"We wanted flying cars, instead we got 140 characters." ~ Peter Thiel, Founders Fund website
We live in an age of rapid change. Amazon, Apple, Facebook, Google, Twitter and many other innovators have changed how we work, communicate and live. But is this a new industrial revolution?
Twenty-some years ago, a large bookstore might have had 100,000 books available. Today online retailers (e.g., Amazon) have millions of books to sell. Similarly, there were no smartphones two decades ago--just simple mobile phones and land lines. Social media then consisted of email and listservs; now we have Facebook and Twitter. A 1990s personal computer had only basic capabilities (word processing, spreadsheets, and a few others). Now an iMac has the power of an earlier generation's supercomputer.
Revolutionary? Well, it depends on what we mean by a revolutionary innovation. I propose that: An innovation is revolutionary if it so changes society that going back to the pre-innovation technology would be catastrophic. By this standard, many of our most recent innovations are incremental, not revolutionary.
Consider the automobile, that archetypal innovation of a few generations ago. If all motor vehicles vanish tomorrow, the result would be catastrophic. If all phones (land lines and mobiles) suddenly stop working--the result would be disastrous for communication.
Now, let's imagine that all social media disappear. Would the economy collapse? I don't think so. Or, if every online store in America closed, would it be catastrophic? Probably not.
Leaving aside these anecdotal examples, it's noteworthy that there isn't an obvious economic growth spike resulting from the Internet era.
The San Francisco based venture capital firm Founders Fund believes that many recent innovations have been incremental, and not revolutionary. It attributes this incrementality to the VC community's failure to support revolutionary technology companies. Critical as this view may be, it implies that incrementalism is a reversible choice. Founders Fund itself is dedicated to investing in revolutionary technologies.
My hypothesis, however, is that we're at the start of a new megatrend of diminishing marginal innovation. The low-hanging fruits of revolutionary technologies have already been discovered and picked. Consequently, we'll need increasing effort to achieve changes that are only incremental and at most, transform a sector. If this megatrend is real, consider these potential consequences:
First, for many entrepreneurs/VCs, incrementalism will be their defining strategy. Stretching to develop revolutionary products will be a losing proposition. Incrementalism isn't unprofitable. LinkedIn, for example, hasn't revolutionized society, but has been very lucrative.
Second, diminishing marginal innovation applies at the economy level, not the sector level. We don't have flying cars as routine transport, and it's difficult to see this occurring. On the other hand, DNA technology is still in its infancy, and might have "running room." We will continue to see sectors transformed (e.g., conventional retailing impacted by online retailing). But innovations in the remaining high growth sectors won't be sufficient to drive revolutionary change/growth in the overall economy. (Consider that even in the 21st Century, an estimated 1/10th of all American jobs are connected to the car industry; it's difficult to see Social Media having that kind of impact.)
Third, by the end of the 21st Century, the world's global multi-nationals will increasingly be headquartered in Asia. Since the late 1970s, the rest of the world has been catching up economically with the West. This trend will only accelerate, unless there's new high-impact revolutionary technological innovation in the United States, or economic collapse/stagnation in China/India. (If country GDPs per capita converge to about the same level, country GDPs will then be driven by population. Consequently, China will have four times America's GDP.)
Fourth, as wage levels converge globally, wage differentials (as a driver of offshoring) will also decline/reverse. This is already happening, as the global management consultancy BCG has recently highlighted:
By around 2015, we concluded--when higher U.S. worker productivity, supply chain and logistical advantages, and other factors are taken fully into account--it may start to be more economical to manufacture many goods in the U.S. An American manufacturing renaissance could result.
Fifth, as the public increasingly understands that growth has slowed, and won't soon increase, the focus of politics will be on the zero-sum game of dividing up what already exists (it feels like this political trend has already started).
And last, a future of slow-growth incremental capitalism will favor corporate bureaucrats rather than visionary entrepreneurs.
For most of human history, economic innovation and productivity growth have been low, as were productivity differences between countries. The last two or so centuries have been an exciting exception--but not the norm--for human history.
I hope Founders Fund will be right and I'll be wrong. So, let me close with the sage counsel of Yogi Berra:
Prediction is very hard, especially about the future.
This piece first appeared in Issue 11 of our FREE new weekly iPad magazine, Huffington, in the iTunes App store.
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If we have affordable renewable energy which is not intermittant, and cost less than fossil fuels, then marrying it with automation and distributed manufacturing is a huge game change.
Let us not foget the miracles which are happening in material science today, and nanotechnology and self assembly.
The industrial revolution was centralyzing and focused power on a one to many relationship. The next revolution is distrubuted and brings production power back to the individual.
I believe that this transfiguration will come in a way that will be more or less like science fiction. H.G. Wells and Isaac Asimov had the uncanny ability to see the future of science. We are at a synthesis of sorts. The idea might seem a bit far fetched, however I think that this drive to the stars has us humans doing something that has been done before. In order to spread life to distant parts of the World nature uses the wind and the waves. Intelligence uses life to disperse into the intergalactic. When the man can't go the machine will, and it will take the genetic codes of life with it as the seeds of life. Adaptation will be that revolution.
Social Media is socialist media. It promotes group thinking and the loss of individualism. It is curated, monitored. The community manager and the data mining tools used in that role are the new Zampolit (Soviet political officer). Because there is no real monetization that translates into hard measurable wealth, Social Media also promotes the banalization of fiat money. A lot of hot air about value, but there are better reasons that gold is selling at $1700 an ounce. Social Media is worth how much an ounce.
And so is the way we are regarding knowledge, memory and personnel. We now have rich catalogs of these things. There is a fight going on, it's the personal service allowed in the brick and mortar boutique business battling the online store industry, sending out cellphone shoppers and creating a service industry no longer based on providing personalized consumer experience.
Stuff comes in blocks for which you can choose to accept or deny, in package forms of thought, you have to be for or against abortion. Look the facts are right here.
The real innovation will have to come in the human sphere. When we or someone finally pulls out the plug for a moment to regard real human beings. It means reading and writing letters or being allowed getting a job in a small shop and staying with it, morphing into service with it. Finding real lives that we have created.
If the Debt Cliff in not resolved in some predictable way then Markets will dictate a resolution.
Not a good outcome.
Merely applying additional requirements to systems process definitions...if we don't do it, we might not survive it.
Second, the biggest issue with social media which few have mentioned, let alone addressed, is that we have created a lot more noise than signal with the vast increase in available if not invasive information. Why is this a problem? Because our perceptual systems work as much, if not more, by filtering out noise as by detecting signals we need.
When humans cannot distinguish between signal and noise, they can enter a state known as catatonia. Literally, they stop all functioning, as they cannot take action. All stimuli become indistinguishable.
What may be revolutionary, or certainly disruptive, in social media, is its simple, vast, seemingly unavoidable pervasiveness. I'm anticipating a backlash, not so much because humans don't like social media, but simply because they are not equipped to handle it. We are not all capable of constantly functioning like fighter pilots in combat conditions, much as many people enjoy simulating such conditions in computer games. Such games can develop our reactive skills. But social media to the extent we can or do pay attention, requires much more of us.
I expect that Facebook is going to decline in value, as people realize it provides negative value.
Social Media will be there with a billion 140 character tweeks and facebook updates saying, "well, that was stupid".
We get out of economic stagnation/crisis by doing one of two things: #1 Print your way out and delay until #2 kicks in otherwise disaster in upon us, or #2 we increase productivity.
Social media and most technological innovation is recycled and amplified old technology, sometimes improving productivity at the margin, but nothing revolutionary. We need a few true revolutions to get ourselves out of this mess, not the least of which are revolutions of the mind, politics and purpose.
We are at the end of capitalism.