The more technology advances, the more valuable land becomes.
We’re starting to see the first glimmers of inflation, especially with the world in an “energy crisis” right now.
But zoom out 20 years – or even five years – it’s clear that everything is becoming cheaper.
Maybe not in dollar terms exactly. In a nominal sense, the price of things is generally increasing. We’ve got inflation that keeps the arbitrary numbers we attach to prices creeping upwards.
But the real cost – the relative price of most things – is decreasing.
Take an i-phone for example. 15 to 20 years ago, the technology embedded in current i-phones possibly existed, but to access it, you would have had to pay a pretty penny. In terms of your labour hours, maybe it would have taken you a full year… maybe more?
Now, how many labour hours does it take these days? Maybe a week? Maybe less.
We often fail to realise how cheap things are becoming because there are so many improvements built into newer models. Computers don’t seem to be getting any cheaper, but the computing power of 10 years ago is already way past obsolete these days.
And it’s not just high-tech stuff. I bought a heater 6 or 7 years ago, and it finally gave up the ghost. So I went looking around – you can buy a cheap fan heater for less than 15 bucks these days!
Sure, maybe it’s crap but still. You can get a functioning heater for less than an hours work on the minimum wage.
Don’t you feel rich?
And its true of bread, crisps, chocolate… almost any thing you can think of. In terms of how long it takes to earn the equivalent of these things, almost everything is getting cheaper.
Basically humans are just getting smarter and more organised. We’ve had a number of major production revolutions in the past 200 years that have radically expanded our access to the stuff of life.
There was the industrial revolution, the production-line revolution, the digital revolution. And some folks are saying we’re on the cusp of a robot and automation revolution that’s going to take it to a whole other level.
Each revolution has made us more efficient at producing things – lots of things. It takes less labour to make each new item, and as a result, the cost of the thing, relative to labour, falls.
As a result, I live in a consumerist paradise that my grandfather could never have dreamed of.
And if you hold quality constant, everything I want is getting cheaper and cheaper.
But there are two major exceptions to this.
Energy and property.
While the price of pretty much everything else is in free-fall, the price of energy (which is really the commodities of oil and coal) and property (specifically land) are on the rise.
Why is that?
Well, the reason is that our technological revolutions couldn’t touch them. All the computing power in the world, even the most sophisticated robots imaginable, just can’t make more land.
These things are fixed (though a potential solar revolution might create an abundance of energy at some point).
And so even though we live in the ICT age, the thing that’s appreciating most in value is still land.
We are moving to a future where technology continues to drive the price of almost everything towards zero – but land stands out as the exception to the rule, as prices keep surging higher and higher.
In fact, the wealthier we become in terms of purchasing power, the more we have to spend on our address.
In 50 years, the share of income devoted to housing expenses has barely changed. The share spent on food however has fallen sharply.
We are intrinsically connected to the earth, and all the value in the world derives and depends on it.
It’s the only safe-bet left.