Everything is at a Tipping Point

This era’s American arguments must be resolved successfully.

America’s foundation is free and vigorous debate by its citizens. We thrive on arguments: liberal v. conservative, farmer v. banker, rural v. urban, incumbent v. startup, bull v. bear, protestor v. police, etc.. These arguments play themselves out in the halls of Congress, the streets of Minneapolis, the offices of Menlo Park, the classrooms of Boston, and the trading desks of Wall Street.

Many lingering arguments are coming to a tipping point, in society, the economy, and our health. 2020 has laid bare the failures of our public sector to resolve these arguments. We live an in era of private sector confidence, and that is where real change will come from.

Arguing out our biggest problems may seem glacial to autocratic societies. Aside from freedom, our approach has another unique feature. From what seems like slow debate, comes sudden change. America itself is a complex system, unique among nations in this regard. As the pandemic reminded us, few are trained to understand complex systems in daily life. We don’t see the change coming until it is upon us. What feels sudden is hard to adjust to. Here are the arguments we need to complete and the change we need to adjust to:

  • Do We Have Equal Opportunity for All?: In America, real societal change occurs at moments of protest. This has been true since our founding. America’s private sector understands that much of society has been left behind. They understand that this is untenable and that equal opportunity and access are the foundation of a stable society.
  • How Does Our Economy Thrive in the 2020s?: The stock market has risen 44% since March 23rd. Back then, I indicated that a low was in. The pandemic has accelerated by years, digital adoption, digital transformation, and innovation. The 2020s can be a golden era of economic growth, but only for digital winners. Archaic government data like GDP do not capture the true value of digital goods and services. Our economy is far larger than it appears. Private and public sector laggards need to catch up
  • Can we Protect our People?: Our public sector has failed us at all levels. Mediocre responses (e.g. New York State) are hailed as successes when compared to abject failures elsewhere. The private sector sees no debate here. A functioning economy requires confidence, and confidence requires a healthy population. Many large and small companies have stepped up, developing vaccines, therapies, PPE, and safety practices to save lives and bring back confidence. Investment is pouring into biotech innovation. And we are turning to our private sector leaders for the confidence we need to get back to work.

From the successful resolution of these arguments comes not a perfect union (for humans are imperfect), but a more perfect union. So while the days may seem gloomy, it’s still morning in America.

Do We Have Equal Opportunity for All?

The scale of the protests suggests a tipping point toward a new level of equality and opportunity.

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While protests skew heavily in volume to states that voted Democratic in the 2016 Presidential Election. . .

2016 Presidential ElectionCountAverage Per Capita Protestors
Republican3018
Democratic1940
Split144

. . .a number of large Republican-leaning states are experiencing protests well above the national average of 26.7. These include Texas, Wisconsin, and Arizona.

The protests are having an impact. Per the Washington Post, the recent protests have awakened the country to the reality that racism remains a major issue in the U.S. After stagnating for many years at or below 50%, over 60% of the public now believes that there is a “great deal/a lot of discrimination against blacks”.

The private sector is leading the way. Virtually every public company has released concrete action plans to advance racial equality. Many have rallied around promoting equal opportunity by investing in apprenticeships, mentoring, training, and employment opportunities.

How Does Our Economy Thrive in the 2020s?

For much of the last decade, financial engineering has limited innovation, even at a time when it seems we have so much of it.

Winners and Losers in Corporate America

Daily headlines bemoan the latest bankruptcy filing. Bankruptcies are disruptive, but necessary to resolve the argument between innovation and the status quo. As I wrote last June here, famed investor Stan Druckenmiller highlighted the shockingly low number of bankruptcies during a period of technological innovation. Many companies had employed financial engineering, not investments in R&D, to survive. That time is over. COVID-19 has forced companies to innovate. This is the normal process of American capitalism.

Digital Acceleration

Those companies that are innovating are embracing digital transformation at a record pace. Their customers are demanding it. Per McKinsey,

Indeed, recent data show that we have vaulted five years forward in consumer and business digital adoption in a matter of around eight weeks. Banks have transitioned to remote sales and service teams and launched digital outreach to customers to make flexible payment arrangements for loans and mortgages. Grocery stores have shifted to online ordering and delivery as their primary business. Schools in many locales have pivoted to 100 percent online learning and digital classrooms. Doctors have begun delivering telemedicine, aided by more flexible regulation. Manufacturers are actively developing plans for “lights out” factories and supply chains. The list goes on.

Source

It’s no surprise that cloud computing providers are far outpacing the broader market.

NameYTD Return (through 7/22/20)
Amazon63%
Microsoft32%
Google15%
NASDAQ 10023%
Cloud Computing Index26%

Government Data on GDP is Undercounted

Many economic forecasters continue to miss the hidden value embedded in our digital economy. A simple example: you pay nothing to use Gmail. The average user gets hundreds of dollars of value from the service. This is not counted in GDP. There are countless other examples, True U.S. GDP is likely far more than $20 trillion.

Can we Protect our People?

As it was in 1918, health has become politicized. Forces on both sides are forming different conclusions from the data. The private sector is not debating – they are innovating.

COVID-19 is Not Under Control

Current hospitalizations have escalated back to April levels.

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Daily deaths remain below April levels. Hopefully, better treatment and therapeutics, virtually all developed by private sector companies, are making a difference here.

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Given an assumed capacity of 36% of hospital beds available out of 728,000 at a given time (not assuming any temporary facilities), Hospitalizations to Likely Available Capacity is back at April levels, but thankfully below critical levels nationally.

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ICU Hospitalizations to Likely Available ICU Capacity is rising again

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The Life Sciences Sector is All-In

Every day brings news of new vaccine trials, new therapeutics, and new testing approaches. Per Ernst & Young,

The life science segment has been able to unleash its full innovative potential in the current coronavirus crisis, EY notes. Within a very short time span it has managed to present over 160 potential vaccines and over 240 therapeutic active agents. EY also points to some 700 tests that Big Pharma had developed by the beginning of June this year — some of them have already been brought to market.

Source

A Golden Age of Biotech Innovation is Coming

Per CB Insights, biotechnology is leading the way in VC deal activity. . .

Source: CB Insights

. . .and investments

Source: CB Insights

This personal blog and its articles are written because of the author’s passion to advance his understanding of deep learning, complexity science, and major global events in markets, politics, and society. Any opinions or forecasts contained herein reflect the personal and subjective judgments and assumptions of the author only, not those of any organization or entity that the author is affiliated with. There can be no assurance that developments will transpire as forecasted and actual results will be different. The accuracy of data is not guaranteed but represents the author’s best judgment and can be derived from a variety of sources. The information is subject to change at any time without notice.

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