America 3.0

Alibaba as a disintermediator, a step toward America 3.0?

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Alibaba

It will be a long time until we have the truly decentralized, additive manufacturing (a/k/a 3D printing) we discuss in America 3.0.

But in the meantime, Alibaba allows an extraordinary level of business to business contact, permitting smaller scale businesses to find suppliers.

This is the kind of disintermediated, non-hierarchic, Web-enabled change that has long been predicted, finally coming true.

This podcast is an interesting introduction to Alibaba.

One friend said that Alibaba was going to allow Chinese manufacturers to somehow overrun the USA. But if you go on their site, you see that firms from anywhere in the world can become verified supplier members.

More importantly, the rise of B2B direct contact on this scale is a genie that is now out of the bottle.

Take a look at this recent post from Zero Hedge entitled “Could The Alibaba Model Undo The Wal-Mart Model?”

How much would I pay to have the item I want delivered to me rather than have to drive miles to the Superstore? if I add up the maintenance costs, fuel and other expenses of operating my car, and the time wasted in traffic, standing in line, etc., how much cheaper is the Superstore price?
 
How much would I pay to direct my money went to a local worker/shop owner I know and trust rather than to some supplier in a distant city?
 
These are questions that arise as a consequence of the digitization of the global/local supply chain in the peer-to-peer model. Just as we have reached Peak Central Planning and Peak Central Banking, we may have reached Peak Centralization not just in government and finance but in the corporate-cartel model of “low quality at high margins.”

The centralization represented by Walmart may be past its peak.

Alibaba’s recent IPO, which was almost certainly over-hyped, should not distract us from the importance of the underlying model, or from speculating about what its long term impact may be.

Regulatory capture is normal, and that’s the problem

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portraits of Julian Sanchez and Megan McArdle

You must read this excellent piece by Megan McArdle, It’s Normal for Regulators to Get Captured. “regulatory capture is not some horrid aberration; it is closer to the natural state of a regulatory body.”

This is true. That is why the entire modern administrative state has to be re-thought, re-configured and replaced. It does not work, it never worked, it cannot work.

The regulatory state is the defining feature of the Industrial Era, America 2.0 state. It needs to be shut down, wrapped up and replaced.

This does not mean return to the law of the jungle. It means making laws that actually align incentives with desired ends, as imperfect as that always is.

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America 3.0 Course at U. Cal. Irvine — Additional Reading

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UCI Irvine

As I noted in yesterday’s post, I team-taught a course on America 3.0 at U.Cal.Irvine last Spring. We considered asking the students to read some additional material beyond the sections of the book we assigned. However, we decided that the book was enough and we did not want to overload under-graduates. The following is the proposed additional material we considered assigning, with links.

Week # 1. America 3.0: IntroductionӬ

Week # 2. America 3.0: America in 2040
IP in a World Without Scarcity by Mark A. Lemley.

”¨The students should read Section I, part C — pages 10-24. This article covers three major sources of disruptive change: 3D Printing, Synthetic Biology and Bioprinting and Robotics. Of course, they may read the entire article if they wish. The question of the law and regulation of these new technologies is a huge area to be explored.

Week # 3. America 3.0: The American Family

Duranton, Family Types and the Persistence of Regional Disparities in EuropeӬ.

See, table page 2, map on page 8, regarding the Absolute Nuclear Family.

The World Values Survey Cultural Map of the World.

Why Americans are the WEIRDest People in the World.

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Stalling Progress in Aviation — It’s Time for a Breakthrough

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Six Hour Radius for Commercial Airliners, 1940-1990

This diagram shows the stalling progress in the speed of air travel.

The inner ring, the range of a DC-3 in 1940, was substantially improved upon by the Lockheed Constellation in 1950, and much more so with the Boeing 707 in 1960. That was twenty years. But from 1960 to 1990, only the small outer circle was gained. And in the quarter century since, it has not expanded at all.

Technology has advanced in small things — small in size, not in importance — like electronics. But in big, macroscopic things, the world of “stuff”, it seems that there has been stasis for two generations. In a recent post, I linked to a video where Peter Thiel made this point. Theil may have overstated his case, but in the case of aviation he certainly appears to be correct. (Incidentally, my copy of Theil’s new book, Zero to One: Notes on Startups, or How to Build the Future arrived yesterday.)

One theory is that only defense-related spending is sufficiently large and removed from market considerations to lead to truly massive breakthroughs in technology. This view is espoused by Peter J. Hugill, in his book World Trade Since 1431: Geography, Technology, and Capitalism Paperback, a brilliant book which I heartily commend to you. However, I am not convinced that this is true in every case. In the case of aviation, the basic scientific insights exist, so government-financed development may not be necessary to reach the next breakthrough in aircraft performance.

My coauthor Jim Bennett notes:

We may soon see transsonic aircraft operating commercially. These will fly just above the speed of sound, where the sonic boom can be minimized by a number of design tricks. These could operate at airspeeds of around 700 knots, compared to the 500-550 at which most airliners are operated today. They could go faster but they are deliberately slowed down to reduce fuel consumption.

According to Jim, true supersonic or hypersonic aircraft “will be limited to transoceanic routes by sonic boom restrictions, or depend on new approaches which have yet to be fully tested.”

While a 20% increase in speed will be nice to have, I am eager to see these massive, disruptive changes in aviation speed — multiples of the present speed, not just incremental increases.

In America 3.0 we predict a breakdown of the regulatory machinery that is stalling technological progress in many areas, including improved aircraft performance. We speculate about what much faster commercial air travel will allow in terms of, for example, locating retirement housing in Cuba and Mexico, with rapid access by air.

Seniors are able to stay at home, both with mechanical assistance and with many people specializing in providing elder care, or move into modularized units easily attached to the their adult childrens’ homes. Retirement communities in Cuba, the Central Highlands of Mexico and the Mexican border zoner are becoming popular. Hypersonic air travel, until recently only used by the very wealthy or government officials, is slowly coming down in price, as aerospacelines compete for business, thus making visits back and forth to visit Grandma far easier.

Just as driverless cars will make exurban development feasible, as we describe in America 3.0, routine, affordable supersonic air travel will make remote locations useable for business and housing that are not feasible now.

A world that it is half or a third the size it is now, in terms of travel time, opens up opportunities that we cannot even conceive of now.

(The map above is from Prime Movers of Globalization: The History and Impact of Diesel Engines and Gas Turbines by Vaclav Smil.)

Milton Friedman: “Only a crisis — actual or perceived — produces real change.”

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Milton Friedman

There is enormous inertia—a tyranny of the status quo—in private and especially governmental arrangements. Only a crisis — actual or perceived — produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes politically inevitable.

Milton Friedman, Capitalism and Freedom, Preface to the 1982 edition.

This could easily have been the quote at the front of America 3.0.

A crisis, or series of crises, are likely to be coming in the years ahead as the economy and government based on industrial era (America 2.0) models fails more and more completely and obviously. The inertia, the tyranny of the status quo, embedded in our existing institutions is going to resist meaningful reform. It will not be an inert resistance, either, it will be attacks on agents of change. To use Clausewitz’s phrase, the defense of the status quo will be “a shield of blows.” Some people will be hurt by the blows.

But it won’t work. It cannot work.

Our task in the book was and is precisely to offer alternatives to existing policies, and explain why our proposed alternatives suit America’s inherited underlying culture, and the technology which will shape our future. Many of the things we suggest in the book have been dismissed as “impossible” even by friendly critics. But as Milton Friedman correctly noted, the politically impossible can become the politically inevitable, if it is an idea whose time has come.