My career in the technology sector was sparked by a strong belief that technological innovation shapes the future of the world we live in. Fortunately, the tools that create this level of innovation have become available to everyone through the internet, and mobile and computing technology.
Meeting with people who can connect the dots between how such innovations create a new future is an opportunity I never pass up.
Recently, I had the pleasure of interviewing Kartik Gada, who has demonstrated a clear view and understanding of how technology will shape practically every aspect of our culture, society and economy.
Kartik is the Executive Director of Woodside Capital Partners and a well-respected voice on all things technology, economics and the future. In 2016, he published The ATOM, a free e-book explaining his ideas about how governments, businesses and corporations can better adapt to new synergies between technology, finance, monetary policy and governance.
During our discussion, we covered topics ranging from artificial intelligence (AI) to universal income. I firmly believe that the ideas, predictions and concepts that we discussed will influence our everyday lives in the near future.
Here is my interview with Kartik.
MH: After studying your work for many months, I’ve become familiar with what you do and how you view the future. For those who don’t know you, how would you describe your profession and areas of study?
KG: I reside at the intersection of technology and finance. This has taken the form of operating an options and futures hedge fund that had a 70%/year annual return from 2009-13, working as an investment banker in technology M&A, and writing a book (The ATOM) and blog (The Futurist) devoted to futurism, particularly economic and technological futurism.
Oddly enough, I studied electrical engineering in college, which was not the right field for me (I come from an ethnic group where the range of professions presented to children, at least in those days, was very limited). I would have been better off with finance, economics, or systems engineering. From there I studied financial engineering and then pursued an MBA. I currently teach an Options and Futures class at Stanford University, and am in the process of seeking approval to teach a second class about the economics of technological disruption.
MH: What caused you to become so involved and invested in this field?
KG: I noticed the accelerating rate of change from a very early age, given my interest in evolution, and then human historical trends. From this, I observed certain trend lines that seem to transcend the smaller considerations that people focus on. This led to a realization that certain predictions could be made just by recognizing long-term trends, and the convergence of more than one trend.
MH: When you think about how technology will affect our society’s economics and culture over the next 5-10 years, what are you most excited about and most worried about?
KG: One thing that troubles me, which I also cite in the book, is that a troubling percentage of the population just cannot handle prosperity. By that, I mean the rapidly growing trend of manufacturing new outrages to weaponize solely for the purposes of harassment of others or extortion. If this is what happens to some humans once all basic needs are easily met, that is a problem for the future, and certainly does not speak well for humanity's competitiveness against AI.
MH: What do you mean by 'humanity's competitiveness against AI?’
KG: The competitiveness of humans vs. AI refers to the ability of humans to remain ahead of the automation of their jobs. That derives from the equation of employee productivity versus the cost of employing them.
MH: Can you provide one specific prediction about how you think artificial intelligence will change our way of life in the next 10-20 years?
KG: Many business models will be quite different, with a very different composition of staff vs. companies today. AI is the greatest boon ever to the entrepreneur, who will eventually be able to get the same work done for little or no cost, that might today take a large staff on payroll. It will be quite common by 2030, to see businesses with $20M/year of revenue but only four human employees. All four of those human employees will be very wealthy.
MH: I often hear that the most impactful innovations take longer than people expect to be fully adopted, but also have much more of an impact than people expect. Do you think this holds true for artificial intelligence?
KG: This is very true for artificial intelligence. Part of it is because AI is not new, but instead is now reaching the next vertical rise in its staircase-like progress. For one thing, note that whenever a form of AI becomes successful, it gets spun out and is no longer called AI (calculators, speech recognition, self-driving cars, computer vision, etc.). Furthermore, whenever AI surpasses a human on a key performance metric previously hailed as the rubicon (chess in 1998, Jeopardy! in 2011, AlphaGo in 2016), people forget about that and set a new metric. For these reasons, the impact is hard for lay people to measure. But in reality, the disruptions from AI are too numerous to mention here, and the economic impact, being deflationary and diffuse in nature, is larger than many realize. We are just 10-15 years away from a world that looks very different than the world of today, even if the people of that time will yet again have adjusted to the new status quo.
MH: I know this is going to be a tough request, but if you had to describe The ATOM in two sentences, how would you do it?
KG: Technology is converging to an ever-larger share of the economy, and the deflation that this technology generates is now large and pervasive enough to distort other macroeconomic statistics and break assumptions that arose from the 20th century. Central bank monetary creations like Quantitative Easing (QE) no longer create inflation because this deflation offsets it, which is a revelation that can enable a revision of our entire tax, fiscal, and monetary structure to reflect 21st century realities, eventually enabling a dynamic, robust safety net despite the ability to gradually phase out all income taxes.
MH: How does your perspective on the future shape your investment thesis? If your predictions end up being correct, what are a few investment areas you think will yield a great return?
KG: Returns have been aggregating towards more sophisticated strategies, and the usage of more complex instruments such as options and futures. The reason for this is that the involvement of AI in the traditional stock market has increased correlations between stocks, making stock picking all but futile for the individual investor. By contrast, the variety of instruments that use time decay and futures contango decay has widened. Ultimately, I believe that high returns are only possible now with the incorporation of some decay component, whether options decay, leveraged decay, or futures contango/backwardation decay. Almost no traditional investing model will do as well as one that makes skillful use of this layer of return enhancement.
MH: In the past, I’ve written about how AI and robotics may replace jobs and create a need for a universal basic income (UBI). Do you think we’ll see some form of universal basic income (UBI) in the United States in the next 5-10 years?
KG: The problem with all previous ideas about UBI is that it is assumed that a tax increase is needed to fund it. This makes it far too expensive, and the idea cannot sustain the weight of its own cost. I contend that the only real way to implement such a safety net is through a tax decrease, as I detail in the ATOM. This removes the primary objection to any form of universal stipend. Note that what I recommend is far more than a UBI. It rises at an exponential rate, and dynamically adjusts the rate of increase in real-time with the rate of technological disruption. I call it the DUES (Direct Universal Exponential Stipend), and it can rise at 16-24%/year, for reasons described in the ATOM publication. If hypothetically implemented today in the US, it would be $500/month for all US Citizens above the age of 18. That is a small level, but the rate of increase ensures that it will be $2000/month by 2025 and as much as $8000/month by 2033. Among many ripple effects, this certainly shatters and re-arranges the ideological map in the US, as the anti-income tax crowd and UBI crowd now have common ground. At the same time, the UBI-favoring left will no longer be allies of the tax-favoring left and government employee unions. I don't think the US will be among the first countries to implement such a revamp. I identify four countries as ideal candidates for immediate implementation of a DUES and phase-out of all income taxes. These countries are Canada, Switzerland, Hong Kong, and Singapore. The general criteria is that a country be wealthy, have a high technological density and a knowledge-based economy, and be small in size. Some countries will move to an ATOM-like plan in the next 5-10 years, but the US is unlikely to be among them within that timeframe.
MH: Do you think more people should become interested in futurism? And if so, what are some of the best resources out there?
KG: Ray Kurzweil's writings are usually the best source to go to, but most of his best written output is from 2008 or earlier. I myself run a blog, The Futurist (www.singularity2050.com) that is one of the highest-traffic one-person blogs in this particular topic, despite only one article per month. Others like Michio Kaku also produce good content.