Happy New Year!
I’m Azeem Azhar. I’m exploring how our societies and political economy will change under the force of rapidly accelerating technologies and other trends. I convene Exponential View to help us explore these topics.
In January, we’ll be bringing together experts to discuss two fascinating topics. On January 15, we’ll go beyond the mainstream view on China’s social credit programs, look at how they’re being implemented and how they affect the citizens. On January 30, we’ll explore the technology stack for Web 3.0 and, in particular, blockchain.
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We’re at the start of new decade so I would like to look out for the next ten. It’s a departure from the usual format of this newsletter. Please enjoy it, comment and forward this to friends.
What do the next ten years hold?
Making predictions is complicated once we understand that the system we are trying to predict is a complex one, of interwoven forces that affect each other, each layering one atop the next. And that we don’t have clarity of when certain technical breakthroughs will occur or how political forces will shape the implementation of technologies (or vice versa).
Then presenting predictions as a list, a set of steps, in this case one to ten, is necessarily a shallow representation of this dynamic system built up of feedback loops of uncertain gait.
And then the prediction-maker is faced with the next challenge. At what level of abstraction should one make predictions? At the atomic level of technological progress (that chips will get faster, the cost of genome sequencing will decline), or at a highly macro level that describes population aggregates. I think the mezzanine layer that sits between the micro- and macro- is most relevant for understanding how our lives will change. This is where things get complicated and where our social institutions (like cities, firms, industries, communities) exist: where, in short, we spend most of our time.
Today, in the shadow of the climate threat, there is no guarantee of a naïve direction of aggregate progress, the sort of simple analysis which merely tracks longer lifespans, larger populations, wealthier societies. Wealth and health are undisputable markers. In the last century we did pretty well on that basis; we increased global GDP per capita on a purchasing-power-parity basis 5.7 times while increasing human population 4.1 times.
A climate catastrophe could unpick that simple teleology and reverse it sharply.
And, of course, values and beliefs change. The wealthiest societies in the world now have fewer children, absolute population levels are no longer a marker of bounty and power. The richest nations have lower birth rates, many with declining populations.
One of the largest collective fictions we’ve engaged in, the nature and operation of the economy itself, is ripe to be unpicked. It will be clarified by new methods from science and social science that better help us understand the processes that underpin economic behaviour and outcomes. This rethinking of economics will happen, given urgency by our collective experience at the sharp end of neoliberal, financialised economic thinking.
Many of these dynamics will result in the transfer of power from one group to another, some equitably, some less so. I can’t gauge accurately how willingly those transfers of power will occur.
We do have some clear choices, forks in the road, up ahead.
My suggestions for the shape of the next decade are based on what I consider a roughly optimistic reading of those choices. I’d welcome your comments, particularly from members, below.
Climate change will be the dominant narrative. We will achieve global peak emissions this decade, as Michael Liebreich argues. I believe we can go further than. Renewables are cheaper than most forms of new fossil fuels and are getting progressively so, even when you add the costs of storage. Founders I meet are bringing the same entrepreneurial skill set that brought us Facebook, Google and Amazon to the climate change problem, including those hard-to-decarbonise sectors (like steel or chemicals). Governments, like the EU and the UK, have announced net zero targets to be enshrined in law. And the financial markets are under pressure to better price in carbon risks, which will increase the financing costs of climate-deleterious investments relative to clean ones. What we can’t be certain of is how rapidly our climate is changing (something we discuss in this briefing call with one of the lead authors of the IPCC 1.5 degrees report, Professor Myles Allen). The speed of this change will determine how we shape our investments into urgent mitigations and disaster relief against sustained investing in shifting our energy mix. We’ll probably need to do both. Addressing climate change will require a concerted effort of World War II scale, but a genuinely global one. During 2019, I had dozens of conversations in boardrooms, with public market investors, entrepreneurs and venture capitalists which lasered in on the imperative to achieve net zero. So perhaps we have a chance to launch a modern-day Manhattan Project to tackle climate breakdown.
Our geopolitics will continue to fragment and this will result in more conflict. This is not merely a story about China’s growing economic power and global influence, exporting its political capitalism and authoritarian capabilities through its technologies and across the One Belt, One Road initiative. Global geopolitics will need to factor a broader rise of Asia, India becoming the world’s 3rd largest economy by 2030, closing in on a $10 trillion GDP. The world will comprise of three major blocs. The EU promotes a citizen-centric model, China a state-centred one. The US lacks an up-to-date cri de l’esprit: the American dream has got mired into the tar of social immobility & profit-at-all-costs companies, which puts off the young, the environmentally-minded, and even many financiers (see trend three.) An inconsistent and unilateral foreign policy chafes capitals around the globe. America’s status as the home of opportunity and world’s moral guardian is weaker than it was twenty years ago.
Outside of those major blocs, there will be significant players whose alignment will be somewhat unclear, including hypersonic Russia, brexit Britain, the major African and Pacific economies. Lurking, demanding a seat at the table, are the major technology platforms—how will they play their cards? Critically, we’ll need to ask where the forums for co-operation and mutual benefit will reside. Much of the benefit of the Internet derived from its widely available standards and global interoperability, as it starts to fragment into four, or more, Internets, will we lose those benefits associated with openness and the democratisation of technology?
In what we have generally thought of as the West, we’ll rethink the shape and purpose of our economies. We’ll ask hard questions about ‘rentier capitalism’, which is the end-state of the Fordist mass production model, the Friedman doctrine coupled with corporate capture, particularly of antitrust. Yes, neoliberalism will be put to bed. We may go as far as rethinking the purpose of our economies to sustainably deliver on the needs of its population, as some have suggested. We might break the simple linear division society encouraged by neoliberalism: markets which work and states which do the rest, each measured solely by their efficiency. Rather, we’ll recognise the value that responsive states provide in creating a secure, kind, purposive substrate in which we can live our lives. Many states will rethink the ‘social contract’ for a new world of work. They will also realise they need to take a more active role in directing investments in technology and shaping our societies. This will take the form of DARPA-like basic research, what economist Marianna Mazzucato calls the mission-driven state. Smart nations will figure out how to do this while facilitating basic science and accelerating the entrepreneurial urge.
We’ll see the rise of new digital commons, economic institutions that are neither public- nor private- sector. Digital commons (such as data trusts) will be broadly fostered to ensure positive externalities and super-linear returns to aggregated resources are widely accessible to societies. A digital commons could hold aggregate health data for a population, such data being made available to researchers to develop novel treatments. Or cities could insist that private sector transport networks contribute transit data to a civic data commons for the broader benefit. We don’t have many great examples of digital commons working at scale, but during the next decade we’ll learn how to set them up, govern them and reap the rewards.
World trade will face a troika of headwinds. Geotechnical pressure is one, encouraging data localisation or buying infrastructure from a native firm. Environmental concerns are another. The growing movement towards circularity, virtual working or local buying will strengthen. Finally, technologies such as 3-d printing, coupled with renewable energy, will reduce demand for ULCCs to criss-cross the globe. The falling trade-to-GDP ratio has already seen demand for larger cargo ships move into retrograde, as over-capacity beckons.
At the end of the coming decade, trade in raw materials and manufactures will be lower relative to GDP than it is now. How will a decreasing relative reliance on trade impact international relations?
Cities will become relatively more important. They will lead the charge to build the affordances of more sustainable livelihoods and tackle climate change. As much of citizens’ well-being is determined at the city rather than national level. As cities continue to be the engines of national economies, city governments will engage in robust debates with national ones over who controls what. As the rural-urban divide has been the most apparent schism in much of the politics in Europe and the US in the past years, this will make for an interesting tension. As shopping malls and big-box retail fails, this land will be used for other purposes. In European-style cities with reasonably close suburbs, expect the development of more live-work neighbourhoods in downtown office and retail areas. This decade will also see even more strongly integrated megalopolises, or city-clusters, especially in China. Larger cities bring those super-linear benefits of greater innovation, but they also see non-linear increases in the incidence of public health problems. Growing cities in Africa and Asia may witness both health emergencies and resource, particularly water, shortages; the challenges of urbanisation might prove fertile environments for innovation at the edge.
We’ll eat far less meat. Plant-based diets will become more popular. Artificially cultured meat will remain a novelty. The health benefits of plant-based diets together with their better energy footprint and cost-basis will give them an advantage over lab-grown meats. The health benefits of plant-based diets will become more widely known, and not just because of this Netflix documentary. In the UK, in the first half of 2019, 3.6m fewer animals were eaten by 800,000 people. Where younger eaters go, so too will entrepreneurs, restaurateurs, food retailers and governments.
The big tech companies, particularly Facebook, Google and Amazon, will work aggressively to increase their footprint over the coming years. They will hoover up data wherever they can and use their balance sheets to expand into new arenas. These firms know that a regulatory settlement, some kind of restriction on the scope and scale of their operations, is coming. By 2030, a complex patchwork of settlements in different geographies will govern the behaviours of these firms. New laws, particularly around the use of personal data, explicit and implied, may hurt their growth.
AI will be everywhere: from our cheap microcontrollers to massive cloud infrastructure. Because of breakthroughs in semiconductors optimised for machine learning and the general availability of noisy-intermediate scale quantum computers, our economies will be able to call on millions or, perhaps, billions of times more compute on which to run potent algorithms. Optimisation processes (routing in transit systems, renewable energy systems management) will benefit. Our computers will use machine vision, listening, path planning and robotics to build an increasingly accurate digital twin of the real world, and bringing smart, adaptive products into the real world. This, however, still won’t be anything like the ‘artificial general intelligence’, because we’ll still lack a good general theory of intelligence. Deep learning approaches, which drove the AI investment wave of the last decade, will be supplemented by other techniques, including symbolic approaches.
During the 2020s there will be a generational shift. Those in their mid-forties, who enjoyed their college years with the Internet and careers with international colleagues from a young age, will graduate to be global leaders. The divisional work of large firms will be handled by those in their 30s today, a generation of the Internet, a group that understands how the Internet enables individual creators, self-organisation and innovation. The agitators and the creators of our economy for the next decade are between 15 and 25 now. They grew up with the smartphone. The arrival of these younger cohorts into positions of power will shape the world deeply. As The Economist pointed out, ‘generational replacement is what shifts public opinion.’
What didn’t I talk about in the ten points above?
I couldn’t speak about the change in the nature of science, how the combination of computation, better search algorithms and data allows for a new type of empirically driven discovery and could herald a new age of rapid scientific discovery. I didn’t get a chance to talk about the potential for blockchain to enable new types of decentralised apps, or the increasing use of state-backed and independent cryptocurrencies. Nor did we speak about the scale of disruption that will hit incumbent firms in sectors beyond media and retail, but reaching deep into finance, transport, energy and beyond. And thus, concomitantly, the opportunity for entrepreneurs to craft new propositions.
I also didn’t have a chance to really zero in on what the new rules and norms of the coming exponential age need to be. In the face of all-seeing algorithmic systems, how we need to rethink the nature and extent of individual rights and the processes by which we protect them. Or what our intellectual property laws should look like as our economies continue their rapid shift towards intangible rather than tangible assets. As work shifts away from the bundle of full-time employment and a welfare net, a new, post-Fordist bundle will be required—I didn’t discuss this in my predictions (but you can hear a great conversation about it here.) Nor did I say much about the nature of identity-driven politics vs. cosmopolitanism, although I reckon that the underlying technologies favour homophily rather than integration.
I didn’t talk about inequality. I expect that globally fiscal policies will move to roughly tackle economic inequality. However the rapid rate of innovation will mean that improved products and services will be made available at a faster rate to those capable of paying. Some of those services, particularly those relating to healthcare (and genomics), education, and wealth management, will allow the very well-positioned to cement structural advantages across generations well beyond any increases in their tax burden.
At more than 2,400 words, I feel like I’ve gone on for long enough. If I could summarise the next decade: it will be ten years of very interesting times. Of difficult, complex systems problems that will demand deeper thinking, more reading, nuanced approaches. We’ll need to stand up against agnotological cynicism and simplism, both of which anaesthetise our human capacities. I hope we will be able to!
And please, I’d love to read your suggestions for the shape of the next decade in the comments below.
This edition has been supported by our partner, Masterworks.
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Trend 1: How to think about energy transition and climate change:
My conversation with Michael Liebreich: Renewable Energy, Climate Change, and Technology
My conversation with Vaclav Smil: Growth and the Energy Transition
Our discussion with Emily Schuckburgh: Our Climate Change, and the Road Ahead
Trend 2: How to think about the fragmentation of geopolitics?
My conversation with Parag Khanna: Technology Diffusion and the Rise of Asia
My conversation with Tony Blair: Governing in the Age of AI
My conversation with Richard Barrons: AI and the Future of Warfare
My conversation with Mariarosaria Taddeo: AI, Warfare and Global Security
Trend 3: How to think about the shape of the economy?
My conversation with W. Brian Arthur: Autonomous Economy
My conversation with Mariana Mazzucato: The Innovation Economy
My conversation with Bill Janeway: Entrepreneurs, the Markets, and the State
My conversation with Carlota Perez: Bubbles, Golden Ages, and Tech Revolutions
My conversation with Binyamin Appelbaum: How Free-Market Economists Got It Wrong
Trend 4: How to think about the new digital commons?
My conversation with Trent McConaghy: Creating the Data Economy
My conversation with Emil Eifrem: Making Sense of the Data-Rich World
Trend 6: How to think about cities?
Trend 9: How to think about AI?