Who Owns The Future?
OSIRIS-Rex returns samples from asteroid Bennu, 4 billion km away.
2008 to 2022 was the door to the next era. And this door is now shut.
Sometime around 2010, I named this period “the door to the next era,” and I advised a sense of urgency, encouraged futuristic initiatives rather than sustaining or chasing the old, and argued that businesses of the old paradigm must be exited or downsized.
Since the global financial crisis of 2008 until 2022, the world economy has experienced ten years of near 0% interest rates on USD, the world’s primary reserve and trade currency. Also, the monetary response to C19 flooded the world economy with base money, creating more reserves than ever created in the entire history of money. This 2008-2022 period of financial abundance coincided with the emergence of new technologies such as cloud computing, AI, CRISPR/CAS9, electric mobility, IoT, reusable rockets, new business models, and new paradigms such as Industry 4.0.
Now, as of September 2023, the US economy is experiencing something strange. Despite the fast pace of the rate hikes and the highest cost of financing since the 90s, the economy is constantly beating growth and labor market expectations. I think this is a result of the structural changes the economy has undergone since 2008, which made the economy much less sensitive to interest rates. Therefore, FED is forced to keep rates higher for longer, more to the cost of the rest of the world’s (RoW) pain and capitulation than the US economy’s. This dichotomy will become increasingly obvious, and as it gets more obvious, it will self-fulfill by directing capital flows from RoW to the USA. The grand implication of this dichotomy is that the door to the next era is shut for RoW.
I think that R&D and venture capital are two visible mechanisms of owning the future by paying for it. After a mini research here is what I found:
Global Share of VC Investments
According to my triangulation from Dealroom, CBS, and Pitchbook, the USA spent ~50% of the global VC dollars from 2013 to 2022, followed by China with ~18%.
Global Share of R&D spending
According to my triangulation of World Bank, IMF, and NCSES data, the USA spent 30% of the global R&D dollars from 2013 to 2022, followed by China with ~23%.
Unicorns:
According to Dealroom, with 1,500 unicorns, the USA had 56% of all unicorns since 2013. China is second with 12.8% of all unicorns since 2013.
Market Capitalization:
As of March 2023, the USA has ~42% of the global market capitalization, followed by China with ~13%.
Another visible mechanism of owning the future is envisioning it.
Global Share of Think-tanks
According to UPenn Think-tank rankings, the USA has 1871 think tanks, accounting for 23% of global think tanks, followed by India with 509 think tanks, accounting for the global 6%.
Figure -1
So, who owns the future?
Figure-1 above shows that the USA is by far the most prominent candidate to own the future, followed by China and a distant pack of others.
It is viable to intuit that this distant pack of countries at the left-bottom of the chart doesn’t have much chance of owning the future.
But does China have a chance? My answer is yes and no. First, China is a goods & construction economy, and compared to Europe, China has made more successful strides in electric vehicles, solar panels, wind turbines, and so on. However, it is unclear whether these strides are enough to compensate for the massive troubles in the Chinese construction sector. Second, despite its scientific leaps, China lagged in AI, cloud, biotech and semiconductors and only woke up in July 2023 regarding its lag in platform businesses.
My intuition about the USA’s continuing and expanding global lead might sound counterintuitive in the light of that so-called fourth-turning thesis. I think most of the fourth-turning observations can also be argued as pains of creative destruction and transition to the next era while other societies progress within the paradigms of the current era. Also, the USA’s shrinking share in global trade might seem like a regression. But looking at the map below, I struggle to find how the USA could be the #1 trade partner of most countries in 2020-2023. The USA, being an economy of QQQs, ARKs, and lots of super-advanced tech companies, even today, doesn’t have tissue compatibility with the rest of the world.
Source: The Economist
© Saip Eren Yilmaz, 2023
