🚀 Faster, Please! Week in Review+ #8
Is the New Roaring '20s still a thing?; Yes, Elon Musk could become a trillionaire; How venture capital is America's economic superpower; 5 Quick Questions for Daniel Sichel and Virginia Postrel
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So much amazing Substack goodness this week. Where to begin. I covered a wide range of subjects in the essays, Q&As, and micro reads on Monday and Thursday (as well as a paywall-free issue on Wednesday). Please, enjoy the summaries, recaps, as well as a bit of new content!
Melior Mundus
In This Issue
Essay Highlights:
— 5 reasons why I still believe in my New Roaring '20s thesis (April 18, 2022)
— Elon Musk could become the world's first trillionaire. And that's OK. (April 20, 2022)
— Venture capital is one of America's most important economic superpowers. Let's not undermine it. (April 22, 2022)
Best of 5 Quick Questions:
— Daniel Sichel, economist, on economic and productivity growth in the New Roaring ’20s
— Virginia Postrel, economic commentator and author, on dynamism
⭐ Bonus: One more special question for Virginia Postrel
Best of the Essays
🌈 5 reasons why I still believe in my New Roaring '20s thesis | “New Roaring ‘20s” is a big Faster, Please! theme, and I will concede that the 2020s have been kind of a bummer so far. The worst pandemic in a century. A mini-depression. War in Europe. Of course, the original Roaring ’20s, the 1920s, didn’t start out so well, either. Europe was recovering from the Great War, and the world from the Great Influenza. Economically, the 1920s began with its own thoroughly nasty mini-depression.
It’s early. We still have a lot of decade left. Let’s set aside the Old Roaring ’20s and look at how some of the boomier postwar decades began. The Go-Go 1960s didn’t really become the Go-Go 1960s until 1962. Recall that candidate John F. Kennedy promised to “get this country moving again.”
Good news on productivity growth. In March, the US Bureau of Labor Statistics reported that total factor productivity, or TFP, in the private nonfarm business sector increased 3.2 percent in 2021. That was the largest growth since 1983.
Silicon Valley is making bigger bets on atoms rather than just bits. The amount of capital plowed into “deep tech” venture capital funds, also known as “frontier funds,” has grown fourfold, from $15 billion in 2016 to more than $60 billion in 2020, according to Boston Consulting Group. Deep tech tends to specialize in “hard” tech startups based on science-driven and research-fueled innovation in sectors such as robotics, life sciences, and space.
Let’s stay positive and patient as we hope all those wonderful advances we’ve been reading about — from AI that can create paintings and predict protein folding to breakthroughs in nuclear fusion and reusable rockets — become economically significant innovations.
🚀 Elon Musk could become the world's first trillionaire. And that's OK. | There’s never been an individual trillionaire in the age of modern capitalism. It’s even hard to find a fictional trillionaire. But Elon Musk (currently worth $261 billion and change) could become a trillionaire — and before we reach decade’s end. And it wouldn’t be surprising if Musk were treated as a supervillain, especially since the media is already calling him a “supervillain.” Yet should he hit the trillion-dollar level in personal wealth, it won’t be because he extorted world leaders with a diabolical superweapon. Musk would almost certainly become a trillionaire by taking two valuable companies that he’s been running for nearly two decades and making them even more valuable over the next decade or so.
Any economy that can produce entrepreneur billionaires is revealing something really positive about itself. As journalist Will Wilkinson wrote in a 2019 NYT column: “Inspect any credible international ranking of countries by democratic quality, equal treatment under the law or level of personal freedom. You’ll find the same passel of billionaire-tolerant states again and again. If there are billionaires in all the places where people flourish best, why think getting rid of them will make things go better?”
Now imagine if Musk buys Twitter and turns it into the first social media platform to effectively balance free speech with responsible content moderation. Maybe Twitter becomes as valuable as Facebook — and Musk becomes a trillionaire, twice over. Seems like a good outcome to me.
🦸♂️ Venture capital is one of America's most important economic superpowers. Let's not undermine it. | Venture capital is a kind of private equity. It focuses on investing in young companies with high-growth potential. The products and services that these startups produce are core to the modern American economy. I don’t see much evidence that Washington is thinking hard about how tax and regulatory changes might affect VC. Immigration, too!
And it should given the importance of the industry and growing international competition. As The Economist reports, “The share of all VC flowing into American startups has declined from 84% two decades ago to less than half.” One analysis finds that if it were not for the US VC industry, at least one sixth of the largest 300 US public companies would not have existed or achieved such success.
So, yeah, VC is pretty important. But you wouldn’t really know that from Washington’s admiring glances at Chinese top-down industrial policy where key sectors are favored by Beijing. And while I would like the US to invest more in basic research and even some mission-oriented “moonshot” projects, I don’t want Chinese economic policy with American characteristics. That especially given China’s own innovation and productivity problems.
Best of 5 Quick Questions
Daniel Sichel is a professor of economics at Wellesley College in Massachusetts and the author of the recent paper “The Price of Nails since 1695: A Window into Economic Change.” It’s fascinating research that explores economic history through a product that hasn’t changed much over centuries — although its price and economic importance has. I urge you to check out my recent podcast chat with him about his research. But I also wanted to pick Sichel’s brain about modern economic and productivity growth, a scholarly specialty of his. So I asked him some questions about those topics for Faster, Please! readers only.
Pethokoukis: When you co-authored “The Case for an American Productivity Revival” in 2017, you were optimistic about the potential for productivity growth going forward. Since then, five years have passed and we've had a pandemic. Were you a techno-optimist at the time, and are you still one today?
Sichel: When that paper was written, I was definitely still a techno-optimist and saw the potential for many emerging technologies to ultimately be a big boost for productivity. I'd say that now I'm a bit more cautious. I think with everything that's happened with de-globalization and supply chain issues and a host of other changes, I think the potential is there, but I think there are many factors that may get in the way of that and impede that potential from being realized.
Virginia Postrel is a Bloomberg Opinion columnist and visiting fellow at the Smith Institute for Political Economy and Philosophy at Chapman University. Her 1998 book, The Future and Its Enemies, describes the clash between dynamists, who embrace risk, change, and creative destruction, and stasists, the eponymous “enemies” of the future. It’s a framework that’s as useful today as it was over 20 years ago. Virginia is also the author of The Substance of Style and The Power of Glamour. During the pandemic, she published The Fabric of Civilization: How Textiles Made the World. You can check out my recent podcast conversation with her here. But as always, Faster, Please readers get something extra:
Pethokoukis: Have the future's enemies changed at all since the late ‘90s, or is it the same people? And if it is, how are they doing?
Postrel: There are different people to some degree. One difference is that as concern about climate change has become greater, what's happened is not what Al Gore was sort of pushing, which is a dramatic stasis embrace. (And Al Gore was not the most radical person, like somebody like Bill McKibben, who's still pushing it, is.) But you've had a huge emphasis on technological innovation as a solution to these challenges, and the idea of using dynamic processes to address environmental concerns. Some of it's misguided, but that's always the case. Some innovation isn't a good idea, whatever the innovation is. But I've been made very hopeful by that approach that this big environmental challenge has not led to, “Okay, we just need to get rid of everything. We need to clamp down. We need to turn back the clock.” That has not been the primary, dominant approach. It's been sort of, “We need to go through this to something better.”
⭐Bonus: One more question for Virginia Postrel
I've written a lot about the possibility of a “New Roaring ‘20s.” If it doesn't turn out that way, what do you think went wrong?
Well, unlike the folks in Silicon Valley, I think the big frontier is biology. It's all the biomedical stuff. It's possibly even synthetic biology, where you genetically change yeast to make them excrete the flavors you need or silk proteins or all this kind of stuff. I think there's a lot of stuff going on in biology. What is the big advance of the last few years that everybody knows about? It's these vaccines. I think that if that doesn't continue to take off, it will be because of a combination of regulation and the fears that drive regulation. I mean, one thing that's happening right now is that there's going to be a test elsewhere in California of some genetically engineered mosquitoes that make it impossible to continue beyond a generation once they breed. And there's this horror of that as tampering with nature and all of that stuff. Even though it's been government approved, it's jumped through a lot of regulatory hoops, there's potential for a backlash there.
On the other hand, I look at things like lab-grown diamonds and synthetic meat. I just moderated a South by Southwest panel about these artificial substitutes that are all selling themselves with an ethical, often environmental, pitch and really appealing to a younger generation. And that gives me some hope for people to overcome the knee-jerk, romantic, the-past-was-better, technology-is-bad impulse. I think there is a generation that if you can address the problems they're concerned about, it does have a potential to unleash a lot of really productive technologies.