The Roaring Zeros:
The good news is, you'll be a millionaire soon. The bad news is, so will everybody else.
by Kevin Kelly
The good times have never been so good, but we can see the end clearly. It
starts with an urgent email from someone on AOL: You better turn on CNBC.
A single unmet expectation has spooked the New York Stock Exchange into
a free fall. This is the Big One.
The market is closed the next day to "restore stability," but the server
farms of the major online brokerages have already melted down. By the end
of the first week, ruined daytraders are leaving the country with doctored
passports, and caterers and cruise lines start getting cancellations. By
the second week of the crisis, résumés flood the online
and the layoff announcements in the dot com sector begin. The fragile pyramid
scheme that supported Stocktopia vaporizes, and with the Dow sunk to an
abysmal 3,000, your own job is in jeopardy.
We have rehearsed this downfall in our minds over and over again. Each
of us has clever friends who mutter about tulipmania and the madness of
crowds. Any one of us can fill in the gory details. The Crash is effortless
But what if we face, instead, a decade or more of continued good times?
What if the digital bubble is made of Kevlar? What if the Dow doesn't fall
to 3,000, but zooms to 30,000 in four years? What if we are just at the
beginning of the beginning of a long wave of ultraprosperity?
Picture 20 more years of full employment, continued stock-market highs,
and improving living standards. Two more decades of inventions as disruptive
as cell phones, mammal cloning, and the Web. Twenty more years of Quake,
index funds, and help-wanted signs. Prosperity not just for CEOs, but for
ex-pipe fitters, nursing students, and social workers as well.
The market will fluctuate daily, but by 2010, the Dow will soar past the 50,000 mark.
How many times in the history of mankind have we wired the planet to create
a single marketplace? How often have entirely new channels of commerce
been created by digital technology? When has money itself been transformed
into thousands of instruments of investment? It may be that at this
moment in our history, the convergence of a demographic peak, a new global
marketplace, vast technological opportunities, and financial revolution
will unleash two uninterrupted decades of growth.
This quick-boom scenario promises accelerating economic expansion, perhaps
in the vicinity of 4 percent per year - a scenario that's simply off our
charts, a prospect so unfathomable that we have refused to consider its
We're the products of nearly a half-century of scientific truthfulness,
media skepticism, and postmodern relativism. In other words, we've grown
allergic to the actual idea of improvement. We accept success when it comes,
but with a sense of misgiving; the most unthinkable thought in the closing
days of the 20th century is that next year, next decade, next century,
things will be a whole lot better.
Yet ultraprosperity for Americans looks more plausible all the time. The
metrics point to it: a booming stock market, low inflation, high employment,
steady consumer confidence, price stability, low interest rates, rising
wages, lowering crime, and no sign of any of these waning. While the End
of Civilization As We Know It can happen anytime (you know the script),
the Beginning of Prosperity As We Have Never Known It seems equally probable.
Why not rehearse both?
The beginning of every previous boom has hatched prophets claiming that
"this time is different." Immediately after these claims are made, the
market crashes. But sometimes, things really are different.
This time, for the first time, the economy reflects these four forces at
Demographic Peak The largest, best-educated, most prosperous generation
that has ever lived is entering its peak years of productivity, earning,
and spending. This
is true for the US, but also for much of the rest of the developed world.
This boom of producers and consumers creates a huge market for products,
a huge force of creativity, a huge pile of money, and a huge demand for
Technology Rush The largest deployment of novel products and services,
labor-saving machines, and life-changing techniques is now under way. In
addition, we'll begin to harvest the productivity gains of technology deployed
in the past two decades. But most important, new technology is creating
entirely new territories of economic development (the Internet and kin)
that will be profitably settled in the next decade.
Financial Revolution Money itself is undergoing a revolution. The
velocity of money - how often it changes hands -
continues to increase, middle-class values continue to spread around the
world, and financial inventions continue to proliferate. Innovations such
as mutual funds, rapid IPOs, microloans, 24-hour markets, hedge funds,
smartcards, reverse auctions, and mass online trading liberate the flow of
capital and spur intense economic growth. And the transformation of money
and markets has only just begun.
Global Openness The spread of democracy, open markets, freedom of speech,
and consumer choice around the globe accelerates economic growth. Global
openness not only enlarges the potential market for any invention to 5
billion customers, it also creates intense competition among governments
to construct environments hospitable to progress. Prosperity can no longer
be segregated to one part of the globe, and when prosperity does break
out, it is amplified quickly by ever-spreading freedoms.
2020. After two decades of ultraprosperity, the average American household's
income is $150,000, but milk still costs only about $2.50 a gallon. Web-enabled
TVs are free if you commit to watching them, but camping permits for
Yellowstone cost $1,000. Almost everyone working has signed up for a job
not exist (at the moment); most workers have more than one business card,
more than one source of income. Hard-hat workers are paid as much as Web
designers, and plumbers charge more for house calls than doctors. For the
educated, the income gap narrows. Indeed, labor is in such short supply
that corporations "hire" high school grads, and then pay for their four-year
college educations before they begin work.
What the rich have in the year 2000, the rest have in 2020:
personal chefs, stay-at-home moms, six-month sabbaticals. The
personal private foundation has become the status symbol of
wealth. People magazine features its annual list of the world's
most charitable donors.
Although tax rates have lowered, the amount of money flowing into state
and federal budgets is awesome. Social Security has ample funds, and hundreds
of thousands of schools, hospitals, and libraries have newly opened. Ambitious,
large-scale public works are all the rage; there's a scandal over whose
corporate logos appear on the space suits of the first manned mission to
Mars. The majority of Americans are heavily invested in the stock market,
so market quotes are as ubiquitous as pop music. The abundance of cheap
appliances and gadgets has devalued possessions. The most affluent consumers
boast of having less of this or that, but in the end they spend a larger
percentage of their income on services and products that attempt to define
their identity. In the age of ultraprosperity, it's easy to make a dollar,
but hard to make a difference.
Indeed, money gets dull quickly, and that becomes the greatest challenge
in the age of ultraprosperity - to make money mean something, or to find
meaning outside of money.
If we handle prosperity properly, it should focus our attention on the
other ingredients of wealth: friendships, relationships, values, character,
charity, justice, and thinking about the long-term future. What better
use of prosperity than to prepare the wealth of seven generations hence?
Whether in fact we'll be responsible with our prosperity in 20 years is
too hard to predict. But here, in some detail, are a variety of consequences
that seem possible, should this ultraprosperity happen.
The Dow at 100,000 The market will fluctuate daily, but by the end of the
next decade the Dow Jones index will soar past the 50,000 mark. Barring
total disaster, by the year 2025 the Dow will hit 100,000. Four analysts,
using four different methods, have forecast the Dow reaching these seemingly
exuberant heights in the coming decades. (See "Stocktopia".)
The Billionaire Next Door Today, 8 million Americans are millionaires.
One estimate, cited by David Kaplan in his book
The Silicon Boys, puts the number of millionaires in Silicon Valley
at 250,000. Many analysts figure that one-third of Microsoft's 30,000 employees
are millionaires. And it's not just in the Valley or Redmond; these days
millionaires thrive across the US, in small towns as well
as large. They're turning up everywhere, as suggested by the best-selling
book The Millionaire Next Door. Based on that book's research,
Money magazine sketches the typical American millionaire as a
57-year-old male who lives
in the Midwest in a house worth $320,000, drives a Ford pickup, owns and
runs a small business, and is worth $3.7 million. Of course, a million
dollars doesn't go as far as it used to, so to be really rich in the next
decade will require multiple millions. Today there are about 300,000
in the US, and 465 billionaires worldwide. But this expanding roster is
not merely the effect of inflation. Adjusted for real dollars, there are
more millionaire equivalents per capita than ever before. Ultraprosperity
should push the number of millionaires living next door to about 20 million
in another decade, and about 50 million by 2020. That would bring
to Microsoft levels: about one out of three adult worker bees with a net
worth of over $1 million.
Income used to drive consumption. Now consumption leads income.
The Equity Majority The percentage of Americans who
own stock in corporate enterprises, either through pension funds, mutual
funds, or direct stock ownership, has been rising rapidly. Today it is
about 45 percent. By 2010 a clear majority of Americans will be equity
holders, especially in a rising market. Historically, equity investments
return greater yields than debt investments (like lending at a bank),
so this equity class will prosper faster than groups that came before it.
In addition, the current generation of workers increasingly demands equity
stakes in the companies they work for (a practice once confined to top
management), leveraging the wealth of workers and spreading the demand
for further employee ownership. Equity culture is also spreading to Europe,
as individuals for the first time invest their savings in mutual funds
and demand equity in entrepreneurial startups. Ultraprosperity nurtures
this emerging equity culture and enriches the equity majority.
Escalator Salaries for Most Those in the highest-paid quintile can expect
to see their average household take-home rise to about $500,000 by 2020.
The average wage will also rise, but not as fast. Membership in wage strata
will remain highly mobile. Workers typically start out at the bottom and
ride up the escalator to higher salaries. In one survey nearly a quarter
of the workers in the bottom tier moved up the following year, never to
descend again. From
1975 to 1991, less than 1 percent of one sample surveyed stayed at
the bottom tier from year to year. Where do they go? Up. Three out of 10
low-income earners in 1975 rode the salary escalator to the
top 20 percent of earners by 1991.
Cheap Necessities As societies become richer, people tend
to spend less of their income on basics such as food, clothing, and shelter.
At the turn of the century a typical American allotted three-quarters of
his spending to these basics; by the 1990s this amount was reduced to 37
percent. It should be as low as 25 percent by 2010. This inverts the ratio
of three-quarters for necessities to three-quarters for luxuries. Prosperity
will liberate 75 percent of the average household income to be spent on
nonessentials such as travel, self-fulfillment, charity, deluxe health
care, risk reduction (insurance), pets, entertainment, investments, and
lots of new gizmos. Another way to think of this is that the average citizen
will need to work only three months a year to cover the basics of living
(not counting taxes), while his or her work for the rest of the year will
pay for the kind of things prosperity brings.
Consumptivity Cheap necessities breed consumption. Without consumption
there is no boom. According to economist Paul Krugman, "Consumer spending
traditionally lags behind the economy as a whole in boom times ... This
time, however, consumers are leading the charge. While the economy expanded
an impressive 4 percent ... consumption grew 5.5 percent."
But can our voracious appetite for new goods continue at this pace another
20 years? Can we possibly purchase, and enjoy, 10 times more than we now
have without collapsing in fatigue? The answer is yes. As the real prices
of goods continue to drop, we will continue to populate our environments
with more of them. More cars. More phone lines. More bathrooms. More trips.
More digital screens. More books. More of everything. Most important, we
will shift from quantity to quality. As Jay Ogilvy of Global Business Network
points out, we may start out by drinking lots of bottles of wine, but at
some point we drink fewer bottles, of more refined and expensive vintages.
Extreme Affluence Shock High consumptivity and cheap necessities will
blow the lid off the high end of premium goods. Real estate prices in trendy
communities will go from outrageous to out of this world; the most expensive
cars, clothes, and vacations will become outrageously ever more expensive.
The deluxe end of all goods will become highly competitive, and every good
and service will acquire a deluxe model. In fact, the boutique tier of
the economy will not be able to absorb all the wealth aimed at it. The
shock of extreme affluence (and extreme prices) will reverberate throughout
Jeeves Returns As go the rich, so go the rest. One can make pretty
predictions about how the middle class will behave by reviewing the lifestyle
of the rich a generation or two earlier.
Not long ago Hawaiian vacations, cell phones, and traveling in sweatpants
were reserved for the very wealthy. As the ultraprosperity wave washes
over middle America, the lifestyles of the working rich become a template
for everyone else. What's the first thing the rich of today do? They hire
Jeeves. They get personal assistants. They pay for doctors, vets, and trainers
who make house calls, or chefs who come to their homes to cook for their
family. They have gardeners, handymen, tutors for their kids, and all kinds
of personal advisors. Time is their prime scarcity; so as wealth becomes
more common, time will be purchased by buying personal services. Companies
that save customers time will prosper. Ironically, the demand for such
personal services raises wages for the suppliers, equalizing some of the
wage difference between the no-collar folks "upstairs" and the hourly workers
"downstairs." Even now, finding a good gardener can be on par with finding
a good dentist.
Eight in Nine Leisure Time Ultraprosperity increases our leisure time -
sort of. According to research by W. Michael Cox and Richard Alm (see "You
May Already Be a Winner"), we already enjoy more leisure hours
than we think. In 1870, for every hour we worked at a job, we spent roughly
two hours not working - and devoted most of that free time to sleep. By
1950, the ratio was close to one hour working for four hours leisure. By
2010, for every hour of our lifetime that we spend working (including working
at home), we'll spend eight hours in leisure. These gains in lifetime leisure
hours come because we start working later, retire earlier, and live longer.
Our leisure time is primarily bookended by youth and old age, with our
working time intensely bunched during our middle years.
We can expect to finish life having worked only one out of every nine hours.
Polyemployment Today there are 20 million enterprises and 130 million
workers in the US; that means there is one company
for every six and a half workers. Starting a business is becoming
as routine as getting a job. In another 20 years, there could be
40 million enterprises, or one company for every three bodies in the workplace.
This is possible not because the average size of a company is shrinking
to three people, but because so many workers double-
or triple-dip, moonlighting, part-timing, consulting, or running a startup
in their garage. Everybody is in business, and they are in more than one
business. We're headed for polyemployment instead of unemployment.
Ten Thousand IPOs The several hundred companies a year that today invite
public ownership could easily swell each year until the ranks of publicly
traded companies rise to a total of 10,000. Publicly traded companies aren't
necessarily better run or more profitable than privately held companies,
but they tap into a tremendous supply of wealth looking for investments
(see chart, facing page). And in a wonderful virtuous circle, successful
IPOs generate huge amounts of wealth looking for yet more publicly accessible
companies. Global 24-hour online trading of these stocks only speeds up
their cycle of creation. Technology will force the invention of easier
ways to invest in privately held companies without the hassle and limitations
(say, minimum investments of $1 million) required now. The trend is toward
maximizing the number of equity opportunities, because equity yields more
than debt. This means an expanding reservoir of potential investors.
Pure Green Prosperity unleashes demand for pure water and air. The true
costs of a clean environment can be faced and afforded. Air, soil, and
water pollution will lower dramatically in the next
20 years. Healthy interiors, including air quality, will be the norm.
for pollutants and species extinction will be high. Once the basics of
life are taken care of, quality-of-life services quickly follow - lower
traces of pesticides in foods, more money spent for wildlife restoration.
As the manufactured world expands, wilderness becomes highly valued. More
land will be protected in the next two decades than in the last two.
technologies that diminish our impact on the environment will make more
money and generate yet more prosperity.
Getting Richer Younger While fortunate times have created sudden wealth
before, there has never been so much wealth in the hands of so much youth
as in this wave. In the past, extreme wealth was slowly accumulated and
enjoyed by people (mostly men) in the latter part of their life. Now the
greatest wealth on the planet is going to an increasingly younger group
of people who are also increasingly women. Workers are getting richer younger,
and the young rich don't use their money in the same way as the old rich;
the chief difference is that the young rich keep working. And since they
are still working, still taking chances, after they buy their big house
and fast cars they invest aggressively, demand equity rather than income,
and keep priming the pump for more economic growth.
Big Giveaway What will the wealthiest generation in history do with all
this money? Pursue philanthropy, for one thing. But giving money away is
not as easy as it seems. Even today some charitable foundations whose
have ballooned as a result of stocktopia can't give away money fast enough.
They don't have the staff
to properly process the 5 percent a year they are required to give, because
that 5 percent has grown so large in dollars. As prosperity takes off,
the problems of giving it away compound. Hospitals and the opera won't
do. Creative philanthropy will blossom; idiosyncratic quests loom. Giving
big will be a status symbol. As Paul Saffo of the Institute for the Future
says, "The BMW of the next decade will be the personal charitable trust
Prosperity Dividend The tidal waves of wealth being generated by industry
are surging into the coffers of the tax collectors.
The US Congressional Budget Office expects to retire the national debt
by 2009. In 2020, there could be a budget surplus in the trillions (!).
As Matthew Miller, a senior fellow at the Annenberg Public Policy Center,
says, "This means guns and butter: ballistic missile defense, universal
health coverage, hefty tax cuts, and a Marshall Plan for Kosovo." Peter
Schwartz of the Global Business Network suggests that a prosperity-fed
treasury means that "we'll set out to do the Great Works - like upgrading
schools, or sending a mission to Mars." The short-lived Peace Dividend
gave us some idea of the difficulty in apportioning a bonus; a longer-lived
Prosperity Dividend will likewise be hard to divide, all the more so as
it gets bigger.
Help Wanted Forever In the ultraprosperity zone there are a million
ideas, a million dollars to fund each idea, and no one to make it happen. Where
do 40 million businesses find enough workers? Where do they find skilled
and trained ones? Where do they find 40 million managers? People are the
limiting factor in the expansion of prosperity. This plays into the strengths
of people, making them the killer app. But it also makes a shortage of
laborers a key challenge. Immigration may help. Retirees who never retire
may also help. Extreme prosperity means perpetual help-wanted signs.
The Capital Tornado Walter Wriston, former CEO of Citibank, likes to quip
that in the new economy, "money goes where it is wanted and stays where
it is well treated." If ultraprosperity blooms, huge waves of money will
continue to flow into
US stock markets and startups as the best deals on Earth. The US economy
becomes a tornado, whipping up huge gains on investments. That great sucking
sound you hear is all the world's money rushing into the most booming economy.
In the vortex, money is well treated, multiplying fast, sucking in yet
more money. That leaves a huge arid vacancy in other parts of the world
for capital. So one of the undesirable consequences of ultraprosperity
may be the concentration of the world's capital into one market. On the
other hand, competition for this capital becomes so fierce that many other
regions of the world will do all they can to make rain and seed tornados.
Several tornados of capital are likely to spin around the globe at once.
Kevin Kelly (email@example.com) is Wired's editor at large. His most recent book is New Rules for the New Economy: 10 Radical Strategies for a Connected World.
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