Market Overview

Shadows of the Coming Tech Boom: Let's Get Real About Regulations


I recently suggested that a major tech boom may very well be on the horizon in the US economy -- spurred by a blend of vigorous technological development, desperation in the marketplace, and the conatus of human survival. I use the word "boom" and not "bubble" in the sense that such technological development in a forthcoming tech boom would create actual wealth in the form of realized innovative technology and not "fictitious capital" based on speculation and expansive credit.

We may be seeing shadows of this coming tech boom already. Interestingly, on April 20, 2012 Reuters reported how Google's (NASDAQ: GOOG) Eric Schmidt and Larry Page are teaming up with director James Cameron and others "to back an ambitious space exploration and natural resources venture." The company would be called Planetary Resources and would "explore the feasibility of mining natural resources from asteroids." Planetary Resources aspires to "create a new industry and a new definition of 'natural resources'."

The Wall Street Journal's Amir Efrati has written that the venture is "a Quixotic quest to mine asteroids". Per Efrati's report, Planetary Resources would focus on space exploration and natural resources to "help ensure humanity's prosperity". Efrati noted that "[i]n recent years, as NASA has pulled back on space exploration, wealthy entrepreneurs such as Inc. (NASDAQ: AMZN) founder Jeff Bezos, Tesla Motors Inc. (NASDAQ: TSLA) creator Elon Musk and Microsoft co-founder Paul Allen have tried to fill the void." Efrati's analysis suggested that pursuing and landing on asteroids may be the next step in humanity's path to space colonization.

What I find interesting is the fact that Google is involved with this start-up. While previously discussing some of economist Karl Marx's theories, I mentioned how from a Marxian economic perspective, "the Google phenomenon is key to the development of capitalism and what our current situation portends for the future." In the previous context, I was addressing Google's course in effectively "fettering" private property and other aspects of the capitalist superstructure, but one cannot help but notice how Google has been on an aggressive march through the marketplace. Given Google's development from e-mail service to YouTube to Google+ to travel business to various online services including Google Maps, Google Earth, Google Translate, et al., it's strange to think of Google as having started as a mere search engine. Whereas Google is effectively establishing itself as a gateway of information and a beacon for future tech development, I think Marx would have foreseen such a corporation rising up at the twilight of the capitalist superstructure -- effectively fettering capitalism and driving society toward an environment where socialism would become feasible.

In terms of start-ups, technological innovation, and economic growth, conservative commentators such as Rush Limbaugh, Glenn Beck, and Sean Hannity have criticized Pres. Obama for fostering too big of a government with too many federal regulations that hinder business growth. On Monday's episode of the Mark Levin Show, conservative radio host Mark Levin expounded out a scathing criticism of Obama's administration in terms of gas prices, student loan debt, taxation, and regulatory schemes that prevent private sector growth. In discussing college graduates and unemployment, Levin commented, "When you are launching a relentless war against the private sector... When you're unleashing an attack on the creation of wealth, you are disincentivizing people. So there's less investment, less productivity, there's less creativity... When you impose massive regulations...and just keep layering and layering and piling and piling [regulations] one on top of the other [with small, medium, and large businesses waiting for ObamaCare] has an enormously negative effect on society."

In pertinent part, Levin suggested that massive bureaucracy and excessive regulations and taxation are counter-productive. Levin: "Then there's this administration and an army of bureaucrats and the establishment Republicans... taking us to misery, destitution." Levin's commentary reflects an emerging consciousness in America that is beginning to view taxation, bureaucracy, and overregulation as being substantially counter-productive -- not necessarily in the context of major corporations, but small businesses and start-ups.

Levin has suggested for some time that Washington needs to unleash the private sector in order to spur innovation, promote job growth, and increase employment. At some point, even if Washington does not want to unleash the private sector, it may be left with no other option but to unleash the private sector. As we have seen with the 2008 financial crisis and various other socio-economic events, the private sector can often work more economically and efficiently than the public sector. That being said, regulation has its proper place. However, as there emerges a growing consciousness in the US that the government must take a step back in order to let the free market run its course and create jobs and commercial activity, the private sector may have to be unleashed. Were the private sector and free market to be unleashed, I believe it could very well trigger a substantial economic boom for technological development and innovation. This tech boom could have positive implications for health care, computer technology, energy, water supply, housing, transportation, entertainment, and various other sectors of the economy.

Interestingly, the Drudge Report Wednesday morning linked as its main headline (with the words "Economic Suicide Pact") a brief video from Free Market America. The video is entitled "If I wanted America to fail". The video discussed everything from energy to manufacturing to capitalism, with an emphasis on gross bureaucratic regulations and the governments' hindering economic growth. From the video: "If I wanted America to fail, I would create countless new regulations and seldom cancel old ones. They'd be so complicated that only bureaucrats, lawyers, and lobbyists could understand them. That way small businesses with big ideas wouldn't stand a chance." The video continued, "And I would never have to worry about another Thomas Edison, Henry Ford, or Steve Jobs."

In some ways, the video from Free Market America promoted by the Drudge Report reflects a growing consciousness in the US that is countering the gross bureaucracy and regulations have become such a major part of the American culture. Whereas too much regulation can be counter-productive, some regulation can be beneficial to prevent fraud and injury; it's finding that equilibrium that can be difficult. What is interesting is that as economic activity declines, the costs of maintaining a gross bureaucracy become apparent. As budgets tighten and individuals are forced to cut back and limit spending to what is essential, the bureaucracy loses its teeth, its ability to regulate in the midst of having to justify its own existence while the rest have to tighten their belts. Counter-productivity can be effectively forced into actual productivity owing to the struggle for survival. And with actual productivity comes the creation of actual wealth.

Taking the above into account, I think there is reason to believe that a substantial tech boom may be on the horizon -- in light of American society's shedding the fetters of gross bureaucracy and the struggle for survival by creating actual wealth. Such a transition portends substantive advances in technology in the near future. Arguably, we are already seeing this in the form of iPhones, hexacopters, drones, and segways. There obviously remains substantial room for technological growth in American society. Given the conatus in humanity to survive, to explore space, to colonize space, and to develop innovative technology to improve the quality of life, in light of remaining wealth and capital in the nation, there remains room for substantive technological investment in the years to come. If the American nation develops to a point of shrugging off excessive bureaucracy and regulations and embracing a free market in order to create genuine wealth and employment, a technological boom may be around the corner -- bringing with it employment and the creation of actual wealth.

In terms of trading and investment opportunities, firms that may take part in such a tech boom may not even exist yet. Even so, traders and investors can take a look at companies like Google (NASDAQ: GOOG) and Apple (NASDAQ: AAPL). Other companies to keep an eye on include Tesla Motors (NASDAQ: TSLA), Orbital Sciences Corp (NYSE: ORB), and Lockheed Martin (NYSE: LMT).

Posted-In: Long Ideas Entrepreneurship Wall Street Journal Politics Psychology Topics Economics Be Your Own Boss Best of Benzinga


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