What would you say if I told you that the largest economy in the world faltered over the last 40 years? Would this come as a surprise to you?
Consider the fact that we live in the era of information, automation, and digitization. There is little doubt that over those decades, we saw more human progress than the rest of our existence combined.
Yet, a case is going to be made that we are far behind where we should be. The trend we established earlier last century actually was diverted from. In fact, it is easy to see how far behind we really are.
According to the San Francisco Fed, we see the total productivity factor falling off a cliff. The pace that was established in the 60s and 70s is a distant memory. Now, we are struggling along to maintain a positive direction.
Before going any further, what is Total Factor Productivity? Basically it is a measurement of the aggregate output as compared to the input. It tries to capture the overall effectiveness of economic output in relation to the different variables that are utilized.
Being in a rapidly expanding technological era, this does not seem to make sense? With the advancements that were made, we should be at a much higher level. Even if we followed the pace of those earlier decades, we would be double as to where we stand now.
So what is the cause of this?
While there is no one answer, a case could be made that we are mired in a period (decades) of misallocation of capital as well as low impact focus.
All of this amounted to humanity underachieving. If you are looking for your flying car, this is why it does not exist yet.
Society altered its path over the last few decades. Technological advancement became a game of money generation. The industry was taken over by Venture Capitalists who were only concerned about things such as ROI. While this is important, it has served to crush the maximization of our output.
For example, Snapchat was a project that received a lot of money in funding. Naturally, since it went public to the tune of tens of billions, it was a very successful project. However, in reality, did the world really need another messenger application? Nothing against Snap but would the money have been better off invested elsewhere?
At the same time, we saw the financialization of our global economy. Capital became the main driver. This meant that debt became commonplace. It led to an environment where most of the money is allocated to the "casino" of Wall Street. Look at the dollar amount invested in stocks and bonds. Unless this is an initial offering pertaining to a capital raise, the money is basically just speculation.
Essentially, this dwarfs the amount spent in funding projects either through Venture Capital or R&D.
We then couple this with the fact that a larger portion of our overall capital is going to servicing debt and we can see how this happened.
Of course, since the global debt load keeps growing and Central Banks are doing all they can to ensure mass defaults (an economic cleansing) does not take place, this will likely continue for a while.
Can we get back on the curve that was originally set so many decades ago? Is it possible that we can jumpstart technology to the point where it catches up in a couple decades?
With cryptocurrency, the potential does exist. However, it is going to depend upon what is done and how we approach things.
Thus far, the basic foundation of cryptocurrency was mostly tied to the same "casino" mentality that Wall Street has. We see it each day with people talking about "mooning". Everything pertaining to this is about speculation and how can instant riches be achieved.
Considering so many live with zero financial accumulation, this is not a bad thing. Nevertheless, we are going to have to shift our mindset very quickly if we are to see a radical change going forward.
Presently, we are on the edge of some very powerful technologies. When we look at the potential impact of quantum computing, AR/VR, renewable energy, and 3-D printing, we can see how massive economic explosion could be on tap.
This will not take place, however, if we are not "priming the pump". One of the keys to the last 40 years is the fact that money did not get where it was needed. When an overwhelming amount of money is locked up in the financial system, the other areas of the economy, those that provide the true growth, suffer.
Cryptocurrency has the potential to change this. One of the biggest benefits it has is that it is not tied to the debt-based system. Hence, no glaring misappropriation of resources.
Another is the ability to fund any idea. Presently, the VC world is established in such a way that only a small handful of projects receive funding. The numbers have to make sense thus we are dealing with larger firms going after the big paydays. This could be successful from a financial ROI standpoint yet does not achieve the desired result that will move the Total Factor Productivity.
Basically, we need more Elon Musks and less Mark Zuckerbergs.
Decentralized Finance (DeFi) as the opportunity to construct a system that can fund the endeavors that society needs. Through the pooling process along with tokenization, DeFi has the ability to take crowdsourcing to a completely new level. This is essential especially as the wealth within the cryptocurrency circles grows.
Everything we discuss plays into a much bigger picture. Web 3.0 is a lot more than just the advancing of our Internet and creating a more advanced social media realm. Instead, it will be a blending of our physical, digital, and biological lives. With all the advanced technology, we see, so far, that the best humanity can come up with is the pursuit of selling people more stuff while increasing surveillance.
When we look at the forward progress of humanity, it is vital that we re-start the trendline from decades ago. Cryptocurrency can fuel this since it is part of the basis for Web 3.0. Incentivization occurs through the tokenization of projects. This not only gives people a stake in what takes place, it also enables them to focus upon those things that are important to them.
Looking back at the above chart, we can see that there was an improvement in the trendline during a short period in the late 1990s into the 2000s. This was the era of the Internet kicking off, something that provide radical impact. However, that faded as the "business as usual" return. Major innovation took a back seat to development of the silo system and a few corporations gaining control.
We must not repeat this same mistake. Right now, we are sitting on something that potentially is many orders of magnitude more powerful than the Internet. It can help humanity return to the historic TFP line and remain there.
So, unless Central Banks are willing to send money directly to individuals and bypass the banking/financial system, cryptocurrency is the only answer that is being offered up.
It is going to be needed to re-start human progress.
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