av koronaviruset.

Solberg-regjeringens 100 milliarder kroner til to nye lånetiltak havner i denne kategorien. Et overskriftstall som høres imponerende høyt ut, men som har liten substans. “Big hat, no cattle”, som de sier i Texas.

Å tro at 50 milliarder kroner i lånegarantier til SMB-bedrifter vil ha noen materiell og umiddelbar effekt for SMB-bedrifter som nå befinner seg i en prekær likviditetssituasjon, er nesten et hån og viser bare hvor fjern og Solberg-regjeringen er fra næringslivet. Og hvilken overdreven tiltro regjeringen har til bankvesenet.

Det vil ta månedsvis før dette programmet gir utslag i nye lån til hardt pressede bedrifter. Kvoten på 50 milliarder vil neppe fylles opp, og isåfall vil det trolig skje i form av lån til bedrifter som uansett ikke trenger det.

Likeså vil de 50 milliarder kronene lovet til gjenetablering til Statens obligasjoner trolig ta flere måneder, og være til liten nytte for å løse den akutte krisen.

Bankvesenet må stille opp

Det finansielle systemet som kapitalismen hviler på, er et korthus som vil kollapse dersom det trekkes mer kreditt ut av systemet enn det som tilføres av ny kreditt – George Soros skriver godt om dette i finansklassikeren The Alchemy of Finance.

For å forhindre at en slik kollaps utløses av COVID-19 er det mest innlysende og nærliggende myndighetene kan bidra med ikke å tilføre ny kreditt, men å gi næringslivet og husholdningene fritak fra å tilbakebetale eksisterende gjeld.

I tillegg til å utsette betalingsfrister av ALT av skatter og offentlige avgifter inntil videre, bør staten innføre et moratorium på låneavdragsbetalinger for bedrifter og husholdninger – slik Italia allerede har gjort og Nordea har gitt sine boliglånskunder tilbud om på eget initiativ. Dette bør dog ikke overlates til hver enkelt bank, men vedtas ved statlig dekret.

Dette er også til bankvesenets beste. Å opprettholde business as usual med betalinger av avdrag (og renter) i en situasjon som denne, er sikreste måte å sende økonomien ned i en deflasjonsspiral. Det eneste som kan redde næringslivet, og bankvesenet, er “extend and pretend” i massiv skala. Forleng lån, utsett rente- og avdragsbetalinger, lat som at det kommer til å bli tilbakebetalt i fremtiden. Men ikke nå.

Banker liker å snakke om hvor mye de bryr seg om samfunnet, så hvis de vil motbevise skeptikerne som (ikke uten grunn) mener at bankvesenet er en samfunnsfiende, så er øyeblikket nå.

100 milliarder til folket

Om det er en tid for helikopterpenger, så er det nå. Istedenfor å fortsette å tro at likviditetstilførsel til bankvesenet skal gjøre folket rikere – tross 13 år av fraværende bevis på at det fungerer – hvorfor ikke bare gi penger til folket direkte? Ved at sentralbanken debiterer kontoen til alle privatpersoner med konto i norske banker. I normale tider ville et slikt tiltak vært helt hinsides, med en inflasjonsrisiko som er høyst reell. Men nå er det desperate tider, som krever radikale tiltak. Dessuten, om det er noe 13 år med kvantitative lettelser har vist, så er det at inflasjonen som det var grunn til å frykte, har latt vente på seg. Tvert imot er risikoen nå deflasjon – den 9. mars bikket hele den amerikanske rentekurven under én prosent – mer enn inflasjon.

100 milliarder kroner i helikopterpenger, ville gitt 18.630 kroner hver til Norges 5.367.580 innbyggere, (gitt at alle har en bankkonto). Eller drøye 40.000 kroner per gjennomsnittshusholdning. Det burde være adekvat til å hjelpe husholdninger, som enten i form av inntektsbortfall eller ekstraordinære utgifter, er blitt satt i en presset likviditetssituasjon av koronaviruset. I tillegg vil det ha en mer umiddelbar stimulerende effekt på næringslivet, enn lånetiltak som avhenger av bankvesenets (diskutable) dugnadsånd.

Risikoen er verdt å ta, og får håndteres senere. I en ekstraordinær situasjon som denne er det eneste riktige å “kick the can down the road”. Stopp pandemien først. Det er ingen grunn til å bekymre seg for de langsiktige konsekvensene av “uansvarlig” økonomisk politikk, hvis, for å parafrasere Keynes: “in the short run we are all dead”.

Så nå er det på tide for Erna Solberg å komme seg opp på hesten og svinge pisken (mot bankvesenet). Denne krisen krever en Napoleon, ikke en Louis XVI.

Økonomiske muligheter for våre barnebarn – 2119

Vi lider nå under et angrep av fanatisk teknologi-optimisme. Det er vanlig å høre foredragsholdere forkynne at vi står på randen til en ny epoke med eksponentiell økonomisk vekst i det 21. århundre; at vi er i ferd med å komme inn på den andre halvdelen av det ordspråklige sjakkbrettet, hvor utviklingen av kunstig intelligens vil eksplodere og menneskets biologi overskrides av teknologi.

Jeg tror at dette er en vrangforestilling av hva som skjer rundt, og med oss. Vi lider ikke av voksesmertene forbundet med ungdommelighet og vitalitet, men av alderdommens revmatisme.

Verden i dag er rikere enn noen gang og har teknologi så avansert at den ville vært hinsides fatteevnen til mennesker fra alle tidligere epoker i historien. John Maynard Keynes har fått rett i sin spådom fra Economic Possibilities for our Grandchildren, at levestandarden i rike land ville være 4-8 ganger høyere ett århundre fra han skrev sitt kjente essay i 1930 – med fasit i øvre ende av intervallet.

Derimot har Keynes fått mindre rett i den andre delen av sin spådom, nemlig at vi ville høste fruktene av økt velstand ved å ta ut mer fritid. Der Keynes så for seg tretimers skift og femtentimers arbeidsuke, jobber de fleste fortsatt 40-timersuke og åttetimersdag.

Hva er da svaret på spørsmålet Keynes stilte om menneskeheten har løst sitt økonomiske problem, som har definert tilværelsen siden tidenes morgen? Kampen for overlevelse gitt knappe ressurser. Etter Keynes død har den grønne revolusjon sørget for revolusjonerende produktivitetsgevinster i jordbruket over hele verden, med den følge at en tilstrekkelig næringsrik diett i dag bare er en knapp faktor for «the bottom billion» av klodens 7,7 milliarder innbyggere.

Klodens kapitalbeholdning har mangedoblet seg slik Keynes prognostiserte, men forblir stadig like ulikt fordelt som ved inngangen til Den store depresjonen på 1930-tallet. Likeså har inntektene for store deler av arbeider- og de lavere sjikt av middelklassen stagnert i flere tiår.

Om Keynes hadde fått forevist de økonomiske statistikker for dagens samfunn, ville han formodentlig ha konkludert at, jo nå er det økonomiske problem omsider løst. Men for oss som er her i dag virker det ikke sånn. Fattige i dag er rikere enn noen gang. Likevel er debatten om økonomiske ulikheter mer intens enn den har vært noen gang siden 1930-tallet. Selv om folk objektivt sett har fått dekket alle nødvendige materielle behov, vil mennesker subjektivt oppleve knapphet, så lenge Kanskje kan det økonomiske problem som sådan aldri bli løst.

Keynes ville nok også stusset over at de siste 90 årenes massive velstandsøkning ikke har blitt akkompagnert av en dertil dramatisk nedgang i arbeidstid. Forholdet mellom arbeid og velstand i en moderne økonomi er en gåte pakket inn i et mysterium. Grunnleggende økonomisk teori sier at det er et likefrem forhold mellom input av arbeid (og kapital) i den ene enden og output av varer og tjenester i den andre. Slik var det fremdeles i Keynes’ tid. I dag fremstår forholdet mer uklart.

Er årsaken til at mennesker fortsatt jobber såpass mye først og fremst økonomisk eller moralsk? Er dagens høye velstandsnivå betinget av alle arbeidstimene som legges ned, og ville velstanden følgelig kollapset om vi plutselig begynte å jobbe mye mindre? Eller kunne vi redusert arbeidsuken til noe slik Keynes så for seg, og likefullt vedlikeholdt dagens velstandsnivå?

Om man skal tro antropologen og aktivisten David Graeber er så mye som over halvparten av jobbene i vår moderen økonomi «bullshit-jobber», som ikke tjener noen annen hensikt enn å holde folk i sysselsetting, og som kunne vært fjernet uten at noen verdiskapning gikk tapt, mens de som stod i slike jobber kunne viet seg til mer meningsfulle aktiviteter, som å spille boccia eller studere Spinoza – og fått utbetalt borgerlønn.

Enn så lenge er størsteparten av middelklassen i rike land altfor avhengig av månedslønnen fra arbeidsgiver til å gi avkall på den, selv om arbeidet i seg selv kanskje ikke skaper noen verdi. Og selv om befolkningen i dag er rikere enn noen gang, er folk flest også mer forgjeldet enn noen gang, høyinntektsgrupper inkludert, hvilket betyr at de færreste er robuste mot eventuelle økonomiske sjokk, og følgelig er avhengig av å tråkke så raskt de kan i hamsterhjulet for å bli stående på stedet hvil.

At store deler av befolkningen plutselig skal si opp jobbene sine for å nyte mer fritid, kommer derfor ikke til å skje. Ihvertfall ikke av seg selv. Og i den grad folk kommer til å jobbe mindre, vil det isåfall skje mer i form av de facto snikferiering med ovale helger, «hjemmekontor» og avrundede arbeidsdager uten at den nominelle arbeidstiden blir redusert de jure – et fenomen som utvilsomt er utbredt i de høyere samfunnslag i rike land som Norge. Kanskje har Keynes således fått noe mer rett i at vi egentlig arbeider mindre enn statistikken skulle tilsi?

Implisitt i Keynes spådommer om mer velstand og mindre arbeid ligger en forutsetning om at fruktene ville bli nogenlunde likt fordelt. Men slik ble det altså ikke. Som blant annet Occupy Wall Street-bevegelsens «We are the 99%» og Thomas Pikettys Kapitalen i det 21. århundre har rettet flomlysene mot, er økonomisk ulikhet blitt det definerende fenomenet ved vår samtidsøkonomi. Om ulikheten vedvarer, vil de 99 prosentene fortsette å måtte klokke arbeidstimer inn i de neste 100 årene.

Om vi forsøker å løfte blikket 100 år frem i tid er det ikke grunn til å være overstadig optimistisk. De mest utopiske fremtidsvisjonene om kolonisering av andre planeter og udødelige supermennesker sammenkoblet med artifisiell intelligens lastet opp i cyberspace er kanskje en realitet om vi ser tusen år frem i tid, men kan nok med sikkerhet avskrives for de førstkommende hundre årene.

Selv om utviklingen innen informasjonsteknologi, eller bitøkonomien har vært forrykende de siste 50 årene, forblir det et faktum at nyvinningstakten i den fysiske verden, motsetningsvis omtalt som atomøkonomien, har vært vesentlig tregere. Mye tregere enn da Keynes skrev sitt essay. Tross den midlertidige depresjonen, var det en tid hvor revolusjonerende (general purpose-) teknologier som elektrisitet, bensinmotoren, fly, telefoni, radio, samlebåndsproduksjon, innlagt vann og kloakk, bare såvidt hadde begynt å kaste av seg. Allerede på Keynes’ tid var det ikke helt urimelig å forvente flyvende biler 100 år frem i tid. Istedet fikk vi elektriske sparkesykler.

Blant alt snakket om å sende mennesker til Mars, er det lett å glemme at ingen land i dag har evnen til å sende en mann til månen, slik amerikanerne først oppnådde i 1969. 1969 kan som sådan ha representert toppåret for menneskehetens fremtidsutsikter. En måned senere kom Woodstock-festivalen og markerte starten på slutten for Les Trente Glorieuses, før 1970-årene ble et tiår med stagflasjon og det globale pengesystemets endelige løsrivelse fra gullstandarden, som åpnet opp for at finansiell sektor vokste som en kreftsvulst i tiårene som fulgte, i samband med en gradvis uthuling av arbeiderklassen i vestlige land idet Kina, Russland og resten av Østblokken sluttet seg til verdensøkonomien og produksjon ble outsourcet til lavkostland under 80- og 90-tallets globaliseringsoptimisme.

I etterpåklokskapens lys bærer epoken 1969 – 2019 preg av senkapitalistisk hybris. Den fenomenale velstandsveksten det siste århundret, fremstår følgelig mindre imponerende når man splitter det opp i to 50-årsperioder, som får den siste til å fremstå relativt stagnerende sammenlignet med den første. Det er mitt utgangspunkt når jeg forsøker å se inn i spåkulen for de neste 100 årene, og som gjør at mine prognoser trolig er mer pessimistiske her jeg nå skriver dem i 2019, enn om jeg hadde skrevet dem i 1969. (Norge, hvor oljeeventyret begynte med oppdagelsen av Ekofisk-feltet i nettopp 1969, forblir til en viss grad et annerledesland i denne analysen).

Det sies at fremtiden allerede er her, den er bare ujevnt distribuert. Keynes beskrev da også sin tids rikfolk som fortroppen av spioner som har slått opp telt i det forjettede fremtidsland. Vi kan fastslå at livene til rikfolk er nokså like i 2019 som de var i 1930 – bare med litt flere elektroniske duppeditter. Likeledes er livene til de aller fattigste også ganske uforandret, mens det er middelklassens liv som har forandret seg mest radikalt, samtidig som denne klassens andel av den samlede befolkningen har blitt mye større.

Fragmenter av fremtiden i 2119 kan observeres fra vår feltbase i 2019. Trolig er det livene til de aller rikeste og de aller fattigste som vil endre seg minst også de neste 100 årene. Mens middelklassen står overfor en brutal omveltning.

Hva vi vet, eller iallefall tror at vi vet, om verden i 2119, er at jordens befolkning vil ha nådd et platå på rundt 11 milliarder mennesker. Mesteparten av denne veksten fra dagens 7,7 milliarder vil komme i Afrika og Asia. Vesten – som jeg med her mener Europa og USA – vil om hundre år kun stå for en tidel av verdens befolkning.

Dette vil legge et enormt press på middelklassen i det som i dag er rike land. Vi kan allerede i dag se konturene av denne utviklingen. Norge med sin oljevelstand har vært relativt skjermet, til sammenligning med middelklassen i andre vestlige land som utsettes for kraftig uthuling. I den kapitalistiske verdens flaggskip, USA, har de nederste 60 prosentene av befolkningen ikke opplevd noen som helst reell inntekstvekst i de fire tiårene fra 1980 til i dag.

Middelklassens uthuling har flere årsaker. Både at tradisjonell industriproduksjon blir mindre arbeidsintensiv og/eller settes ut til lavkostland, så vel som fremveksten av plattformøkonomien og den medfølgende atomiseringen av arbeidsmarkedet.

Ikke engang Norge er immunt mot konsekvensene av plattformøkonomien. Riktignok er det fremdeles et marginalt fenomen i samfunnsøkonomisk sammenheng, men det er på marginene at forandring starter. I skrivende stund er Foodora-saken et godt eksempel på hvor utviklingen er på vei. Den såkalte delingsøkonomien, med tjenester som Foodoras sykkelbudleveranser av restaurantmat, river ned det organiserte, ordnede arbeidsmarkedet som trepartsmodellen i Norge har bygget opp. Ikke bare arbeider sykkelbudene ugunstige skift til lav lønn, men de må attpåtil stå for kapitalinnsatsen selv, i tillegg til arbeidsinnsatsen, i form av egen sykkel som de selv må stå for vedlikehold av.

Hvis vi ekstrapolerer fra i dag, er det rimelig å anta at dette er veien arbeidsmarkedet vil gå i det kommende hundreåret. I en globalisert verdensøkonomi med fri flyt, eller stor grad av flyt av arbeid, kapital, varer og tjenester, vil priser tendere til å konvergere på tvers av landegrenser. Ergo, vil det bli stadig vanskeligere å opprettholde geografiske lommer – som Norge – med substansielle lønnspremia i forhold til andre steder, når arbeidet, kapitalen, varene og tjenestene som omsettes i stor grad er homogenisert og globalisert. I fremtiden er det nærliggende at også middelklassejobber i skjermet sektor – som den oftebrukte eksemplariske frisøren – vil utsettes for det samme lønns- og prispresset som industriarbeidere i konkurranseutsatt sektor, ettersom også tjenestemarkedet i økende grad globaliseres, og ikke minst at arbeidskraften som utøver tjenestearbeid globaliseres. Dette er allerede tydelig i rike land som Norge hvor i løpet av en generasjon eller to, hele yrkesgrupper, som renholdsarbeid og godstransport, er blitt langt på vei overtatt av innvandret arbeidskraft fra lavkostland.

I dag er bruttonasjonalprodukt per innbygger på verdensbasis nokså nøyaktig 100.000 kroner. Hvis verdiskapningen per innbygger skulle fortsette å vokse med omkring to prosent per år også i de neste 100 årene, som i de forrige 100, vil det bety mer enn en syvdobling til 750.000 kroner i 2119. Ergo, at verdensborgeren i 2119 er like rik som gjennomsnittsnordmannen i dag, (NB er disse omtrentlige og upresise, ikke minst er gjennomsnittsnordmannens inntekt en del lavere enn hans bruttonasjonalprodukt). Det ville kreve intet mindre enn en tidobling av verdensøkonomien, fra dagens nivå på 800 billioner kroner, til 7.500 billioner kroner. Det kommer ikke til å skje.

Det som derimot kommer til å skje er at veksten, især i de rike landene, kommer til å avta, slik den allerede har de siste 50 årene og med en enda tydeligere nedbremsing siden årtusenskiftet. På 2000-tallet har veksten i BNP per capita i USA og eurosonen kun vært på en prosent per år. Det er ikke plausibelt at veksten i de rike landene plutselig vil skyte fart igjen i de neste hundre årene. Tvert imot er det mer sannsynlig at veksten vil svekkes ytterligere til rundt en halv prosent per år, eller stagnere helt.

Hvis BNP per capita skal vokse med én prosent årlig i de neste 100 årene, mens befolkningen øker til 11 milliarder, ville det bety en firedobling av verdensøkonomien, og et velstandsnivå på linje med Spania i dag, (~280.000kr). Jeg tror i beste fall at velstandsnivået på verdensbasis vil vokse med en halv prosent per år, som fortsatt vil bety godt og vel en fordobling av verdensøkonomien i løpet av 100 år. Gjennomsnittsmennesket i 2119 vil da være omtrent like velstående som litauere og latviere i dag, (~160.000kr)

Det som vil skje, som allerede har begynt å skje, er en stor konvergens hvor lønningene til middelklassen i fremvoksende land som Kina vil stige opp mot baltiske nivåer, mens lønningene til middelklassen i rike land som Norge vil synke ned mot baltiske nivåer. Skvisen middelklassen i vestlige land har opplevd de siste tiårene er bare begynnelsen. Idet lønnsnivået for homogenisert ikke-spesialisert arbeidskraft vil konvergere mot en global norm, vil store deler av den historiske arbeiderklassen i Europa og Nord-Amerika miste sin relative økonomiske trygghet som har definert epoken siden andre verdenskrig. I dens sted vil det oppstå et prekariat av i økonomisk forstand unyttige borgere som markedet ikke vil verdsette nok til å gi dem en levelig lønn for deres arbeid. Foodora-syklister og Uber-sjåfører har dannet fortroppen for denne hæren som vil invadere fremtiden.

Det er med andre ord ikke særlig grunn til å være optimistisk for hva som er i vente. I W. B. Yeats’ ord: sentrum kan ikke holde. Så hva skal gjøres? Kanskje vil mennesker i fremtiden, som horder av unge har gjort allerede, gi opp det virkelige liv og gjøre en retrett inn i den virtuelle verden og leve livene sine i parallelle cyber-samfunn. Problemet med det er bare at den virtuelle verden ikke kan kutte navlestrengen fra den fysiske. Vi er raskt på vei mot punktet hvor den fysiske verden ikke lenger kan mette det eksponentielt økende energibehovet som kreves for å holde den virtuelle verden i live – hvilket er årsaken til at internasjonale internettkjemper driver forebyggende kolonisering av datasenter-egnet norsk utmark. Når våre barnebarn sitter og spiller dataspill i 2119, ser jeg derfor ikke bort fra at det vil være, Civilization XXX: New Dark Ages.

Will there be life after Google?

The Google system of the world is an evil empire that stifles entrepreneurial activity and is doomed to fail, before a decentralised Internet will rise from the ashes, argues George Gilder in his latest book.

life after google

On the face of it the main argument George Gilder is making in his latest book is preposterously bold: “The Google era is coming to an end because Google tries to cheat the constraints of economic scarcity and security by making its goods and services free. Google’s Free World is a way of brazenly defying the centrality of time in economics and reaching beyond the wallets of its customers directly to seize their time.”

Considering that Google generated revenues of 136,8 billion dollars and profits of 30,7 bUSD in 2018 and has a market capitalisation not far shy of a trillion (870 bUSD as of April 22), its decline and fall does not seem imminent, but a rather far-fetched prospect.

Google’s system of the world

Google is not only one of the most valuable (on some days the most valuable) companies in the world, but more than any other of the tech giants Google represents a system of the world, (borrowed from Neal Stephenson’s Baroque Cycle trilogy). A system of the world necessarily combines science and commerce, religion and philosophy, economics and epistemology.

Google’s theory of knowledge, its religion, is Big Data. Whereas good Christians may go to heaven “good googlers” are on a determinist path to a place called Singularity, where technology has transcended biology and artificial intelligence surpassed human intelligence.

Reaching Singularity rests on two conditions:

All data in the world can be compiled in a single “mind”.
Algorithms sufficiently comprehensive to analyse the data can be written.

As Gilder points out the Google theory of knowledge and mind are not mere abstract exercises. They are central to Google’s business model, which has progressed from “Search” to “Satisfy”. Google can already show considerable evidence that with enough data and processors the search engine can know better what will satisfy your longings than yourself. Notwithstanding that it in many cases makes us stupider: Just last weekend I was in Vienna and Google could tell me a restaurant I fancied was closed for lunch. We walked by to double-check and lo and behold open the restaurant was.

The fatal conceit of Google-Marxism

Gilder – an unreconstructed Reaganite free-marketeer – sees Google’s idea of a universal omniscient logic machine as deterministic and ultimately dictatorial. He accuses Google of repeating Karl Marx’s erroneous belief that we have reached the final stage of history. An immanentized escathon, in the words of William Buckley. Ironically both the technology Utopians and Dystopians share the belief/delusion of the coming all -powerful AI. Gilder thinks they are exaggerating the attainments of their own era, and sees the gospel espoused by the Google guys, Ray Kurzweil (since 2014 employed by Google) and the likes of Life 3.0 author Max Tegmark and Yuval Noah Hariri as hubristic Google-Marxism. Gilder accuses the AI champions of being blind to the realities of consciousness and of having forgotten Gödel’s lesson that all logical systems, such as AI, is incomplete and in need of an “oracle” (such as human consciousness outside the machine). He does not share Kurzweil’s position that when a machine is fully intelligent it will be recognised as conscious.

Indeed, there are eerie similarities between the Google theory of progress and the Soviet economic theories of central planning. The Soviet economist Leonid Kantorovich, who won the Sveriges Riksbank’s economics prize in 1975, the year between Friedrich Hayek and Milton Friedman, never shed the belief that advances in information technology would give Gosplan (close to perfect) knowledge and make central planning more efficient than market choices.

One foundational feature of the Google system is the Zero Price. Informed by Internet pioneer Stewart Brand’s slogan that “Information wants to be free”, Google has made (almost) all of its content and information free, in a digital version of the medieval Commons – i.e. public resources available to all. Private data are the mortal enemy of the Google system of the world.

In Gilder’s view the Zero price is the fatal flaw that dooms Google, just as Hayek predicted that the lack of price signals would doom the Soviet economy. Jeremy Rifkin heralds a Zero Marginal Cost Society, where prices for near every product and service will reach (close to) zero as every device and entity become connected in an Internet of Things and exponential network effects will unleash a Utopia of leisure and abundance – (a vision for the future that needless to say is much in vogue at the Googleplex).

Gilder does not buy into that prophesy. He sees “free” not only as a lie – as Apple CEO Tim Cook acerbically pointed out: “If the service is ‘free’ you are not the customer but the product” – but as a return to the barter system, a system so inefficient that it was left behind in the Stone Age: “Above all, you pay in time. Time is what money measures and represents – what remains scarce when all else becomes abundant in the “Zero Marginal Cost” economy. Money signals the real scarcities of the world concealed in the false infinities of free.” Furthermore, “free” entails a slippery avoidance of liabilities to real customers and no concern for security.

Disconcertingly for Google there are many signs that internet users have had enough of attention-grabbing ads and lack of data privacy.

Adoption of ad-blockers are skyrocketing to the degree that even Google itself has felt forced to launch their own “ad-blocker” – and it is the most attractive demographics for advertisers that are leading the trend. In the US 25 percent of internet users were blocking ads in 2016.
Internet users are simply developing “banner blindness”, becoming more or less immune to the bombardment of ads.
In the product-search category Google is rapidly losing ground to Amazon. Internet users still prefer Google for informational searches, such as “What is the capital of Kazakhstan?”, “Was Jesus a Muslim?” or “When will the world end?”. But by 2017 Amazon had captured 52 percent of the product-search market; intentional searches for products to buy, vs 26 percent for Google and other search engines.

Nobody really wants the value-subtractive ads that are the underpinning of the Google system. Gilder, who is 78, thinks this will doom Google within his lifetime, although he qualifies his prediction by saying that search will likely remain a valuable business.

Crashing into Hölzle’s Wall

If you meet any technology investor today his first question will likely be if your business is “scalable”? Meaning if you are able to grow revenues with less than proportional, or ideally no increases in marginal cost – the key to ever-fatter profit margins. That is what the likes of Google and Facebook have achieved, and what investors hope the likes of Amazon, Uber, Spotify, AirBnB et al. will achieve.

The question is if the margin story can continue for Google? An inherent challenge in Google’s business model is that “free” inevitably leads to over-consumption. “Free” has enabled Google to capture (effectively) the entire market, but will the company eventually collapse under the weight of the unlimited demand for its free services? As Gilder writes: “The nearly infinite demand implicit in ‘free’ runs into the finitude of bandwidth, optical innovation, and finance – a finitude that reflects the inexorable scarcity of time. This finitude produces not zero marginal costs but spikes of nearly infinite marginal costs – Hölzle’s wall. The latter a reference to Google employee number 8, Urs Hölzle’s lament that Google’s cloud infrastructure was “rapidly approaching a wall”.

The exponential growth in demand for Google’s services (see chart below) – which roughly doubles every year – has forced Google to build out the largest cloud infrastructure on the planet over the past 15 years, with three underwater cables across the Pacific and more on the way. The 12.899km third cable from California to Hong Kong (that was scheduled to be completed last year but is delayed) will carry data at a rate of 144 terabits per second – up 29-fold from Google’s first 5tbps cable from California to Japan in 2010.

Screenshot 2019-04-22 14.10.56 — Source: Urs Hölzle keynote OFC Plenary, 2017

This is putting huge Capex pressure on Google, with the need to continue building massive data centres and undersea cables. As Hölzle pointed out in his 2017 keynote apart from the change from copper to fibre, cable building has not changed much over the past 150 years and the system’s reliance on a small amount of cables leaves it vulnerable to tail risks. Still, Google is to a significant degree essentially free-riding on the backs of carriers such as AT&T, Verizon and T-Mobile, whose infrastructure investments Google is totally reliant on. The cost is ultimately passed on to the end user: On average (US) smartphone users pay 23 dollars per month for ads, trackers, scripts and other spam that strikes them with malware, slows load times and depletes battery life. Strikingly, on popular publishers’ sites as much as 79 percent of the mobile data are adds.

What will replace the Google World Order?

The latter parts of Gilder’s book are somewhat unstructured and anecdotal but contain insightful observations. Obviously, it would be a futile exercise to foretell exactly how the Google system will meet its end. But Gilder argues interestingly that the overarching threat to Google will come from the Cryptosphere. That the un-secure and centralised Google Empire will be replaced by a decentralised and secure Crypto order. That is admittedly far away – 70 percent of all Internet links are handled through Google or Facebook. But alternatives are emerging, such as Blockstack, whose mission is to “foster an open and decentralised Internet that establishes and protects privacy, security and freedom for all internet users.” Tim Berners-Lee, who fears the Internet is being broken by the centralisation of user data in the giant silos of Google, Facebook, Amazon and Microsoft – is one Blockstack admirer.

Gilder also goes through the emergence of Bitcoin and Ethereum and discusses their potential and limitations as currency systems. He sees the upper limit of 21 million total bitcoin units as one of the main challenges that would likely be highly deflationary over time. The high price volatility of Bitcoin could likely be addressed by more issuance and circulation of Bitcoin-redeemable liabilities – something which SEC’s clampdown on ICOs and crypto in general may put up obstacles for. Nevertheless, despite all the challenges it is clear that it is in the Cryptosphere the most interesting economic and political ideas are to be found today.

In the “Googlesphere” on the contrary, true entrepreneurial activity is being stifled by the narrow focus on developing largely parasitic apps and profitless Unicorns inside the Google/Android, Facebook or Apple iOS ecosystems — (a charge I would stand guilty of myself). Gilder also laments investors excessive belief in Marc Andreessen’s mantra that “Software will eat the world”, which has the unfortunate effect of crowding out innovative hardware investment. Though there are pockets of light, such as Luminar Technologies, which manufactures advanced Lidar censors for autonomous vehicles. What makes Luminar founder Austin Russell stand out from the crowd is that he does not believe in the consensus that autonomy is chiefly a software problem, but a hardware one, and that no amount of big data, artificial intelligence and software can make up for bad data from hopelessly outdated hardware. In contrast for example, two of the three finalists in the startup pitch at the Web Summit in Lisbon before Christmas were self-driving startups focused on getting more out of existing hardware with better software, one of them even claiming that a $12 camera will suffice for self-driving – Luminar would beg to differ.

Most business books today are boring. Life after Google is definitely not boring. And even if Gilder will be proved wrong in his hypotheses about the fall of the Google system of the world and the rise of the Blockchain economy, his analyses are insightful as well as idiosyncratic. That makes the book worth reading for everybody seeking to understand the new and uncharted economic landscape we find ourselves in.

Reid Hoffman’s not fully convincing book on “Blitzscaling”

Businesses can achieve global scale faster than ever in the Networked Age, argues LinkedIn-founder Reid Hoffman in his new book, but must grow fast or die slow in a brutal market where the winner takes all.

Blitzscaling — The lightning-fast path to building massively valuable companies. Reid Hoffman, Chris Yeh, 336 pages, Penguin Random House, 2018

Reid Hoffman may be the closest Silicon Valley has to a philosopher king. Stanford- and Oxford-educated Settlers from Catan enthusiast. Original Communist, who has dedicated his formidable brain capacity to “playing monopoly” on the Internet. Member of the “PayPal Mafia”, the eccentric group of nerds — including Elon Musk and Peter Thiel — who founded the pioneering payment service before moving on to building some of the most powerful businesses in the Internet age. In Hoffman’s case, the professional network LinkedIn. Since Linkedin was acquired by Microsoft for $26,2 billion in 2016, Hoffman has served as a board member of the software giant along with his numerous other investing and philanthropic endeavours.

Precisely because of his somewhat paradoxical background, Hoffman brings illuminating perspectives on the 21st century Internet economy, in his new book — Blitzscaling: The lightning-fast path to building massively valuable companies — and explains why he believes the ability to act fast is the key to competitive advantage in the modern economy.

The title, Blitzscaling, derives from Blitzkrieg. The German concept of attacking warfare perfected by Heinz Guderian during the invasion of France in 1940. French forces were completely outmanoeuvred and overwhelmed by the surprise element of the Germans’ lightning-fast and densely concentrated combined tank and air attacks. Hoffman is fully aware of the nomenclature’s burdened history but has chosen analytical precision over political correctness — also considering that the German word (which in fact was popularised by the British tabloids and never officially used by the Wehrmacht. Guderian himself referred to the doctrine as Bewegungskrieg in his book Achtung — Panzer!) or its shortened form Blitz has become a common metaphor in sports and elsewhere. As Hoffman makes clear, Blitzscaling accurately captures the strategic essence of how technology companies such as Amazon, Google, Facebook, Apple, Uber and AirBnB have rapidly subjected huge markets to their rule.

Dawn of the Networked Age

At the end of 1996, the world’s five most valuable companies were General Electric, Royal Dutch Shell, The Coca-Cola Company, Nippon Telegraph & Telephone and ExxonMobil. The common denominator is that they all were traditional industrial or consumer goods companies. Fast forward to the end of 2017, and the the Top 5 list looks very different: Apple, Google, Microsoft, Amazon and Facebook. All technology companies, of which Google and Facebook were not even born in 1996, while Amazon was a two-year-old toddler.

What happened? The Networked Age happened — Hoffman’s preferred term for the era he dates from the stock market listing of Netscape, the pioneering web browser provider, in 1995. Today, over two billion people are connected to the internet through smartphones that have become an extended limb of the human body. At the same time, more and more industries and businesses are being run on software and delivered as online services, as Netscape founder Marc Andreessen wrote in a well-known essay in 2011, “Software is eating the world”. Binge watching on Netflix has replaced the drive to the video rental shop. Amazon has delivered mass death for physical bookstores. IBM produced its last PC in 2005, and today is essentially a software and services provider. Even industries that produce physical products (the economy of atoms), like cars or refrigerators, are becoming ever more integrated with software (the economy of bits). Such as when a Tesla’s acceleration is upgraded by an automatic software update while the car sits untouched in the garage overnight.

Goodbye Galapagos

Hoffman’s central thesis is that in this hyperconnected world it is possible to build global monopolies faster than ever in history. This has fundamentally changed the market economy. While the world economy previously consisted of geographically fragmented “Galapagos Islands”, where many businesses such as newspapers and bookstores were relatively sheltered from external competition, the networked age has tied these islands together in a hyper-competitive global market.

The Networked Ages opens up enormous opportunities for entrepreneurs with wet dreams of monopoly. The flip side is a merciless market where “thewinner takes all”. Hoffman illustrates with an analogy from the movie Glengarry Glen Ross, where Alec Baldwin’s character, Blake, tells a sales team: “As you all know, first prize is a Cadillac Eldorado. Anyone wanna see second prize? Second prize is a set of steak knives. Third prize is you’re fired. Get thepicture?” Or in the social network category: First prize to Facebook, second to MySpace, and third prize to Friendster, who hardly anyone remember.

Why did Facebook win? Mark Zuckerberg was not the market’s first mover — Both Friendster and MySpace got off the ground before Facebook. But Facebook was the first scaler. Being the first to achieve critical mass is decisive in a market with network effects. If all your friends choose Facebook, it is pointless to sign up with another social network that no one uses. This creates a positive feedback loop, eventually ending in an equilibrium where Facebook more or less monopolises the market while all the other players go the way of Friendster. De facto the consumer does not really have much of a free choice whether he wants to use Facebook or a competing social network. Like a political prisoner in a remote Siberian labour camp a Facebook user in theory is quite free to go anywhere, but in practice has nowhere else to go. The degree of customer lock -in Mark Zuckerberg has cunningly engineered would be admired by the designers of the Gulag.

The Magic of Network Effects

Hoffman prefers the layman’s definition of network effects: A product or service is subject to positive network effects when increased usage by one user increases the value of the product or service for other users. Network effects occur in several forms: Increasing numbers of passengers or guests attracts more drivers and landlords to marketplaces such as Uber and AirBnB, and vice versa, (two-sided network effects); The dominance of operating systems such as Windows, iOS or Android, encourage third-party application developers to adapt their apps to these platforms, (indirect network effects); Microsoft Word’s dominance meant that its document file format became the industry standard and swept all non-compatible competitors off the pitch, (network effects driven by compatibility and industry standards). Similarly, that Internet Explorer came pre-installed on all Windows PCs was the “pincer movement” that broke Netscape.

A feature in markets with network effects is increasing returns to scale, which often results in a monopolistic/oligopolistic equilibrium where one single or a few dominant players eat all of an industry’s profits — as demonstrated today by for instance Facebook. Facebook enjoys a gross margin of a whopping 82 percent. Yet, as Hoffman reminds, many failed to see the potential value of Facebook in the company’s early days, when Zuckerberg turned down repeated takeover offers. Perhaps the doubters were not without reason; as late as 2012 Facebook struggled with the transition from desktop to mobile.

Move Fast and Break Things

Facebook’s problem with finding the right product/market fit was nevertheless a luxury problem. Thanks to the record-breaking user growth, Facebook accumulated enormous amounts of data on billions of people — a digital gold mine. It was just a question of time to figure out the profit-maximising business model. MySpace or Friendster didn’t have this privilege. Without users, no business model. With users, one can find a business model later.

In this market landscape, speed is as vital as it was for Guderian’s Panzerkorpsin World War II. The only difference is that while Guderian had to capture land, business have to capture data. To achieve scale quickly, businesses must be willing to sacrifice efficiency for speed. Companies must grow fast or die slow. Summarised in Mark Zuckerberg’s previous motto: Move fast and breakthings. The classic approach to business strategy, carefully gathering information and making decisions with a fairly high confidence level, is dead. Blitzscaling forces businesses to make much faster decisions in the face of much higher levels of uncertainty, and they must commit to making big investments being half-blinded in the dark.

In a market where the winner takes all (or most), it becomes more important to cement market share before focusing on profitability. For Jeff Bezos in Amazon, profit has been secondary to growth for a quarter of a century — expressed by his bon mot that: “your margin is my opportunity”. Uber has subsidised both drivers and passengers when they have launched in new markets, in order to take the pole position before their competitors. Naturally, it would not have been possible without investors who have been willing to pump in nine billion dollars to fund Uber’s growth — an investment they can be far from sure to recoup. The growth imperative in the networked age also explains the popularity of Freemium business models, which companies from Spotify to Dropbox employ, luring new customers with a free version in the hope that they will upgrade to a paying premium subscription later on.

Can Software Digest the World?

It is a small paradox that technological developments are taking place so quickly, at the same time as productivity growth in the economy overall is stagnating. This must probably be seen in light of the fact that only a very small number of companies achieve lightning-fast growth and monopoly profit, while many others are lagging behind. Information technology also appear to be a contributing factor to the rising market concentration seen in many industries, raising the productivity gap between market leading and average firms.

As Peter Thiel, among others, have highlighted there is a dichotomy between the economy of bits and the economy of atoms, with rapid technological development in the former and far slower in the latter.

Thiel’s bifurcation can be illustrated by Tesla, a company at the intersection of new technology and old industry. Due to physical bottlenecks in the value chain, Tesla has not managed to increase car production in line with rising demand — hampering the company’s growth and exposing its fragile finances. One big reason why fast-growing online businesses like Dropbox have been able to navigate around such infrastructure limitations is Amazon’s cloud services offering, Amazon Web Services (AWS) — which almost by accident thus has become Amazon’s primary cash cow. However, so far nobody, not even Elon Musk, has found a way to manufacture Teslas in the cloud. Unfortunately, it must still be done in the physical world. This is the Achilles heel of Hoffman’s thesis: Companies can grow exponentially in the internet age, as long as they confine their business to the realm of bits. Confronted with the sticky realities of the world of atoms, things tend to slow down. Perhaps software is eating the world, but there are still some chunky pieces of the physical economy left that may prove tricky to chew and digest.

Previously published on Medium

Is Harvard Studio 54? And Can America still make Airplanes?

Peter Thiel was speaking on American Democracy and economic stagnation at Harvard the other day, building on the themes he has lambasted for years. Thiel’s perspectives are as always lucid and contrarian and worth listening to:

The techno-optimists are wrong, the economy is in secular stagnation. The Kurzweilian “Google propaganda” of runaway progress towards Singularity is false. Progress is much slower today than 50 or 100 years ago.
Secular stagnation is primarily a supply-side problem, not a demand-side problem (as other stagnationists such as Larry Summers believe).
And the reason for that is CULTURAL not natural. Scientific breakthroughs are still possible, scientists are just too lazy, (Thiel thinks Western culture effectively was killed around the time of Woodstock in 1969).
Economic stagnation is a much bigger problem than economic equality – growth of 3-4+% would solve all/most problems.
The Big STEM lie: Outside computer science (and perhaps petroleum engineering) there are no well-paying science jobs, for PhDs physics, chemistry etc. Because not much new is happening in the world of atoms. People could just as well study the humanities, where at least there is no expectation of getting a well-paying job after graduation.
Women are not starting companies even if there are no societal barriers preventing them from doing so, (not what the feminists want to hear).
Society has given up on complex projects.
Startups only focus on really easy and trivial consumer internet apps. No willingness to take real risks and solve big complex challenges.
Has modern aircraft become to complex (as Donald Trump hinted at the 737 MAX 8), or is America simply not able to produce airplanes any more?
Communism with 5-year plans is better than Communism without 5-year plans (but still bad).
It is not a problem getting jobs in today’s economy, with unemployment at record lows at ~3,5%, but jobs are badly paid.
On average Americans are fine, but Americans are not average. The average house price in America is only 250k dollars. But that is as irrelevant as knowing the river you will have to cross is on average 4 feet deep. Americans are not average types existing in cyberspace. They either live in dysfunctional high-cost mega cities, with decent-paying jobs but still struggling to survive and having to endure dysfunctional 20th century public infrastructure. Or they live in flyover country where society stopped decades ago, where housing is cheap but wages even lower.
The US should be more decentralised, not concentrating “all” economic activity in 3-4 metropolises. The UK and France even more screwed with only one mega city each.
Should the US do like Brazil or Burma and “drain the swamp” by moving the capital city from Washington D.C?
Silicon Valley fast approaching breaking point. Real estate too expensive and public infrastructure bottlenecked, pushing people and companies to secondary cities. Next Google, Facebook likely to come from outside Silicon Valley.
Universities today are as corrupt as the Catholic Church in the 16th century. Harvard is basically an exclusive Studio 54 nightclub. Popularity of the institution only upheld by severly limiting access. The value of a Harvard education is not in its intellectual content (almost all of which are freely available online, or much cheaper at non-elite schools) but in the diploma/indulgence letter promising the holder a ‘fast-track’ to heaven, while those who don’t pay up will end up in a bad place.
Thiel considered launching a new university but concluded that all US universities established after 1900 had been failures. On the other hand old universities seem able to retain their stature, irrespective of the quality of their academic offering.
Even though the audio is bad most of the [Harvard] audience questions sound to be coming at Thiel from very woke angles, with more concern for social justice than economic stagnation, making one wonder for how much longer Ivy League diplomas can retain their illusional value?