Optimistopheles: Pessimisticles, you’re so negative. At the party this evening I’ve told all my tech friends not to talk to you about the economy because you will ruin their festive mood. They all work in Silicon Valley, at cutting edge companies, and are convinced that technology is the solution to most of the world’s problems. They have all read Matt Ridley’s ‘The Rational Optimist’, the works of Ray Kurzweil on exponential growth and ‘The Singularity‘, and most recently, ‘Abundance: The Future Is Better Than You Think’ by Peter Diamandis. You won’t be able to persuade them that doom and gloom is in their future.
Pessimisticles: Probably not but in my experience when everyone thinks the same way it’s probably best to take a contrarian position.
Optimistopheles: There you go again! Can’t you just open your eyes and see all the marvelous discoveries and innovations that are being made every day in the field of biotech, healthcare, mobile computing, robotics, food production and clean energy. Thanks to Moore’s law these new developments are increasing at an exponential rate. We are making more technological progress in a few years than we used to make in a few hundred years. In addition, billions of the world’s poor are joining the global economy and gaining access to the internet so there are that many more minds employed in problem solving activities.
Pessimisticles: I don’t disagree with anything you’ve said but there’s one thing that doesn’t change and that’s human nature. Throughout history societies have moved between extremes of optimism and pessimism, independent of the technological innovation that is going on around them. Invariably long periods of optimism and progress are followed by periods of pessimism and a retracement of much that was achieved in the prior period. Inevitably individuals and societies extrapolate the progress made during the good times, taking more risk than they would otherwise, creating and extending more credit than they would if they were in a more prudent frame of mind. Corruption in both the public and private sector thrives because a rising tide of credit lifts all boats, and so corruption is easier to hide, as the Bernie Madoff affair demonstrated. However, sooner or later, reality asserts itself and the Emperor is revealed in all his nakedness. Investments based on nothing more than wishful thinking have to be liquidated and asset values collapse for no other reason than a collapse of confidence.
Optimistopheles: Naked Emperors indeed! I’ve never seen so much optimism and confidence as there is in Silicon Valley at the moment. Deals are being made every day and there’s no shortage of funding for the right ideas. Furthermore, the social and economic benefits of all this innovation are real, not illusory, as you suggest.
Pessimisticles: It’s true that Silicon Valley is still throbbing with vibrancy and optimism, although the Facebook fiasco may be indicative that even the positive mood of tech investors has reached a tipping point. Whether or not the innovations you describe produce real social and economic benefits will, of course, only be seen in retrospect. Many of the so-called benefits of the tech boom in the 1990’s turned out to be just the wild imaginings of over-enthusiastic entrepreneurs.
Optimistopheles: Why should I take your doom and gloom predictions seriously? The track record of doom and gloomers is not good. Remember all those dire prophecies that never happened, such as worldwide starvation, hydrocarbon exhaustion, nuclear extermination and global cooling. Why should your predictions be any different?
Optimistopheles: Pessimisticles, I don’t mean to be rude, but maybe it would be best if you didn’t come to the party tonight.
Pessimisticles: No problem. I certainly don’t want to spoil anyone’s fun.