The price of tomorrow could be ruinous: Technology's unstoppable march
I was very happy to hear about Canadian entrepreneur Jeff Booth's book, The Price of Tomorrow, because it focuses on a subject that is close to my heart and intellect: The role of technology as a deflationary force and its capacity to destabilize society.
It's rare to hear any voices on this subject, so I was keen to hear how he had come to this realization and why he wrote the book.
(Please see the introduction to this interview: Unstoppable tech-driven deflation will be the next economic challenge.)
Some background
Jeff Booth is a Canadian serial entrepreneur. He has built several companies -- the largest was a public company with a market value of $500 million. He sits on the boards of 10 companies, and he is a current co-founder and investor in four startups. He is a government advisor, and much more.
My notes
Here are my notes from a recent conversation with Jeff Booth. Most of my comments are in parenthesis:
I start by telling Booth I'm so happy to be talking with another person on this subject because I cannot understand why so few people are interested. I have a degree in chemistry, so I'm mostly self-schooled in economics; I'm just some guy with a laptop reporting on Silicon Valley tech trends. So why aren't economists -- the professionals -- all over this? Why can't they see that technology is a deflationary force with tremendous positive potential and an equally potentially devastating effect on society?
(Technology creates abundance, and abundance is a scary thought in this economy, which relies on scarcity to support prices)
Booth says that he had a conversation with a senior economist and was asked: Why is it that you see it and we economists don't? It's because I'm an outsider. Outsiders can see things because they aren't locked into accepted belief systems or the accepted biases.
(That's very true. I have an outsider status when it comes to PR and marketing. About 15 years ago, I started writing about how every company is a media company, and now PR is all about content marketing -- producing journalistic content to fill the gaps in the shrinking media industry. EC=MC is a transformative equation. Every company is a media company. And a tech company.)
Booth says he wrote the book not to make money, he is already wealthy and firmly in the 1%. He wants public discussion on this topic because he wants his children to have a good future. The way things are progressing, he is fearful of social strife amid an extended depressed economy.
He explains technology's deflationary role very simply: If you look at the smartphone, it is about 13 years old. It now replaces so many things: It's a map, music player, video player, tape measure, personal assistant, personal diary, camera, tape recorder, and the apps are free or very low cost.
If you imagine that same type of pace happening within every industry sector -- then the deflationary effects of technology are massive and growing exponentially.
(It really is a dismal science that economists cannot measure any benefit from technology. All that data and nothing. Their analysis of tech investment shows a negative productivity effect!)
Government monetary policies are all inflationary and work to counteract deflation. Governments do it by printing money, massive amounts of it, which we've witnessed during the COVID-19 lockdown, and we will see many trillions more, Booth predicts.
This strategy of fighting deflation with debt will eventually break the economy, which is why we need to embrace our future and transition consciously over to what can become a very prosperous economy but based on very different economic principles, rules of investment, and work. Or face dire consequences.
FAKE GLOBAL GROWTH
Booth points to the fact that, since 2000, $185 trillion in new debt created just $46 trillion of growth. That's a terrible return on investment (ROI). And the ROI is getting worse as trillions of dollars in new debt floods in to support ailing enterprises.
Governments around the globe will have to print more money -- it is the only thing they know as a response. But this just delays a settling of accounts.
The book has examples of tech's deflationary power. One is artificial intelligence (AI), which eventually will be able to perform the most skillful and highly paid jobs that humans do, far better than any person.
Yet society is not preparing for these lost jobs, which will disappear for no fault of the people but because of the unstoppable march of technology, as it improves so many things while reducing costs.
Deflationary trends are everywhere, says Booth. They are naturally generated by our economy. But monetary policies constantly work against this trend, not understanding it, is impossible.
EXPONENTIAL PAPER FOLDING
Policymakers need to understand that technology grows exponentially -- a pace of growth difficult to imagine.
Booth has a favorite way of demonstrating the awesome compound power of exponential growth with a story about folding a single sheet of paper. You can only get to seven folds, but if you could do 50 folds, your sheet of paper would reach the sun.
Technology is at fold 33, he estimates.
(Therefore the next doubling will add the equivalent of the last 70 years of technology advances in one fell swoop. There's no way new debt can be issued in the amounts required without crushing the economy.)
Booth says that our crony capitalism props up markets and re-funds the failures. We don't allow businesses to fail, and this compounds the inequality we see. We bail-out the rich while the losses are socialized.
(As I like to say: "Let's have socialism for all -- not just the capitalists.")
He asks, what people would say if their governments told them that they were pursuing monetary policies whose goal was to continually erode the value of their dollar? There is no discussion or knowledge about what a deflationary world would be like and how to live in it.
Deflation has a bad reputation. It is associated with the Great Depression of the 1930s, but Booth sees it as a positive force because people's money increases in worth every day. Inflation destroys value.
Booth sees technology as the means to creating an abundance of the things and services people will want, but our economy relies on creating artificial scarcities to drive up prices. (How can this conflict be best resolved? We know what the outcome will be.)
History will be very unkind to the central bankers, says Booth. But he understands why they react the way they do.
Booth is very calm while discussing such a serious subject and its consequences.
But the general public might get very angry when the consequences of the terrible management of the economy reveal themselves.
A COVID SHOVE
From what Booth describes, it's reasonable to say we are at a critical juncture. We are approaching a tipping point that just got an extra shove from the printing of trillions of dollars to fight the COVID economic crisis.
A deflationary economic system is the inevitable future of humanity, he says.
(I think of it as a metaphor: A large meteor on an unavoidable collision course with the Earth -- first spotted by a few amateur astronomers. It could end up as a murderous hailstorm of molten rocks, or we'll develop the technology to capture the asteroid and mine it for its riches.)
Booth thinks it might be too late for an orderly transition. But we need to be talking publicly about this subject to educate and mitigate its effects.
Please pick up a copy of The Price of Tomorrow: Why Deflation Is the Key to an Abundant Future.