I imagine my parents must have been extremely apprehensive about bringing a child into the world in the late 1970s.
The entire decade was an economic sh*tshow. Inflation soared in the 1970s. The US economy shrank. Stagflation reigned. Unemployment surged to levels not seen since the Great Depression.
And then there were the nasty social effects and geopolitical events– rising crime, constant protests, political turmoil (including the resignation of the President of the United States), the Arab oil embargo, and the humiliating helicopter evacuation of Saigon.
The year I was born saw yet another energy crisis, skyrocketing oil prices, inflation reaching 13%… not to mention the 53 Americans who were taken hostage in Iran.
And decades later, now that I’m a father myself, I can appreciate how much gut-wrenching anxiety my parents felt in the face of so much chaos and uncertainty.
I also imagine that a lot of people are feeling similar anxiety today.
Major uncertainty and risk seem to have exploded onto the scene in a very short time, compared to the relative calm and optimism of just last month. It’s been a wild roller coaster.
But the 1970s are also instructive about what could come next– and I’m not talking about gloom and chaos. I’m talking about growth and prosperity. And I’ll explain here my vision for what’s possible.
You see, one of the hallmarks of 1970s stagflation was a dramatic, almost shocking decline in US productivity growth.
Productivity is a critical measure of economic success; it essentially describes how much a single worker can produce.
If you think about a medieval textile worker, for example, it took weeks or months to complete a single garment. And because the production of clothing was so time-consuming and labor-intensive, it was also very expensive… hence why only the wealthiest nobles and kings had fine robes and garments.
But then the Industrial Revolution came along, and machines made the manufacturing process much more efficient. A single worker could now produce multiple garments in a day… which overwhelmingly lowered the cost of production and made clothing much more affordable.
In other words, productivity increased, and everyone became better off as a result.
Productivity in the US boomed after World War 2, often surpassing 4% annual growth in the late 1940s and 1950s. But by the 1970s, American productivity plummeted– in large part due to onerous government regulations and inflationary pressures.
But it was the technology boom of the 1980s that helped reverse this trend.
Companies like IBM, Hewlett-Packard, AT&T, and Texas Instruments were among the big corporations at the forefront of the computer revolution, alongside scrappy startups like Apple, Microsoft, and Compaq.
The technology these companies developed helped spark a productivity boom in the 1980s and 1990s. Companies became much more efficient. Margins surged. Profits surged. Goods and services became much more abundant.
Just like the Industrial Revolution, the 1980s tech boom was instrumental in creating widespread economic prosperity… and reversing the gloom of the 1970s.
Frankly, the technology that is rapidly emerging today has vastly more potential.
Earlier this month some of the biggest names in AI gathered at the Fountainbleu Hotel in Las Vegas for an industry conference, where speeches and presentations included proclamations like:
AI will be more significant than fire or electricity (Sundar Pichai, CEO, Google)
AI will lead to an age of abundance, making goods and services nearly free (Sam Altman, CEO, OpenAI)
AI will solve all of humanity’s grand challenges, from disease to poverty (Marc Andreesen, Venture Capitalist)
Techno-enthusiasts are often prone to hyperbole. But it’s difficult to exaggerate the impact that AI can have on American productivity in the coming decade.
Whereas the famous “Moore’s Law” would imply that AI would double its capabilities every two years, the industry is now moving so quickly that AI computational power is doubling every six months.
And the growth in business applications is just absurd, from automating customer service to coding custom programs to fraud detection to risk assessment to sales and marketing.
There are even widespread medical applications, with companies like Woebot Health, Wysa, and Limbic providing AI behavioral therapy and mental health services.
Figure AI is a company which combined artificial intelligence and advanced robotics technology to produce “a general-purpose humanoid”.
Is it creepy? You bet. Figure’s 5ft 6in robot has arms, legs, walks like a human, and is capable of performing a variety of tasks. In fact, BMW is already using it on its manufacturing line.
Then there’s hardware technology, like high performance computing and quantum computing, both of which are evolving rapidly and will eventually be able to solve some of the world’s most complex challenges.
Pharmaceutical designs, for example, require outrageous computational horsepower in order to calculate the effects of hundreds of billions of molecular permutations.
More efficient compute means more rapid drug discovery in everything from cancer treatment to human longevity. And staying healthy (and alive!) longer is extremely good for productivity…
Vastly more efficient compute power also has the potential of solving ‘impossible’ engineering problems– like designing a superconductive material, nuclear fusion, etc.
Speaking of nuclear, that’s also on the horizon. Small-scale nuclear reactor technology has the potential to generate safe, clean, incredibly cheap electricity… which can power businesses, factories, and consumers’ homes for a fraction of the cost of conventional sources.
If you put all this together, it’s easy to imagine a world where the majority of people drive electric vehicles. And not because Joe Biden, Gavin Newsom, or Greta Thunberg told them to. It’s because filling up their car with electrons will be so much cheaper than filling it up with hydrocarbons.
Oil and gas exporting nations like Saudi Arabia, Russia, and Iran would consequently lose all geopolitical power… and their primary source of wealth.
The US could also become the world’s leading manufacturer again, as factories– powered by cheap nuclear energy– crank out highly cost-effective goods and services thanks to AI and robotic automation.
No other country would be able to compete with America’s dirt-cheap manufacturing costs. And it carries over into multiple sectors: construction becomes much more efficient, resulting in homes becoming larger, more luxurious, and less expensive.
Production expands exponentially, prices fall, and the entire economy is better off.
This isn’t some crazy techno-fantasy. It’s a potential reality that could only be around 10-years away, maybe less.
Sure, there are plenty of uncertainties, and it’s far from a guaranteed outcome.
But when thinking about a Plan B– in light of all the looming challenges that lie ahead– it’s also sensible to keep an eye on the incredible pace of human progress and to not live solely in the world of risk.
