abril 04, 2019
by Sergio Alberich | reprinted from HAIC Insights
For the most part, the current economic and market setting is far from pleasant. Printing money has become an addiction, debt and deficit levels are at all-time high and the rise of interventionism is a fashionable trend in the West as a whole.
However, the World’s glass of water is not half-empty. Despite all the gloom and doom of the money bubble of the recent past and present, the entrepreneurial genius is still thriving and making our lives better. We have more scientists alive today than in all other periods of history added together. Intercommunication and the spread of knowledge keep expanding. 3D printing, energy storage, energy producing tech, block-chains, crypto currencies, advanced robotics, autonomous vehicles, peer-to-peer communications, crowd funding and advanced materials are changing the way we imagine, plan, fund, produce and sell almost anything, anywhere. With astonishing implications for the future of our economic, social and cultural lives, new scenes are emerging outside the scope of punitive regulatory schemes, making human action and creativity ever stronger.
The production process of the past – or present – was based on pushing out enormous quantities of the same products. Entrepreneurs and their innovations, however, have cut down the cost of producing smaller batches, allowing markets to become niche focused to the point that each product can be tailored precisely to each consumer’s desires. Some markets are already shifting from the centric mass production to the higher profits (made possible by new technologies) of micro niches production.
Right now, manufacturing is taking giant leaps in the same direction and high speed in which communications, publishing and media did a few years ago. It is devolving from the domain of big firms to the rule of small niche oriented ventures. Obviously, it does not mean the extinction of mass production and big firms, but a monumental change for some markets and sectors. Also, even where the reign of the production line process is maintained, the impact of those new technologies will be felt.
While today’s production involves taking lots of parts and screwing or welding them together, now a product can be designed on a computer and “printed” on a 3D printer, creating a solid object by building up successive layers of material. It makes possible for new designs to be produced and thus a wide new range of possibilities emerges.
Add to that the fact that some 3D printers are already being sold on Amazon, Staples and many other mass retailers at prices below U$1,000.00 and you realize that it is not only GE printing jet parts or BMW testing some prototypes. The applications of 3D printing are mind-blowing. Today, almost anything – from plastic toys to hearing aids, from metal car parts to medical equipment and from concrete homes to artistic sculptures – can be printed anywhere.
While anything is already fascinating enough, the anywhere part might be even more disruptive to the economy. A World with different shipping needs, with less production controls and without huge transaction costs for getting things is very likely to take form. Supply chains will have to be reassessed, managers will have to rethink their works, some comparative advantages will be lost and others will be gained. Probably the cost of labor will take a smaller share of the equation. Perhaps barrier of entrance imposed by huge investments in machinery will be lowered. But overall, the structure of production will be changed forever.
It is not only 3D printing, but much more. A parade of technologies and innovations is fostering large changes in economies and societies right now. Advanced materials and nanotechnology make the incredible advancements in medicine and transportation a constant topic of discussion. Materials are lighter, stronger and might adapt over time and circumstances, making possible the once impossible, and cheap the once expensive. Energy storage and solar panels have greatly improved – economically and technologically – over the past 5 years to the point customers have a viable option to the always-troublesome utility firms. Block-chain technology is still a toddler, but will turn the financial industry upside down and eliminate many unnecessary intermediaries in financial transactions – making life easier, faster and cheaper. Crowdfunding is allowing people to finance projects without the help of Venture Capital Funds or Banks and many other changes are making life better for customers and easier for entrepreneurs.
In many aspects, this revolution of the atoms will be very similar to the revolution of the bits we have been experiencing over the past 20 years. It will be completely disruptive. Producers will be affected, consumers will benefit from more options at lower costs, entrepreneurs will thrive – some will fail -, industries will be turned upside down and a new scene will emerge.
More than anything, these breakthrough technologies and innovations seem to spring a virtuous environment for entrepreneurship to prosper. While the heavy hand of governmental regulation can easily touch factories and production processes focused on mass production, it will be far harder for regulatory agencies to block creativity in production when it is happening almost on an individual scale. The peer-to-peer exchange decentralizes commerce, 3D printing turns shopping for goods into a simple download of a design, blockchain technology brings a new way of thinking about legal contracts and intermediaries, energy producing tech and energy storage free the individual from the harm of bad energetic policies, and so on.
While entrepreneurs and consumers, above all, will be cheering these transforming innovations and their benefits, governments will find them hard to appreciate. They will try to protect industries and companies that already exist and block the newcomers that could dethrone the crony kings. Subsidies will be given to old businesses and newcomers will be bullied by governments and unions trying to maintain old processes. Billions of dollars will be spent to support technologies that technocrats want to prevail. With the excuse of protecting consumers, saving jobs and supporting innovation, regulatory agencies and taxes will be discussed and maybe imposed on different sectors.
Governments have always been lousy at directing the market, and they are likely getting worse, as multitudes of entrepreneurs, makers, designers, consumers and suppliers exchange information and knowledge online, turn them into products and market them globally from their own living rooms.
By brute force, Uber and Airbnb might be pushed out of some cities, but other small players will replicate their ideas and flourish independently of the criminal taxi and hotel associations’ efforts. Disney, big recording companies and patent trolls lobby every day for tougher IP laws and frequently get their wishes attended. Still, while they might kill one specific competitor, a thousand others start similar operations every week. Despite all the bad press bitcoin gets from the mainstream media and the fact that its competition is legal tender laws, its adoption keeps growing.
With this new reality and its ever-changing demands in mind, entrepreneurs, investors and executives give form to their endeavors. They place competitors, suppliers, customers and technologies within this context in order to adapt old business models and designing new ones. However, succeeding in this scenario requires more than that. It involves comprehending that some laws have become obsolete, and that they should not be made the core foundation of a company’s strategy. It includes adjusting to the growing regulation, understanding when to use it to leverage the firm’s strengths and when to take it as just another cost of doing business.
In other words, a music studio that does not adapt its business and keeps relying solely on copyrights to prevail, will fail. A taxi driver who thinks banishing Uber from his city will secure his monopoly, will suffer deeply. A financial intermediary company that neglects the block-chain impact in its business and tries to outlaw its use, will see clients vanishing. And a car parts manufacturer CEO who hopes regulation will prohibit 3D printing competitors from making similar products and spends loads of money and time trying to enact and enforce new laws, will watch his company die quickly.
To sum up, despite bad news on the economic front and challenging regulations in the markets, skillful entrepreneurs and innovators are powerfully driving the unstoppable anything, anywhere production revolution that will help us recover from the money-debt bubble burst (unfortunately, almost inevitable at this point) and create a bright future.