The best minds of our generation are working on video filters
In a world dominated by short-term financial incentives, income potential decides where talent is allocated. And the outcomes are abysmal.
There are more PhDs today working on Machine Learning algorithms optimizing the positioning of visual gimmicks in video calls, than on the issues of new energy sources. The big digital technology giants employ more engineers than all space programs across the globe. Our best brains are strategizing pharmaceutical M&As, rather than working on new drug development at a broader scale.
As a society, the allocation of our best people seems all wrong. We are heavily investing time and efforts in short-lived financial engineering, ever-present entertainment, and slightly improved first-world consumer services.
At the expense of tackling severe global challenges, of which plenty are well-defined and in urgent need of fresh thinking and approaches if we are to improve (and sustain) life across the globe.
“The status quo, and our broader societal ability to generate innovation, is almost certainly in need of significant change.” (Patrick Collison, CEO Stripe)
It is more than clear that what truly has a net positive impact on lives across the globe is divorced from where rewards are accrued, especially in the short-term. While the 19th and 20th century brought unprecedented progress for people across the globe, in terms of health, longevity, and quality of life. So far the 21st century has been marked by distribution of some of that progress to the developing world, while the progress in the developed world has stagnated and life outlooks for many have worsened.
Life expectancies, for example, in both the US and the UK are on the decline.
These are trends that have not been seen since the early 20th century. A positive outlook on life is also on the decline, with parents expecting their children to be worse off than they were themselves. Something is not moving in the right direction.
Confusing value with values
The financialization of all aspects of life has brought one straightforward equation to everyone’s mind: Money = Value. If something earns a monetary reward, then the size of that reward is in line with the value created. And somewhere along the line, we have further started to confuse value with values, thinking that what generates financial value must also be of societal value and hence something we value.
“Greed is good” — now the mantra across all industries.
Yet finance is only a small section of real life. Anyone dealing with health issues, unhappy relationships, or spiritual emptiness will be able to attest to that, which is a steadily increasing amount of the global population. Depression and other psychological diseases are on the rise, while life satisfaction levels are declining continuously. And that in what some would argue is the most prosperous century in human history.
Somewhere along the way, our pathological focus on monetary value has made us spiritually poor. This is especially true in our life pursuits — which for so many, are dictated by where the highest amounts of money can be earned. Highly educated talent is at a shortage everywhere, and our young professionals are chasing income as their highest value.
Pushing them into careers of little value to society, and eventually leaving them to question what this was all for, once the money-high wears off. As is eventually will.
Universities, once places of self-discovery and exploration, have become mere degree factories. Every course not directly related to a bankable skill is being cut. Gone are the years of orientation, taking a broad range of courses out of interest, and taking the time to grapple with philosophical texts and thinking about life and one’s values. Now speed, and degrees are all that matter — to move into a job and start earning.
M&A keeps rising, R&D keeps declining
The last decades have been marked by extreme financial deregulation. The owners of assets and capital have seen significant improvements, while those working for a living have been left behind or even worse off than before. The same can be said for corporations at large — those basing their profits on financial engineering have had a heyday, while companies investing in educating their workforce, creating real innovation, and building real businesses have started to struggle.
It is no surprise then that almost all Fortune500 corporations have, on average, lost R&D productivity and increased their M&A spending.
Buying new products and market share from the outside, once others have developed them, has become preferable to doing the work internally. The survival rate of start-ups, despite the plethora of unicorn headlines, are at an all-time low, as the most promising ones are bought up by incumbents, before being able to grow to a significant size.
This combination further leads to a higher degree of centralization than before — where most sectors are dominated by four or fewer incumbents, looking more like oligopolies than real competitive capitalism. And those where the rewards accrue can further afford to pay top salaries and acquire further upstarts, cementing their lead for good.
In this economic environment, there is no strong incentive for real innovation. Any expensive, long-term R&D investment is not short-term profitable.
Hence neither start-ups, who have impatient venture capitalists in their back nor large corporations, who report quarterly to investors, make those investments. The only places left where the real innovation is being pursued are universities, where important research is stalling for a whole other host of reasons. This leaves us with many quick fixes and no solutions.
How do we get the future we were promised?
Watching beloved sci-fi movies from the late 20th century, it is clear that we have taken some unforeseen turns. Rather than continuing on the trajectory of constant net life improvement for all globally, progress has significantly stalled, and in some parts of the world, even reversed. Whatever authors and movie makers have imagined back then, has only to a very small degree become the reality we live in today.
Similar for the leading economists of the last century.
Where John Maynard Keynes forecasted a permanent shortening of the workweek, it is now often longer for many than back in his day.
An unimaginable outcome for people thinking about the future back then. At some point, the progress has stalled or even reversed — continuing on the path of GDP and financial growth without improving people’s lives.
The only real motor for progress we have as humans is our ingenuity. Real progress comes from diverse groups of people applying their creativity to complex problems, and working away at it tirelessly. This has led us to discover electricity, develop the light bulb, significantly increase life expectancy through medical improvements, as well as many more critical inventions and achievements.
Today our best and brightest are busy with financial engineering, entertainment gimmicks, and improved eCommerce recommendations — any field where the highest rewards accrue.
These fields are the most lucrative because decades of financial deregulation and winner-take-all incentive and investment systems have benefited value redistribution over real net value creation — which is often very long-term, laborious, and uncertain. No one is willing to finance or undertake risky endeavors anymore.
So binge-watching Netflix and spending hours daily on Facebook clearly states to the world that this is what we want. Same as continuously buying things on Amazon.
A good part of the problem lies in the values we express as consumers when we cast votes with our attention and wallets. Whatever we seem to value is what is valued more highly by investors, and hence accrues money and talent.
A deeper part of the problem lies in our regulatory environment. We need to tame the extreme degree of financialization in industry and balance the scales back in favor of real innovation and creation. Firms have to benefit more from their R&D efforts than financial engineering through M&As and stock buybacks.
What and how we tax, as well as where we provide grants and subsidies, will directly impact where investments are flowing as their most efficient allocation.
Rebalancing the scales, from values to value
“For the past two decades, we’ve funneled treasure and talent into the ethereal world of software and digital optimization. Imagine what could be accomplished if American ingenuity came back down to Earth.” (Derek Thompson, Atlantic)
At the current trajectory, enlightened billionaires appear to be our best chance at some serious moon shots — literally. Ambitious space missions and exploration beyond orbit have been all but few in between since the moon landing. Governments have lost their enthusiasm after it failed to be a point of differentiation or gain bragging rights. Now Elon Musk, Jeff Bezos, and others are reviving our space dreams.
It should not be up to individuals to move resources into the directions they think are essential. Our systems of government are supposed to the mechanisms, by which we as societies agree on support frameworks, legal frameworks, and also investment frameworks of national or internal interest, where the private sector fails to prioritize them. These are significant areas of human concern, which need to come into focus again.
Ultimately, the working of a complex system such as our society and economy comes down to the smaller feedback loops within the system, which are influenced by incentives.
At the moment, financial returns seem to be all anyone is valuing, and there are many short cuts to get those.
We need to both think about how to make the important work more valuable again economically, but also how we can value human progress, being in services to others, and contributing to human achievement more highly. Our spiritual values seem to have evaporated, and it will take some serious soul-searching to see how we can rebalance the scales in our long-term favor.
If you have any thoughts, responses or questions to add, I would love to hear from you in the comments below, or feel free to reach out to me directly via LinkedIn. Thank you for reading!