Michio Kaku on the Intellectual Capital Economy

Disruption is a word that is widely used, and loosely used too as our Startups Editor Peter Peele pointed out to me, in the Tech Startup and Tech Ecosystem. So, it came as no surprise as this year's Internetix conference by Internet Solutions had Disruption as the theme.

What is this disruption?

What is being disrupted?

How are we disrupting?

Why are we disrupting?

Are we even disrupting at all?

We fortunately had the opportunity to have a one on one chat with the well known and acclaimed physicist, futurist and author Dr. Michio Kaku for him to elaborate on disruption and also pick his brain on the future of South Africa and currencies among other subjects.

Dr. Kaku is also the co-founder of the String Field Theory which he sees as his personal mission to carry on Einstein’s quest to unite the four fundamental forces of nature into a single grand unified theory of everything.

String Field Theory Genius Explains The Coming Breakthroughs That Will Change Life As We Know It

During his talk to the audience, Kaku touched on many subjects from brain chip implants to digitizing and storing thoughts and memories and replaying them back as images or videos. The sub-theme to all these examples seemed to illustrate that some, if not most, of the concept we see in Sci-Fi movies are not that far fetched. Although some on them are still in labs in crude form, it seems like only a matter of time before they are reality.

One such example is the Brain Research through Advancing Innovative Neurotechnologies (BRAIN) which is a 1 billion euro collaboration between European Union and the USA.

With this initiative the scientists hope to be able to

Make complex pictures of the inner brain that show how individual cells and neural circuits work and interact and examine how the brain records, uses and retrieves vast amounts of information.

You can continue reading the transcript of the interview or listen to it on our SoundCloud channel below.

iAfrikan:You mentioned during your talk that South Africa is best poised to make a success of the future? How do you advise we harness this opportunity and move towards this techological success you speak of?

Michio Kaku: I do a lot of travelling around the world interacting with physicists, scientists, intellectuals and leaders in different countries and I obeserved that South Africa is currently positioned for potential greatness. The country is poised to be launched into the future because it has several basic ingredients.

First, peace. You have a nation that is at peace with itself. No civil wars and no great ethnic rivalries that are ripping other nations apart. Secondly, it has young excited and energetic people that are eager to be part of the future. Third, you have a government that doesn't dwell on the injustices of the past. Next, you have an entrepreneurial class that is very vigorous, young and energetic and lastly of course, natural resources.

However, that said, what is the fuse, what is the match that will set it off (into the future)?

Firstly it will be education. The world is not getting simpler, it's getting more complicated technologically and entry level jobs like factory ones are dissapearing slowly. So we have to educate the people because we're witnessing the

transition from commodity capital to intellectual capital.

For example, England derives more revenue from Rock n Roll than their coal mining industry. That's a transition from a commodity capital to intellectual capital.

Second, government. They have to, in some sense, get out of the way. Governments like to regulate, they like to justify their existence even though we don't need extra layers of regulation. Tax policy should encourage entrepreneurs to create new businesses. For example, in the USA I can create a business from my cellphone. In other countries you have to wait weeks, months, (with) layer after layer of red tape an then you get rejected. So government must step out of the way and tax policy must encourage investment in innovation and not tax innovation to death.

Thirdly the entrepreneurial class must be energised by all this to see what's down the line and create their own Silicon Valley. Silicon Valley wasn't created by government decree but by accident. Also, the lessons of creating Silicon Valley are not so mysterious. They've been published in many books.

Silicon Valley: A Place Or A State Of Mind?

But, the culture of entrepreneurs has to change. In Europe and Japan if you make a mistake as an entrepreneur or scientist, your career is over. You're not allowed to make mistakes because (in Europe and Japan) mistakes follow you. You make a mistake, it's a smear on your record.

In the USA, if you make a mistake it's your badge of courage. If you don't make a mistake, something is wrong with you.

So in America they ask one question: "What can you do for me TODAY?"

They don't care about the past but TODAY! So the entrepreneurial climate has to change and be more open to mistakes, to say to themselves that nobody is perfect and you wisdom by making mistakes.

South Africa and most African country's derive the majority of their revenues from natural resources. Is this sustainable going into the future?

No.

It's not sustainable because commodity prices historically drop. Of course oil and some other resources oscillate with time. But in the main they drop over time.

Take food for example, food prices keep dropping over the last 150 years due to better shipping, better preservation and better competition among many other factors. Food is ridiculously cheap in many countries. The breakfast you had this morning, the King of England couldn't have had it a 100 years ago. Delicacies that are dirt cheap from different countries, they didn't have that a 100 years ago.

So, nations that only invest invest in agriculture or a single commodity will be poor in the future. If you want to know who's going to be rich or who's going to be poor, it's not such a big mystery;

those countries that only invest in the commodity capital will be poor in the future.

What then about the future of the financial industry and currencies?

Well, the financial industry will be turned upside down because we will have instanteneous knowledge of markets and artificial intelligence programs to help digest some of this large mass of information.

The currency of course is political as well as scientific and so you realise that countries look to manipulate currencies. There are also problems inherent in having a uniform currency.

For example, take a look at the European Union (EU), in some sense the EU was formed pre-maturely. That's not to say it shouldn't exist, it just means that it was patched together so quickly that people overlook the fact there were very large economic differences between some nations. Having one currency for the entire continent revealed these big seizures.

As an example, the Greek economy was not sufficient to really enter the EU, so politicians lied. They lied to get in, but it backfired because initially they would have access to markets but in the long term if there's a financial crisis, you cannot print money. That's how governments usually get out of economic crisis, they print money. Greece couldn't do that because they do not control the euro. So that is a political problem, not necessarily just an economic problem.

Under free market capitalism, Greece would have been cut free and allowed to go up and down. If their currency was over inflated the markets would punish Greece but not punish the rest of Europe. So I think currency manipulation is a by-product of trying to meddle too much into the natural course of events.

Novelist William Gibson was once quoted in The Economist of 4 December 2003 as saying "The future is already here – it's just not evenly distributed.". I think you know where I'm going with this. Firstly, do you agree and how do we speed up Africa's access to this future that is already available in places like the USA and Japan?

First of all, when I was in graduate school many decades ago, if someone published a technological breakthrough, it would take months or years for the journal to reach the developing world. It was a joke the fact that the post office would take so long to deliver scientific journals.

That (delay) impeded the distribution of information and technology. Today, it's done at the speed of light. As soon as you have a breakthrough in science, you push a button and "BOOM!" it's on the web. Instantaneously and in microseconds other countries have access to it. So, access is less and less of a problem.

The problem however is education. We have to educate people in the developing world so that they can take advantage of all this technology which is freely available.

The concepts of Silicon Valley (as mentioned before) are concepts that anyone can take advantage of. So if people don't take advantage of it (technology) it's because the governments don't encourage it and they don't have the foresight to get into it.

Realise then that in that sense, it's a level playing field. However, it's not a level playing field in terms of investment capital. In Silicon Valley you find entrepreneurs with access to hedge funds who will then bank on your technology. But the idea of Silicon Valley, the concept, is up for grabs.

What are your thoughts on the recent rise in the abuse of the word disruption? We've always had disruption over the ages however of late some products or business models are evolutionary or revolutionary rather than disruptive but are labelled so. Why now?

The word disruption does not fully embrace the progress that we see in technological revolutions.

Disruption is like chaos and disruption for the sake of disruption is chaos, and that's bad. We don't want disruption for disruption's sake. However, sometimes you have to get rid of the old to embrace the new.

The question to ask I believe is rather what is this thing being born right before our eyes?

What's being born that is creating all this disruption

What's being born is what I call "perfect capitalism".

Capitalism is based on private ownership of the means of production with supply and demand setting prices. It's currently imperfect.

You don't know what things really cost. The owner of the company does not know what the consumer wants. That's what I believe all these gadgets, apps and computer technologies are all about -- perfect capitalism.

In the not so distant future the internet will be in your contact lens, you will walk into a store and immediately you'll know who has the cheapest product, who has the best product etc. You'll know everything about a product because you'll see in your contact lens. The producer will also know everything about what the consumer wants because they will have data mining and Analytics tools that will help them meet the needs of the consumer.

So, again, what we're headed for is perfect capitalism. The word disruption by itself does not capture the full extent of this revolution.

Perfect capitalism is being born out of the womb of imperfect capitalism. It is disruptive but disruptive in a good way and not in a chaotic way.

We don't have blacksmiths or wagon makers anymore but do we care about that? We don't cry about this because no one wants them or needs them anymore. That's a disruptive process but good progress because it fulfills what people want. That's what we're getting to.

The consumer wants something and the producer tries to meet that need. We're also removing the middlemen. The losers are middlemen. They get in the way of perfect capitalism. They are the friction of capitalism. Middlemen will have to re-invent themselves or they will simply go out of business.

Take middlemen like stockbrokers for example, they no longer sell stocks. What do stockbrokers sell if they no longer sell stocks? They sell intellectual capital, experience, knowledge, know-how, intuition and foresight. That's what they sell because they no longer sell stocks as you can buy that on the web.

Middlemen have to sell intellectual capital or they will go extinct.

Cover Image Credit: Brian Pennington

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