Venture capitalist Marc Andreessen gave a long interview to Vox about artificial intelligence on Wednesday, but the most interesting part was actually about something completely different: the bifurcated US economy.
From Silicon Valley, the economy looks great. Tech wages are plump, housing prices are skyrocketing, construction cranes are everywhere, and the top five most valuable companies in the US are all tech: Apple, Alphabet (Google), Microsoft, Amazon, and Facebook.
But in much of the country, wages are stagnant, good jobs are scarce, and people’s paychecks are being eaten up by skyrocketing prices.
Overall, growth is sluggish and interest rates have been close to zero for eight years now. What’s going on?
Andreessen argues that there are actually two economies side by side, and the poorly performing one is dragging everything else down.
In some industries, prices are dropping rapidly: consumer electronics and computer gear, food, and media.
People look at these changes and blame innovation for killing jobs or shipping them overseas. then blame the economy’s sluggishness on those lost jobs.
But as Andreessen points out, there are other sectors where prices are rising rapidly: mainly health care and education. He believes these rising prices cancel out the benefits of technological innovation, making the entire economy sluggish.
Why are these industries so slow to innovate? Because, as he puts it:
“You’ve got monopolies, oligopolies, cartels, government-run markets, price-fixing — all the dysfunctional behaviours that lead to rapid increase in prices. The government injects more subsidies into those markets, but because those are inelastic markets, the subsidies just cause prices to go up further, which is what is happening with higher education.”
So in Andreessen’s view, the answer is to set markets free — by eliminating government-enabled distortions on one hand, and busting up monopolies or oligopolies on the other. Then, lowered prices should lift all boats.
He also disagrees that increased automation will kill jobs. Rather, he thinks that it will increase the need for people to provide higher levels of service than the machines can do. His evidence: there are more retail clerks and bank tellers, even as those industries get more automated.