I had the pleasure of being a guest on Tom Ashbrook’s excellent “On Point”radio show which airs on NPR. The main guest was Peter Diamandis, author of a new book, Abundance. I was on to provide the needed “skeptical voice.”
I started out by pointing out that I like abundance too. In fact, I debated Tyler Cowen a while back when he came out with his book “The Great Stagnation” which was the polar opposite of Diamandis’ book. Tyler says growth is over. Peter says we’re entering into the new golden age. Why is it that everyone exaggerates so wildly. I guess because no one would buy my new book titled “Eh, the future will be okay: better than today but not a revolution.” If you want to hit the top seller list on Amazon, total exaggeration is the way to get there (oh and it doesn’t hurt to have a gimmick like a book covered in tin foil).
So why is Peter wrong? First, because he’s letting his amygdala get the best of him. He and his coauthor Steve Kotler, start out any conversation on the book by saying that the part of our brain called the amygdala filters news so that we aren’t objective and only hear the bad stuff. Maybe they have “anti-amygdala” since they filter news and only present a very narrow slice of the world that is good.
More seriously, they say that through some magic of innovation generated by people with cell phones and a few super-rich magnates like Elon Musk, we will reach the new nirvana. Specifically, they state, “Within a generation, we will be able to provide goods and services, once reserved for the wealth few, to any and all who need them. Or desire them. Abundance for all is actually within our reach.”
So the way economists measure abundance is through GDP and productivity. Productivity is the amount of economic output produced per unit of work (e.g. a hour). Over the last couple decades global productivity growth averaged around 3.5 percent per year. Given that median global income is around $800 per year, this means that in a generation (25 years), global median income will increase to around $1,900. But wait, according to Diamandis, we are entering into an era in which the pace of innovation is growing exponentially (hint, you know you are listening to a pie in the sky futurist who is looking to get the big bucks on the speaking circuit whenever you hear “the pace of change is accelerating, EXPONENTIALLY!”) So let’s just be widely optimistic and assume that the pace of global productivity growth doubles to 7 percent (a pace that has never been reached, even in the Industrial Revolution). At this rate, median per-capita income increases to around $4,000, not too bad if you are one of the folks who now makes $800 a year, but a far cry from GLOBAL ABUNDANCE. Futurists have a long history of being wildly over optimistic, especially since “it’s difficult to make predictions, especially about the future. In 1968, futurist Herman Kahn (who the Peter Sellers Dr. Stranglove character was modeled after) predicted in his book “The Year 2000” that per-capita US income would grow massively. He overshot the mark by 50 percent.
Diamandis does this because he thinks “Moore’s law” applies to everything. Moore’s law is from one of the founders of Intel, Gordon Moore, who famously predicted the price of computer processing would fall by half every 24 months and double in speed. Only two problems: Moore’s law only applies to the IT-portion of the economy, and as important as this is, the “atom and cell” portion (e.g., goods and human services) is still much bigger. Sure cell phones are getting cheaper, but construction services are getting more expensive becauseconstruction has shown negative productivity over the last two decades
There’s a least one last – and much bigger problem – with the vision inAbundance. It’s largely a libertarian vision of individuals (supported by super-rich folks donating their money and empowered by new tech tools like cloud computing and 3-D printing) being the new drivers of innovation. This is the vision of folks like Michael Armington (founder of Tech Crunch) and Peter Thiel (founder of Pay Pal), leading to the question, who needs government?
In this completely ahistorical and ideological vision, government and big corporations are the problem. All big corporations do is resist change. All government does is get in the way. Really! The fact that most of the innovations in Silicon valley can trace their source back to federal support for research seems to escape these folks. No, innovation comes from people giving TED talks.
In fact, Silicon Valley would still be full of apricot trees without federal support for research. In 1992, Santa Clara county received more defense contract dollar per-capita, mostly for R&D, than any other county in the nation. Oracle got started doing work for the Central Intelligence Agency and Intel sold much of its early output to the Pentagon. Sergey Brin was working on bibliographic research with a National Science Foundation (NSF) grant when he conceived Google. The founders of Genentech and other Bay Area biotech firms relied in part on federal research money to universities. Granted, these and many other companies became forces in the market independent of government, but does anyone really think that the federal dollars that flowed into Stanford, U.C. Berkeley and the Lawrence Livermore Lab had nothing to do with the Silicon Valley of today?
No, Silicon Valley libertarians want to deny all this. You don’t need collective action to solve problems (e.g, all of us as citizens contributing a bit of our taxes every year so that government agencies like DARPA, ARPA-E, NIH, NIST, and NSF can fund leading edge innovation around the nation. No just rely on rich guys. The authors cite the Gates- Buffet Challenge which encouraged billionaires to give away up to half their wealth. A wonderful vision and all the credit in the world should be given to Bill Gates and Warren Buffet for leading this. But to pretend that this is enough and can replace, rather than supplement government support for innovation is delusional in the extreme. Assume that all the billionaires give half their wealth, that $600 billion tops. Assume it comes over 20 years. That’s $30 billion a year. Most of which will rightly go into addressing social causes and not R&D. Now compare that to the fact that U.S. citizens fund R&D at $145 billion annually (the amount of the federal R&D budget. Moreover, Bill Gates himself has been one of the leading voices in calling for more federal support for R&D especially for clean energy.
But for these cyber-libertarians, the world is moving to self-organizing systems where people are empowered by IT networks. Big organizations – government and industry – “don’t get it” (the last phrase is the favorite insult of cyber-libertarians. If you don’t agree with them, you just “don’t get it.”) Diamandis is optimistic because 3 billion people will come online soon and they will be the new innovators. But the vast majority will have less than 8 years of education. I’m sorry, but you can’t find the cure to cancer with an 8th grade education, no matter how many Nick Negroponte “one laptop per child’s” you have. This doesn’t mean that open innovation, distributed innovation, customer-driven innovation are not important. They are. But this is not either-or; it’s both-and. Bottom-up innovation is important, but so is top down.
Two last points: for all the techno-utopians who base their visions on the fact that there are more scientists and engineers on the planet than ever before, and therefore there should be more innovation than ever. Remember one thing. Innovation is getting harder at the same rate if not more than the growth of resoruces we throw it. Thomas Edison could invent the lightbulb with a small group of folks in his New Jersey laboratory, because it was not all that complex a problem. Curing Alzheimer’s is not like inventing the light bulb. That’s why life science innovation has slowed, not because the drug companies are lazy or greedy, but because the low hanging fruit of medical innovations have been picked and what’s left is really, really hard.
So in summary, this doesn’t mean innovation will end. In fact, most of ITIF’s readers know that we are techno-optimists. But we aren’t cyber-libertarian utopioans.