You know I've always been a dreamer
(spent my life running 'round)
And it's so hard to change
(Can't seem to settle down)
But the dreams I've seen lately
Keep on turning out and burning out
And turning out the same
So put me on a highway
And show me a sign
And take it to the limit one more time
-The Eagles, 1975
Straightforward solutions to complex problems: they're nice in theory, but they're rare. Think of the Affordable Care Act, or Obamacare, for instance. It tries to address the complex problems of expanding access to healthcare while simultaneously controlling its skyrocketing costs. But, sadly, there is no simple solution, and certainly not one that is not contentious in the extreme.
Americans are living longer and working longer, and that’s good news for those of us who don’t want to slow down or miss a thing. These two trends will only continue. Globally, the average human lifespan has more than doubled in the past 113 years. And our "healthspan," or the number of years we remain active, vital, and able to do what we want to do, has increased just as dramatically.
But there's a catch. Today, in the aftermath of the Great Recession, younger people in the developed world are finding it harder to secure jobs, buy homes and cars, and start families. The economic headwinds they face put tremendous pressure on the money-engines that fuel Medicare, Medicaid, and Social Security. We all know this story well by now: unfunded liabilities are bankrupting America and will force a “reorganization” of some type or other within a few years. When that moment comes the current contretemps will seem like a walk in the park.
But what if the lifespan and healthspan increases we're going to see in the next couple decades prove to be so rapid and so profound that they fundamentally change the need for Medicare and Social Security as we understand them today? And what if they also ignite the biggest economic boom any of us have ever seen, by providing high-tech, high-skill jobs for younger Americans? These are questions that skeptics immediately dismiss as unrealistic, based upon how things have worked in the past. And if the past is our measuring tool, then dismissing those “what ifs” might be the correct thing to do.
But that same past-performance measuring tool would have missed the computer revolution, the Internet, cell phones, etc. For that matter the steam engine and the internal combustion engine. Disruptive technologies are remarkably difficult for humans to wrap their heads around. Envisioning a future bound by the technological limits of the past was the mindset that yielded the concept of peak oil. One could say that the current shale gas revolution is a very recent development, but the nascent technology was there 10-15 years ago, visible to those who looked and understood that very radical improvements would come about. Thus I could stand up and dismiss the “world is running out of oil” doomsayers with the firm belief that we would figure out how to find energy to fuel the needs of a growing world. Maybe it would be cheap and maybe it would cost more, but we would find it. (I actually believe that within my lifetime carbon-based energy will become a footnote to history. Yes, things are indeed going to change.)
I believe that the human experiment is on the cusp of an amazing, accelerating transformation of technology that will, in turn, transform our lives and society. That is just one of the many reasons why I'm excited to bring you, as today's Outside the Box, an eye-opening essay on the interplay among technology, demographics, and economics, from my good friend and newest colleague, Patrick Cox. Patrick has an uncanny ability to take complex social and technological trends and distill them into insights you can use. Patrick is no stranger to longtime readers of Outside the Box. He and I have spent countless hours talking about the latest trends in technology and their impact on the human experiment.
While it has been a long time in preparation, we can finally announce that Patrick has just launched a new letter here at Mauldin Economics, called Transformational Technology Alert. You can find out more about it right here.
Patrick and I are also hosting an online virtual conference, live, tomorrow (that's Wednesday, October 16). We've brought together a panel of experts to unpack two questions. First, what does the future look like? And second, how can we all live happier, healthier, and potentially wealthier lives in this future? We're calling this event Science Saves the Future. You can learn all about it and register to see it for free, here.
And in the near future, I want to give you a better idea of what our overall vision is and where we're going to go. It's a big vision, but we believe in a bright future – after we deal with the “minor” problems that governments have created. I think you will want to come with us.
Today, though, let's take a step into the future with Patrick's article. As you're about to see, the true solution to what ails America today (and the rest of the world) may be more straightforward than you ever imagined.
The solution might even work for France, although last week’s election could make things more interesting. If Marine Le Pen is the answer, then someone is asking the wrong question. “Quelle direction maintenant, France?” See Ambrose Evans-Pritchard’s latest if you have the time after you read Pat. He wonders whether it's time to bet on France being the first to leave the euro.
I am back home after a quick trip to my dentist in Albuquerque for what turned out to be more significant problems than I thought, after a tooth cracked. And since I had not been to the dentist for too long, a quick cleaning revealed more issues. I am not certain which I dislike more, getting my teeth cleaned or listening to a Dennis Kucinich speech; but with a little painkiller and earphones blasting “Take It to the Limit” by the Eagles, I can endure. That has been my personal theme song of late, as the limits on so many fronts just seem to keep expanding. That keeps me charged up when I think about the problems we face. There are just too many good things in life to get truly depressed, even as we deal with the current political impasse.
Your amazed at how my world is changing analyst,
John Mauldin, Editor
Outside the Boxsubscribers@mauldineconomics.com
Life-Extending Biotechnologies: Creating and Solving Our Economic Problems
If you read today's headlines, the issues that are driving the current political strife and confusion may appear to be separate from those driving the economic problems. In fact, though, the debt, the deficit, and healthcare costs are all consequences of something that has no historical precedent. That is the "demographic transition," which is dramatically reducing the worker-to-beneficiary (WtB) ratio, the number of people paying into entitlements systems compared to the number of recipients.
We hear incessantly that we must learn from history to avoid repeating the mistakes of the past. While there is some truth in this adage, the really spectacular mistakes come from assuming that the past is a reliable guide to the future. It's not.
The truly new, even if it is essentially positive in nature, almost always creates massive disruption. Economist Joseph Schumpeter called this "creative destruction" and described the process whereby established institutions resist change but are eventually replaced.
The demographic transition, driven by improvements in technologies that increase human lifespans while reducing birthrates, is one of the biggest changes ever to hit human societies. Moreover, it is not only ongoing, it is accelerating.
In the short run, this means that the dynamics that have created fiscal crises globally will continue to worsen. At some point, however, these same scientific and technological forces are going to win out over the old institutions and create a far better world. I'll get to that in a bit.
Human Lifespans Are Still Increasing Rapidly
To review: For most of human history, life expectancies were relatively constant except during periods such as war or pandemic disease. Over the centuries, average lifespans increased so slowly that the improvements were largely unnoticeable. In modern times, however, it has become obvious that the very gradual increases in lifespans were actually the first stages of exponential growth.
In just over a century, average Western life expectancies have nearly doubled. Just as importantly, birthrates have plummeted. In America, they are about half what they were in 1920. The same trends are evident throughout the developed world and continue to spread across the globe.
Demographers and some policy makers have finally begun to acknowledge the depopulation problem. Low birthrates and swelling older populations are inverting the "demographic pyramid." The ancient and reliable status quo – populations with many young people and relatively few older people – is being flipped on its head.
Birthrates are already well below replacement level in many countries, including Austria, Canada, Germany, Italy, Korea, Poland, Portugal, Russia, Spain, and Switzerland. Less-developed countries are behind the curve but catching up rapidly, which means they will not be able to supply the immigrants to make up for the First World's depopulation problems, as they have done in the past.
Academic and Media Blindness
Given that the media and high-level academics such as Paul Ehrlich have been proclaiming imminent overpopulation doom for as long as I can remember, you might think that the flipping of the demographic pyramid amounts to some unforeseeable "black swan" event. Let's dispense with that drivel now.
Sociologist Warren Thompson and other demographers were already measuring the impact of improvements in medical and other health-related technologies a hundred years ago. Thompson forecast the demographic transition in the 1920s, using relatively simple mathematical extrapolations of trends that had been obvious for some time.
You might assume, therefore, that the demographic transition, with its predictions of falling birthrates and populations, is a minor theory. On the contrary, Thompson's book Population Problems was the major demographic text until the 1960s. The truth was known but was ignored, starting in the 1970s, by a younger generation that looked backwards and insisted that historical birthrates would continue forever.
The Worker-to-Beneficiary Ratio Quandary
For policy wonks like me, the bottom line is the falling worker-to-beneficiary ratio. Simply put, it means that fewer and fewer younger people are being asked to support more and more older people.
In 1950 America had a WtB ratio of about 16 to 1. Today, there are about 3.3 workers for every beneficiary, and that number continues to fall. Transfer payments to the aged, however, are rising.
Veronique de Rugy of the Mercatus Center at George Mason University points out that over 35 percent of federal spending today, when we include Medicaid, goes to the elderly. That's the biggest component of the federal budget and twice as much as defense spending. In 1970, federal spending on the elderly accounted for only about 20 percent of the federal budget, though income disparity between young families and the more wealthy aged population was much less severe at the time.
Today, however, the basic worker-to-beneficiary dynamic is straining budgets internationally. This is why much of the world is struggling with unsustainable debt, deficits, and healthcare costs.
Science the Villain
The irony is that the demographic transition and the subsequent decrease in the WtB ratio were brought about by welcomed improvements in medical and other health-related technologies. Some of the advances that improved health were general improvements in quality of life, such as better agricultural, water, and sanitation technologies. The really big advances, however, have come in biotech and medical technologies. Antibiotics and modern vaccines alone account for two to three decades of increased life expectancy.
It is important to understand that scientific progress is at the root of our current budget and political challenges, because the strains on our current institutions caused by shifting demographics are not easing. Even if we adjust to the current situation, the biotech progress responsible for the reduced worker-to-beneficiary ratio is increasing at an exponential rate. This trend is far from over.
Of course, there is an upside. Our lifespans will continue to improve in both length and vigor. We're not talking about tacking on years of frailty to the end of people's lives. Rather, we will delay senescence and extend healthspans, the fully functional, robust part of life, dramatically. Already, many of the conditions that have been assumed to be the inevitable effects of aging can be reversed, restoring vitality and health.
Thus, the demographic transition is a two-edged sword, and we're going to be forced to wield it to our advantage. We have no choice.
Science the Hero
One way to counter the demographic transition is to establish a massive cloning program, which would produce millions of babies using my DNA for the male half of the population. Obviously, I'm joking, but the jest has a point. Most people think that human cloning is possible only in science fiction.
In fact, a paper was published in the journal Cell only a few months ago, documenting a successful cloning procedure that would have produced human babies if pursued to its end. Other animals, including monkeys, are routinely cloned; but scientists at the Oregon Health & Science University found that the human cells used in the cloning procedure needed a shot of caffeine to start down the path to life. I know the feeling.
Based on my conversations with leading stem cell researchers, I believe the technical problems involved in cloning humans have actually been solvable for some time. Few stem cell scientists, however, would engage in such a controversial endeavor. I bring it up, though, for a reason. Though successful human cloning is an indisputably historic event, it remains virtually unknown to the general public.
This gulf between the actual state of biotechnology and public awareness of its rapid advances is typical. Similarly important but equally unknown scientific developments are occurring every day. They will, in fact, have an enormous direct impact on your life.
Fixing the Worker-to-Beneficiary Ratio
So clone farms are clearly out of the question, but we could increase the birthrate using significant tax incentives and subsidies. Given current fiscal deficits, however, this idea, too, must be relegated to the domain of science fiction. Moreover, it would take decades for the babies produced by either strategy to reach the job force. We need solutions much sooner if we are to avoid serious pain.
Fortunately, there is another way to increase the worker-to-beneficiary ratio. We can't increase the number of young workers quickly, but we can extend working careers significantly. Essentially, older workers can work longer, paying for their own healthcare and building larger retirement accounts.
Raising the age of eligibility for entitlement programs is not, of course, politically popular. Nevertheless, we are already seeing retirements put off due to the degradation of pensions and savings accounts. Polls show that most older workers expect to continue working past their retirement eligibility. This is possible because lifespans have been growing as retirement ages have fallen, increasing the average length of retirement from about eight years in 1950 to almost twenty today.
This is not the whole story, though. I'm not suggesting that those older people who enjoy unemployment give up their dreams of leisurely "golden years." I'm suggesting that we remove the barriers to biotech progress to rapidly extend healthspans, the active and robust portion of life. Biotech advances could quickly allow people to work a decade longer and still have active retirements that exceed current expectations. Simply put, we can extend healthspans and careers by a decade or more, solving our entitlement problems.
This is not just possible in theory. Many of the advances we need already exist. Even more dramatic breakthroughs are only a few years away if they get sufficient funding. These are not hypothetical breakthroughs that need billions in grants to validate, either. Practical but largely unknown biotechnologies exist that could contribute to dramatic increases in healthspans almost immediately.
Allow me to give you just a few examples of technologies that are wading through the molasses-filled regulatory labyrinth now. Yes, that's a badly mixed metaphor, but I guarantee it's justified.
The Topic of Cancer
It's difficult to know what our most expensive diseases really are. Measuring direct costs is hard, but indirect costs and lost productivity are even harder to gauge. Moreover, the shift in demographics is changing the medical cost picture rapidly. Because Alzheimer's and obesity rates increase with age, dementia and diabetes are moving their way up the hit parade of expensive killers. Liver disease is also a mover.
Cancer costs America about $100 billion per year for treatments, with indirect costs in excess of $150 billion. Alzheimer's, the actual "brain-eating zombie plague," has lower direct costs, because there are no sufficiently effective approved treatments; but its indirect costs, including unpaid care by family, are incredibly high. Heart disease actually kills more people at this time, and productivity losses put it in the same quarter-trillion-dollar range.
Traditionally, however, cancer has been viewed as the most expensive disease, so let's talk oncology. Curiously, there's not a lot of optimism about finding real cures for cancer, or other major diseases, outside the research community, where I regularly talk to scientists who are quite literally giddy about their work.
This public pessimism is probably due to legacy attitudes about drug development. The public doesn't understand that new and spectacularly effective biotech tools have emerged in the last decade, accelerating the pace of research by orders of magnitude. Everything that most people think they know about drug discovery is actually yesterday’s news, not today’s reality.
Today, drug candidates are exploiting biological systems that weren't even discovered until a few years ago. Also, we have a far better understanding of what the full impact of drugs will be, so less time and money is being wasted. As a result, I'm tracking at least half a dozen drugs that together could end the threat of cancer as we know it today.
Of course, you have every right to be skeptical, but I was recently told the same thing by Dr. Cameron Durrant, who participated along with the esteemed George Gilder in a virtual seminar that John Mauldin and I arranged. (Click here to register to watch this special event when it airs tomorrow.) Durrant was a top executive at several Big Pharma companies but left to participate in more scientifically productive startups. Biotech insiders know Durrant as the man who accurately warned Big Pharma that it was wasting billions pursuing amyloids as the cause of Alzheimer's.
Durrant is also on the board of a remarkable private company, Bexion Pharmaceuticals. I introduced our host Monsieur Mauldin to Bexion several years ago, and he subsequently invested in the company.
Bexion's technology uses two cellular components, both large molecules, found naturally in our bodies to form a nanovesicle. This nanovesicle homes in on phosphatidylserines (PSs) that are present on all cancers and the blood vessels they use to grow.
Normally, PSs exist inside the cell wall and appear only when it’s time for the cell to commit suicide (apoptosis) and be replaced. Cancers, however, turn off the apoptotic functions and move PSs to the outside of the cell to play a variety of roles useful to cancers.
Bexion's nanovesicles have no impact on normal cells. In the acidic environment of cancers, however, they restore the PSs' ability to induce programmed cell death, resulting in wholesale cancer suicide. Humanized animal and human cell studies show that the nanovesicles are effective against virtually all cancers, including blood and brain cancers. Fortunately, Bexion just won an unprecedented National Cancer Institute grant that will enable human trials next year. (See http://news.cincinnati.com/article/20131013/NEWS10/310130052/-2-9M-grant-lets-Covington-firm-try-cancer-drug-human-trials.)
Other technologies that are in or near human trials include a harmless plant sugar that allows the immune system to pierce the lethal cloaking shield that cancers use to protect themselves from T-cells. Those T-cells then communicate with the immune system to produce specific killers able to destroy cancers.
Another drug candidate restores apoptosis in cancer cells by fixing DNA repair mechanisms that cancers shut down. Yet another candidate is a remarkably effective DNA vaccine technology that trains immune systems to detect and kill specific types of cancer cells. Additionally, a new cancer diagnostic is headed shortly into clinical trials that will give us the ability to detect cancers at the earliest stages, allowing far more effective treatments.
Killing the Other Killers
Just as cancers are about to pass from deadly to irritant status, the days of virus-borne diseases are also numbered. A new generation of vaccines as well as nanotech virus killers are queuing up to conquer some of humanity's most ancient and feared enemies, from lethal influenzas to herpes and HIV.
Liver disease, even in the advanced stages, can now be reversed using nontoxic carbohydrate drugs. In fact, all fibrosis diseases, which play a major role in half of all organ failures, are on their way to joining the catalog of easily treated ailments.
Several treatments that will significantly delay if not actually cure Alzheimer's disease in many of the afflicted are headed to clinical testing. One, in fact, is available in an over-the-counter form now.
Even diabetes has real cures in sight. One underfunded Israeli company, Orgenesis, has shown that it can reprogram a patient's own liver cells to behave as pancreatic islet cells, by means of a treatment that can be used in the extensive existing network of transplant clinics. The result, for both type-1 and type-2 diabetics, will be lives free from drugs, insulin injections, and the ravages of diabetes.
Moreover, the pace of progress is just about to ramp up yet again as genome sequencing becomes cheaper, widespread, and useful to individuals on a daily basis. In the same seminar I mentioned earlier, I interviewed Dr. Eric Schadt, who has come from the bio-mathematics field to upend the entire field of genomics. Schadt is Director of the Institute for Genomics and Multiscale Biology at Mt. Sinai. For an overview of his impact on genomics, as well as a picture of him riding his BMW S1000 RR, read the Esquire magazine article "Adventures in Extreme Science."
Adapt or Die Poor
All these technologies are going to push healthspans even faster up the exponential curve. They can't be stopped, no matter what American regulators do or say, because world-class health tourism clinics are already providing top-quality therapies to Americans at bargain prices. Most will also throw in cocktails and pedicures.
Then there's regenerative medicine. Mostly, I've talked about curing disease to prevent accelerated aging, but we also have the ability to begin reversing the aging process. The first true regenerative-medicine therapy will likely use patients' own rejuvenated iPS cells to create endothelial precursor stem cells. These cells, when transfused back to the donor, will effectively rejuvenate the patient's entire cardiovascular system.
These world-changing biotechnologies could, however, be accelerated even further. I'd like to see the proposal by Dr. Andrew von Eschenbach, ex-head of the FDA and the American Cancer Association, to eliminate phase-3 drug testing implemented. The entire regulatory regime needs an overhaul.
The solution to the demographic transition is not to be found in piecemeal, temporary adjustments. The solution is more, not less, demographic transition, delivering even longer and healthier lives so older people will have the strength and time they need to stop depending on the young.
It will happen because it has to; the only question is when. It could happen very soon, if enough people want to save the lives of the people they love.
To register for the free virtual conference Patrick is hosting tomorrow, click here.To learn more about Patrick and his new letter, Transformational Technology Alert, click here.
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