The ignorance of Washington continues to amaze.
Reporters are all claiming Republicans “must” win in 2022, because the economy will be destroyed by inflation.
The economy will not be destroyed by inflation. The economy isn’t what it was.
Yesterday’s economy was based on resources. The economy before that was built on the rising efficiency of manufacturing. Today’s economy is based on technology and Moore’s Law. It’s built on clouds and devices. It’s centered on software. The gating factor in a tech economy is what I have called “human capital” – trained, empowered brains.
This is the creativity economy. (Shown is Richard Florida, who has been talking about this since 2002.)
Coding is one form of creativity. There are many others, all valuable. It takes creativity to imagine new ways to do business. It takes creativity to implement them. In all these cases, costs are being taken out of the system. People, too.
It started with middle managers, two decades ago. It is now moving on to retail clerks, to bankers and brokers. It has happened to taxi drivers, and it will happen to Uber drivers. People are being replaced by software. It means people are available to do other things. So is the value they once created.
Technology is also replacing itself. My wife has spent her career in the credit card industry. The profits are huge, because you’re taking 3% of a merchant’s money, plus swipe fees, then making loans at 20% interest. Now companies like Square and Buy Now Pay Later players like Affirm are reducing the merchant fees and taking those loans away from banks.
We assume that moving money must cost money. A lot of money. Companies like Venmo drop that through the floor. PayPal makes international transfers cheap, by translating between currencies on the fly. The whole idea of blockchain is to cut transaction costs.
That’s more money for buyers, and more money for sellers. That’s savings. That’s deflation. That’s just one example.
We take Amazon’s success for granted. You can now “break bulk” in a warehouse, and deliver to a consumer’s door, for less than it takes to break bulk in a big box store. Walmart is now doing it. So are Target and Kroger. Costco does it by not breaking bulk.
Again, that’s savings. That’s deflation. All the work is being done. It’s just being done at lower cost. Lower costs are passed down the chain. How that happens is a political decision.
Science and innovation are moving faster in all directions because clouds let calculations be done instantly. The cost of scientific instruments declines, and accuracy rises, thanks to Moore’s Law. Scientists are more productive. Progress keeps accelerating.
It’s now cheaper to harvest energy from the Sun, wind, and water than to burn fossil fuels. That’s why banks no longer lend money to oil companies. This year’s post-COVID demand increase means higher prices in the near term. But the higher prices are a huge incentive for the new industries. They’re going to grow, and their innovators will get a hearing from venture capital.
This has everything to do with the current political moment. Reporters are acting like it’s 1979. It’s not.
The reason this is not reflected in our media is because tech hasn’t invested in it. The Cloud Czars see themselves as mere conduits, as pipes. They take no responsibility for the medium they’ve created. Which means others do, and they don’t have tech’s interests in mind.
As media continues to bite the hand of tech, and feed the old inflation myth, this will change. A little creativity is all it will take for tech to build new media that takes advantage of Moore’s Law.
I’ve been writing about this for over 25 years. Maybe it would have already happened had I run businesses instead. For this I apologize.
But the creativity economy is coming to journalism.
