For the past few years I’ve co-hosted an interesting dinner, where I ask each guest to speak for less than 2 minutes on a way they think the world will change in the next 5 years – that is not obvious.
In November I hosted 55 leaders in a wide variety of disciplines – from horticulture to economics. The guest list included; 2 Governors, a Senator, 5 CEO’s of companies of more than $2 billion in revenue, Chief Investment Officers of more than $38 Billion, 11 venture capitalists, etc….so you get the idea.
The 55 ideas were then voted on by each table, and below is the fifth of the six finalists – on ways the world will change that are not obvious. Please share your ideas on other non-obvious predictions and your thoughts about this one.
Africa, Germs and Power.
I did this under the context of thinking about distribution and abundance and scarcity, and asking the question five years from now: what will there be more of, what will there be less of, and will it be in more or fewer hands?
That is the framework, and then, what is the probability and the size of the impact?
One — fewer capital exchanges, by which I mean financial exchanges. De-listings and lower trading volume today will force further consolidation of exchanges; global twenty-four equity markets emerge, medium probability, medium impact.
Two — fewer charities and philanthropies. They will be merging, Buffet joined Gates by choice, others will do so by necessity — other probability, medium impact.
Three — less aid to Africa — and this is counter-intuitive — actually creates less corruption in Africa. Africa emerges, as a result, as the new China, with the lowest cost of labor, particularly south-eastern and south-western port cities; medium probability, medium impact.
Four — Africa is main beneficiary of what will be deemed the world’s greatest unintended philanthropy, which is today’s capitalist pursuit of solar energy, unsustainable evaluations in too many companies, and classic shrimpatarian creative destruction, to mean that most investors in solar companies take flight in Icarus — they are burned, leave solar cells metaphorically littered on the sides of silicon valley, and a clever entrepreneur picks them up and creates Africa Edison tower with a rise of distributed centralized power, which makes sense for Africa, and solar makes no sense for base-load power.
Five – What does make sense for base load power is: nuclear renaissance takes hold, waste and proliferation issues are solved through safe chemistry. Waste and inefficiency myth in energy is busted — the most egregious myth in energy, which we were ranting about is that if you actually want to reduce energy use you should make things more inefficient not efficient. The more efficient something is, the cheaper it becomes; the cheaper it becomes the more people use it.
If you think about personal computers, personal computers of fifty years ago versus today, they are a million times more computing capacity, a million times more energy efficient, but we have hundreds of them. Same thing with refrigerators, they are much more efficient than they were yesteryear, but now you have one in our dorm room, your office, your home, you cabin, etc. You can think about it like bandwidth — if you have a fiberoptic cable watching movies, downloading bit torrents, YouTube — you are sucking up a huge amount of bandwidth.
If you actually want to use less bandwidth, you should be yourself on a 56K baud modem and pull your hair out.
Six — we will see more germs, pandemic flu, or other low probability with an enormous impact, probably only second to nuclear. More distributive health care, digitization of records, network diagnostics, decentralizes health care to edge away from hospitals and doctors, cuts costs for looming Medicare trillions — five year,s you will be five years into the retirement of the baby boomers and Alzheimer’s will cost the government 1.2 trillion dollars. If you postpone the onset of Alzheimer’s by five years, you halve the cost.
What is it worth to you to invest 600 billion dollars and how would that rank against some of the current priorities? Last few, distributed R&D, and a little bit of pandering to my gracious hosts, but R&D in the form of decentralization away from corporate R&Ds and universities — you see the rise of firms like Innocentive, yet2.com, Bolivan, which mean that the ideas are coming from everywhere like Reykjavik to Russia.
Seven – More power for Russia: specifically, Iceland becomes the Cuba of the north. Russia jockeys for Arctic power and for Arctic resources with five hundred and sixty three billion dollars in currency reserves. Little noted in the popular press today but they gave a five billion dollar loan to Iceland when everybody else is fleeing the country and it is a means for them to project power just as they wanted in Cuba. That is the smartest geo-political investment nobody is talking about.
Eight – Inflation runs rampant five years from now — the emissions that matter are not the carbon variety but the US dollar variety emitted from the Fed and all their central banks. We see interest rates rise to the teens.
Speaking of teens, a video game company gets big enough and acquires a large media company, akin to AOL Time Warner, but this time it will be Electronic Arts or an Activision blizzard.
Vegas invents a new game, it needs a new poker and my bet is it is Bakera.
Last, five-year investment cycle, everyone wants to be today where they should have been five years ago: banks in 1990 is where you should have been and they were investing in banks in 1994. The internet is where you should have been in 1994, people were investing in 1999. Housing and commodities in 1999 is where you should have been and people were investing in 2004 and energy is where you should have been in 2004 and I believe — self serving — that venture capital will be the best-performing asset class in the next five years.
I don’t know the key to success, but the key to failure is trying to please everybody.
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