What is wrong with our world, in one tweet. 1. The structural change that created the Reformation (bypassing churches control of books) was replacing one (scribe/priest) to many (congregation) with more (mass duplicated printed book) to many (congregation).
2. The structural changes of the internet are larger:
few (publishers, TV channels, newspapers) to many (nations) replaced with many (everyone has a channel on the internet) to many (everyone, regardless of borders).
3. Play this simple game (30 minutes and it will explain network theory without any jargon or tech knowledge requirements) and it will show that until the network (our world post internet) settles into a small world one (largely siloed communities where people can belong to more than one, connected by just a few individuals i.e. not like twitter, where everyone is connected to everyone), there will be instability as lies will propagate more than truth.ncase.me/crowds/
As if it wasn’t clear already VW illustrates the giant, ticking time-bomb at the heart of Europe’s economic model.
The European economy is based on two things, industrial production and selling the past.
Selling the past includes tourism, where nice places have a history and the story increases the margins. Selling the past also includes things like fashion, perfume and luxury goods where the brand associations with history, also increases margins.
Industrial production is obviously about making things. But it is no longer about making industrial era things. Cars are a great example here. as although EVs look the same as the type of cars that Germany produces, the way they are produced and their business model and margins are totally different.
Fintech is a niche internet sector that everyone thought would be huge, but outside of China it has resulted in very few platform companies like Revolut. Here’s why.
1. It’s a massive market sector that had everyone drooling but regulation means it’s not a level playing field for startups.
2. Outside of the period of ultra low interest rates it’s ultimately about balance sheet size, which is hard for startups.
3. The big product opportunities are very simple in user proposition, product terms: a bank and an insurance company.
Why France could implode.
This is Germany - the feedback loop of incentives to work to create wealth where a portion pays for a welfare state (a good thing) doesn't work anymore and it's getting worse, with this specific example. But now, let's compare it with France.
France is a lot worse, the state is 60% of the economy vs Germany's 45% and it hasn't made a profit in half a century, so its debt is increasing.
And the cost to service that debt is increasing for France both because zero interest rates are ending and because the French debt is becoming more expensive than Germany's, meaning it has to cut spending or increase taxes.
My macro view:
Agrarian to Industrial to Digital era.
(Information economy is as big a transition as Industrial Revolution)
The introduction of the printing press rewired communication from one to a few to a few to many.
It triggered the Reformation and 200 years of war and eventually led to the US model of popular culture. The masses (via broadcast channels) had more purchasing power than the elite and movies made more money than opera.
The internet rewired communication from a few to many to many to many. This is an even bigger structural change than the printing press delivered.
Everyone has a broadcast channel and people that care about a fringe issue will spend 24/7 promoting it, where moderates won’t.
Fringe issues and conspiracy dominate because there are an infinite number of lies but finite number of truths, so there are more compelling lies than compelling truths and lies win.
Eventually this stabilises when the network settles into a small world topology where people that link tribes gate-keep the lies from spreading.
But for now, we are not just in the 1930s, we are in Reformation 2.
Every action has an equal and opposite reaction and the increased communication that the information era unleashed, from postal service to the telegraph, phone network and ultimately the internet eventually led to noise in the system.
This noise includes the lies, extremism, culture wars on the Left and nationalism on the Right, spam, phishing, hacking and state interference on social media. As a tribal species prone to irrational beliefs we are susceptible to flaws in communication.
The efficiency of communication that led to trade and globalisation culminated in secular deflation. The reaction to it is creating nationalism and social division which ends up with friction in trade and production, protectionism and secular inflation. Inflation is not over but will come in spikes based on individual events triggered by the above underlying causes.
Wake up Europe, the digital age is bypassing you. You have no Google , Amazon, Meta, Apple. You arrogantly called SpaceX a fanciful dream and it wiped out the European Space Agency. You have no Nvidia and your response to AI has been to regulate before you have anything domestic to regulate. Your car industry is about to be wiped out by the Chinese. Your biggest economy shut down nuclear out of spite and with fraud. Your capital markets have no liquidity and your startups are drowning in bureaucracy. Your border is being attacked by Russia and your defence spending will have to triple just to be where it was with US subsidy given that part of the former Soviet Union and the Eastern bloc is now part of the EU. Your economy has slumped from the world’s largest to way behind the US. Your pensions are paid by three times less people and cost five times as much as people live longer. Your infrastructure is a model for the world but is configured for rail over self drive. Your electricity grid needs half a trillion of investment to cope with planned capacity and replacements, for the switch to renewables, within a decade. There are bright spots such as pharma and your healthcare system is a model for what civilisation looks like it. But to afford it, you need to completely transform from the industrial to digital age, to reform your institutions and rout the sclerotic bureaucratic system.
I did this interview for the Guardian nearly a decade ago, shouting at clouds about the same thing. Since then, I’d argue, things have gotten worse. It needs a massive, multinational initiative to correct, urgently. theguardian.com/technology/201…
In reply to the most contentious part of the above rant: infrastructure being configured for rail over self drive. It seems like a stupid point on the face of it, but I think it’s true. I thought self drive would never happen before ChatGPT was released, now I think it is likely and it will transform transportation and the built environment more than the switch from horses to cars. It will blur the lines between public and private transport and create the possibility of a true network of point to point carriages. Rail is the opposite of this and will not work in terms of economics of coverage. I speak as someone who loves trains and high speed rail, but I live near Geneva and to go to Bordeaux by train means going all the way to Paris and then back down the other side of France, taking twice as long and at twice the price of alternatives.