Bill and Andrew resume last week’s conversation to finish looking at how current trends in technology will have an impact on the future of our economy. Although these shifts may be a few years away, understanding the how these change can impact your business will help you prepare and not be caught off guard.
This week, we speculate on what will disappear and just how these shifts impact the economy and thus your livelihood. The predictions we propose have the potential to revolutionize the way we interact with the economy. Tune into this final segment of our two-part conversation to find out how you can get prepared.
Andrew: Welcome to the eCommerceFuel Podcast, the show dedicated to helping high six and seven-figure entrepreneurs build amazing online companies and incredible lives. I’m your host and fellow eCommerce entrepreneur, Andrew Youderian.
Hey, guys. It’s Andrew here. Welcome to the eCommerceFuel Podcast. Thanks so much for tuning in today. And today, we’re going to be continuing our discussion that Bill D’Alessandro and I…that we started last week, specifically talking about the massive world-shifting changes that are going to be headed your way in the coming years. And last week, specifically, we talked about robots and artificial intelligence. We talked about widespread virtual reality. We talked about negative interest rates and an extremely low-interest-rate environment for the coming future. And that’s where we left it off. So what to dive in today is particularly about things that are going to be disappearing in the future that are going to have a big change on your life. So I’ll go ahead and we’ll pick it up right from where we left off last week. Enjoy!
The Two Party System
So moving into things that will be disappearing, the first one on here, and this is something that’s really interesting, Bill, because we have different opinions on this. The two-party system. You and I were prepping, and we were like, “We’ve got to make sure that we do not turn this into just a political mock-fest,” because I think you and I could go off for hours about what a nightmare elections… And apologies to people outside the U.S. This will be U.S.-centric. But most people would agree it’s been a very unorthodox election campaign season. And I think this could be the final straw to break the two-party system, but you don’t. And I’ll let you maybe make the argument first.
Bill: I would like you to make the argument first, and then I will rebut because I think…
Bill: Well, because I have not heard your angle on this, so I would like to hear it.
Andrew: I think the two-party system in the U.S., of course, Democrats and Republicans, I feel like has been… It’s kind of anachronism. And you have, I think, a lot of people our age, Bill. Not just like, you know, late 20s or early 30s. But going out 10 plus years in both sides, you have a very large portion of the population that is far more centrist, people that are maybe economically conservative but socially liberal, people that don’t identify with the very extreme fringes of the Democratic and the Republican Parties.
And for a long time, I think, traditionally, the two-party systems, they weren’t quite as extreme, and so maybe that larger or kind of social norms were a little bit more divided. But I think that the parties historically weren’t as extreme, and so people were able to relate to them more. But I think in the last 10 to 15 years, they’ve gotten so extreme on both sides. You have a lot of people that don’t feel like they don’t belong to any party at all. And I think this is the first election where you have just open rebellion in the Republican Party, and to a much lesser degree, in the Democratic Party.
But with Trump, it’s just… you and I were both talking about this. We were trying to figure out who we’re going to vote for, and it’s maddening. We strongly, strongly dislike both candidates. And I’ve heard that from probably a dozen people. “Who are you going to vote for?” “I’m going to vote, but I’m going to either…” A lot of them say, “I’m just going to give a throwaway vote because I want to vote, but I can’t bring myself to vote for either one.” And I see this as potentially being the straw that breaks the camel’s back, where you finally somehow have people say, “This is crazy. Why is there just two choices? There’s got to be a third party that’s not as extreme and is more in the middle.”
Bill: So your argument is that because the two existing major parties have become so polarized, it is ripe for a centrist party to come to rise?
Andrew: Yes, but as an extension, I’d also say not just because of they’re so polarized. If you had 40% of democrats really strongly relating to the Democratic Party and 40% of…the majority of democrats and the majority of republicans feeling like their parties and their party representatives really represented them well, then absolutely, I think it could continue on for a while. But I think you have so many people that say, “I can’t relate to either one of these parties.” The parties are so extreme relative to their constituents. I think that’s the problem.
Bill: So I agree with you that… So my take on this argument is I’m firmly on the other side that the two-party system is not going away in the United States unless we have a dramatic reform of the way that we elect our leaders. I think it is much more likely, however, that we are seeing the near-term end of the traditional Democratic and Republican Parties. Our kids might be voting for parties that are very different, with different names, with different leadership, that type of thing.
But the argument that is to follow as to why the two-party system is never going away in America is because of the way our elections are structured. And this comes straight out of a political science class, if any of our listeners have ever taken one of these in college. So what we have in the United States is called a first-past-the-post election system, also known as winner-takes-all. So if you get 50.1% of the votes, you’re the president. You’re the party in power. You win the seat in Congress. Whatever it might be. And so as a result, in all countries or governments throughout history, whenever you have a first-past-the-post election system, then you end up with two parties.
And the reason is… Let’s say in the next election, some third party begins to rise to prominence, and they get 10%, 15%, 20% of the electorate. Pretty soon, either the republicans or the democrats or one of the major parties in power starts to look at them and go, “Man, if we could compromise on a couple of points, we might just be able to bring these 20% of voters into the fold and win the whole election.” And so over time, that third party, as soon as they become powerful enough, they tend to be subsumed into one of the major parties because one of the major parties is willing to compromise on a couple of things in order to take over their voting bloc.
And so because in the United States we have a first-past-the-post election system, it is nearly impossible for a third party to ever gain to become viable enough to win 50%, because long before that, I mean, even at 5% or 10%, both major parties… I mean, because we’ve got… When you win a presidential election, you win at, what, 52% to 48%, right? So if you have a third party that has even 5% loyal support, that’s the election right there. That’s all you need to win is to bring them into your fold. So all you’ve got to do is compromise on one or two core values, bring them into your fold, and win the presidency, and bam, you’re back to two parties. So I think it’s not going away. The republicans may go away. The democrats may go away. But we will always have two in the United States unless we have election reform.
Andrew: Very interesting. Well-thought-out. And I agree with you. What I should have said is we’re going to have the end of the traditional Republican-Democratic Parties as they kind of have existed the last 10 years. But I think that’s a compelling case. I think you’re right. I can see that happening. So I guess I’ll come over to your side just like that independent party would have to.
Bill: Well, so there’s actually a way to fix it. Are you interested in the way to fix it?
Andrew: I’m guessing is that you’ve got to runoff where you have like… Let’s say you’ve got 10 parties, and then the top three or top four, they go into a runoff election, and then the top two. Is that how it would work?
Instant Runoff Voting
Bill: That’s an expensive and difficult way to do it. Yes. There’s actually a very easy way to do it that doesn’t increase the cost of elections at all. It’s called instant runoff voting, or the alternative vote. And what that is is that instead of just going into the ballot box and you vote for your preferred candidate, what you do is you rank the candidates. So you might go in there and rank candidate number one, but if they don’t win, I want my vote to slide over to candidate two.
And so that allows somebody…Party A to get 40%, Party B to get 20%, and Party C to get 40%. But then the small independent party, when they don’t win, their votes still slide over to the voters’ second choices. So it prevents their party from being subsumed entirely, and it allows the third party to build some momentum before eventually it flips and you’ve got the major parties people ranking the independent party one and their traditional party two. It allows voters to move between parties. They don’t have to depart their current party to say, “Yeah, I support these independent guys as a better version.”
So it’s called instant runoff voting. And so the only change we’d have to make to allow third parties in America would be to switch from winner-take-all to instant runoff voting, and that would be all you need to do. There’s a group called the Electoral Reform Society that talks lots and lots about this. And there’s a think tank and everything that you can Google if you would like to know more.
Nationality Based On Your Birth Location
Andrew: Wow. I love it. But then you’d still have to rank Hilary Clinton or Donald Trump one or two. That will still be tricky. Oh, I love it. That’s really interesting. All right. So the final one that we’ve got, things that will be disappearing. This is kind of what I put in here. I’m going to preface this by saying that I think this is something that’s probably…when it does come… It’s probably 25 years out. I don’t think we’re quite ready for it, but I think the building blocks and the foundation are there for it. And that is, what’s going away at least, is nationality based solely on your birth location.
And it’s interesting. In the history of the world, it’s born in America, you’re American. If you’re born in France, you’re French. I think today, capital is getting so much easier to move around. Talent and human capital are skills. With so much being done online. it’s getting so much easy to move around. Even physically, I mean, you can get around the world in 30 hours, more or less. Why is it that where you’re born, you’re locked into that? It’s so difficult to move around, especially when your country of origin, their philosophies and the systems they have in place have such a massive impact on your life.
So I think it will be interesting. You’re starting to see countries, some in the Caribbean. I think it’s Nevis, offering citizenship with some economic… If you’re able to buy your citizenship, also able to see other countries. Like Singapore, for example, offering incentives to move there and for citizenship, things like that. And I think we’re going to start seeing over the next couple of decades more and more countries realizing, “Hey, if we offer citizenship, when we set up a country, set up certain things that favor an open business climate that favor what’s important to people that we want to come, we can really foster a population that is going to be advantageous for the long-term health of our country.”
So a little tricky. I mean, you either have to, A, start a new country, which is tough right now. Not a lot of free land, that’s, you know, up for grabs, unless you go to Antarctica, and that’s still probably got some earmarks on it, or you’ve got to change an existing country. But I don’t know. It will be interesting. I would be surprised if we didn’t see more of this in the coming decades.
Bill: So are you talking about actually moving people, or are you talking about sort of non-resident citizens?
Andrew: I think both. I think you could do both. It depends on…obviously, non-resident citizens is a little easier to start with. But ultimately, I think people moving to a place because they like the policies of the government, because they meet certain guidelines, because the government is making it attractive for them to live there. I think both.
Bill: I think this tracks very interestingly with the prediction of widespread virtual reality, because there are certain things… When you talk about nations and human psyches, there are so many things that are entrenched. Physical proximity. Do they look like me or not? All of these types of things that make nations and contribute to racism and nationalism and xenophobia and all of these things that we have and have had forever. But with the advent of virtual reality, that begins to strip all of those things away. Physical proximity doesn’t matter anymore. Physical appearance doesn’t matter anymore.
So you can have groups of people who coalesce based purely on their value systems, which is what I think you’re talking about. It will be very interesting. There’s a book called “Ready Player One” that explores this, where basically everybody is jacked into the matrix all the time, and all of the people have formed sort of digital alliances and countries inside of the matrix in the book. That’s a great book if you are interesting in this type of thing.
I think it’s possible. I think this one’s a much slower grind just because it depends. So much of it is physical proximity. I mean, you still got to jack into the matrix from somewhere, and you need electricity, and you need to own the land that you’re sitting on, and you need to put food in your face, and you still have to be physically present. And I don’t think the concept of nations based on where you’re born and where you live is going away, but I think you may end up with this sort of parallel layer of…call it guilds, or call it groups, or whatever you may want to call it, that exists virtually on the internet that people identify with, in the same way that people identify with what college they went to as much as being American. That type of thing.
Andrew: And to clarify, I don’t think that we’re going to have your citizenship based on birth disappear anytime soon, but I think it’s going to become easier. It’s going to become easier and easier in the coming decades to be able to potentially opt out of citizenship or be able to get an additional second citizenship based on some of these criteria. And it’s interesting you tie it into virtual reality because it does have some pretty… Have you read “Atlas Shrugged”?
Bill: Not all the way through. That thing’s a brick.
Andrew: It is. It’s brutal. For people who’ve read it, one of the things at the end is they ultimately… If you don’t want a spoiler alert, you might want to turn me off here. But at the end of the book, they pretty much create this utopian entrepreneurial world where only people who are willing to be responsible for their own things are high output-producing people more or less live in this little, secluded valley. And on one hand, I mean, that sounds pretty elitist, and I think it is. And I wouldn’t want to be a part of a world like that. I think it’s got some pretty awful social implications and implications for empathy for other people, but I think that’s something we’re going to be forced…that’s going to happen more and more in the road as it’s easier to move around, and the potential for being able to engage with other countries and become a citizen there maybe might be easier.
So, not all good things. I think it would be interesting, and I think it could be positively good or potentially good. But the last thing you want to do is get into creating more or less countries based around eugenics, maybe not just for genetics per se but for other attributes. It’s kind of scary, too.
Bill: It might go to that. But to put a less polarizing spin on it, imagine The Valley was just full of people who were interested in art, or were cycling enthusiasts, or whatever it might be. It doesn’t necessarily have to break on economic lines.
Banks Are Shrinking
Andrew: So, Bill, one of the reasons I was a little hesitant to play devil’s advocate earlier was I actually do think the financial industry is going to see a lot of contraction. Like you mentioned in Charlotte, over the next 10 years, specifically, I think the one that immediately comes to mind is traditional financial advisors. I think just based on their track record of paying somebody to manage your funds versus index funds, with all the robo-advisors coming up, I think that’s going to be a harder and harder sell in the future.
Banks. Like you said, banks are shrinking quite a bit. You’re getting a lot that’s automated. And I hate going to banks. Anytime I go to a bank, even the bank that I like, I got to walk up, I got to fill out a deposit slip. It makes me crazy that the tellers don’t fill those out for you, or they just can do it for you. But anyway, I think our generation and a lot of other generations just hate going into banks. So for a lot of reasons, I think we’re going to see a huge contraction in the financial services industry, and a lot of those positions just are not going to be around in 10 years.
Bill: I think you’re right in that the financial services industry will change dramatically. I’ve heard a lot of people say particular private wealth advisors, paying somebody to manage your money, all of that’s going away with the advent of Betterment, and Wealthfront, and Charles Schwab Intelligent Portfolios, and all of these robo-advisors, because it is better for your average investor to index for the long-term and not mess with it.
So this is really active versus passive management debate, which I won’t get into whether active or passive is better because that’s not really the futurist discussion. What I’m saying, though, is I think those jobs, while some of them will go away, a large portion of them will not go away because I think what people underestimate about the role of financial advisor is how much of it is salesman and confidante and how little of it is actually placing the trades.
An algorithm can’t take you out to a steak dinner, except in virtual reality, right? But I don’t think an algorithm is going…people are going to rely just on an algorithm. You’re still going to need to be “relationship manager”, somebody that convinces you to invest with his algorithm, right? Somebody that answers your questions. Somebody that puts you in the right algorithm necessarily. It’s just we’re just rehashing the same things over and over, right? The right fund, the right algorithm. I still think there’s going to be a need for financial advisors and financial hand-holders always. I think they may become more salesmen trying to vacuum up as many assets as possible and put them in their algorithm, but I don’t necessarily think the function is going away.
Andrew: I don’t think it’s going to disappear, but I think it’s going to definitely be hit harder, especially as people get older. I feel like the younger you are, the more comfortable you are transacting financially online, the more comfortable you are putting a big chunk of money, i.e. your retirement to your IRA or something, into one of these accounts. I mean, you look at Wealthfront, and the majority of people there are people probably not necessarily in The Valley, in Silicon Valley, but people that are young, that are very tech-savvy. And I think that’s something that…you’re not going to have your 60-year-old mother probably…or someone who’s 60 or 70, they may be less likely to be in that.
But I think that’s going to be something where…I agree with you. They’ll be there for the long-term in some capacity for people who want that human touch for it, but I think it’s going to be a consistent decline over the coming years, at least on the financial advisor side. And there’s definitely cases to be made for very advanced wealth management. And there are really good financial advisors. There are really good estate planners. There’s a lot of things that are very valuable.
But, Bill, you and I both know, being from that industry, there’s also a lot of people in that industry, or at least some people in that industry, who, to be very frank, are probably not qualified to be telling you what to do with $300,000. So I think as people get more comfortable with algorithms doing it, given you also have some people mixed in that pool, then I think that’s just going to be, I don’t know, a recipe for seeing a lot of those jobs go away.
Bill: And I think there are other functions of banks that are changing dramatically, too. We, on purpose, left cryptocurrency out of this conversation, but, obviously, that is something that’s happening or may be happening over the next couple of years. I mean, you also have things like… The traditional role of banks is to lend money to people, obviously, right? But you see the rise of all of these things, alternative funding sources, not only just things like OnDeck Capital and Kabbage, but things like… I think it’s called Able where people are actually lending to other people directly because you have all this capital in people’s bank accounts and they can lend to each other. And it turns out the default rates are actually a lot lower when their people are borrowing from their friends. And so if the internet can unlock all of the capital in all of the bank accounts in the world to logistically provide loans for small business, that’s interesting/potentially scary if you’re a big bank.
Andrew: Agreed. Into just kind of pieces of news, a little bit off sheets, but what do you think of Lending Club really having issues recently? And also, have you seen the price of Bitcoin? It’s up to like $600 again.
Bill: Bitcoin is up that high. I’m, I think, like you, pretty anti-Bitcoin.
Andrew: I am finally back in the black on my Bitcoin investment. I bought it like 580. And I think I talked about it, so I won’t talk about it much. But I bought Bitcoin, about five Bitcoin or something, as more or less a lottery ticket, thinking that 90% chance these things go to zero or are not relevant in any meaningful way, with a 10% chance that they completely revolutionize the world economy and how we use money.
Bill: Interesting. I own one Bitcoin. I own a single Bitcoin more just for fun, as an experiment. I’m trying not to go down the Bitcoin rabbit hole. I am pro-cryptocurrency. I think Bitcoin as an implementation is flawed because it has dramatic built-in deflation. There are only so many Bitcoins that can mathematically be created, and it just bakes in huge deflation, which is economically crushing and just is a horrible feature of a currency. You would never build in dramatic deflation into a currency. Bitcoin, because of that, I think, is doomed as the cryptocurrency. I think the concept of the block chain in cryptocurrency is here to stay, but I think Bitcoin as an implementation is deeply flawed.
Andrew: And there’s a new one. Is it ethereum? Is that how you pronounce that? Do you know what I’m talking about?
Bill: I do not know what you’re talking about. No.
A New Kind of Currency
Andrew: I’m totally going off the cuff unprepared here. Ethereum . Close to that. I’ll update that in the show notes for the actual one. But very interesting. It’s a currency, but it’s getting more and more traction in the cryptocurrency space. And it was designed less to be a currency and more to leverage the strengths of the blockchain, to be able to enable smart contracts, to really make it easy for people to use the technology and even piggyback off the technology to build their own apps, almost like creating an API for Bitcoin. They didn’t care about the currency but made it possible to create smart contracts that you could set into place and just ran, which is kind of what a lot of people got excited about with Bitcoin in terms of the technology underneath it. But they created their own currency that really was optimized for that.
Bill: I think that makes a lot of sense. I mean, that’s the real killer app for the blockchain. And cryptocurrency is not necessarily replacing the dollar, but as a means to transfer assets verifiably and know that they haven’t been copied. I can give you a Bitcoin, right? And I don’t have the Bitcoin anymore. The same cannot be said for a JPEG file. I mean, that’s the strength of cryptocurrency and the blockchain is that I can send you a file and I don’t have it anymore, which enables kind of single-use copies of things.
Andrew: Bill, you’re good, man. You even mentioned that I tend to be a worst-case scenario guy when we did the Amazon episode. At the end, you’re like, “Dude. Yeah, man.” It’s pretty severe. Negative opinions there. Same thing for this. I like that you bring it back to the middle and tamper my worst-case scenario tendencies.
Bill: You know, I’m just trying to think of what is…stuff like this. People go, “Oh, it would be really bad if this happens,” or, “It would be really good if this happens.” I tend to look at things as, “This is probably going to happen. How can we cope with it?” It’s unlikely. So far, the world hasn’t exploded, right? For millions of years. So if you think that the past predicts the future, the world is probably not going to end anytime soon. So we’re going to end up at some sort of equilibrium. So these things are going to happen if we end up with widespread VR or if we end up all the things we’ve talked about, if we end up with the humans don’t work at all, if we end up with all of these types of things that have changed.
If that all happens, okay, so it happens. How do we cope with that? What does the new society look like in a world where people use virtual reality 12 hours a day? It’s not a good or bad. It just is. It’s just a thing. To borrow a phrase from Marc Andreessen, like, “Did you really get mad at your new toaster?” It’s not a revolution. It’s just a thing. It’s a tool. It’s just the thing that is.
Andrew: And it’s interesting, too, to think through predictions from the past. I mean, you think about…there’s an interesting Planet Money episode where they were talking about… I think it was one of the famous economists. I think it was Keynes, where his prediction… I could be wrong. One of those economists. Their prediction for the year 2000-ish was that because of the gains in productivity, because they were advancing so quickly, humans would work 10 hours a week. We’d almost work…no work at all, and leisure. We would just be in these wonderful lives of leisure. Well, he got the productivity part right, but in terms of how much we work, we work more than we used to.
And it’s interesting, too. A lot of times, when you look at your predictions for the future, you always…it’s easy to spot the potential bad, but a lot of times, you maybe don’t get enough credit or don’t think through the positive things that can come out as well. I think that’s probably something that’s been pretty common in most predictions for the future.
Bill: And you think about a prediction about everybody only works 10 hours a week. They thought everybody would work less. Well, maybe that prediction isn’t actually that far off. But what they got wrong was that the work would be evenly distributed, that everybody would work less. And in fact, a smaller subset of people work the same amount, and a large portion of people are unemployable.
Bill: So maybe their prediction is right at its core, but the nuance is wrong.
Andrew: And Keynes had no idea that AI would play into that.
Andrew: Bill, I love it. I love it. We’ll have to check back in 20, 25 years. I’m sure we’ll be doing the podcast.
Bill: We’ll be doing the podcast in virtual reality in 20 years.
Hopefully The Future Means Bill and Andrew in a VR Podcast!
Andrew: Oh, I love it. We’re doing it in virtual reality with making no money, being diagnosed by robot doctors, with the…I’m going to call it the Sofa Party as the main candidate for president, which will be interesting.
Bill: Yeah. Exactly.
Andrew: Bill, it’s been fun, man. Thanks for batting these ideas around.
Bill: Yep. No problem.
Andrew: Want to connect with and learn from other proven eCommerce entrepreneurs? Join us in the eCommerceFuel private community. It’s our tight-knit vetted group for store owners with at least a quarter million dollars in annual sales. You can learn more and apply for membership at eCommerceFuel.com. Thanks so much to our podcast producer, Laura Serino, for all of her hard work in making this show possible, and to you for tuning in. Thank you for listening. That will do it for this week, but looking forward to seeing you again next Friday.
What Was Mentioned
- Connect with Bill: Rebel CEO | Twitter
- Humans Need Not Apply
- Electoral Reform Link
- The Tim Ferris Show
- Bill Gross’ supernova explosion can be great for Indian equity market; here’s how
- Planet Money’s Episode on Working 10 Hours per Week in the Future
Photo: Flickr/VR Demonstrations