Have we stopped believing change is possible?

When I look around, most people I know here in Finland don't believe that the world will change much, at least not for the better. If they do, they have a hard time saying what will be different when asked.

For young families, finding a home they can afford near schools, workplaces, and urban infrastructure can be challenging. When they manage to buy one, they will be in serious debt for most of their working lives. The lifelong debt significantly limits the freedom to change careers or how and where to live. Generally, millennials are less well off than members of earlier generations when they were young, with lower earnings, fewer assets, and less wealth.

My mother, born in the mid-1940s, is not much better off than young adults. The future looked brighter for the generation born after WWII when they were starting their families, but now many of them are struggling with a healthcare system that was designed for a different era and a long list of diseases that are killing us: Alzheimer's, cancer, dementia, heart disease, diabetes.

These are mostly my anecdotal observations, but survey data tend to agree. Even though metrics like global poverty have been declining for two centuries and child mortality rates are down, few believe there's an exciting future ahead.

Below, I will discuss why many of us should be more hopeful about the future and what we can do about it. Most of the historical data I use is from the United States because it's the most complete data set available and goes back the furthest. For the purposes of this blog post, I use the United States as a proxy for liberal Western democracies. I try to put together accurate, detailed data to paint a complete picture, but my argument is still more directional. Whether you agree or disagree, I'm grateful if you take the time to read. No less is at stake than our future.

Future that never arrives

We have quietly accepted that being able to afford a house for our family should be hard and that old age comes with crippling diseases is normal. It's deeply troubling how the status quo is accepted without much thinking that things could be different.

Most people I know are hard-working, smart folks who are trying their hardest within the cultural and economic environment they were born into, but they don't see how the world could change radically for the better.

When a plan for change emerges, it's mostly about reorganizing our current resources or making minor, gradual improvements. It's rare to hear an argument about building something new. Yet, the latter is also an option.

Technological innovation drives economic growth

Technology's deeper meaning and promise got lost after 1970. With the rise of the Internet, technology has come to mean something that lives inside a smartphone—most of what we think of as technology would be more accurately called software.

This was not always the case. During the 100 years between 1870 and 1970, with rapid industrialization and technological innovation, we laid much of the groundwork for the modern world. This era is characterized by significant advancements in technology and industry, such as the development of the telephone, light bulb, indoor plumbing, automobile, airplane, plastics, air conditioning, assembly line production methods, antibiotics, television, nuclear fission, and the integrated circuit. The invention of electricity and the combustion engine alone changed daily life during the 100-year period beyond recognition.

The new technological inventions drove the fastest economic growth in the history of the world between 1920 and 1970. On average, Total Factor Productivity (TFP) in the United States grew at close to 3% a year between those years, peaking at 3.5% between 1940 and 1950. TFP represents the portion of output growth that cannot be attributed to changes in inputs such as labor and capital. You can simplify TFP to measure the economy's long-term technological change. If output grows faster than the increase in inputs, TFP has increased, indicating that the economy is getting more output from its resources. For context, the average real GDP growth rate for the United States between 1940 and 1950 was close to 9% a year. Given the technological changes starting in 1870, it took several decades before the new technologies were widespread enough to see the impact on productivity numbers. However, when they arrived, it showed. New technological innovation sped up economic growth significantly. Equally important, we learned the increase is not automatic. TFP growth after 1970 was barely a third of the rate achieved between 1920 and 1970.

In his 2016 book "The Rise and Fall of American Growth," Robert J. Gordon attributed the rapid TFP growth in the United States to several one-off events: Along with record technological change, women joined the labor force, there was a transition from an agrarian to an urban society and an increase in high school and college education rates. Other tailwinds Gordon identifies include investments in public infrastructure (highways and airports), the emergence of strong trade unions in the aftermath of the Great Depression, the creation of social safety nets, and government-funded research and development during and after World War II.

Gordon argues that we haven't seen similar TFP growth since the 1970s because we lack many of the above-outlined tailwinds, and we are faced with headwinds like an aging population, rising inequality, stagnating education, environmental challenges, and the high cost of healthcare and housing.

I agree with Gordon on the tailwinds between 1870 and 1970 and the headwinds we are facing, but I disagree with why we haven't seen much TFP growth after 1970.

Economic historians like Robert J. Gordon are good at piecing together the past but not as good at predicting the future. All the important events will be hard to predict singular one-off events like World War II. We might not get a WWII re-run to drive demand for new technology, but we will get other significant one-time events. A good candidate to drive an economic boom could be the emergence of powerful artificial intelligence or large-scale commercial entrance to space. It's equally hard to predict the emergence of singular individuals like Elon Musk, who has single-handedly changed the course of several industries. Significant events that change the world in a big way tend to be exponential, but most predictions are linear and backward-looking, especially when made by those who are not driving the change. Predictions and visions of the future are useful in inspiring, giving ideas for progress, and guiding our broader culture. For decades, SciFi literature and movies have influenced our imagination of what the future could look like. But the most useful predictions are ones where the singular vision of a different future is made real by the visionary herself. The only sure way to predict the future is by building something new and singular.

We get what we celebrate

Given that we saw the TFP growth fall off a cliff in 1970, there must be a good explanation, even if it's not a structural cul-de-sac like Gordon argues. I believe the answer is culture. That means higher economic growth is not impossible, but at the same time, it's not automatic either. It's up to us. It's not enough that we can do it. We also need to want it.

By culture, I mean our beliefs about the world and about our agency. Do we believe in human rationality and our ability to tame the unpredictability of the natural world, or are we hesitant to push any further, fearing we might permanently change the world around us, or perhaps because we think it's just too hard? Steward Brand famously said, "We are as gods and might as well get good at it." He commented on humanity's place in the world. We have great power over the natural world, similar to the powers attributed to gods in myth and religion. We have a duty to use that power wisely rather than rejecting it out of fear or ignorance. To embrace and responsibly use technology, including genetic engineering and geoengineering, to solve problems and advance humanity. In this spirit, we would do well to revisit ideas from Enlightenment thinkers such as Francis Bacon and John Locke. In fact, Economic historian Joel Mokyr argues that we can trace the beginning of modern economic growth to the cultural transformations of this period.

In his 2016 book "A Culture of Growth: The Origins of the Modern Economy," Mokyr explores how cultural transformations during the Enlightenment between 1500 and 1700 played a pivotal role in shaping the modern economy. Mokyr defines culture as a set of shared beliefs, values, norms, practices, and institutions that shape the behavior and mindset of a society. He highlights the significance of cultural factors, emphasizing the impact of ideas and knowledge on economic growth. He argues that societies that valued useful knowledge (which roughly translates to science and technology) and fostered a culture of innovation, entrepreneurship, and risk-taking were more likely to experience sustained economic progress. Mokyr challenges the conventional view that economic incentives alone drive technological change and emphasizes the cultural dynamics that encourage the generation and adoption of new technologies. The book provides a comprehensive analysis of how cultural transformation, alongside intellectual and institutional developments, laid the foundation for the rise of the modern economy, shedding light on the vital role of culture in fostering future economic growth.

I have personally seen how transformational cultural beliefs can be. In 2008, I cofounded the Slush conference to celebrate technology entrepreneurship. When we started, we needed to explain what a startup is when talking about the event. During the past 15 years, Slush has become the world's premiere startup event. During the same 15 years, Finland has transformed wholesale into a nation excited about technology startups. For its cultural significance, the annual Slush conference has become analogous to a World Fair for the country. Starting a technology company has become not just accepted but a celebrated act. Whether the success of Slush is the reason or just an outcome of the development is less relevant. Technology entrepreneurship has become better understood, but even more importantly, it's become a desired career path for the smartest people of a generation and a celebrated choice across Finnish society. At the same time, we have seen investments in Finnish startups rise over 10-fold, and the Slush alums have built multi-billion euro companies. We truly get what we celebrate.

Figure 1: Investments in Finnish Startups 2022

The annual economic growth rate in the Western world from AD 1 to AD 1820 was only 0.06% a year, or 6% per century. For the past 200 years, we have seen first a meteoric rise and, more recently, a decline in economic growth. We can confidently state that we can directly influence the degree of economic growth we see in the world. If we decide a prosperous future is what we want and work hard for it, I am confident we can consistently hit high single-digit economic growth in our lifetime. At that point, we'd have all the houses we need, and there would be a whole lot fewer diseases to worry about.

Housing

With the above in mind, let's explore potential futures to see examples of what life could look like. These futures are far from wild SciFi visions. They are within our reach relatively rapidly if we want to build them out.

Many young families can only secure a home by taking on large debt that lasts a lifetime. Investing in technological progress can change that. In fact, it's the only thing that can change that in the long run. Technology has a double impact. It drives economic growth via TFP growth, increasing incomes across the board. It's also deflationary by nature, making the areas it touches cheaper as the technology matures and enabling an ever larger percentage of the population to afford the produced goods and services. By looking at the chart below, you can see technology's deflationary impact. The areas of the economy where we have not made technological progress have become more expensive, while areas touching information technology has become ever cheaper.

Figure 2: Price Changes for selected US consumer goods and services

We can only accommodate so many housing units in the city center. Politicized permitting procedures hinder the construction of the most desirable neighborhoods with increasingly taller buildings. However, if we can't build more affordable housing in the city, with the right technology, we can shrink the distance it takes to get to the city from afar, where there's more affordable space.

Austin Vernon and Eli Dourado wrote about how cheap energy would change transportation and how we could live in a world where cheap energy would be abundant.

In 1979, transportation engineer Yacov Zahavi proposed that people behave as if they have nearly fixed travel budgets for both money and time. Given a variety of transport modes with different speeds and costs, travelers act as if they “solve” an optimization problem to maximize their spatial and economic opportunities. He found that daily travel times averaged from just above 1 to 1.5 hours per day, with an asymptote around 1.1 hours per day as higher-speed travel options became available. As a result, further increases in transport speed don’t serve to save time; they simply make more spatial and economic opportunities available. This finding was picked up by Italian physicist Cesare Marchetti, who used a wide range of anthropological evidence to show that travel time in human societies has always averaged about 1 hour per day. Since then, 1.1 hours has become known as Marchetti’s constant.

[…]

Since energy use typically increases with both speed and distance, energy costs will play a major role in expanding the human transportation network. Lower energy costs increase human range.

Development for vertical-takeoff-and-landing (VTOL) aircraft using distributed electric propulsion proceeds rapidly. One of the leading companies, Joby Aviation, has already got clearance for US flight tests. When they arrive, VTOLs could change how we live:

VTOL aircraft require landing space similar to a large helipad. While a dense city can support several helipads, it may not make sense to devote the space for enough of them to make VTOL aircraft a practical means of transport within cities. They could make sense for suburbs, exurbs, and bedroom communities. It could be “land and ride” instead of “park and ride.” Much like how cars gave us the suburbs, VTOL aircraft could bring extensive exurbs that allow cheaper housing without long drives to work or play.

[…]

The speed of a VTOL aircraft allows for a significant improvement in travel times. Given Marchetti’s constant, miles traveled will increase as daily travel times remain stable. The increase in distance could be two to four times, depending on how congested traffic is and on the service route.

Faster travel (via cheap energy) is just one of the technologies that would make housing more affordable. Automation, process innovation, new materials - there's a lot we can do if we want to.

Figure 3: Joby Aviation recently got clearance for flight tests in the US.

Health

Biology, which has long been artisanal, is fast becoming industrial. Health is becoming an engineering challenge, and the pace of progress resembles the rapid advances we've made in computing as the cost of gene sequencing is plummeting. The central idea driving all of the sequencing is miniaturization. Just as miniaturization steadily decreased the price of computer chips, genome sequencing is getting cheaper as working components are made even smaller. Regulation willing, we might see as much progress in healthcare during the next decade as we’ve seen in computing during the previous one.

Figure 4: The exponentially declining price of DNA sequencing vis-a-vis Moore’s Law

Several fields are evolving rapidly and demonstrating the potential to revolutionize how we prevent and cure illnesses.

Cell and Gene Therapies: These approaches aim to treat disease at the cellular and genetic level. Cell therapy involves extracting patients' cells, reprogramming them, and injecting them back into the body, often with the goal of using the immune system to fight diseases like cancer. Gene therapy involves delivering genetic material into patients' bodies with the aim of replacing or correcting faulty DNA.

Closely related to cell and gene therapies, mRNA, or messenger RNA, therapies essentially work by using synthetic mRNA to instruct cells in the body to produce proteins that can either prevent or fight disease or help restore normal function to cells and organs. This technology has been a game changer in modern medicine, with Pfizer-BioNTech and Moderna utilizing it to develop their COVID-19 vaccines at an unprecedented speed during the pandemic.

While mRNA technology has been around for several decades, its use in approved therapies was limited before the pandemic. The successful development and deployment of mRNA-based COVID-19 vaccines have highlighted the potential of mRNA technology for vaccines and therapies for genetic disorders, cancer, and other diseases, leading to renewed interest and investment in this area.

Synthetic Biology: A field of biotechnology that uses engineering principles to create new biological systems. This can be done by designing and assembling new DNA sequences or modifying existing ones. Synthetic biology has the potential to develop new drugs, foods, and materials and to revolutionize the way we treat diseases.

Biotechnology has also benefited from rapid improvements in machine learning (ML) and AI technologies. ML and AI will likely continue to play an increasingly important role in biotechnology, driving further improvements, including drug discovery, personalized medicine, genomic analysis, and clinical trial optimization.

Let's address the long list of diseases we outlined in the beginning.

1. Alzheimer's Disease and Dementia: Biotech companies are leveraging various approaches, such as targeting beta-amyloid plaques and tau tangles, hallmark features of Alzheimer's disease. These approaches include monoclonal antibodies and small molecules. Some companies are also exploring gene therapy and stem cell therapy for treatment. Still, the field has seen many clinical trial failures, and the path to a cure is still uncertain.

2. Cancer: Biotechnology has significantly contributed to cancer treatment. Techniques such as immunotherapy, gene therapy, and CAR-T cell therapy are being used. Immunotherapy leverages the body's immune system to fight cancer, while gene therapy aims to replace or silence the genes responsible for cancer. CAR-T therapy involves engineering patients' immune cells to fight cancer. These treatments have shown promise, but they are also not quite there to be universally effective.

3. Heart Disease: Here biotech is being used to develop therapies for heart disease, including gene therapy, stem cell therapy, and tissue engineering. For instance, gene therapy is used to stimulate the growth of new blood vessels in the heart, while stem cell therapy aims to repair damaged heart tissue. Tissue engineering involves creating artificial heart tissue that can be used to replace damaged areas of the heart. These therapies are still mainly in the experimental stages and have not yet resulted in a definitive cure.

4. Diabetes: Not surprisingly, companies are working hard to fix diabetes. For type 1 diabetes, some companies are working on encapsulated islet cell therapy, which involves transplanting insulin-producing cells into the body. For type 2 diabetes, biotech firms are creating better insulin therapies and drugs that can regulate blood sugar levels. Again, we have more work to do as these treatments are designed to manage the condition rather than cure it.

This is just a small subset of illnesses we want to cure, and we have a lot of work ahead of us, but we have proved that early science works. Now promising technologies need further investment, more scientists and engineers to improve them, smart regulation to get them to market, and fast distribution across the world so we can put them to use.

Our culture determines how we regulate technology

Health, housing, and aviation are all regulated domains, so our progress depends on whether we want it and decide to regulate the domains accordingly.

One argument on why we have seen such fast progress in computing is that we forgot to regulate it because we thought the computer was a toy. Conversely, we have heavily regulated many areas of life and subsequently not seen much progress. When looking at Figure 2. above, the regulatory burden is especially heavy for industries that have become the most expensive, including housing and healthcare. In addition to the actual permitting process for new housing, housing costs have risen because of the lack of faster transport and cheap energy. It’s not surprising that nuclear power and aviation are some of the most regulated industries in the world. With healthcare, the case is even more clear-cut. It even has a name, Eroom's law, which is the inverse of Moore's law. It's the observation that drug discovery is becoming slower and more expensive over time, not least because of the increasing regulatory burden.

Figure 5: Eroom's law is the observation that drug discovery is becoming slower and more expensive over time.

Do we want our lives to improve?

As we stated in the beginning, we have accepted that being able to afford a house should be challenging and that old age comes with a deadly disease. This is a symptom of something more fundamental. We have silently accepted that the world won’t materially change during our lifetimes.

Peter Thiel noted that if nothing changes in the next 100 years, the future will be at least 100 years away: “What makes the future distinctive and important isn’t that it hasn’t happened yet, but rather that it will be a time when the world looks different from today. In this sense, if nothing changes for the next 100 years, then the future is over 100 years away.” By Thiel’s definition, we have been robbed of our future.

What would it take to get back to the future, afford a house without a lifetime of debt, and cure the illnesses that plague us? Technological innovation is our only hope in the long term. Technological innovation drives economic growth, which directly translates into a higher quality of life, funds further science and innovation, and makes many of the central institutions of our liberal democracy function. Without growth, modern society will grind to a halt. Conversely, economic growth might solve all our problems.

If technology can drive change and solve our problems, why has it not done so already? Just as it's important to understand that change is possible, it's equally important to understand that it's not automatic. We need to believe it’s possible, want it, and work hard for it.

For us in Finland, during the past 15 years, Slush leveled the playing field with bigger technology hubs, brought in international technology investors, and educated us on technology entrepreneurship. But the most interesting thing was how it changed the cultural fabric of the country in a relatively short time. It created a forward-looking atmosphere of hope and excitement at a time when one should’ve expected the opposite. Right when Nokia, the Finnish miracle that accounted for approximately 4% of Finland's GDP at its peak, started to crumble in the late 2000s and early 2010s, Slush got started by a group of kids in their 20s who naively believed in the future since nobody cared enough to inform them how dreary the future would be. Turns out optimism and excitement are contagious. It was a cultural shift that produced the results we now see. Slush showed that a small country like Finland, with 6 million people, can culturally reinvent itself in a decade.

Despite all the excitement in Finland, maybe the cultural remake didn’t go far enough. Sometime after 1970, we forgot that change is possible. Across the liberal democratic world, most still believe the prosperity that technology can deliver is reserved for technology businesses. We haven’t yet realized that it is only the tip of the iceberg. Technology is not just what lives in your smartphone or is reserved for a few large software companies. It can change all our lives for the better beyond recognition. To do that, we need a cultural awakening where we start believing in the future again. How could this happen?

1. Bring back the future by celebrating definite, ambitious futures and people building them

Organize events, parades, and celebrations, write songs and books, and make movies and art. Paint the cultural fabric with the message. For every dark and dystopic Terminator or Oppenheimer movie, make one about how AGI and atomic energy change our lives for the better. Make it normal to talk and plan for ambitious futures. Above all, celebrate individuals with singular definite visions of new and different futures. Those who aspire to build singular new ideas instead of competing to be the best in what already exists. These individuals are the only way to a future that's not captured by the past. We need more of these individuals. This is especially important in a world where the media will publicly crucify anyone for departing too far from the accepted dogma. Rooting for the unreasonable individuals we don't always agree with can feel particularly oxymoronic, but the future depends on it.

2. Opinionated and ambitious capital

We need all the large institutions that manage our capital and wealth excited for the future. Endowments, pension funds, wealthy families and individuals, and sovereign wealth funds. We should celebrate those who finance risky, ambitious new technologies and channel more capital into building a definite future and less capital to index the indefinite status quo. Where we currently search for ideas that fit our financing instruments, we should shape our financing to fit the new ambitious ideas in need of capital. Few have the stomach to fund the most ambitious because they look different. It means there are outsized returns for those who will.

3. Challenge the existing cultural truths

We should have a healthy disrespect towards tradition and what came before. If we believe those who came before had all the correct answers, trying to create anything new seems pointless or insulting. Yet, that's what we need to do if we want ground-breaking scientific discoveries and technological innovations. At the same time, we shouldn’t question everything to the extent that all becomes relativistic. Thinking for ourselves is harder and more important than ever before.

4. A regulatory environment that wants us to prosper

We should also remove obstacles to new ideas, science, and technology. We will not see our lives improving if we punish for mistakes or regulate industries until there are no uncertainties left in life. Taken too far, regulation drives up costs, slows down progress, and pushes innovation elsewhere. After regulation starts to slow down progress, it’s not in the interest of society anymore. If we only introduce new laws and regulations, eventually, everything will be outlawed. This is an opportunity for the smartest countries to attract talent and the most ambitious technology companies by creating strategic regulatory environments. Companies pushing what’s possible in energy, biotech, transportation, space, AI, and many other critical industries will be established in regulatory environments where they can get their technology to market as fast and cheap as possible with the least regulatory uncertainty.

We can do all this. It's not whether we can get affordable housing and cure the illnesses that trouble us but whether we believe it’s possible and want it enough. In the free world, we tend to get what we celebrate. Let's celebrate the future and the change it brings with it.

*All historical Total Factor Productivity (TFP) numbers are from the book The Rise and Fall of American Growth by Robert J. Gordon