Is The Sky Really Falling?

I had the opportunity to give my Building an iPhone Business presentation to a group of graduate entrepreneurship students a few weeks ago. It was a lot of fun and they are a bunch of smart people. They quickly understood the problems and formulated solutions. There was a lot blue sky there, which I expected, but they didn’t miss anything major either.

In the middle of class the professors and I deserted the class and went out to dinner. It was a pretty heavy hitting group. Melissa Appleyard is well published and was taught by some outstanding Economics professors at Berkley; Wilf Pinfold is director of Extreme Scale Programs at Intel and has been chair of the Supercomputer Conference; and Bill Newman, an MIT graduate and a very well respected local venture capitalist. We got into a fascinating conversation about U.S. world dominance, economic success and the future.

I constantly find that my opinion is contrarian when it comes to long-term economics and I thought it might spark a conversation here. It seems like the main opinion in the United States is that US economic dominance is a thing of the past, soon to be surplanted by China and India.

The problems are well documented: too much debt, too little investment in education, corrupt or incompetitent leadership, foreign students going home after graduate school, relatively small population. I’m sure I missed a dozen reasons why we have reached our economic peak and falling off that I haven’t mentioned.

It’s fairly clear how we became dominant. After World War II we were pretty much the only market-oriented country standing. Europe was a mess. The Soviet Union was focused on communism. China was focused inward. We had all the money to lend and the industrial complex to support it.

But our advantage has disintegrated as outlined above. And most seem to think that that deterioration is about to escalate. I’m not convinced.

There are a number of world events that are working in our favor:

  • We are a resource-rich nation. In the future I think it will be important for us to supply our own natural resources, whether for power and transportation or for building and construction. Few countries in the world have the same advantages.
  • We have a reasonable number of mouth’s to feed. I’d hate to be China or India, trying to figure out how to handle 4.5 billion people. I think this will dampen growth over time.
  • As costs to transport goods becomes a major factor with increasing oil costs, I believe more manufacturing will come back to the US. The price gap between manufacturing in China and paying transportation costs and manufacturing in the US with none will close.
  • If we can figure out how to manage costs through the baby boomer retirement years — not a given — we will come out the other side with a younger and more balanced work force.

Do we have major problems? Of course. But everyone does. In my opinion, the biggest problem is managing the triple whammy of health care costs, social security insolvency, and mounting debt.

But if we can find our way through that problem, I think we’ll be in pretty good shape.

And as I said at that dinner to conclude my comments… what do I know? I’m an entrepreneur and by nature entrepreneurs are optimists. On the other hand, when everyone says the sky is falling, it’s most definitely not.