The Embrace of Growth Through Technology
Understanding the impacts of declining population growth
Electricity is an example of a general purpose technology, like the steam engine before it. General purpose technologies drive most economic growth, because they unleash cascades of complementary innovations, like lightbulbs and, yes, factory redesign.
-Erik Brynjolfsson
I get it. You're scared. You're energized. The future is more uncertain than it has ever been. You feel like you should be cautious. I'm here to tell you now is the time to go hard and to pick up the pace. The only way forward is to embrace technological advancement. If you look at my predictions for 2023, I talk about rising tensions between the US and China. A friend shared this tweet with me and asked if I was reconsidering my position.
https://twitter.com/chamath/status/1671043206711070720?s=20
Figure 1. A tweet about declining age curves around the world.
Note: If you're really concerned about de-dollarization, I wouldn't be because you probably don't have any control over it if it does happen. Are you going to move to a different country? We've been in an economic war for years. If you read the Principles for Dealing with a Changing World Order by Ray Dalio, the fall of an empire's currency doesn't happen until the empire has already fallen. So unless you think the US has fallen, I wouldn't be concerned with de-dollarization.
Even though declining population curves are estimated for most major countries, this doesn't change my view because there's more to a strong economy than just population growth. Technological growth's impact on productivity matters just as much. My premise is that the rate of technology growth in China is on track to outpace the US, which is one of the many causes of growing tension. Let’s examine how population growth and technological growth affect economic growth.
Declining Populations
Let's start with a basic tenet.
Economic growth is proportional to productivity growth.
What are components of productivity growth?
Productivity growth is proportional to population growth and technology growth
Which means
Economic growth is proportional to population growth and technology growth
But here's the thing. Population growth is diminishing. If the death rate is equal to the birth rate, the population is constant. If the death rate is greater than the birth rate, the population is declining. For instance, it is well known that Germany is running out of young people. If the birth rate is greater than the death rate then the population grows. However, humans grow slowly and these age curves can be monitored and future issues can be known. The graph in Figure 1 shows how different countries are going to lose population in the future.
Why is this becoming a bigger issue? By all estimates, planet Earth is expected to cap out at a population of around 10 Billion people. There's even a count-down for it. So we are already at a point of declining population growth. Which means that the most prevalent and relied upon source of economic growth, population growth, is disappearing. Implying that the only way forward to increase economic growth is through technology growth.
Figure 2. The estimated peak population of Earth.
Figure 3. A view of how the population growth rate is declining as we approach peak population.
As you can see from Figure 2 and 3, we've already begun to decrease the rate at which the world population is growing. There are a lot of reasons why the population is growing the way it is, and there are a lot of reasons why economic growth is very important to have. Hans Rosling has given some great talks about it, along with the writing in his book Factfulness. What I can tell you is that the people that make these estimates are very good at what they do.
So if we can't rely on population growth to fuel economic growth, what do we rely on? Technology growth. What's the best-known method at the moment to improve productivity through technology? Artificial Intelligence. The industrial revolution found a way to use machines to improve the physical output of a person. The AI revolution is finding a way to improve the mental output of a person. People need to embrace AI as it is going to be the main driver of technology growth and ultimately economic growth.
Technological Growth
It seems like every week there's a new forecast coming out about increasing how many trillions of dollars the AI market is worth? Why is that? People are starting to realize what comes from expanding the productivity of the human mind. Improve technology, improve productivity. Improve productivity and you improve economic growth.
A big impediment to the adoption of any technology is the ability to govern and control the technology in a useful way. Most of the fears around AI are based on uncertainty and perceived inability to wield the technology. The algorithms used in current AI systems have been around for years and decades, with their performance steadily improving. These algorithms are in the products you use every day. People are just beginning to realize the outsized impact the algorithms have. The automation provided by these algorithms is extremely valuable. The automation from AI today draws parallels to the automation during the industrial revolution. What is clear from history is that the steady march of progress leaves those that do not embrace new technology in its wake.
Again, let's examine our tenet:
Economic growth is proportional to population growth and technology growth
With population growth declining, the only way to increase economic growth is to increase technology growth. So what can you do? Start to embrace AI and figure out how to adapt to a world that is filled with it. What is clear, is that no one is really sure what a world filled with AI will look like. Perhaps it will be more effortless. Maybe it will be annoying. Maybe it will be magical. What I am sure of is that human kind will adapt to it. AI will be needed to deal with the increasing complexity of the world. Evolution shows those that can adapt to changing conditions will come out ahead.
Great you say but show me the numbers. Goldman Sachs reports that AI could raise global GDP by 7%. Customer service agents are seeing productivity increases of 14%. per a real-world study by Stanford and MIT. Researchers in Belgium find that firms using AI can improve sales by at least 5.2% and worker productivity increases by 14.6%. We’re already starting to see large gains even as we begin to scratch the surface of how productivity can be enhanced with AI.
If you're still set against AI but still think economic growth is necessary, there is one other avenue you can explore - space exploration and expansion. By expanding humanity into space, we have the ability to reignite population and productivity growth. This is because on new worlds we have the ability to start increasing the population beyond what the expected limit is on Earth. As such, we can drive economic growth by expanding to other worlds (FYI, there's a massive amount of technology that's needed to do this which will also drive economic growth all by itself). AI will also aid in controlling technology and machinery to support expansion beyond human limits. AI infusion is inevitable. Innovation is driven by technology. Technology growth drives economic growth. So, figure out how to make technology better, faster.