The Futurist

Nanohealing Material Heads to Market

I first wrote on October 14, 2006 about a liquid that quickly self-assembles into a solid gel upon contact with blood, sealing the wound quickly.  At that time, it appeared that military use of this type of substance was 8-10 years away for 2006.  However, it appears that progress has accelerated, and we are much closer to market availability than it initially appeared.  An update on the progress is posted this week in MIT Technology Review.

The material consists of naturally occurring amino acids that have been engineered to form peptides that spontaneously cluster together to create long fibers when exposed to salty, aqueous environments, such as those found in the body. The fibers form a mesh that serves as a physical barrier to blood and other fluids.

Needless to say, this could save many lives on the battlefield, in car crashes, and during surgery.  If it becomes inexpensive enough, it could even be part of home first-aid kits.  Arch Theraputics is the company that is licensing the technology from MIT, and clinical trials are set to begin soon.

Let's hope the next hurdles are quickly cleared. 

Ten Biotechnology Breakthroughs Soon to be Available

Popular Mechanics has assembled one of those captivating lists of new technologies that will improve our lives, this time on healthcare technologies (via Instapundit).  Just a few years ago, these would have appeared to be works of science fiction.  Go to the article to read about the ten technologies shown below. 

Most of these will be available to average consumers within the next 7-10 years, and will extend lifespans while dramatically lowering healthcare costs (mostly through enhanced capabilities of early detection and prevention, as well as shorter recovery times for patients).  This is consistent with my expectation that bionanotechnology is quietly moving along established trendlines despite escaping the notice of most people.  These technologies will also move us closer to Actuarial Escape Velocity, where the rate of lifespan increases exceed that of real time. 

Another angle that these technologies effect is the globalization of healthcare.  We have previously noted the success of 'medical tourism' in US and European patients seeking massive discounts on expensive procedures.  These technologies, given their potential to lower costs and recovery times, are even more suitable for medical offshoring than their predecessors, and thus could further enhance the competitive position of the countries that are quicker to adopt them.  If the US is at the forefront of using the 'bloodstream bot' to unclog arteries, the US thus once again becomes more attractive than getting a traditional procedure done in India or Thailand.  But if the lower cost destinations also adopt these technologies faster than the heavily regulated US, then even more revenue migrates overseas and the US healthcare sector would suffer further deserved blows, and be under even greater pressure to conform to market forces.  As technology once again acts as the great leveler, another spark of hope for reforming the dysfunctional US healthcare sector has emerged. 

These technologies are near enough to availability that you may even consider showing this article to your doctor, or writing a letter to your HMO.  Plant the seed into their minds...

Related :

Actuarial Escape Velocity

How Far Can 'Medical Tourism' Go?

Milli, Micro, Nano, Pico

US Ideological Distribution, 2008

The Pew Research Center has presented a simple linear chart that places the ideology of the three Presidential contenders and the current President on a left-right scale, along with the median ideology of the voting public.  A two-axis chart would be more informative, but this one-dimensional distribution reveals a great deal :

1) The center of gravity of the US public is significantly right of the center, no matter what leftists may say/wish.  McCain, thus, is far closer to the center of gravity than Bush, who in turn is closer than Obama or Clinton.  The GOP is far less dependent on centrists to win elections than Democrats are. 

2) The notion that McCain is 'not conservative enough' does not stand up to statistical evidence.  Those who whine about McCain's support for amnesty of illegals or compromises on judicial appointments forget that even Ronald Reagan did three things that were not purely conservative.

a) Reagan granted amnesty to illegals in 1986

b) Reagan appointed two moderate Supreme Court Justices, Kennedy and O'Connor, and only one conservative, Scalia. 

c) Reagan did increase income taxes, after first lowering them

No President will be purely conservative, nor should he/she be.  So I reject the initial conservative hostility to McCain (which seems to have somewhat abated).  The job of a political party is to win elections, and the fact that Republicans span a wider ideological spectrum than Democrats should be a source of pride, which brings us to observation #3.

3) The Democratic Party has been enslaved by fringe leftists.  Obama and Clinton are nearly identical in ideology, yet very far to the left of the center of gravity.  The purple oval I have inserted, along with the question mark, represents a vacuum in the moderate left.  A large number of voters clearly reside there, but the Democratic party of today will not nominate someone who resides in the purple zone, leaving these voters as ideological orphans.  Thus, Clinton and Obama have to lie (assisted by a complicit leftist media) to appear more moderate than they are, and hope that the public doesn't figure that out. 

Joseph Lieberman, the VP candidate against Bush/Cheney just seven years ago, was run out of the Democratic Party simply for not being opposed to bringing democracy to Iraq.  Bill Clinton's actions of supporting free trade agreements like NAFTA, sending troops to fight proto-Al-Qaeda terrorists in Somalia in 1993, reforming welfare, cutting taxes on capital gains in 1997, attacking Saddam Hussein to remove his WMD programs in 1998, etc. are all actions that the modern Democratic party would not take. 

I am a political moderate, in that I care about only three issues.  These are, in order of importance to me :

a) aggresively fighting against terrorists and other enemies of democracy and women's rights,

b) the preservation of free market meritocracy, and the use of market forces to solve problems, and

c) a judicial system that punishes crime, instead of ignoring justice and proceeding to reward the criminal as a poster-child for some perverted cause. 

I have a neutral/uninterested position on abortion, gay marriage, gun ownership, prayer in schools, and many other domestic issues.  Yet, I am considered 'right wing' by some extreme leftists, on account of holding the above three positions alone.  Until 2001, it did not even occur to me that only one of the two parties still advocates these three basic principles - I assumed that these were values held by any logical person.  I wish I had a true choice between two parties, but I don't.  In the words of once-Democrat Ronald Reagan, I did not move away from the Democratic Party, it moved away from me. 

The moderate left died in 1968, when two of their most promising young leaders were assassinated.  Since then, Democrats have only won three of the last ten elections.  After the disaster of Jimmy Carter, Democrats never again won 50% of the popular vote in SEVEN attempts, while Republicans achieved this feat 4 times over that period (1980, 84, 88, 2004).  This is a truly shambolic performance from the Democrats of the modern era.  Jimmy Carter did more to ensure a generation of GOP dominance than Reagan, Gingrich, Limbaugh, or Rove ever could. 

Furthermore, Democrats are not capable of getting a majority of voters who earn over $30,000 a year.  The middle class earning between $50,000 and $75,000 voted just 44% for Democrats.  A party that is soundly rejected by the middle class and upper class is not positioned for long-term success. 

2008 is a year where more factors, from a weak economy to an unpopular incumbent, are working against Republicans than at any time since 1976.  Thus, Democrats should be in a position to win by a landslide, but even now are trailing in the polls, and have at best a 50/50 chance of winning the White House in November, with a nominee far more distant from the voting public than John McCain is.  Even if, say, Obama wins, he might repeat the Carter-esqe phenomenon of ensuring another generation of GOP dominance starting from 2012.  If 2008 is 1976, 2012 could be 1980. 

Once again, the job of a political party is to attract the votes of 50% of the public, and Democrats can only hope to achieve this by fluke.  If Democrats want to become a national party again, they must move into the purple zone, period.  I sincerely want them to do this, as this will force the GOP to compete to become a better party as well, rather than stagnate into mediocrity with the knowledge that they only have to be better than the most pathetic of opponents. 

When will Democrats purge the leftists and move to the center?

Energy vs. Financials, A Divergence of Historical Extremes

Energy and Financials are both large sectoral components of the S&P500.  Yet the two have diverged immensely over the last 2 years.  Not since the technology bust at the start of the decade have any two sectors diverged so much from each other, and from the composite S&P500 index. 

XLE is an exchanged-traded fund for the Energy sector, while XLF is the equivalent for the Financial sector.  First, let us view a two-year chart : 

Energy has outperformed the S&P500 by an equal margin that Financials have lagged the S&P500 by.  Next, we can view a five-year chart :

While Financials only began to fall away in 2007, Energy has gone so high above the composite market that it reminds one of the technology bubble of the late 1990s. 

It seems quite obvious here that while it is impossible to identify the exact top of the Energy run, or the exact bottom of the Financials correction, it would be very prudent to sell any existing holdings in Energy (or even short Energy if you have the appetite) and rotate the proceeds into Financials.  The gap could widen in the short term, but rarely do two sectors reach such extreme disparities that make a profitable trade so obvious. 

(crossposted on TechSector).

Reverend Jeremiah White,...I mean, Wright

The Futurist, above all else, is devoted to bringing original ideas, observations, and analyses to the blogosphere.  The Jeremiah Wright controversy has been heavily analyzed from a mind-boggling array of angles.  Yet one noteworthy detail just has not emerged in the discussion.  Maybe, as an Indian-American, I am truly a third party, and what was utterly invisible to the two races involved in the discussion, was somehow the very first question that entered my mind. 

What immediately struck me is that Barack Obama, who is half Kenyan and half white, still has a darker skin tone than Jeremiah Wright.  Indeed, in Africa, Barack Obama himself would be considered white.  Could it be that less than half of Mr. Wright's ancestors are black? 

To be fair, one must examine additional datapoints.  Fortunately, this research exercise required no additional effort beyond what I was about to do anyway.  I proceeded to search for photographs of Halle Berry, known to have had one white parent, in order to assess her skin tone.  She, too, appears to be of a similar hue as Barack Obama, but distinctly darker than Wright.  Here is more video footage of Wright.  There just is not enough evidence to believe that even 50% of Mr. Wright's DNA originated from sub-Saharan Africa.  Clearly, more than 50% of his ancestry is white. 

Reverend Wright has built a career out of being a leader to a community from which less than 50% of his ancestry comes from, while condemning a race that apparently more than 50% of his ancestry comes from.  He could just as easily have been a pastor in a white community, where the average skin tone would be closer to his own.  White Americans have become so post-racial that it has entirely escaped their notice that the man can scarcely be considered black.  His defenders claim that his anger is a byproduct of the racism he experienced in the Jim Crow era, yet he is actively applying the one-drop rule to himself. 

It is curious that a man who refers to this country as the "U.S. of KKK-A", managed to attend Harvard University and the University of Chicago, and will soon reside in a 10,340 square foot mansion that his church has provided to him.  Most white people are not fortunate enough to live in homes of that size.  Indeed, most Harvard graduates don't manage to acquire such an impressive residence.  Far from shame America, he has demonstrated how generous, to the illogical extreme, this country is.  Nowhere else can someone with light skin pretend to be black, then condemn whites who are closer to his own skin color, and in the process achieve wealth from a nation while simultaneously condemning the same nation through the worst possible insults. 

It appears that Reverend Wright identified a profitable niche, positioned his career accordingly, and reaped a rich bounty.  As appalled as I am as an American, I am just as impressed as an entrepreneur. 

Only in America......

We shall close with a poll.  Choose multiple answers if desired (poll closed 4/21/08).

A Rebuttal to 'Peak Oil' Doomsday Predictions

At The Oil Drum, a detailed article by 'Gail the Actuary' speculates how declining production of oil combined with rising demand will cause an economic catastrophe, leading to the global economy contracting by 2040 to a much smaller size that it is today.  The author actually believes that in 2040, most people will no longer be able to afford cars, electricity will be unreliable, and goods and services will be fewer and rarer than today. 

Another article submitted by an different contributor on The Oil Drum arrives at the same pessimistic conclusion, stating that 'economic growth will end one way or another'.  Most of the commenters on both articles are in a groupthink state of agreement that can best be described as a Maoist-Malthusian cult. 

I would normally not bother to rebut something like this, except that this particular essay is so stunningly wrong and annoyingly pessimistic, despite the seemingly meticulous research the author has conducted, that I am compelled to disect how insulated groupthink can spiral into a zone where even the most extreme conclusions are accepted. 

Note that I happen to be someone who actually does believe in Peak Oil theory, but that such a condition generates long-term positives that outweigh short-term negatives. 

The assumptions that the 'Peak Oil' doomsday scenario makes are :

1) That rising oil prices do not cause a long-term downward adjustment in demand.  Oil demand may be inelastic in the short-term, but in the long term, people will buy more efficient cars, carpool, ride bicycles, reduce discretionary trips, conduct more commerce online, etc.  To assume otherwise is to ignore the most basic law of economics.  This is before even accounting for the indirect benefits of declining oil demand such as a drop in traffic fatalities (which cost $2 million apiece to the economy), less wear and tear on roads and tires, less pollution, less real estate consumed by gas stations, less competition for parking spaces, etc. 

2) That rising grain prices will not move consumption away from increasingly expensive meat towards affordable grains, fruits, and vegetables, thereby reducing grain and water demand.  This, too, is economic illiteracy.  If the price of beef triples while the price of rice and potatoes does not, consumption patterns shift.   

3) That there will be very little technological innovation in alternative energy, automobile efficiency, batteries, or information technology from this point on.  In fact, there is innovation in all of those areas, so we have multiple layers of protection against the doomsday scenario, as detailed by these articles :

A Future Timeline for Energy

A Future Timeline for Automobiles

Batteries Set to Advance, Finally

Solar Energy Cost Curve

Terrorism, Oil, Globalization, and the Impact of Computing

4) That most economic growth is now in knowledge-based industries, which consume far less energy per dollar of output.  The US economy today produces twice the financial output per unit of oil consumption as it did in 1975, with information technology rising as a portion of total economic output. 

5) That a major economic downturn, featuring skyrocketing food prices for people in poorer countries, will somehow not translate to a lower birth rate that inhibits population growth and hence curbs demand, and that population projections will somehow not change. 

6) That there will be no humans living beyond the Earth (whether in orbit or on the Moon) by 2040.  The reason this point is relevant is because a society cannot advance in space travel without simultaneous advances in energy technology.  I say that advances in photovoltaic efficiency make Lunar colonies closer to viability by that time. 

7) That we are going to have over 30 years of negative growth in World GDP, despite not having had a single year of negative growth since 1973, and despite the trendline of growth solidly registering at 4.5% a year even today.  I happen to think that by 2040, the world economy will be 4 times larger than it is today.  Even the Great Depression was only 5 years of negative growth, followed by a recovery that elevated prosperity to levels higher than they were in 1929, at a time when World GDP was only at a trendline of 2% annual growth, or less than half the level of today.  Yet Gail the Actuary thinks car ownership will no longer be affordable to most people by 2040. 

Peak oil may be on the horizon, but the US economy has already adapted to oil at sustained prices of $70 or $80/barrel (which is the biggest story that no one is noticing yet), and will soon adapt to $100/barrel.  I want oil to hit a sustained $120/barrel by 2010 to start a virtuous cycle of technological and geopolitical chain reactions that make the world a better place in the long term.  If oil hits $200/barrel, that will cause a deep recession that could last several years, but after that point, we will have adapted out of the oil burden almost entirely, and World GDP growth will resume at 5% a year. 

Could I be wrong and they be right?  Well, let us first see if oil rises substantially above $120/barrel, and if that year has negative World GDP. 

Does anyone feel like defending the doomsday prediction from The Oil Drum?

Actuarial Escape Velocity

Every now and then, an obscure concept is so brilliantly encapsulated in a compact yet sublime term that it leaves the audience inspired enough to evangelize it. 

I have felt that way ever since I heard the words 'Actuarial Escape Velocity'.

For some background, please refer to an older article from early 2006, 'Are You Prepared to Live to 100?".  Notice the historical uptrend in human life expectancy, and the accelerating rate of increases.  For more, do also read the article "Are You Acceleration Aware?".

In analyzing the rate at which life expectancy is increasing in the wealthiest nations, we see that US life expectancy is now increasing by 0.2 years, every year.  Notably, the death rates from heart disease and cancer have been dropping by a rapid 2-4% each year, and these two leading causes of death are quickly falling off, despite rising obesity and a worsening American diet over the same period.  Just a few decades ago, the rate on increase in life expectancy was slower than 0.2 years per year.  In the 19th century, even the wealthiest societies were adding well under 0.1 years per year.  But how quickly can the rate of increase continue to rise, and does it eventually saturate as each unit of gain becomes increasingly harder to achieve?

Two of the leading thinkers in the field of life extension, Ray Kurzweil and Aubrey de Grey, believe that by the 2020s, human life expectancy will increase by more than one year every year (in 2002 Kurzweil predicted that this would happen as soon as 2013, but this is just another example of him consistently overestimating the rate of change).  This means that death will approach the average person at a slower rate than the rate of technology-driven lifespan increases.  It does not mean all death suddenly stops, but it does mean than those who are not close to death do have a possibility of indefinite lifespan after AEV is reached.  David Gobel, founder of the Methuselah Foundation, has termed this as Actuarial Escape Velocity (AEV), essentially comparing the rate of lifespan extension to the speed at which a spacecraft can surpass the gravitiational pull of the planet it launches from, breaking free of the gravitational force.  Thus, life expectancy is currently, as of 2007 data, rising at 20% of Actuarial Escape Velocity.

I remain unconvinced that such improvements will be reached as soon as Ray Kurzeil and Aubrey de Grey predict.  I will be convinced after we clearly achieve 50% of AEV in developed countries, where six months are added to life expectancy every year.  It is possible that the interval between 50% and 100% of AEV comprises less than a decade, but I'll re-evaluate my assumptions when 50% is achieved. 

Serious research efforts are underway.  The Methuselah Mouse Prize will award a large grant to researchers that can demonstrate substantial increases in the lifespan of a mouse (more from The Economist).  Once credible gains can be demonstrated, funding for the research will increase by orders of magnitude. 

The enormous market demand for lifespan extension technologies is not in dispute.  There are currently 95,000 individuals in the world with a net worth greater than $30 million, including 1125 billionaires.  Accelerating Economic Growth is already growing the ranks of the ultrawealthy at a scorching pace.  If only some percentage of these individuals are willing to pay a large portion of their wealth in order to receive a decade or two more of healthy life, particularly since money can be earned back in the new lease on life, then such treatment already has a market opportunity in the hundreds of billions of dollars.  The reduction in the economic costs of disease, funerals, etc. are an added bonus.  Market demand, however, cannot always supercede the will of nature. 

This is only the second article on life extension that I have written on The Futurist, out of 154 total articles written to date.  While I certainly think aging will be slowed down to the extent that many of us will surpass the century mark, it will take much more for me to join the ranks of those who believe aging can be truly reversed.  To track progress in this field, keep one eye on the rate of decline in cancer and heart disease deaths, and another eye on the Methuselah Mouse Prize.  That such metrics are even advancing on a yearly basis is already remarkable, but monitoring anything more than these two measures, at this time, would be premature. 

So let's find out what the group prediction is, with a poll.  Keep in mind that most people are biased towards believing this date will fall within their own lifetimes :

When will Actuarial Escape Velocity be achieved for wealthy individuals?
	2010-2020
	2020-2030
	2030-2040
	2040-2050
	2050 or later, if ever
Free polls from Pollhost.com

How Far Can 'Medical Tourism' Go?

Studying what lies beneath the surface of market forces can be fascinating.

BusinessWeek has a slideshow depicting major centers for medical tourism, as well as the cost savings of various procedures in relation to the US.  This got me thinking about several dimensions of this concept, particularly since healthcare is 15% of the US economy, yet is also the sector of the US economy, outside of government, where wastage and ineffeciencies are the greatest. 

Many procedures that cost $100,000 or more in the US can be done with equal competence for $10,000 in Thailand or India.  Normally, if something of comparable quality is available for just a tenth of the cost, demand migrates to the cheaper alternative in a huge torrent.  Even after accounting for travel costs, the gulf is immense.  Yet it appears that only a small percentage of US patients for cardiovascular surgery, joint replacements, etc. are going overseas for their operations.  Medical tourism will still only earn a miniscule $4 Billion in 2008 for India, Thailand, and Singapore combined, of which only one-third is from American patients.  Thus, only a fraction of a percent of the US, European, and Japanese healthcare sectors have been dented. 

This, of course, can be due to two reasons :

a) Fears about quality/safety, either real or perceived.

b) Net out-of-pocket cost to the patient still being lower in the US, due to insurance. 

Regarding quality, many of these surgeons are certified by US boards or even educated in US colleges, and accidents do not appear to happen at any greater rate than in the US.  At the same time, it is not possible to pursue malpractice suits against facilities in India or Thailand, which, while certainly an element of risk, itself is part of the reason for their lower price relative to the US.  It is inevitable that some mishap befalls an American patient in Asia, and the media latches onto the story for a week or more, reversing the market demand for medical tourism for years, even if the incidence of such tragedies may be no more than in US hospitals.  In fact, I am surprised it has not happened already. 

In terms of cost, that brings us to the elephant in the room, which is the revelation that it is not India or Thailand that are too cheap, but rather that US healthcare is too expensive to begin with.  I am no expert in this field, but it seems obvious that a lack of market forces in the value chain, a lack of regulation of lawsuits, the horrendous dietary habits of most Americans, and the tendency of consumers to not care about how much the insurance company pays are all contributory factors to what is arguably the greatest tragedy in US economic history.  Socializing the healthcare system will worsen it, for reasons too vast to delve into here.  It is true that many Canadians come to the US for urgent procedures that would require a 3-month wait in Canada. 

However, millions of Americans don't have health insurance at all, and while for some this is by choice, for some it is not.  For them, traveling abroad for a $10,000 heart procedure may be the only affordable option.  Even if the most experienced and well-frequented facilities are in India and Thailand, nearby options also exist in Jamaica and Costa Rica.  Over 20 other countries across Eastern Europe, Asia, and Latin America are also vying for a slice of the pie. 

As unintended consequences ripple through, herein lies the path to forcing some degree of reform of the US healthcare system.  As more Americans either choose or are forced to seek low-cost procedures abroad, even if it is only a small percentage American patients, this will compel insurance companies to include medical tourism options to patients.  The insurance company can offer their own version of malpractice insurance to the patient, cover all travel expenses for the patient and spouse, and even throw in a vacation package and cash incentive.  Even after all this, if the cost of the $10,000 procedure in India or Thailand has now risen to $30,000, it still outcompetes the $100,000 US alternative handily.  Some insurance companies are already starting this with enthusiasm, and before long, all insurance companies will effectively have to compete on this level. 

As the number of Americans combining surgeries with a tropical vacation becomes a small but significant percentage of the total patient pool, the US healthcare system will have no choice but to undertake the difficult reforms to bring costs down at a systemic level, thus benefiting even those Americans who refuse to go overseas, and even procedures that are not candidates for offshoring.  If software development can be outsourced to India where it is one fourth the cost, surgeries cannot expect to be perpetually immune to competition that is a tenth or twentieth of the cost.  Through some combination of tort reform, free-market principles, and preventative focus, US costs will gradually be brought down closer to a market rate.  Perhaps the US can comfortably sustain prices that are 3 times that of Thailand, but not 10 times.  This will be the next industry in the US that is forced to adapt. 

To review, the expected sequence of events is :

1) Americans with no insurance are forced to make a life or death decision to get their surguries abroad, where the service meets or exceeds their expectations. 

2) More insurance companies offer medical tourism with liability guarantees and cash/vacation incentives to American patients.  Only a small fraction of patients are adventurous enough to do this, but all insurance companies are compelled to offer these options.

3) Major centers for medical tourism, after a track record of about a decade, develop solid brands that can attract American patients. 

4) When we finally get to the point that 10% of Americans are traveling abroad for a wide array of procedures, the US will be forced to begin to take measures to reduce costs throughout the healthcare system.  Losing 10% of the market is all that it will take to force some positive changes.  This could begin to happen by 2020. 

Such a sequence of events, of course, will boost the US economy greatly.  Of the $2 Trillion mentioned above, as much as half of that, a whopping $1 Trillion or 7% of the US economy, is estimated to be wastage incurred due to a shortage of market forces in healthcare.  Imagine if that $1 Trillion could be redeployed elsewhere.  A person who saves $90,000 on a heart procedure can choose to use that money on emerging innovations in biotechnology that may be available in the 2020s, such as treatments to slow down or halt some aspects of aging. 

This is not going to be a trend that moves as quickly as some of the others discussed here on The Futurist.  But the economics involved are massive enough that it has certainly caught my eye.  Let's see what happens, both before and after the predicted media frenzy over a foreign medical mishap. 

Update (4/3/08) : Businessweek has an article on how technological advances in medical instrumentation are enabling some surgical procedures to be done with far tinier incisions.  Patients who previously would have to stay in the hospital for a week to recover now can leave in under a day. 

The article also mentions how hospitals are opposed to these technological advancements, as they reduce the number of days of revenue a hospital can collect while a patient recovers after surgury.  This anti-productive, entitlement mentality will hasten the downfall of the US healthcare cartel, as shorter recovery times due to smaller incisions will make a trip to a tech-friendly facility in Thailand or India even more compelling.  When the cost is a tenth and the recovery time is a fifth of what it would be in the US, how long before market forces dominate?

'Outsourcing' - What a Non-Crisis That Turned Out to Be, v2.0

I wrote version 1.0 of this article on November 26, 2006.  16 months later, it is time for version 2.0 to provide more historical context on how misplaced the hype over some fashionable issues eventually turns out to be, and why what once appeared to be a harbinger of doom is now all but forgotten. 

In the 2001-03 economic downturn, the aftermath of the technology bust resulted in hundreds of thousands of software engineers and assorted high-tech workers losing their jobs.  A jittery public was vulnerable to influence from isolationist politicians, with the likes of Lou Dobbs and Pat Buchanan fanning the flames in the media.  As a result, the simple business practice of moving certain components of daily operations to a lower-cost location, if only to keep up with competitors already doing the same, became a dirty word - 'outsourcing'. 

The cover story of Wired Magazine's February 2004 issue was on the outsourcing of software jobs to India.  Within the article, a core theme was the supposedly tremendous hardships that white-collar Americans were about to experience due to a 'giant sucking sound' of jobs going to India.  In the same month, then Presidential candidate John Kerry screamed about the practicies of "Benedict Arnold CEOs" who outsource American jobs to India, hoping to gain the support of isolationists and the economically ignorant.  Elsewhere, very uncharitable things were said by leftists about brown-skinned Indians, due to their rapid adoption of capitalism and globalization at the expense of the leftist plantation where Indians were required to symbolize Gandhian non-violence, zen spirituality, yoga, curries, and the glorification of poverty. 

Let's call February 2004 as time when the bubble of 'outsourcing' fears reached a fevered peak.  Now, what happens whenever a bubble of psychology reaches a peak?

A quick glance at a few economic indicators from the Bureau of Labor Statistics in the 4 years since then reveals the following :

So 7.5 million jobs were created in this short time, the unemployment rate is lower than it has been for 33 of the last 37 years, and wages have risen while real GDP has grown at a 3.2% clip.  There is thus no evidence of job losses, wage erosion, or underemployment over this period.  Take that, Lou Dobbs, Pat Buchanan, John Kerry, Dennis Kucinich, and other assorted demagogues, who have no ability whatsoever to truly grasp the trends that shape our world. 

India, in the meantime, has benefited greatly as well.  GDP growth has averaged 8% a year over this same period, pulling 100 million people out of poverty.  Political ties with the US have strengthened in a manner unlike any previous episode in the last 50 years.  The faster these ties broaden, the better the world will become.  A prosperous India is a critical component to the US achieving favorable outcomes in both the War on Terror and with China, as seen from where India resides on this particular map.  Anti-Americans become apoplectic when they learn that India is the most pro-US country in the world. 

What does the future of outsourcing hold?  Is there still a risk of jobs vanishing from the US at a rate faster than they can be produced, as pessimists still maintain?  Unlikely, even though Internet backbone bandwidth has quintupled in the last 4 years, and many more people in India have PCs and Broadband connections today than in early 2004.  This is because aggregate demand growth has saturated even India's vast labor pool.  Salaries in India have been rising at over 12% a year due to labor shortages, causing their cost advantage to erode.  The Wired article from 2004 stated that the average salary of an Indian programmer was $8000 a year; today, it is closer to $15,000 a year in US dollars.  India itself has started outsourcing to Bangladesh and Eastern Europe, which are much smaller labor pools and will also saturate quickly.  Indeed, the trends favor more job creation in America and India. 

Now that we are in another recession, phony issues like this one emerge again.  Democrats are still speaking in protectionist tones, bashing NAFTA and opposing free-trade agreements with Columbia.  But other than a few pessimists, socialists, and racists, it is unlikely to gain much traction, as Americans have seen that the benefits have outweighed the costs by a handsome margin.  BusinessWeek also had an article from 4/24/07, six months after version 1.0 of this article was post, on how misrepresented the outsourcing issue is.

Thus, the bubble of fashionable pessimism has moved to the next topic, which happens to be the decline of the dollar.  This, too, will turn out to be a passing concern that the economy adjusts to after a brief period of pain.  Among other things, a competitively priced dollar has led to Europe outsourcing jobs to the US, and is also working towards reducing US dependence on oil.  A debunking of the 'weak dollar' fad will be posted on another day. 

Related :

Terrorism, Oil, Globalization, and the Impact of Computing

Why I Want Oil to Hit $120 per Barrel

Outsourced Education - the Latest Flattener

Batteries Set to Advance, Finally

The Economist has a great article on the history and near-future outlook for battery technology. Batteries have scarcely improved in the last century, and there have been too many false starts for a seasoned observer to get his hopes up too easily.  But this chart of battery capacity by unit weight, in particular, is something I have been seeking for a long time.  It vindicates my belief that lithium-ion technology is improving at a rate far faster than traditional nickel batteries (that have scarcely improved at all in the last half-century).  Note, importantly, that if we join the multiple curves, we see a strong indication of the classic accelerating technology exponential curve.  This time we know it's for real. 

This is exciting on multiple levels, because it opens to door to not just mainsteam electical vehicles in the next decade, but to a variety of wearable electronic devices, 20-30 hour laptop batteries, household robotics, and other applications that have not yet been imagined. 

Future projections are usually over-optimistic, you say?  Let's also not forget Stanford University's nanowire research to increase Lithium-ion battery capacity, which was wide acclaimed as among the most important scientific breakthroughs of 2007. 

Related :

A Future Timeline for Energy

A Future Timeline for Automobiles

Why I Want Oil to Hit $120 per Barrel

Is Technology Diffusion in a Lull?

There are minor but growing elements of evidence that the rate of technological change has moderated in this decade.  Whether this is a temporary trough that merely precedes a return to the trendline, or whether the trendline itself was greatly overestimated, will not be decisively known for some years.  In this article, I will attempt to examine some datapoints to determine whether we are at, or behind, where we would expect to be in 2008. 

There is overwhelming evidence that many seemingly unrelated technologies are progressing at an accelerating rate.  However, the exact magnitude to the accelerating gradient - the second derivative - is difficult to measure with precision.  Furthermore, there are periods where advancement can be significantly above or below any such trendline. 

This brings us to the chart below from Ray Kurzweil (from Wikipedia) :

This chart appears prominently in many of Kurzweil's writings, and brilliantly conveys the concept of how each major consumer technology reached the mainstream (as defined by a 25% US household penetration rate) in successively shorter times.  The horizontal axis represents the year in which the technology was invented. 

This chart was produced some years ago, and therein lies the problem.  If we were to update the chart to the present day, which technology would be the next addition after 'The Web'? 

Many technologies can claim to be the ones to occupy the next position on the chart.  IPods and other portable mp3 players, various Web 2.0 applications like social networking, and flat-panel TVs all reached the 25% level of mainstream adoption in under 6 years in accordance with an extrapolation of the chart through 2008.  However, it is debatable that any of these are 'revolutionary' technologies like the ones on the chart, rather than merely increments above incumbent predecessors.  The iPod merely improved upon the capacity and flexibility of the walkman, the plasma TV merely consumed less space than the tube TV, etc.  The technologies on the chart are all infrastructures of some sort, and it is clear that after 'The Web', we are challenged to find a suitable candidate for the next entry. 

Thus, we either are on the brink of some overdue technology emerging to reach 25% penetration of US households in 6 years or less, or the rapid diffusion of the Internet truly was a historical anomaly, and for the period from 2001 to 2008 we were merely correcting back to a trendline of much slower diffusion (where it take 10-15 years for a technology to each 25% penetration in the US).  One of the two has to be true, at least for an affluent society like the US.

This brings us to the third and final dimension of possibility.  This being the decade of globalization, with globalization itself being an expected natural progression of technological change, perhaps a US-centric chart itself was inappropriate to begin with.  Landline telephones and television sets still do not have 25% penetration in countries like India, but mobile phones jumped from zero to 10% penetration in under 7 years.  The oft-cited 'leapfrogging' of technologies that developing nations can benefit from is a crucial piece of technological diffusion, which would thus show a much smaller interval between 'telephones' and 'mobile phones' than in the US-based chart above.  Perhaps '10% Worldwide Household Penetration' is a more suitable measure than '25% US Household Penetration', which would then possibly show that there is no lull in worldwide technological adoption at all. 

I may try to put together this new worldwide chart.  The horizontal axis would not change, but the placement of datapoints along the vertical axis would.  Perhaps Kurzweil merely has to break out of US-centricity in order to strengthen his case and rebut most of his critics. 

The future will disclose the results to us soon enough.

(crossposted on TechSector)

Related :

Are You Acceleration Aware?

The Impact of Computing

These are the Best of Times

Nine Tantalizing Small Companies

In scouring the startup universe for the companies and technologies that can reshape human society and create entirely new industries, one has to play the role of a prospective Venture Capitalist, yet not be constrained by the need for a financial exit 3-6 years hence. 

Therefore, I have assembled a list of nine small companies, each with technologies that have the potential to create trillion-dollar economic disruptions by 2020, disruptions that most people have scarcely begun to imagine today.  Note that the emphasis is on the technologies rather than the companies themselves, as a startup requires much more than a revolutionary technology in order to prosper.  Management skills, team synergy, and execution efficiency are all equally important.  I predict that out of this list of nine companies, perhaps one or two will become titans, while the others will be acquired by larger companies for modest sums, enabling the technology to reach the market through the acquiring company. 

1) NanoSolar : NanoSolar produces low-cost solar cells that are manufactured by a process analogous to 'printing'.  The company's technology was selected by Popular Mechanics as the 'Innovation of the Year' for 2007, and Nanosolar's solar cells are significantly ahead of the Solar Energy Cost Curve.  The flexible, thin nature of Nanosolar's cells may enable them to be quickly incorporated onto the surfaces of many types of commercial buildings.  Nanosolar's first shipments have already occurred, and if we see several large deployments in the near future, this might just be the company that finally makes solar energy a mass-adopted consumer technology.  Nanosolar itself calls this the 'third wave' of solar power technology. 

2) Tesla Motors : I wrote about Tesla Motors in late 2006.  Tesla produces fully electric cars that can consume as little as 1 cent of electricity per mile.  They are about to deliver the first few hundred units of the $98,000 Tesla Roadster to customers, and while the Roadster is not a car that can be marketed to average consumers, Tesla intends to release a 4-door $50,000 sedan named 'WhiteStar' in 2010, and a $30,000 sedan by 2013.  The press coverage devoted to Tesla Motors has been impressive, but until the WhiteStar sedan successfully sells at least 10,000 units, Tesla will not have silenced critics who say the technology cannot be brought down to mass-market costs. 

3) Aptera Motors : When I first wrote about Tesla Motors, it was before I had heard about Aptera Motors.  While Tesla is aiming to produce a $30,000 sedan for 2013, Aptera already has an all-electric car due for late 2008 that is priced at just $27,000, while delivering the equivalent of between 200 and 330 mpg.  The fact that the vehicle has just three wheels may reduce mainstream appeal to some degree, but the futuristic appearance of the car will attract others.  Aptera Motors is a top candidate for winning the Automotive X-Prize in 2010. 

The simultaneous use of Nanosolar's solar panels with the all-electric cars from Tesla and Aptera may enable automotive driving to be powered by solar generated electricity for the average single-family household.  The combination of these two technologies would be the 'killer ap' of getting off of oil and onto fully renewable energy for cars. 

Related : Why I Want Oil to Hit $120/Barrel.

4) 23andMe : This company gets some press due to the fact that co-founder Anne Wojcicki is married to Sergey Brin, even as Google has poured $3.9M into 23andMe.  Aside from this, what 23andMe offers is an individual's personal genome for just $1000.  What a personal genome provides is a profile of which health conditions the customer is more or less susceptible to, and thus enables the customer to provide this information to his physician, and make the preventive lifestyle adjustments well in advance.  Proactive consumers will be able to extend their lifespans by systematically reducing their risks of ailments they are genetically predisposed to.  As the service is a function of computational power, the price of a personal genome will, of course, drop, and might become an integral part of the average person's medical records, as well as an expense that insurance covers. 

5) Desktop Factory : In 2008, Desktop Factory will begin to sell a $5000 device that functions as a 3-D printer, printing solid objects one layer at a time.  A user can scan almost any object (including a hand, foot, or head) and reproduce a miniature model of it (up to 5 X 5 X 5 inches).  The material used by the 3-D printer costs about $1 per cubic inch. 

The $5000 printer is a successor to similar $100,000 devices used in mechanical engineering and manufacturing firms.  Due to the Impact of Computing, consumer-targeted devices costing under $1000 will be available no later than 2014.  I envision an ecosystem where people invent their own objects (statuettes, toys, tools, etc.) and share the scanned templates of these objects on social networking sites like MySpace and Facebook.  People can thus 'share' actual objects over the Internet, through printing a downloaded template.  The cost of the printing material will drop over time as well.  A lot of fun is to be had, and expect an impressive array of brilliant ideas to come from people below the age of 16. 

6) Zazzle : Welcome to the age of the instapreneur.  Zazzle enables anyone to design their own consumer commodities like T-shirts, mugs, calendars, bumper stickers, etc. on demand.  If you have an idea, you can produce it on Zazzle with no start-up costs, and no inventory risks.  You profit even from the very first unit you sell, with no worries about breakeven thresholds.  You can produce an infinite number of products, limited only by your imagination.  At this point, those of you reading this are probably in the midst of an avalanche of ideas of products you would like to produce. 

While the bulk of Zazzle users today are would merely be vanity users who manage to sell under ten units of their creations, this new paradigm of low-cost customization will inevitably creep up to major industrial supply chains.  Even more interesting, think about #5 on this list, Desktop Factory, combining with Zazzle's application, into an amazing transformation of the very economics of manufacturing and mass-production. 

7) A123 Systems : Read here about how battery technology is finally set to advance after decades of stagnation.  A123 Systems is at the forefront of these advances, and has already received over $148 Million in private funding, as well as an article from the prestigious MIT Technology Review.  A123 is a supplier for GM's upcoming Volt, and has already has begun to sell a module to convert a Toyota Prius into a plug-in hybrid.  For choices beyond those offered by the #2 and #3 companies on this list, A123 Systems is poised to enable the creation of many new electric or plug-in hybrid vehicles, greatly increasing the the choices available to consumers seeking the equivalent of more than 50 mpg.  A123 may just become the Intel of batteries.  Combine A123's batteries with Nanosolar's cells, and the posibilities become even more interesting. 

8) Luxim : Brightness of light is measured in Lumens, not Watts, which is a measure of power consumption.  Consumers are learning that CFL and LED bulbs offer the same Lumens with just a fifth or a tenth of the Watts consumed by a traditional incandescent bulb, and billions of tons of coal are already being saved by the adoption of CFLs and LEDs.  Luxim, however, aims to take this even further.  Luxim makes tiny bulbs that deliver 8 times as many Lumens per Watt as incandescent bulbs.  The bulbs are too expensive for home use, but are already going into projection TVs.  With $61 Million in funding to date, Luxim's main hurdle will be to reduce the cost of their products enough to penetrate the vast home and office lighting market, which consumes tens of billions of bulbs each year.   

9) Ugobe : Ugobe sells a robotic dinosaur toy known as the Pleo.  A mere toy, especially a $350 toy, would not normally be on a list of technologies that promise to crease the fabric of human society.  However, a closer look at the Pleo reveals many impressive increments in the march to make inexpensive robots more lifelike.  The skin of the Pleo covers the joints, the Pleo has more advanced 'learning' abilities than $2500 robots from a few years ago, and the Pleo even cries when tortured, to the extent that it is difficult to watch this. 

The reason Ugobe is on this list is that I am curious to see what is the next product on their roadmap, so that I can gauge how quickly the technology is advancing.  The next logical step would be an artificial mammal of some sort, with greater intelligence and realistic fur.  The successful creation of this generation of robot would provide the datapoints to enable us to project the approximate arrival of future humanoid robots, for better or for worse.  Another company may leapfrog Ugobe in the meantime, but they are currently at the forefront of the race to create low-priced robotic toys. 

This concludes the list of nine companies that each could greatly alter our lives within the next several years.  Of these nine, at least three, Nanosolar, Tesla Motors, and 23andMe, have Google or Google's founders as investors.  The next 24 months have important milestones for each of these companies to cross (by which time I might have a new list of new companies).  For those that clear their respective near-term bars, there might just be a chance of attaining the dizzy heights that Google, Microsoft, or Intel has. 

Related :

The Impact of Computing

A Future Timeline for Automobiles

A Future Timeline for Energy

The Imminent Revolution in Lighting

Batteries Set to Advance, Finally

(crossposted on TechSector)

US Recession Began in December 2007

The US government usually declares a recession only several months after it has begun.  I find the Economic Cycle Research Institute to be a vastly more reliable source of leading indicators.  While the ECRI has still not declared a recession as 'unavoidable', the economic data of the last week tells me that it is, indeed, not just unavoidable at this point, but that it actually began in December 2007.  It is far too late for any 'stimulus' to prevent a recession, nor will the EU manage to avoid hardship of its own. 

When I identified the pervasive nature of the Housing Bubble way back on April 13, 2006, I stated that housing may do poorly in inflation-adjusted terms even for the next 20 years (until 2026).  Few were convinced then, now only somewhat more are.  But supporting data for my prediction of the housing bubble being an event of generational duration is accumulating steadily. 

Furthermore, when the US economy was not at any risk of recession on November 4, 2006, I wrote an extended piece to refute the broken clocks who always insist the US is on the brink of collapse.  I declared that if recession does not happen by the end of 2007, then the housing bubble will no longer be a cause of recession, due to the housing correction being lengthy (hence digestible) rather than sharp.  As the recession began in December 2007, we missed passing into the safety zone by just a hair. 

As the question of recession is now in the past, the next question is when a recovery may take place.  The drop in economic conditions between October and January was so steep, and the Federal Reserve's reduction in rates in January, while belated, was so large in magnitude, that GDP recovery may arrive as soon as Q4.  But I am not making a prediction on recovery timing yet. 

Update (3/20/08) : The ECRI has officially declared the economy to be in recession, six weeks after The Futurist. 

(Crossposted on TechSector).

Related :

The Housing Bubble - 20-Year Gains May Never be Repeated

The Futurist's Stock Portfolio for 2007 - RESULTS

On January 23, 2007, I created an investment portfolio to be frozen at that time, and evaluated on December 31, 2007 against the benchmark of the S&P500 index.  The portfolio incorporated principles, economic trends, and technologies discussed in other articles here on The Futurist.  Dividends were reinvested, and so the price paid reflects dividend-adjusted cost-basis.  Yahoo and Google Finance do tend to miss recording some dividends, so one must go to a more reliable site like Morningstar to account for the exact dividends. 

So how did the portfolio do?  I achieved a return of 13.0%, vs. just 4.3% for the S&P500, from January 23 to December 31.  Most fund managers are unable to beat the S&P500 index despite the advanced tools at their disposal.  The fraction of those that can beat the index by a margin 8.6 percentage points is even more exclusive, putting this portfolio in the top 10% of all mutual fund results for this period. 

As always, weightage matters just as much as stock-picking.  The first two securities, amounting to 50% of my portfolio, were a total disaster.  In fact, when I first created the portfolio, I listed FXI as a security that was strongly considered but left out.  FXI returned an eye-popping 83% over the same period, so if I had included FXI instead of ICF, the portfolio's total return would have exceeded 25%.  But it was not included, so 'what ifs' do not count. 

The India Investment Fund (IIF) was a star, more than compensating for the failure of the first two securities.  But the real home runs came from the video game stocks.  Three of the four outperformed the S&P500, and two of those, Activision and GameStop, surged into the stratosphere.  My selection and detailed analysis of this sector way back on April 17, 2006 yielded a spectacular payoff.  As a quartet, these 4 gaming stocks returned a combined 49% over this period. 

So there you have it.  Futurism is not impossible after all.  I have already started my 2008 portfolio, and we shall see how that goes on December 21, 2008.  The same principles covered in the articles below, are being applied.  Let us see if the success can be repeated or exceeded. 

The Next Big Thing in Entertainment, Part I, Part 2, and especially Part 3

The Culture of Success and Stock Market Capitalization in Developing Countries

The Stock Market is Exponentially Accelerating too

(cross-posted at TechSector)

2007 Technology Breakthrough Roundup

One year ago, I posted a roundup of 2006 technology breakthroughs from MIT Technology Review.  Of the breakthroughs listed at that time, displays, plug-in hybrids, and solar cells showed impressive progress over the subsequent 12 months. 

Now, we arrive at the 2007 list, which has expanded from four categories last year to five this time. 

The Year in Software

The Year in Hardware : Gadgetmania

The Year in Energy : Solar power inches closer.

The Year in Biotechnology : Stem cell research methods that no longer need embryos.

The Year in Nanotechnology : Stanford University research into nanowires that dramatically increase battery capacity is the most promising breakthrough of 2007, in any discipline.  Think 30-hour laptop batteries. 

Most of the innovations in the articles above are in the laboratory phase, which means that about half will never progress enough to make it to market, and those that do will take 5 to 15 years to directly affect the lives of average people (remember that the laboratory-to-market transition period itself continues to shorten in most fields).  But each one of these breakthroughs has world-changing potential, and that there are so many fields advancing simultaneously guarantees a massive new wave improvement to human lives. 

This scorching pace of innovation is entirely predictable, however.  To internalize the true rate of technological progress, one merely needs to appreciate :

The Milli, Micro, Nano, Pico curves

The Impact of Computing

The Accelerating Rate of Change

We are fortunate to live in an age when a single calendar year will invariably yield multiple technological breakthroughs, the details of which are easily accessible to laypeople.  In the 18th century, entire decades would pass without any observable technological improvements, and people knew that their children would experience a lifestyle identical to their own.  Today, we know with certainty that our lives in 2008 will have slight but distinct and numerous improvements in technological usage over 2007, just as 2007 was an improvement over 2006. 

Into the Future we continue, where 2008 awaits..

(cross-posted at TechSector).

Hiatus

Dear Readers,

Due to a convergence of professional and personal responsibilities, I will not be posting any new articles between now and January 31 (except maybe a year-end roundup).  I will, however, be updating existing articles sporadically.  I also will be starting a different blog on a somewhat different subject, as well as working on updating the book manuscript that I had written up before starting The Futurist (from which many of the articles here are extracted). 

Thanks for your readership, and I will return in 11 weeks time.

GK

The Futurist's Stock Portfolio for 2008.

Early this year, I presented my 2007 portfolio, which will be evaluated on December 31, 2007, in relation to the performance of the S&P500 index. 

I am now going to present my 2008 portfolio, which is to be tracked over the remaining 13+ months between now and the end of 2008, again in relation to the S&P500 index.  The hypothetical portfolio of $100,000 will be invested in exchange-traded securities and mutual funds that reflect what I believe to be an optimal portfolio construction for 2007.  We will, at the end of the period, see how the portfolio tracks the broader market.  Dividends will be re-invested. 

So the portfolio is :

 

This is a simpler portfolio, with less emphasis on gaming, and more on fundamental value-based principles.  The selections represent general principles and specific predictions outlined in the previously written articles :

The Next Big Thing in Entertainment, Part I, Part 2, and especially Part 3

The Culture of Success and Stock Market Capitalization in Developing Countries

The Stock Market is Exponentially Accelerating too

I hereby sign and seal this portfolio, bought at the prices on November 9, 2007, to be evaluated on the last trading day before December 31, 2008. 

Bobby Jindal and the Future of Geopolitics

Bobby Jindal has become the new Governor of Louisiana.  In order to understand why is this important to anyone outside of Louisiana, consider the following points, in combination :

1) Bobby Jindal is only 36 years old, and has become one of the youngest ever Governors in US history.  Prior to this, he has served in the US House of Representatives, was a Rhodes Scholar, and was employed at McKinsey & Company.  His success in so many different areas reflects deep intelligen