The Price of Tomorrow

1. Technology is Inherently Deflationary and Disrupting Traditional Economic Models

Technology is deflationary.

Exponential growth. Moore's Law, which states that computing power doubles approximately every 18 months while costs halve, exemplifies the deflationary nature of technology. This exponential growth is not limited to computing but extends to various technologies across industries.

Disruption of traditional models. As technology advances, it creates abundance and lowers costs in ways that challenge traditional economic assumptions:

• Digital goods can be reproduced at near-zero marginal cost
• Platforms like Amazon and Airbnb aggregate vast supplies, increasing choice and competition
• Automation and AI are replacing human labor in many sectors

Economic implications. The deflationary pressure from technology conflicts with traditional economic models built on inflation and scarcity. This tension is forcing a reevaluation of monetary policy, job creation, and economic growth strategies.

2. The Global Economy is Trapped in a Debt-Fueled Growth Cycle

If we stopped adding to that debt and started to pay it back at a rate of $1,000 per second, it would take nearly 8,000 years.

Unsustainable debt growth. The global economy has become increasingly reliant on debt to fuel growth:

• Total global debt: ~$247 trillion (as of 2018)
• Global GDP: ~$80 trillion
• Debt-to-GDP ratio: Over 3:1

Diminishing returns. Each new dollar of debt is producing less economic growth than in the past, creating a cycle where more debt is needed to maintain the same level of growth.

Systemic risk. The massive debt burden creates systemic risk in the global financial system. Central banks and governments are forced to maintain low interest rates and continue monetary easing to prevent a debt crisis, potentially exacerbating long-term economic imbalances.

3. Artificial Intelligence is Rapidly Advancing and Will Transform Every Industry

It is not therefore a difficult leap for the imagination that—with enough data, compute power, and storage—almost any problem that could be solved by a human could be better solved by a computer.

Exponential progress. AI capabilities are advancing at an exponential rate, with breakthroughs in areas like:

• Deep learning and neural networks
• Natural language processing
• Computer vision
• Reinforcement learning

Wide-ranging impact. AI is poised to transform virtually every industry and profession, from healthcare and finance to transportation and creative fields.

Economic and social implications. The rapid advancement of AI raises critical questions about:

• Job displacement and the future of work
• Economic inequality and wealth concentration
• Privacy and data ownership
• Ethical considerations in AI decision-making

4. The Future of Energy is Abundant, Clean, and Nearly Free

By getting our energy directly from the sun instead of a circuitous route of digging things up that originally got their energy from the sun and transforming and re-transforming them, we remove an entire supply chain of inefficiency and cost.

Solar revolution. The cost of solar energy has plummeted, following a trend similar to Moore's Law in computing:

• 88% cost reduction in the last decade
• Continued 20% cost reduction for every doubling of shipped volume (Swanson's Law)

Abundance and deflation. As renewable energy becomes nearly free, it will have profound economic implications:

• Disruption of traditional energy industries and jobs
• Potential for abundant clean water through affordable desalination
• New possibilities for carbon capture and environmental remediation

Geopolitical shifts. The transition to abundant clean energy will reshape global power dynamics, reducing the strategic importance of fossil fuel reserves and potentially alleviating some sources of conflict.

5. Jobs and Economic Systems Must Adapt to Technological Disruption

If every job is a function of our intelligence, as computers beat us at intelligence, how could any job be safe?

Job displacement. As AI and automation advance, they will increasingly outperform humans in various tasks, potentially displacing a significant portion of the workforce.

Skill obsolescence. The rapid pace of technological change is making many skills obsolete faster than ever before, requiring continuous learning and adaptation.

Economic restructuring. Traditional economic models based on full employment may become unsustainable, necessitating new approaches such as:

• Universal Basic Income
• Shorter work weeks
• Redefinition of work and value creation

Education reform. Educational systems must evolve to prepare people for a rapidly changing job market, emphasizing adaptability, creativity, and lifelong learning.

6. Human Biases and Narratives Shape Our Understanding of the World

We are constantly creating and using stories to explain how the world works and how we fit within it. The stories we choose tend to reinforce our beliefs, from religion, to politics, to good versus evil, to capitalism or socialism or anything else we believe in.

Cognitive biases. Our brains are hardwired with various biases that affect our decision-making and perception of reality:

• Confirmation bias
• Anchoring effect
• Sunk cost bias
• In-group bias

Narratives and belonging. Humans have a deep need to belong to groups and create narratives that reinforce their beliefs and identities.

Filter bubbles. Technology and social media algorithms can amplify these biases by creating echo chambers that reinforce existing beliefs and limit exposure to diverse perspectives.

Implications for society. Understanding and addressing these biases is crucial for:

• Improving decision-making in business and government
• Fostering cooperation and reducing polarization
• Developing more effective education and communication strategies

7. Cooperation and Shared Goals are Essential for Solving Global Challenges

The findings suggest that Maslow's theory is largely correct. In cultures all over the world the fulfillment of his proposed needs correlates with happiness.

Human needs hierarchy. Maslow's hierarchy of needs provides a framework for understanding human motivation and behavior across cultures.

Cooperative strategies. Game theory and evolutionary biology suggest that cooperative strategies tend to be more successful in the long run than purely selfish ones.

Global challenges. Many of the world's most pressing problems, such as climate change and inequality, require international cooperation and shared goals to address effectively.

Incentive structures. Designing effective incentive structures that align individual and collective interests is crucial for fostering cooperation and solving global challenges.

8. Economic Inequality and Loss of Hope Fuel Social Unrest and Extremism

People do not naturally hate others when they're content or have abundance. They are manipulated into it when they feel discounted or that they have nothing to lose.

Rising inequality. Technological disruption and current economic systems have contributed to growing wealth inequality:

• Top 5% of the population holds more than two-thirds of wealth in the US
• Three individuals have more wealth than the bottom 50% of the US population

Social consequences. Increasing inequality and loss of economic hope can lead to:

• Political polarization and populism
• Social unrest and extremism
• Erosion of democratic institutions

Psychological factors. Economic insecurity and perceived injustice can make people more susceptible to divisive narratives and extremist ideologies.

Addressing root causes. Solving these issues requires addressing the underlying economic and technological drivers of inequality, rather than just treating the symptoms.

9. A New Economic Framework is Needed for the Age of Technology and Abundance

We need to build a new framework for our local and global economies, and soon, or the same technology that has the power to bring abundance to us and our world will instead destroy it.

Outdated models. Current economic systems were designed for a pre-technology era of scarcity and are ill-equipped to handle the realities of technological deflation and abundance.

Rethinking value and work. A new economic framework must address:

• The decoupling of human labor from value creation
• The potential for universal basic services in an age of abundance
• New measures of economic well-being beyond GDP

Policy challenges. Developing and implementing a new economic framework will require overcoming:

• Entrenched interests and resistance to change
• Short-term thinking in politics and business
• Coordination challenges at the global level

Opportunities. A well-designed new economic framework could:

• Harness technology for widespread abundance and well-being
• Reduce inequality and social tensions
• Create more sustainable and resilient economic systems

Last updated: September 6, 2024