“Catch the wave”, February 18th 1999). The industrial waves Kondratieff observed in the 1920s came every 50-60 years or so. By the late 1990s, fresh ones were arriving twice as often. Fifteen years on, their frequency appears to have doubled yet again. Waves of new innovations now seem to be rolling in every 10 to 15 years.
I think those waves are going to come at us even faster in the next 20 years, resulting in what I call the Age of Transformation. Literally, our lives will be transformed, and at an ever-increasing pace of change. The Gartner Group has developed a cool paradigm that they call the “hype cycle.” They basically see every technology through the lens of five different phases in this hype cycle: the innovation trigger, the peak of inflated expectations, the trough of disillusionment, the slope of enlightenment, and the plateau of productivity.
For the past 20 years, Gartner has produced an annual update of various hype cycles that provide snapshots of the progress certain technologies have made during the previous year, where on the innovation cycle they currently reside, and how long they will take to reach maturity (if ever). This year’s collection (published on August 11) assesses the prospects of some 2,000 technologies, grouped into 119 aggregated areas of interest.
The chart below is the most recent hype cycle, published by the Gartner Group last month. See if you can find a few new technologies that you didn’t know even existed.
It would be nice if we could just sit back and let growth happen. But as it turns out, our government seems to be doing its best to retard growth. The bureaucracy of government has become what Newt Gingrich calls “the prison guards of the past.”
In field after field, regulators feel the necessity to control the spread of technology in ways that are consistent with the past they seem to want to perpetuate. Neither Newt nor I is against reasonable regulation (it is a requirement for civilization); but regulation run amok kills growth and jobs, and in the case of one federal regulatory body it is killing people. (Warning: this hits one of my personal hot buttons.)
This week I was confronted with a single FDA bureaucrat slowing down a new medical technology by what may be five months. Doesn’t sound like much time, does it? Except that this is a technology that will literally save millions of lives per year. Not improve life, understand: save lives. As in life or death. (Given the provision that the technology must be proven to work as we expect it to.) Rather than focusing on what we can do to move this crucial innovation along as fast as possible, the regulator is forcing this company to spoon feed him information that has already been provided in multiple forms. Because he evidently didn’t have the time to read the massive amounts of information provided, he simply came up with a bogus reason to excuse his inaction and delay further progress. The fact that the lives of fathers and mothers and daughters and sons and spouses and friends will be lost evidently doesn’t bother him.
I wish I could say it was just this one instance, but we all know that this sort of thing happens many dozens of times a year. The entire process of drug approval is broken. It is rigged to benefit Big Pharma and largely prevents small startups from succeeding by dramatically increasing costs beyond what is necessary.
If I could wave a magic wand and change just one thing in our government, it would be to replace the FDA. Not reform it – I don’t want to tinker at the margins. We need an FDA for the 21st century. I’m not advocating some wild west scenario, either – of course we need a regulatory process for the medical field, but not one that is killing what should be the leading new technology in the United States, not to mention delaying lifesaving and life-enhancing technologies that are so needed. The majority of biotechnological research is done in the US; but under the current regulatory regime, it is increasingly likely that the early benefits will not be enjoyed by us, and that jobs that should be created here will be shipped offshore.
Energy should not be the leading job producer in the US; that should be new health and wellness technologies. I am watching some of the most promising new technology companies involved in extending life and healing bodies go shopping for venues outside of the US because the regulatory process is so onerous and time-consuming that the scientists literally don’t feel they can wade through it and don’t want to wait.
By the time they can get a process or drug approved, they are already three iterations beyond the original process for which their applications were filed. The field is literally moving that fast. We are going to be shipping jobs – high-paying, rewarding jobs – overseas, along with the new technologies. Dear gods, Japan and other forward-thinking countries are way ahead of us in the regulatory process. This is just wrong on so many levels.
Much of the US regulatory process is actually a fence-building program to protect the current workers or companies in a field. To use a rather odd example, why do some states feel that a nail technician needs to have a license that requires a 750-hour training program (at considerable cost) to learn something that every teenage girl knows how to do by the time she is 13 or 14? Seriously, do you need 750 hours of training (that you have to pay for) in order to be able to do a manicure for which you get paid 20 or 30 dollars?
As I probably don’t have many manicurists among my readers, I have hopefully not offended too many of you. But what if I started talking about your profession? Just saying. Many regulatory regimes are simply barriers to entry for new competition. Current participants basically capture the bureaucracy they deal with in order to ensure their own positions.
The desire to protect your own personal marketplace is not new. The concept started with guilds in the Middle Ages, and I assume some research would date it back to the time of the Medes and Persians. In the same way, many of us are beginning to feel uncomfortable with the increasing level of armaments in our local police and federal agencies. It seems that every government organization wants to extend its personal level of power and immunity. Can someone please tell me why the Railroad Retirement Board needs its own SWAT team? The Consumer Product Safety Commission? The US Department of Education? Seriously? Literally scores of agencies at the federal and state level seem to feel the need for SWAT teams. Many with armored vehicles. And then they find reasons to use them.
The principle of self-protection and self-aggrandizement holds in almost every area of bureaucratic regulation. In the same way that we all want and need the police in our neighborhoods, we do need regulators (or at least some of them). But an unchecked police force and a stultified regulatory bureaucracy can become a detriment to the society they are supposed to protect. In theory, that is why we subject these organizations to civilian control. In practice, it’s not happening. (End of rant.)
The original point I was trying to make is that the main driver of growth is not monetary policy, notwithstanding the current fetish for dissecting every utterance of the Federal Reserve. More important is US fiscal policy. Even more important is US regulatory policy. I think we have to mention our educational system (which is showing signs of being increasingly broken and inadequate for the 21st century) somewhere around here. But it’s crucial that the natural innovative drive that is inherent not just in US entrepreneurs but everywhere in the world is nurtured and encouraged.
That is not to say that monetary policy is not important. Get it wrong and we all lose. We all become poorer for the impediments to growth misguided monetary policy can create. Burdening a country with too much debt and crowding out productive investments in the process is likewise destructive.
Economists sometimes place too much emphasis on monetary and fiscal policy and miss the importance – in my opinion, the primary importance – of the other factors in the equation. That is somewhat to be expected because monetary and fiscal policy are what they study. But we need to keep things in perspective.
David, I’m sure you will have a few withering insights, and I look forward to reading and chewing them over with you. As always, I treasure our time together and our conversations.
Labor Day, San Antonio, and Washington DC
I’m enjoying my extended time at home here in Dallas. I had the pleasure of hosting Stephen Moore (you know him from the editorial page of the Wall Street Journal) the other evening, when we talked politics and economics into the late hours, over steaks at Nick & Sam’s. Stephen started the Club for Growth back in 1999 and has been an intellectual driver and personal force in pushing for policies that help create growth.
I’m looking forward to going to the Casey Research Summit in San Antonio in a few weeks. Quite a few of the usual (and unusual) suspects, many of them good friends, will be on hand, including James Rickards, Grant Williams, Mark Yusko, Lacy Hunt, Leland Miller from the China Beige Book, David Tice, Mike Shedlock, Rick Rule, and Alex Daly, as well as Stephen Moore. It is really quite the lineup, and for those of you interested in energy and natural resources, it is a must-not-miss conference. You can find out more here. The San Antonio Hill Country is beautiful this time of year, and the conference is at a splendid Hyatt resort well away from the city. I liked the Riverwalk, but this is better.
Then a few weeks later I will be in Washington DC for a private speaking event as well as meetings, and then head back home to celebrate my 65th birthday. Haven’t quite figured out what to do this year. Somehow 65 doesn’t seem nearly as important as 60 did.
Family and friends will gather Monday evening, and we’ll be grilling out by the pool of the apartment, celebrating my oldest son, Henry’s, 31st birthday. He has informed me that there is a new grandchild coming along.
Workouts are proceeding apace, although the weight is coming off more slowly than I would like. Everyone keeps telling me that muscle weighs more than fat, but Dr. Mike Roizen tells me I can only gain about a pound a week of muscle at the max. Oh well, you just have to keep plugging. Have a great week!
Your wishing we could replace the FDA analyst,
John Mauldin
subscribers@MauldinEconomics.
