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Why Tech Thrives
A friend, an economist at a big-time university, sends along the following materials, asking, impishly, “Is there a pattern here?” First, from the United States, in “Conversations with Tyler”:
TYLER COWEN: Let’s start with some questions about stagnation, Peter. At any point, if you care to add other topics of your own, please do so. You’re well known for arguing, well, “they promised us flying cars and all we got is 140 characters”; “technological progress has slowed down.” How is it you think that we’re most likely to get out of the great stagnation, when that happens?
PETER THIEL: Yes, I think there are, those three separate things. There’s the question of stagnation, which I think has been a story of stagnation in the world of atoms, not bits. I think we’ve had a lot of innovation in computers, information technology, Internet, mobile Internet in the world of bits. Not so much in the world of atoms, supersonic travel, space travel, new forms of energy, new forms of medicine, new medical devices, etc. It’s sort of been this two-track area of innovation.
There are a lot of questions of what has caused it and I think maybe that’s a good part to start in terms of what gets you out of it. On a first cut, I would say that we lived in a world in which bits were unregulated and atoms were regulated [emphasis added].
From Israel, in an address at the Tuck School of Business, Guy Rolnik, editor of TheMarker, offered this observation:
“Tech thrives because it is the only sector free of government interference—it’s where anyone with ambition goes.”
From China, “The wild, wild East,” an article in the September 10, 2015 issue of The Economist:
Published in Economics, TechnologyWhat helped Neusoft take off, says Mr Liu, was that there were no SOEs to block new software firms. “The Chinese state today is technologically sophisticated … but that was not the case at the start of the IT boom,” says Mr Liu. “We got lucky because the IT sector was so new, so driven by talent, that the government didn’t understand how it worked [emphasis added].”
You don’t say!
There are two reason India is the “Pharmacist to the world“. FDA and the Intellectual Property laws in the U.S. and allies.
There s a reason it takes a company like Google to push local and state laws via it’s Self Driving car project. In the age of bailouts and revolving doors between politics and industry, one has to be very big indeed to change status quo. If anyone can do something about it, it would be someone like Peter Thiel; you should tell him that next time you speak to him.
I agree that sometimes the problem is government regulation, but sometimes the problem is physical reality.
Take air travel. I don’t think that jetliners aren’t any faster than they were in the 1960s. This is not the fault of regulation, but of the physical fact of the sound barrier, which creates two problems: (1) the sonic boom is a huge externality that people on the ground won’t tolerate, rightly in my opinion, and (2) the fuel cost of maintaining supersonic speed is very high, so the time savings isn’t worth the cost.
Sometimes the best way to do something is relatively low tech. The Romans cut their pork chops with hand-held steel knives (at least I imagine that they did). So do I. No improvement is necessary or practical.
We still use concrete. Granted, the formula is “better”, but we still use it.
“On a first cut, I would say that we lived in a world in which bits were unregulated and atoms were regulated”
YES!
Regulation is part of it, physical limits are another part…but culture is important, too, and for the most part, the “thing” world does not have the same Charisma as does the “bit” world. This has implications for investment, for where talented people choose to work, and for public policy….which of course is what drives regulation. See my post
Faux Manufacturing Nostalgia
The regulatory regime’s purpose is to slow down change because it is dominated by comfortably established companies and the last thing they want is innovation, new competition and uncertainty which is what unregulated markets bring. Our future depends on a race between innovation and change within the unregulated sector and the speed with which the larger older companies can elbow their way into k street and establish control. The outcome is probably assured unless we start aggressive deregulation so the regulators have to fight a defense war to keep their power.
A profound point that, about the fight between the old and the new. Beautifully put.
In case anyone around here likes podcasts, here is the youtube video as an mp3.
http://mercatus.org/events/future-innovation-conversation-between-tyler-cowen-and-peter-thiel
Don’t worry: the fact that we don’t know how to write software reliably coupled with the dogged insistence that software be everywhere (cf. the ridiculous notion of the “Internet of Things”) will result in stagnation too, as the Internet of Things, self-driving cars, etc. fail to interoperate, suffer OPM-level attacks, etc. leading to a popular backlash and a demand for government, rather than technical, solutions. This is a promise.
Never under estimate the importance of low capital investments.
Peter Thiel: “On a first cut, I would say that we lived in a world in which bits were unregulated and atoms were regulated.”
This suggests there is a bigger business opportunity, not in building a better mousetrap, but in building an unregulatable mousetrap.
Hmmm. An example springs to mind…
You know how pretty much every electronic product you own is powered by a dangly tangly AC adaptor? ‘Sometimes called “wall warts”. They’re ridiculous, right? A separate one for each product, different shapes, sizes, voltages, currents, connectors. They are totally cumbersome.
Why do they exist? We used to just plug products into the wall . Well, products that plug into the wall require extensive UL certification. So a cumbersome pre-certified low voltage AC adaptor is necessary for companies that want to get their products to market quickly and efficiently.
Business idea for an the unregulatable mousetrap:
Create a universal standard power source for low power digital appliances with a new, easily recognizable, and easy to handle plug. All of your small digital devices could plug into a single outlet strip with no wall warts. And all manufacturers of low power products will have an incentive to adopt the new standard.
(USB connectors are sometimes used as power sources, and you can buy AC outlets with built in USB sockets. But USB has many problems as a power standard and is only suitable for certain super low power situations.)
(Investors, you know how to get hold of me.)
‘Finally listened to the whole Conversations with Tyler podcast. Very, very nice. Start to finish.
Don sez, “Check it out!”