Albert Wenger is a managing partner at Union Square Ventures (USV), a New York-based thesis-driven venture capital firm, where his investments have included Etsy, Twilio and MongoDB. Before joining USV, Albert was the President of del.icio.us from founding through the company’s sale to Yahoo. Albert graduated summa cum laude from Harvard College in economics and computer science and holds a Ph.D. in Information Technology from MIT. In his new book The World After Capital, Albert discusses how, “Technological progress has shifted scarcity for humanity. When we were foragers, food was scarce. During the agrarian age, it was land. Following the industrial revolution, capital became scarce. With digital technologies scarcity is shifting once more. We need to figure out how to live in The World After Capital in which the only scarcity is our attention.”
In this interview, I speak to Albert Wenger about our shift from the industrial to the knowledge economy, and what that means for all of us.
Q: What are the key differences between the industrial and knowledge economy?
[Albert Wenger]: The industrial age economy was characterised by the scarcity of physical capital like machines, buildings, and roads. Capital is no longer the binding constraint on humanity. We have an excess of physical capital. It really was all about could you develop those at some meaningful pace, for instance, you could make steel, or you could make fertiliser? …hence the title of the book is The World After Capital. The real scarcity today is attention to the importance of the question, to what end are we deploying this capital.
The knowledge age economy is aspirational and that is where I believe we should aim for as we are clearly not there yet. We are in a limbo now, an interregnum phase and this is when everything is particularly unsettling which is regrettably the current situation.
Q: What are the symptoms of the transition?
[Albert Wenger]: Inequality is an example of a symptom due to the huge divergence in the disproportionate income and wealth distribution. This is true at a time when we have lifted a lot of people out of abject poverty all around the world, but we have also, if you look at within country inequality, it’s at a rate that has not been seen since the1920s!
The next symptom is that there is a large disaffection amongst the population and a very large mental health crisis. This is like prior transitions experienced during the agrarian age to the industrial age, when people were dislocated as they moved from the country into the city. The people had jobs in agriculture and now they had these machine-based jobs.
During this transition there was a similar kind of mental health crisis we see today and on top of that we are living in an age of propaganda as the news and current affairs is bursting with people making bold claims (that are largely populist claims) designed to create a majority of the disaffected.
Q: How will we arrive at the value-set for society?
[Albert Wenger]: We are seeing people returning to religion, spirituality and looking towards to populist narratives because there has been a failure to create a secular narrative of what a common human future might look like. In my book I talk about what makes humans human and for me it’s the existence of knowledge. Knowledge here broadly defined as the kind of things that we hand down. I can read a book today that was written by somebody else in a different part of the world a thousand years ago and from that, I derive a set of values. We as humans are first and foremost extremely alike to each other.
The first value for me was solidarity. This stood out for because humans need to show solidarity with other humans. Then there are differences that are our diversity, that we should celebrate those, but they are not what keeps us apart, they are what we are all part of the same kind of species.
The second value that comes out of this discussion of humanity’s role in demand is existential, which is this idea of responsibility. That famous great line from the movie Spider-Man ‘with great power comes great responsibility’ is so true. We have the power of knowledge- for example to save the whales. The whales are obviously not going to save us. We are not going to wait for the whales to somehow intervene in the global problems such as the critical situation of the climate. We need to have solidarity among humans, that the big problems we are facing, that affect all of humanity and we all equally have the responsibility to do something about it.
The third one I would point out is the idea of optimism, which is that problems, even severe problems like the climate crisis, can be solved if we put enough attention on them. These are values that I think are incredibly important to the construction of this knowledge.
Q: Do you think that we can meaningfully tackle climate change?
[Albert Wenger]: I don’t think so at all that we can meaningfully tackle climate change. I think that it’s a question of facing the crisis for what it is, which is an existential crisis, and then allocating resources accordingly. We are now trapping in the Earth’s atmospheric oceanic system that used to go into space dangerous amounts of greenhouse gases which is equal to four Hiroshima sized nuclear bombs per second. Of every second of every minute of every hour of every day. Imagine for a moment if we had alien spaceships hovering above earth, dropping four Hiroshima nuclear bombs into our atmosphere every second. What would we do? We would drop everything until we got rid of them. We need to get out of the peacetime footing that we are on and we need to get onto a wartime footing against this climate crisis.
During World War II, the US allocated 50% of GDP roughly to fighting, and I believe we need to get to 50% of GDP sustained over 5 to 10 years. We can have an amazing world after that, by the way. We can have clean cities and abundant electricity like the things that become possible, but they only become possible when you put that much effort behind it. At the moment we are at 5% of GDP. In many places we are less than 5% of GDP which is very troubling.
Q: Do we need to fundamentally rethink how our economies ‘work’?
[Albert Wenger]: Firstly, what we have to recognise is that the market based system has been incredible at solving the capital accumulation problem. Meaning markets have resulted in a huge amount of physical capital being created. Markets are good at things that have prices, but certain things cannot have prices.
With regards to solving the climate crisis all the people born in the future and maybe all our own future selves would be the biggest in demand to do something about it as it is our future at stake.
Many people are bad at imagining the world being in a different state than it is today, and this results in a lack of the right demand, and so there’s not the right prices. Whenever you have situations where you can’t have prices, for some reason it’s not a question of a missing market, it’s that you cannot fundamentally construct this market, and this is when government intervention is required in terms of direct action. Governments ultimately are the citizens coming together saying we need this done.
I do believe that this isn’t so much a question of value exchange, as much as it’s a question of government deciding this is the right thing to do and this would be put a high price on carbon, $200 a tonne if you want to emit, redistribute that so that it’s not a regressive thing.
Big emitters need to pay more, and small emitters get our net recipients. We also need to make use of the power of government to be more stringent and say no to permitting an internal combustion engine car approved and refuse to allow obtaining a licence for it. We have done this before. If you think about the ozone layer crisis (the hole) we banned outright a certain set of harmful gases.
I think between setting a price on carbon, banning certain things and then using the government procurement power to say, we’re going to start building some things that we’re not building enough and we’re going to build more drawdown capability (not necessarily machines) but it could be e.g planting forests at a scale, that can be dealing with other biological methods. It can be some amount of direct air capture even.
We need to put large scale resources the same way that the government went to Ford during World War Two, where it was proposed, we don’t need to build cars even though there’s a demand for cars right now – we need to build warplanes even though there was zero demand from the private for these fighter plane jets.
In conclusion, sometimes in these circumstances and clearly we’re in one of the situations right now where government intervention is vital. The government would need to cut the items that would be taken up by the normal incentive system and there are democratic ways of doing that, a citizen’s assembly, for example.
Q: Are we going to see more decentralised society?
[Albert Wenger]: We have made the mistake to centralise too much. Whether that’s the US federal government or whether that’s the EU, I very much believe in the subsidiarity principle, which is we should be deciding things at the lowest possible level.
Very few things need to be decided at the global level – the atmosphere / climate issue being clearly one of them. A carbon price ideally is something that we could pull up on a global basis, but we need to push a lot of matters back down and in that regard, I do believe in smaller government at the higher levels. Often government and central government squander their credibility by getting into issues that people would much rather decide locally and resolved.
We are in a bad equilibrium. There are many other forms of democracy, and I briefly mentioned citizens assemblies, and I should point out again what that is. Basically, if you look at Ireland and how they made their abortion decision was they didn’t rely on government to do it. They selected a panel of citizens. They presented that panel of citizens with experts and expert opinion. That panel of citizens decided. That decision in turn became binding. That is a means of democracy that we should avail ourselves of considering the climate crisis. We should not wait for the existing politicians who are often deeply conflicted, whose campaigns have been financed by the fossil fuel industry to make decisions that would go against those industries that they have been so richly rewarded by for such a long time.
It is stated by people that I am advocating for dictatorship. No, my answer is that I’m advocating for other means of democracy, citizen’s assemblies being one of them.
Q: What is the role of cryptocurrency in our future?
[Albert Wenger]: Central banks all around the world have essentially abused the power of printing money, and they have abused it by using quantitative easing, meaning creating new federal money to kit over fundamental problems, structural problems in the economy.
Quantitative Easing (or QE) acts in a similar way to cuts in Bank Rate. It lowers the interest rates on savings and loans and that stimulates spending in the economy for the people.
So much of that acceleration in the wealth inequality has come from this quantitative easing, where somebody like me, who is relatively wealthy can now get a third or fourth mortgage when somebody else doesn’t have a house yet at all, is unhoused.
The US is in the exceptional position that the dollar is the global reserve currency and what we’re seeing again in the current crisis and within these past few weeks is massive devaluation of the British pound for example. Some people are thinking oh, the pound’s the reserve currency because the pound accounted for 5% of global financial activity, whereas the UK economy is 3%. There was some premium, but 5 and 3% is a rounding error on the global financial markets.
Global financial markets have decided that the pound is just not a trustworthy currency.
I do believe that ultimately cryptocurrencies will be an alternative to this and they already are. In the current inflationary situation in the US there were some pundits who wrote, oh look, the whole theory that crypto is a inflation hedge didn’t pan out. But what they were doing, they were using Bitcoin prices, they were looking at them at Bitcoin in USD, but USD was the one currency that managed well.
If you see Bitcoin in various other currencies around the world, it was a very good inflation hedge in those countries. So yes, I think that we’ve abused central banks all around the world. It’s not just the Fed, it’s the ECB, it’s the Chinese Central Bank, they have all essentially abused that power of being able to print money and not paid attention to the wealth distribution effects that that has had and that has severely made the existing situation much worse.
Q: Is there a role for universal basic income in our future?
[Albert Wenger]: Through QE. We would have had to produce much less money if we had just given money directly to people. A key point of the world of the capital is that the transition we are now in, which is the decision out of the industrial age, is as profound as the prior transition from the hunter gatherer age to the agrarian age, which was about 10,000 years ago. The transition from the agrarian into the industrial age, which started a few hundred years ago and really wasn’t complete until the end of World War Two. One of the key things we changed when we went from the agrarian age to the Industrial Age was who takes care of people.
In the agrarian age, it was the benevolent (sometimes not so benevolent) ruler. That was a system where you were paying taxes, not necessarily making you well-off but a system intending to protect you from invading criminal hordes (generally speaking). We went from that to a system where we had a reasonable belief that the government was going to make sure that between government and labour unions, society made enough money to afford shelter and a place to live, good health care, education etc.
We are going to need to revisit these systems entirely and it is not a question of incremental change. The big political mistake is that for 20, maybe 30 years now, politicians have believed that this is all about trying to stay in the industrial age, to treat the industrial age, to turn a knob on the insurance arrangement, to turn a knob on the interest rate, or on job training and then everything will be fine, except for many people in countries like the UK and the US, it’s clearly not working at all.
We need to accept that the industrial age is over. Its expiration date was 20 years ago. It is time to invent and create a new social safety system with a universal basic income being the main component.
Q: How can we make changes in a meaningful way that can allow us to transition into a new, exciting form of humanity?
[Albert Wenger]: We have reached a time where civil disobedience is compulsory to climate action. The most exciting climate movements in the world today are movements that are quite unpopular to some degree, such as just stop oil in the UK or in Germany because they intentionally disrupt peoples daily everyday life.
History shows when you want real change, when you want governments to pay attention and listen, whether that’s women’s right to vote, civil rights, fighting against AIDS, it’s only once movements go to a civil disobedience mode of action that real change can be accomplished.
Honestly, I’m excited to see these civil disobedience movements occurring and I encourage more people to participate in them, because that will get the attention of the governments to act. You need to get that level of attention that scares and one way to get it is to disrupt people’s daily lives because people’s lives are more than going to be a little disrupted if we do not get on top of the climate crisis.
Q: What would be that message of optimism that you would give to today’s society?
[Albert Wenger]: I think the message of optimism is that we can use the power of digital technology, and the new technologies on the climate side to create an extraordinary place for not just humans, but also other species. For instance, we take up a huge amount of land for agriculture, but we have many innovations that would let us dramatically compress the amount of land and have extraordinary places to visit.
People see the need to fly to Africa, for example, to see certain types of wild animals. We could have those back in many parts of the world.
We could have an easy life where many of us don’t need to work if we choose. In fact if we wanted, we could work to make more money. But if we don’t want it, if we want to take care of friends and family, or take care of our animals, or just do nothing but play video games, make music, whatever the case may be, we can.
We have achieved a level of automation and we can go much further on automation that makes that possible. On that note I do believe with this climate crisis, if we get ourselves into a wartime footing and we get through this transformation, we can live in a truly magical place.
Q: How do we find purpose in an abundant society?
[Albert Wenger]: ….we need this dramatic, systemic change. Our school system today has rigid elements designed to produce essentially cogs for the machine, e.g., you must get a hall/ toilet pass to go to the bathroom, have to fill out the test with a certain type of form. These are all things that are designed to stunt creativity, not to unlock it, to produce a uniform product.
Often people say, well, people won’t have any ideas what to do and they’ll be bored but if we’ve trained people to be a cog in the machine and then we take away that part of the machine and say, you’re now a useless cog, of course people are going to be like completely unmoored.
We are never going to run out of exciting things to do, we just have to decouple the idea that something is stimulating and motivating and a worthwhile pursuit from the idea that humans have to work to earn a living. Many of the most interesting things that humans can work on are things that might not have a market, more fundamental maths research. We’ll work on space engines that may not go anywhere. The world is full of potential Einsteins’ who never get an opportunity or a chance at doing it because they are working in a job at Starbucks as they have no option as its their only means of survival (income).
Once we start seeing it through that lens that humans are fundamentally curious and born curious, people want to do interesting things for the most part, if we change the system where we train that out of them, great things will happen.
Optimism is to believe that humans are not this sort of limited, bit trodden, disheartened set, but are capable of greatness. I think that’s a crucial aspect.