Ten years ago the debate about stagnation raged in economic journals, on blogs and in op-ed pages, but today popular consensus is that the good economic times in the U.S. ended a half century ago. Public intellectuals, economists and business people like David Graeber, Tyler Cowen and Peter Thiel made strange allies supporting the stagnation argument against the prevailing narrative. Today, holdouts of various forms exist, from those who believe that "growth is just around the corner" to people who claim hedonic adjustments account for the slowdown. Still, the popular mood in the United States is undeniable and the rest of the world has failed to keep up (EU, LatAm and Africa) or is rapidly slowing (APAC). Now that the sickness is acknowledged, we can turn to the effort of diagnosis and treatment, but to avoid wasting time and effort, let's first understand the current state of discussion around stagnation and progress.
Jolts of Progress
When Isaac Newton published Philosophiæ Naturalis Principia Mathematica in 1687 he created classical mechanics, explained the movement of the planets, invented calculus and kicked off the Scientific Revolution, which led to the First Industrial Revolution. Newton's laws codified the observations of astronomers and popularized the inductive method. His second law (F=ma) can be paraphrased as:
The rate of change of the momentum of a body is directly proportional to the net force acting on it, and the direction of the change in momentum takes place in the direction of the net force.
The speed of progress (velocity) is measured by the increase (acceleration) in economic productivity and technological advancement. Progress, like velocity, can be said to be measured with respect to time. If you define "technology as doing more with less," it is synonymous with productivity, which like acceleration, is also measured with respect to time. The third derivative of position is jerk or jolt. The rate of innovation (jolt) is the speed at which you increase technology.
Taking Newton's second law, a two by two matrix can then be constructed with rate of change on one axis (acceleration/deceleration) and direction (reformer/radical) on the other. Reformers are mostly concerned with steadily maintaining the current pace of technology, while radicals believe we need a jolt of innovation.
This framework for discussing progress is useful because proponents and detractors of the stagnation thesis may find themselves in striking agreement with those whose political views they stridently oppose. Graeber, for example was an avowed leftist anarchist, Theil a right-wing libertarian and Cowen a centrist. Having laid out the partisans, my next post will deal with the substance of the debate, and what can be done about stagnation, but before delving deeper into the causes and treatments, permit me a brief tangent to explain what Tail Risk is about.
Technological Society and Its Future or: How I Learned to Love Worrying and Stop The Bomb
What does Tail Risk have to do with progress? Who am I to be writing on these topics? Why should you spend your valuable time here? These are all fair questions to ask.
First, Tail Risk is an exploration of low probability, high impact events that was born out of quantitative finance but is applicable across fields such as epidemiology, climate studies and cybersecurity. In many cases the goal is to avoid catastrophic or existential consequences. The potential of such a loss is often given as a justification for not trying something in the first place. The excellent Byrne Hobart and Tobias Huber recently wrote about this problem in Pirate Wires.
When I started my career, the field I entered was called technology risk. Today it is called cybersecurity. Material progress, doing more with less, is about addressing challenges through technology. That does not mean that technology is a free lunch, as economist and expert on progress Joel Mokyr would have it. Technologies solve one set of material challenges and often create others. In the 1850's steam boiler explosions occurred on average once every four days killing 50,000 Americans a year. Until recently, automotive crashes were the leading cause of death for children in the U.S. If we are to believe progress is not only possible, but worthwhile, we must be prepared to address these challenges and the doomsayers.
Things That Happen and Things that Don't; Things that Will and Things that Won't
Cybersecurity is a still young field, being developed at the innovation frontier, which provides the ideal vantage point to observe the interplay between technology and risk. Information technology is one of the few fields making progress and yet, detractors (often cybersecurity professionals themselves) are quick to point out the risks associated with such progress. When I hit upon this insight, I realized that most of the problems in cybersecurity were economic or political in nature, not purely technological. We know how to make computers cybersecure, but the point of information technology isn't to be cybersecure, the point is to be useful.
One other useful framing of tail risk is to think about power law distributions. Most pursuits engage in achieving or avoiding the possible. Tail risk occupations sit around all day trying to prevent the unthinkable, but power law occupations seek to discover the improbable. These activities are hits driven, like entertainment, pharmaceuticals, fossil fuel extraction and venture capital. Scientific breakthroughs, intellectual awakenings and leaps forward in progress are also power law outcomes.
Over the past two years, my worlds collided as I worked in cybersecurity venture capital, finding, funding and fostering startups. This opened my eyes to the role of agency in outcomes. Tail risks can befall someone that is not prepared, but power law outcomes don't occur unless people battle against the odds.
This experience convinced me more than ever that the goal of progress cannot simply be to avoid risk but must be to unlock potential. Just as great a peril as failing to avoid risk, but less discussed, is the danger that we fall back into primitivism. As to whether my perspective is valuable, you will have to be the judge. I can only hope to prove my worth over time.