I have been reading an article by Peter Thiel written in 2011, which offered a view of technological progress and its pace. Lately I have been trying to understand if my 15 year long investment thesis in US tech companies, especially NVDA is nearing its end or not. Mind you I am interested in macro economic trends, that lasts multi-decades. For those who do not who who Peter Thiel is, here is a short summary about him.
Peter Thiel is a prominent and influential American entrepreneur, venture capitalist, and political activist. He is a significant figure in Silicon Valley and beyond, known for his involvement in several groundbreaking technology companies and his distinctive, often controversial, views.
A lot of us live inside an echo chamber, in their own bubble, and I am often no exception, even if I try otherwise. One of the potential problem of my information is by potential bias against the current Trump Administration. However, if this bias cloud my judgement in terms of understanding of major trends that is a problem. I will explain this with the simple chart below, which is the price trend of a basic popular automobile in the US, a subcompact SUV/crossover for example. I have plotted its inflation adjusted price trends over the last 20 years. We can clearly see that the price of a basic car is higher today than in 2005 (mind you, I have taken the inflation out).
In the last 20 years, there have been Republican Presidents, and there have been Democrat Presidents, and there have been Trump too with a full term (yes, pun intended!). My point is cars are outpacing inflation in a big way. In America, a basic car is very important, much more important compared to the rest of the world. Notice in the chart, one can argue, during 2005-2020 (15 years just before Covid), the car price was flat, inflation adjusted, about 24K-25K for a basic entry level car. Now, suddenly, it is 30K, and Covid is over for 2 years. I don't see the price coming down to 24K anytime soon.
Theil argued the following key points in his article:
The Premise of Declining Progress: Theil argued that modern Western civilization's belief in never-ending progress, rooted in science and technology, is faltering, especially in the wake of the Great Recession (which is now 17 year old and counting).
Economic Imperatives: There's a desperate need for high-paying jobs and rapid growth, with the expectation that science and technology will provide solutions despite a general lack of understanding of these fields.
Deceleration in Key Areas: There are some rapid decline in multiple key areas, like Travel speed, Energy innovation, Commodity shock, and lack of growth in Medicine and Biotech.
Computers mark a spot as a Sole Hope (and a Deceptive One): Information technology, driven by Moore's Law, appears to be the only area of rapid progress, leading to a "decoupling" of computers from other sectors of the economy. This raises questions about whether this progress creates new value or merely shuffles existing structures. I mean, just because my iPhone has the same computation power as the entire Apollo Mission program, doesn't mean that I am smarter than those people, nor can I accomplish more than all those NASA scientists in the 70s.
The broad stagnation of real wages and incomes since 1973 suggests a lack of across-the-board technological progress, with computer advancements seemingly canceling out failures in energy. I mean, we are still burning fossil fuel, and when we talk about green energy, we talk about wind and solar, which are not only old story, but also energy sources very low in energy density. I work in this field myself, and I can tell you that we haven't done any significant breakthrough after the Manhattan project and its aftermath where we created nuclear reactors to unleash the power inside the atom. That is 80 years ago folks!
I don't think Trump is a disease, he is just a symptom.
A lack of economic growth threatens the modern political order, leading to a zero-sum game where there's a loser for every winner, fostering increased political nastiness and a misdiagnosis of problems as purely economic. We can argue that that the "Keynesian" approach, which seemed to work during the 20th century due to a scientific and technological tailwind, is no longer viable. Meaning, throwing money at the problem by taking more and more debt can only work so long. We have Japan's stagnation as a society to look at but we are taking a blind eye to it!
Therefore, there's a shift on the political right towards pessimism and a questioning of supply-side economics. Trump and his populism is simply a by-product of this.
My fear is not just the American govt, but any govt of the world is currently stagnating. I am skeptical about about our current ability to restart innovation due to a lack of scientific leadership and a reluctance to prioritize research over welfare spending. This is especially true in EU and similar nation what we call Big Govt.
Bringing the car price back to the discussion: if a college student or a first time homeowner struggles to buy a basic car, what else will he/she will struggle with. I am going to assume everything! In that case, where is the upward mobility in any country?
I feel the hope of Western civilization for ongoing progress, fueled by technology and science, is mostly an illusion. Outside of information technology, we can argue, real innovation has slowed, causing economic stagnation (demonstrated by stagnant real wages since the 1970s). This relative absence of real growth exposes society to increased financial crises and a "zero-sum" politics in which culture wars divert attention from underlying problems.
In the current post-globalized world, marked by rising tariffs and social unease under the current US administration, Thiel's arguments find even sharper resonance:
De-Globalization and Tariffs: Thiel's doubt regarding the virtues of unbridled globalization is reflected in policies favoring economic nationalism and tariffs. This movement away from strict free trade, in order to safeguard domestic industry and employment, is consistent with his suggested criticism of a system that might have emphasized efficiency over general social welfare, even though such policies impose their own economic drawbacks (e.g., increased consumer costs).
Enduring Economic Discontent: The underlying condition of stagnant real wages and economic insecurity continues to be a potent force. Despite economic recovery, many Americans perceive themselves as falling behind and continue to be politically polarized and seek scapegoats. This provides a political environment in which the "winners" are suspected of having profited from a "racket," a view that has been salient in recent years.
Accentuated Social Decline: I think we are witnessing a "cultural decay" and "soft totalitarianism." In the contemporary context, heightened conflicts over social issues, identity politics, and perceived assaults on traditional values are interpreted by some as harbingers of additional social fragmentation, satisfying the premise that these "fake cultural wars" deflect from underlying issues of stalled progress. The emphasis on such polarizing topics can, in fact, obscure meaningful discourse regarding long-term innovation and economic health.
I think any government today will more likely display bureaucratic inertia than effectively implement high-ambition projects. This view accords with modern debates on the effectiveness of large-scale public spending and regulatory structures. Further, the contention that "money is either hard or fake" accords with persistent fears about fiscal responsibility and the implications of national debt on future prosperity.
More and more, I am feeling that right now we are running on fumes. Only AI can do so much for us! I mean, even if I assume, AI will be internet of the 90s, still that is just a 10 years of growth, and 2 of them are already gone. We really need to find the next thing, and I am running out of ideas, and so is the world I feel.
