As the RBA pushes interest rates to record lows and the stock price of financial technology company Afterpay surges to record highs, it’s time to reflect on whether the world is getting everything it can from an environment of easy money.
Low interest rates and loose money are doing what they are supposed to, no doubt. Businesses that would have been marginal or impossible in the old world of 6% interest rates become viable ideas, and some grow. All this propels us through an age of innovation, but what are the roll-on effects? And importantly, what are we missing?
A throng of unicorns
Silicon Valley has so much loose money running in its veins that it is at risk of a rupture. At one point, the word “unicorn” was coined to describe start-ups that were worth $1 billion. Now the term is debased. From vegan burgers to new ways of doing e-commerce to innovative delivery services, unicorns are no longer rare — they flock thickly across the San Francisco Bay Area and beyond.
In this environment, new ideas thrive. And often we are really just talking about ideas. You don’t need much of a business plan to make it as a unicorn. Revenue is optional and you certainly don’t need profits. Those are scoffed at as an old-economy idea. Funding is available no matter who you are.
From this fountain of readily available capital we have gained space travel, artificial intelligence, social media, and new financial technology. This keeps people employed in the short run, and possibly lays the groundwork for a brighter future.
Is this the best we can do?
But take a bigger picture view. Are we investing in the right things? Are these ideas the best we can do?
Even as software companies remake the world, another revolution is underway. This one is not happening on the pages of The Wall Street Journal but on the pages of Nature and Science and Cell.
Our understanding of the human body is being changed dramatically. Science is beginning to grasp that a human is more like an ecosystem; our microbes have an enormous effect on our health, most especially the microbes that dwell in our guts.
To take just the most recent high-profile example, a gut microbe has been discovered which appears to promote physical endurance. The little bug Veillonella atypica lives in mammalian digestive tracts and eats lactate, which is produced during exercise. The scientists found much higher levels of Veillonella atypica in the guts of elite athletes after a marathon — which was interesting. But the truly exciting finding was when they put the bug into the guts of mice: it extended their endurance running ability by 13%. That hints at a causal effect. This domain is utterly new, and thus potentially transformative.
The paper on Veillonella atypica is not the only finding on the importance of gut microbes to our health. Parkinson’s may start in the gut, scientists now suspect. Obesity almost certainly has something to do with gut bugs. Dozens of other diseases? All linked to the gut, and its population of bacteria, bacteriophages, archaea and fungi.
These findings are dramatic. It is no exaggeration to say they may change the course of human history. The value to our species of a more complete understanding of health and illness is many times higher than the value of anything Silicon Valley has come up with yet.
So is there a great surge of funding for research on the microbiome? Is anyone making use of the historically low level of interest rates to point a fire-hose of money at this extremely promising field?
The answer is no, not really. There are a few small start-ups in some of the more commercialisable applications. A company is putting that bacterium Veillonella atypica into pills for you as we speak.
But what is needed is basic research — the sort of research that can’t be commercialised or patented because its end point is just an improved understanding of the gut. It’s the sort of research the private sector won’t touch because it can’t be owned. It’s the sort of research historically funded by governments.
Yes, governments. The organisations we formed to think about the future for us, but which so rarely do.
In this era of low rates, basic research is being starved in Australia and abroad. Australia’s CSIRO has been gutted. Last year’s MYEFO delivered funding cuts for science and this year’s budget was described by the scientific community as “lacklustre”. Elsewhere, Donald Trump is seeking huge cuts to the US National Institutes of Health.
That adds up to a slower pace of improvement in science. The costs of that slowness will be impossible to measure. We will never know the cost of relying on private markets to distribute capital to promising new ideas. The many lives that may have been saved or simply improved will remain unnoticed and unremarked upon.
But in a century’s time, I suspect the scientists that make great breakthroughs in the understanding of the microbiome will be looked back on far more fondly than the entrepreneurs that brought us Snapchat and Afterpay.
What should we invest in during this era of low interest rates? Send your comments to [email protected]. Please include your full name.