During a recent business trip to California, I took a detour to San Diego to visit a childhood friend, a Ph.D. microbiologist who relocated there from Russia a few years ago.
In the late 1970s, after my freshman year in college, I had spent a summer frying chicken at the local amusement park. I had hoped to do something more meaningful, but jobs were so few that my only alternative was to hang out on the beach. San Diego was a provincial town inhabited mainly by U.S. Navy retirees and their Mexican gardeners.
Not any more. It is a thriving, international metropolis. In the intervening decades, the southern tip of California has become a world capital of the biotech industry clustered around its world-class natural sciences research institutes. My friend works at Burnham Institute in La Jolla and his social life revolves around scientists and researchers from the former Soviet Union, all of whom have made a new home in San Diego in recent years.
San Diego provides an answer why recent hand-wringing about the terminal decline of American economic primacy is nothing but empty talk, and why the United States will maintain a solid lead in technological innovation for the foreseeable future.
The Age of BiotechThe biotech industry has always been similar to Brazil. For decades, the South American giant has been touted as the coming economic superpower. On paper indeed it was, complete with a huge territory, a market of over 100 million undersupplied consumers and natural resources. Sao Paulo has always been Latin America’s most powerful industrial hub. Yet, despite these advantages, Brazil has remained a sleeping giant.
Biotech, too, has frustrated investors for a long time. It seemed to have all an investor would need to make a killing, from cutting-edge science to huge potential markets comprised of aging baby boomers needing new pharmaceuticals and the hungry masses around the world clamoring to be fed. Yet, while some companies or products grew successful, the overall industry has been a notorious black hole.
As ads for mutual funds are fond of saying, past performance does not guarantee future results. Where is it written that biotech will continue losing money forever? In this decade, even Brazil has emerged as a star performer, both in terms of economic growth and stock market gains. The biotech industry, too, is about to move to the forefront of the global technology revolution.
Revisiting MalthusBritish demographer Thomas Malthus became alarmed 200 years ago that Planet Earth would soon run out of resources and would not be able to provide enough food, water, air and commodities for its expanding population.
Since then, the human race has multiplied far beyond anything Malthus ever thought possible, increasing from less than 1 billion in 1800 to around 6.5 billion now. Remarkably, while human society consumes vast amounts of commodities and food, there are still enough scarce resources to go around.
Nevertheless, fears of Malthusian scarcity emerge periodically, especially when commodity prices begin to rise. In the 1970s, the looming food crisis was resolved relatively easily, thanks to the green revolution brought about by the introduction of modern fertilizers and farming methods into India and other parts of Asia and industrial agricultural practices in traditional food-producing countries. Food, as well as other commodities, became extremely cheap once more in the 1990s, and the fears of looming shortages were thoroughly forgotten.
Now, commodity prices are up and forecasts as to when the world will run out of natural resources are fashionable once more — just in time to reward those investors who had the persistence to keep funding biotech research. Genetic engineering holds out a promise to raise agricultural output dramatically, and high prices are already breaking down resistance to GE products. One difference from the past is that in the world’s most populous countries such as China, India and Brazil people not only want more food and greater variety, but for the first time ever they also have money to pay for it.