(Interviewed by Louis James, Editor,
International Speculator)
L:
Doug, people have written in saying you’re a “doom-and-gloomer” and a
“permabear” – but I know you’re an optimist. Why do you suppose that’s
so?
Doug:
Perhaps it’s because I’ve long said that the Greater Depression
is going to be even worse than I think it will be. But
looking forward with a long view, I think the future is not only going
to be better than I imagine, it’s going to be better than I can
imagine.
The coming Greater Depression will be
serious, but I don’t think it’s going to change the fundamental
long-term trend of human history. I believe Jacob Bronowski was right:
the Ascent of Man will continue. Mankind started out grubbing for
roots and berries in the mud, but our descendants – not so far in the
future – will be colonizing the stars.
L:
That was the guy who wrote the 1973 BBC series called The Ascent
of Man? I didn’t remember his name, but I remember watching the
series… even though I was only eight. So, when you talk about the long
term, you’re not talking years, decades, or even centuries, but the
grand sweep of human history, and beyond.
Doug:
Yes, exactly. An interesting thing about investing, and life in
general, is that there are long-term trends, medium-term trends, and
short-term trends. You have to figure out which ones are important,
and then if and how to capitalize on any of them. And it seems to me
that one of the longest-term human trends in existence is the
5,000-year-long bear market in commodities.
In real terms, metals were extremely
expensive and rare in Neolithic times.
L:
Iron was so rare, it didn’t exist. And I’d guess that, say, a polished
copper mirror would have taken the equivalent of many human lives to
make.
Doug:
Right. What metals there were came from what people could find
in the metal’s native form. That meant primarily gold, for the reasons
we talked about in our
conversation on gold. There would have been some copper and some
silver, but that would have been about it. And even the equivalent of
kings back then would have had very little of it.
Then civilization developed in what is now
the Middle East and we entered the Bronze Age, which gave way to the
Iron Age – and now we’re in the Silicon Age. Each one of these things
is progressively less rare. Silicon makes up the computer chips that
drive modern life, but it’s basically just sand. On a scale of
millennia, commodities have collapsed in price. Eventually, they’ll go
to near zero in cost. Commodities will drop to no more than the
royalties on the software that runs the nanotechnology that extracts
them.
L:
Let’s come back to nanotechnology in a moment. The overall trend
you’re describing doesn’t depend on it. Even without nanotech, cheap
and abundant energy would drop the prices of most commodities to near
zero. Sea water is full of dissolved metals, for example; you could
have all you wanted if you just had the energy to process all that
water. Cheap enough energy makes the lowest-grade concentration of
anything economical.
Doug:
Yes, and even now we know how to extract those metals or make
artificial oil; it’s strictly a matter of having enough energy to
drive the engineering. And, of course, the economics. This is why I
find it so frustrating when people talk about running out of natural
resources. There’s no danger whatsoever of that. Not only are the
resources of the world adequate, they are essentially infinite. It’s a
question of technology – know-how – and capital, enough wealth to
implement the know-how, that is, to build the machines.
Look, every material thing in the universe
is constructed out of the 92 elements in the periodic table of the
elements. Having anything we want, from a slice of bread, to an ounce
of gold, to a new car, is simply a matter of rearranging atoms into
the correct combinations at an acceptable cost.
L:
My friend Jim Von Ehr, CEO of Zyvex, a nanotech instrument company,
once told me that some of the most valuable land in the future would
be the sites of old landfills, because they are basically mountains of
purified materials. Once you can reduce matter into its component
atoms and make new things with it, such places, packed with high
concentrations of useful atoms, will command a premium. In the future,
there will be no such thing as trash. So, this bearish trend on
commodities you speak of isn’t really a bearish trend at all; it’s a
bullish trend in technology.
Doug:
And that includes nuclear waste. Greens, who generally have
little background in science, are completely unaware that spent
reactor fuel is a potentially valuable future resource – in addition
to being a trivial storage problem in the interim. Technology – it’s
the most bullish thing possible for the standard of living of the
average human being. Many people living below the poverty line in the
U.S. have televisions, refrigerators, medicines, and luxuries that
even kings and queens of only a hundred years ago couldn’t have
dreamed of. That trend is going to continue – and accelerate. It’d be
hard for me to overstate how favorable this is.
Notwithstanding that being the megatrend, I
think commodity prices are going to go higher over the next few years.
They’re in a multi-decade bull cycle. That said, there are
countertrends to most trends, and the Greater Depression could cause
commodity prices to drop in the near term, in spite of the
broad-based, secular bull market in commodities I think we’re in.
L:
If the commodities bull that started in 2001 lasts as long as the
21-year commodities bear that started in 1980, we’d be just under
halfway through it.
Doug:
Yes, and there are good reasons for being bullish. Number one
is the development of the Third World, primarily India and China. You
know – Mrs. Wu wants a stainless steel wok to replace her cheap old
aluminum wok, she wants a nice new refrigerator to keep her food in,
and she – and everyone like her across China – wants a new car to go
buy her food in. And Mrs. Singh in India is not far behind. All of
these things add to the demand for commodities, especially metals.
On the other hand, a possible near-term
negative countertrend is that there has been a lot of stockpiling of
raw materials over the last year. With the trillions and trillions of
dollars circulating outside the U.S., a lot of governments,
corporations, and other entities are stockpiling commodities. They
want to convert their paper dollars into something of real value that
they might soon need – or, frankly, just about anything that isn’t
crumbling dollars.
L:
Wheels within wheels; countertrends to the countertrends.
Doug:
That’s right. But the megatrend remains that advancing
technology makes it cheaper and easier to extract, purify, and utilize
commodities. As we’ve discussed before, in pre-industrial times, a
gold mine needed to grade an ounce of gold or more per ton, in order
to be worth bothering with. Now, you can make money mining deposits
that grade a hundredth of that. Simultaneously, our use of these
commodities has become more efficient. You can see that clearly in
automobiles; the average car in the 1950s might have gotten 10 miles
per gallon, now it gets closer to 30 miles per gallon – and goes much
faster in the process. (see
Doug Casey
on Cars- Past, Present, and Future)
L:
And has safer glass, better headlights, movie screens to entertain
children on long trips, anti-theft technology, and performs much
better in collisions.
Doug:
Yes, and that’s how it is with all technology. Just think about
computers. Moore’s Law. They double in capacity every 18 months.
Incidentally, that’s the solution to one of
the bugaboos of our age: pollution. The better the technology, the
less pollution there is.
L:
So, would you say you’re a techno-optimist as a matter of general
principle – because that’s the way you’d bet on the multi-millennia
trend – or because there are specific technologies you see developing
that lead you to this conclusion?
Doug:
Both.
A key fact my mind keeps returning to is
that there are more engineers and scientists alive today than there
have been in all of the rest of human history combined. And all of
these people want to become the next Steve Jobs or Albert Einstein –
they all want to become immensely wealthy or make major breakthroughs.
The path to the former is by inventing better technologies, and the
path to the latter adds to the understanding that allows us to do the
same. These people are as motivated as any alive, and I expect a good
number of them will succeed.
There is a countertrend, however:
government. States all around the world are becoming increasingly
virulent, both in terms of seizing capital and in terms of making
capital accumulation more and more difficult. Further, they’re
constantly creating new regulations on what can and can’t be done. And
remember what I said before: technology isn’t enough – you have to
have the wealth to implement the new technology. Whether it’s through
power-hungry myopia, bureaucratic stupidity, or ideological insanity,
governments are actively destroying the capital we need to advance,
and slowing its accumulation.
Back on the positive side, I’m a huge
believer in nanotechnology. I believe it is likely – even in the span
of the next generation – to change the nature of life on this planet
totally, unrecognizably, and irrevocably. It’s the single biggest
thing on the horizon.
L:
Want to take a moment to define the term, in case any readers are not
familiar with it?
Doug:
Sure, it’s the creation of computers and machines on the
sub-microscopic level – the atomic level, really.
L:
There are lots of definitions, but that’s as good as any I’ve heard.
Why should anyone care about machines the size of a molecule? Well,
for one thing – it carries what you said about better technology to
the ultimate level. If you use molecular machines to build things one
atom at a time, there is literally no waste. Zero. Every atom
is used and put exactly where it is needed. No byproducts, no
pollution.
Doug:
Yes. And it enables you to build perfect machines – perfect in
the sense of them having no mechanical imperfections – which vastly
increases their efficiency and reduces the need for energy.
L: A
good example of this I’ve read about is the creation of rocket engines
that deliver perfectly linear thrust. Rocket motors now spew out all
sorts of stuff, roughly in the right direction, but also including a
lot of noise and light, which don’t really help them move. If you
could build rocket motors that eject perfectly linear exhaust, you
might be able to lift the same payload one of those monstrous Saturn V
rockets lifted, with a motor the size of a toaster.
Doug:
There are many applications. Medical applications are among the ones
I’m most interested in. Once you have machines the size of an enzyme –
which is really just a natural molecular machine – you can program
them to spread through a patient like a “doctor virus,” one that
repairs cellular damage from within each and every single cell in a
human body. That doesn’t just mean fixing malfunctioning cells as in
the case of cancer, though that would be trivial for such machines,
but also fine-tuning all sorts of tissues for optimal health – which
basically means preventing (and repairing) aging.
L:
A fountain of youth – sounds like science fiction.
Doug:
It does, but it isn’t. This is hard science. One person I have
great respect for is Ray Kurzweil, an inventor and thinker about the
future who’s written about a coming “technology singularity” – a point
at which technology doesn’t just get better, it all but instantly
leaps to its full potential. Everything that is possible to do, we’ll
know how to do. After this happens, people will look at this event as
the single most important thing to ever happen – to ever
happen. As we date things now BC and AD, in the future everything will
be pre- and post-singularity. And this could happen within the next 20
or 30 years.
Editor’s Note: Here is a chart on this subject from
Doug’s book, Crisis Investing for the Rest of the 90s.
The expected abrupt transition from the
paleolithic to nanotechnic eras (a long-term perspective). Stone-age
agriculture and Moon landings lie in the transitional zone.
L:
Sounds even more like science fiction.
Doug:
Well, if you look at a graph of the rate of change in
technology, it’s basically flat for a long, long time, then slopes
upward gently until about the 1750s. Then the Great Enlightenment and
the Industrial Revolution hit, and the curve rises more and more
steeply. If you look at it now, it looks poised to basically go
vertical. Short of a global catastrophe that knocks us back to the
Stone Age, or wipes our species clean off the planet, there’s no
stopping it. The rate of change is accelerating. If it’s not
stopped, you get to the point at which the lifespan of your body – or
a better one you make – has no natural limit, and your control over
everything in the universe that can be controlled is complete.
L:
Do you really believe that’s possible? Can
atomic-scale machines really be built by human beings? Dick Feynman
first introduced the concept we now call nanotechnology in his
mind-bending paper, “There’s
Plenty of Room at the Bottom” back in 1959. He opened with the
idea of recording the entire (then) 24 volumes of the Encyclopedia
Britannica on the head of a pin. But then nothing much happened
with the idea, or so it seemed, until the 1980s, when K. Eric Drexler
started promoting and popularizing nanotech, particularly in his
seminal book, Engines of Creation: The Coming Era of
Nanotechnology. Now there’s a lot of talk about it, and the
non-profit Foresight Institute
continues Drexler’s promotional work, but nobody has built an
atomic-scale assembler robot, nor knows how to build one.
Doug:
The way Drexler explained it, if you extend Moore’s Law, not
only are computers getting twice as powerful every 18 months, their
components are getting twice as small at the same time. Don’t forget
that Moore’s Law describes an exponential curve. So, we’re approaching
the point at which we’ll have molecular-scale super-computers. And
there’s no reason not to suppose those computers couldn’t give
instructions to molecular robots, which he called assemblers.
Assemblers could take apart anything at all, one atom at a time, and
reassemble those atoms into anything you like. That’s where I think
we’re headed.
But even without getting to that level,
there are so many other technologies I see advancing, I think great
optimism is warranted. Great optimism in everything except politics
and ethics, which continue to be very degraded.
L:
What other technologies, besides nanotech, do you see
ripening?
Doug:
I’m very bullish on space flight – as long as it’s not left to the
likes of NASA. I’d draw your attention in particular to what Burt
Rutan is doing at Scaled Composites.
Scaled Composites’ Spaceship One was the first private spacecraft to
carry people into space. Innovative entrepreneurs like Rutan will soon
be able to go to the Moon, Mars, the asteroids, and beyond, and
establish colonies there.
L:
Why should anyone who isn’t nuts about space, or a
science fiction fan, care about that?
Doug:
Where’s your sense of adventure?
L:
It’s right here in my space-loving heart. But most
people don’t want to claim an asteroid and head out into deep space in
it the way I do.
Doug:
Well, it’s human to want to sail across the ocean, just to see
if you can, or to climb a mountain, for the same reason. But on a more
practical level, if the nanotechnology revolution or the general
technology singularity is delayed, there are immense benefits to
economical space travel. There are practically infinite resources to
be mined in the asteroid belt. There are other planets too, that can
be mined, or terraformed so humans can live on them.
One of my favorite aphorisms is: “EARTH
FIRST – We’ll mine the other planets later!” With more power pouring
out from the sun than we can use and all those raw materials, there’s
enormous wealth out there waiting for us to mobilize. There’s also the
importance, if you care about the human race, of getting some of our
eggs out of this one puny little planetary basket.
But maybe the biggest reason is to open a
new frontier, a place political malcontents and “rugged individuals”
can once again flee to from stifling old societies. There will
eventually be thousands of new political entities, greatly
accelerating the rate of experimentation and learning regarding social
organization.
L:
Diaspora.
Doug:
Exactly. Being limited to this one little backwater of a planet
with its 200 squabbling nation-states spread over it like a scabrous
disease is not very appealing to me. It’s time to get off the damned
planet.
L:
You’re singing my song. One idea I’ve tried to
communicate for some time is that if, as you say, the technology
singularity or nanotech revolution is delayed, getting heavy industry
off the planet would be a very good thing. Out there, resources are
abundant, and all sorts of manufacturing would be cheaper and better
because you could make things in zero gravity. And if heavy industry
is in space, it would not pollute the Earth.
Further, our population requires modern
civilization. If you don’t want to kill off 99 out of 100 people
living on the Earth, trying to force everyone to return to a
pre-historic lifestyle, you have no choice but to reach for space – or
see the planet paved over. Even if you were one of those extremists
who see people as a disease on Mother Earth, you’ve got to realize
that people won’t go quietly – and war would trash the planet even
more. You’ve got to be pro-space development, and you should
be an advocate of the fastest technological advance possible.
Doug:
Yes, you’re absolutely right about that. And I think it will
happen. The only thing that can stop it, of course, is politics.
Politics always raises the cost and slows the development of
technology. It’s nothing but a circus show where the worst among us
dramatize their psychological aberrations. If we didn’t have so much
government “help” from glacially paced bureaucracies like NASA, we’d
already be living in a world as technologically advanced as that of
the Star Trek movies.
L:
There are people who might say that it was government
science that put a man on the Moon…
Doug:
Government doesn’t create anything. All it does is take
resources from those who have discovered or created them, and,
sometimes, focus some of them in a given area. I’m of the opinion that
private space travel would have happened sooner and at lower cost if
the government hadn’t first given itself a monopoly in the field. I
can’t prove that, but that’s what I think.
L:
I can believe it. And we have seen very blatant
efforts by government to stop technological progress, such as the
previous U.S. administration’s effort to stop stem-cell research.
Doug:
Yes, and government imposes up to a billion dollars in unnecessary
costs on developers of every new drug. All that money goes to pay
lawyers and compliance experts, not scientists.
L:
On the other hand, I’ve heard it argued by some
technologists that while what you say about government is true, and
that even though you can’t expect a sudden flowering of rationality to
overcome everyone in Washington DC, you can count on
self-interest. So, if, for example, neo-luddites in Congress were to
ban research in nanotechnology because they fear it’s too dangerous,
that won’t stop people in other countries. And since there are
military applications, no government can afford to be left behind. So
you end up with an arms race no country would dare be left out of –
and the technology is developed, whether people want it or fear it, or
not.
Doug:
That’s exactly why this is a field that should not, and cannot, be
regulated.
L:
You know they’ll try.
Doug:
Yes, and in trying, they’ll throw up barriers and increase
costs. Which will drive entrepreneurs to the freest jurisdictions.
That’s one reason why the U.S. is losing its lead in technology. There
are now plenty of places that are not just a lot cheaper but a lot
friendlier to science, technology, and business in general.
L:
Interesting times indeed. Are there any investment
opportunities here? Are you long any nanotech companies?
Doug:
I do have a significant investment in one nanotechnology company, but
it’s not something I recommend to others, yet. It’s all in the R&D
stage, and I hate to invest in such science projects. It’s exactly the
opposite from the type of thing Graham and Dodd recommend as a proper
securities investment.
On the space front – not to say, the final
frontier – there’s Scaled Composites and its joint venture with Virgin
Galactic. They are working on a commercial vehicle to take tourists to
space (here’s a
press release
on the latest developments) but that’s not a stock pick. There are
several private rocket companies, but this, too, is a field that’s
still mostly in the R&D phase.
But their time will come, and one thing I am
willing to bet on is that Alex Daley, editor of our new technology
letter, will be among the first to spot new investment opportunities.
As an aside, I have to say that I think the
space cat is out of the bag. NASA may not like private space
companies, but that won’t stop other countries from hiring those
companies to build them space vehicles.
Ever since my friend Erwin Straus wrote a
book called Basement Nukes in the 1970s, in which he argued
that the average upper-middle-class American family could build a
small nuclear device, I’ve been optimistic that government will not be
able to stop progress. And that’s a good thing, because technological
advances have always been to the greater benefit of the average man
over those in power.
The greatest example of this is the
invention of gunpowder, which made it possible for the average peasant
to kill the heavily armored thugs – knights – who were dominating
them.
L:
The great equalizer.
Doug:
Exactly. And the state did try to appropriate that technology
for itself, but it didn’t work. Just as the gunpowder cat got out of
the bag, newer technologies will as well. That’s especially true as
there are many more new technologies in development now than there
were at the time gunpowder and the printing press were being
developed. By the time government committees are done drafting
proposals to study possible frameworks for regulating new
technologies, the bureaucrats’ plans will be obsolete.
So, yes, I’m an optimist – and the greatest
single reason for that is technology.
L:
Well, I’m feeling upbeat. Thanks for your insights,
Doug.
Doug:
You’re welcome. Talk to you next week.
The ascent of man, Doug and the editors at
Casey Research believe, will come through advanced technology… which
is the number one industry in the United States at this point. The
next Google could be a nanotech or space-exploring company – and
riches await those who recognize these startups for the emerging
giants they are. Try a risk-free, 3-month subscription to
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