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After the 1918 Spanish Flu came the bustling era of the radio and the automobile known as the Roaring Twenties. Hoping history will repeat this post-pandemic boom, some have predicted a New Roaring Twenties. But what coming innovations or general purpose technology could spark such a period of progress and prosperity? My guest today thinks that technology has already been invented and you probably use it every day. On a recent episode of Political Economy, Mark Mills discussed the cloud revolution and its economic implications.

Mark is a senior fellow at the Manhattan Institute and a faculty fellow at Northwestern Universitys McCormick School of Engineering and Applied Science. His latest book is The Cloud Revolution: How the Convergence of New Technologies Will Unleash the Next Economic Boom and A Roaring 2020s .

Below is an abbreviated transcript of our conversation. You can read our full discussion here . You can also subscribe to my podcast on Apple Podcasts or Stitcher , or download the podcast on Ricochet .

Pethokoukis: What is the cloud? Is it just like a big computer or a big warehouse full of so many computers that it, itself, is a mega computer?

Mills: Well, thats a part of the cloud. I would say 90 percent of people in America today use the cloud close to daily. If you do finance on your phone or a computer, if you order with DoorDash, Airbnb, or you use Google Maps, all these functions connect through wired and wireless networks to massive, warehouse-scale computers, data centers, to do processing.

They dont just store information and calculate. They do inference things, not just calculations. So all those features together, all that physical infrastructure combined, is the cloud. But at the middle of the cloud sort of its beating heart, if youd like are these extraordinarily big warehouse-scale, Walmart-sized buildings that are jam-packed full of computers and servers and storage that dont just store information.

You describe these mega computers as physical infrastructure. How do they compare to more traditional categories of infrastructure in the scale of our investment?

The biggest new infrastructure that humanity has ever built is being built today, which is, loosely, the cloud. It is not an ethereal thing; its a physical infrastructure. By all measures dollars, physical equipment, square feet of buildings its the biggest infrastructure humanity has ever built. Its really quite remarkable. Its not just data centers. Were spending more on that now than we are spending on oil and gas infrastructure hardware. Were spending far more building out clouds that consume electricity than all the worlds utilities are spending annually to produce electricity and distribute it, so its already become a big consumer of capital.

One square meter of a typical cloud data center has about a thousand times more compute horsepower than the whole world had in the early 80s, and were building out data centers at the moment at the rate of about 10 million square feet a year. And data centers interestingly cost about the same to build as a skyscraper like the Empire State Building or the World Trade Center. Dollar per square foot, its about the same.

Is the cloud revolution another example of innovation in the world of bits that wont translate into real productivity?

So the things that the cloud has made better in our lives, are in the worlds of information, bits worlds, that are much easier to automate. Does that move the meter in the productivity of the economy? At the high level of economics, no, because the bits part of our economy (news, entertainment and finance) are important, but collectively, they are roughly 20 percent of GDP. So we have improved, with information, the information-centric parts of our economy.

If one looks across the physical domains of making stuff, what you see is that in every one of them, engineers are building pre-commercial or just-commercial capabilities that are as consequential to productivity as Airbnb and Uber are to those information-mediated domains. They are slower in being implemented because the regulations are properly more challenging. We can ironically accelerate that regulatory process soon because computers are on the cusp of being good enough to eliminate dangerous things easier in silico.

Is the cloud a general-purpose technology?

The electric motor is a general-purpose technology. An internal combustion engine is a general-purpose technology. Microprocessors are general-purpose technologies in the same way. Theyre the building blocks of the cloud, your smartphone, end-use devices, so thats the general-purpose technology.

The cloud is more like a utility infrastructure. The way electricity is, the way water is, with a distinction thats not trivial. It enables other general-purpose capabilities quite unlike electrification, because it invades all the others. Electricity has invaded a lot and we keep electrifying things, but its not that easy to electrify everything. It just isnt. Some things are better done mechanically or with combustion. Theres almost nothing that we do for which more information is not useful. In fact, in everything we do, everything in life, more information and knowledge has utility. So when I take a general-purpose engine like a microprocessor and distribute it to the scale we distribute it at, we really change the world in a way that no other general-purpose technology has.

So if we look back a decade from now, is your best guess that we will have indisputably seen a productivity acceleration where a key technology has been the cloud?

Yes. I think well look back and say the same kind of thing that people were starting to say when the internet took off early on. You and I both remember a lot of people were skeptical. And most people did not anticipate the scale of the expansion of the internet. In hindsight, Wow, its a big deal. It generated whole new industries, trillion-dollar industries that didnt exist before. Were going to see that times 10 in the next decade.

Ill end with Peter Druckers line, who was one of the great analysts of business and of human nature. He said that he only predicted whats already happened in forecasting, and by that, he meant he looked at patterns of things that were already underway that were firm and had high inertia and said, That will continue. And I think the pattern for a boom is already happening.

James Pethokoukis is the Dewitt Wallace Fellow at the American Enterprise Institute, where he writes and edits the AEIdeas blog and hosts a weekly podcast, Political Economy with James Pethokoukis .Mark Mills is a senior fellow at the Manhattan Institute and the author ofThe Cloud Revolution: How the Convergence of New Technologies Will Unleash the Next Economic Boom and A Roaring 2020s .

See the rest here:
5 questions for Mark Mills on the cloud revolution - Washington Examiner