Innovation In The 2020s

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Economic growth is fueled by innovation and the pace of society to absorb it. I feel today a little bit like in the early 2000s in Silicon Valley. I experienced it during my college years in Budapest.

We had the Dotcom bust, then the Nine-Eleven attacks, and eventually the Accounting scandals. Old ideas become mainstream. They are not the playground of PhDs anymore. People start investing in them, but they do not pay off quickly.

One answer was building monopolies of the best companies in each industry. Peter Thiel’s opinion is that monopoly builds up because one company will become better in everything than the competitors. PayPal, Google, Netflix, and Amazon rule in whatever they do at a scale that deters everyone but the bravest. They copy the story of PhDs that built them.

When you have a PhD you are likely asked in courtrooms about the toughest cases. You spend lots of effort, so your skill set is rare. You have the degree and title, you psychologically “own” your research topic. You become a monopoly there.

However, this structure will eventually lead to governments claiming control diplomatically over decades. Imagine that you are a prime minister. You cannot build your own electric company, a Big Company is better and cheaper. You are accountable to your citizens, you will insist on public scrutiny. The EU does this today. Other countries do this today. The resulting structure will be similar to the economic structure of Warsaw pact countries. Each country played an assigned role in manufacturing cars, weapons, buses, home appliances, etc. No competition. A little stress strengthened the inefficiencies, and the system collapsed. This was the Afghanistan war of the Soviet Union.

Inflation will disappear if the money available matches the value provided. Uber was one of the best ideas to break barriers. A model where drivers buy the service instead of being employed and regulated by the company would be way cheaper for riders. Self-driving will be around for a long time. Think again. Would you hop on a train now and read this post and ride back? Obviously not. Self-driving will free up some time for commuters, indeed. Most of us won’t be able to use that time effectively. They do not go faster either. Self driving will probably be a premium feature for decades. Tesla was right of the target audience. Long interstate drives of trucks may benefit the most from the concept.

Crypto is here, and it is precisely related to value. Bitcoin spiked once Tesla announced acceptance. There will be many regulated industries leveraging the additional liquidity. Vertically integrated supply chains are probably the ones where it actually matters to reduce risks. Ask President Trump, how it is to align the banks and payment terms of so many contractors for a building project. Supply chain-specific cryptocurrencies may raise anti-trust questions regardless. Coworking spaces relied a bit too much on property appreciation. They are pricey. People want to do work, so even if they share all of space, isolation, cost, and privacy matter.

Energy issues are here to stay. The author of this article thinks it is energy reduction that may be the main topic of the early 2020s. Shipping machinery and base materials together, may save much to make trade more distributed and break down the barriers.

Much of China’s and the EU’s economic headache is energy independence, especially in oil. Eliminating gigafactories with high fixed costs may give space to small manufacturing outposts that change production as demand changes, making it better for the society. I believe hydrogen-powered airplanes pioneered now in France will bring another wave of economic growth in the second half of the decade. I also give a big chance to hydrogen distribution to desert areas like Nevada, Utah, or Africa to build communities giving space back to nature.