Entropy Economics is a strategic insight firm focused on technology, innovation, and the global economy. We produce ahead-of-the-curve research on the technologies, industries, companies, and government policies that drive world markets. We advise investors, technology firms, and policymakers.
Our firm is led by Bret Swanson, who has studied the digital economy and advised investors for the last 20 years. He is a nonresident senior fellow at the American Enterprise Institute, where he helped found the technology research program in 2013. He is a visiting fellow at the Krach Institute for Tech Diplomacy at Purdue University. He is also trustee and chairman of the Indiana Public Retirement System (INPRS) where he chairs the investment working group.
Swanson presents his technology and economic research around the globe and often contributes to the editorial pages of The Wall Street Journal. He was previously a technology analyst and executive editor of the Gilder Technology Report, a senior fellow at The Progress & Freedom Foundation, and a scholar at the U.S. Chamber of Commerce Foundation.
Our research focuses on information technology and the economics of information. We study the Internet, mobile, cloud computing, software, crypto, and semiconductors and the impact these technology platforms have on firms, industries, and the broader economy.
Recent research includes a 50th anniversary analysis of Moore’s law, a look ahead to 5G wireless networks, and reports on the impact of public policy (in particular Internet regulation and wireless spectrum allocation) on the digital economy. Because of our deep interest innovation, economic growth, and the ways technology increasingly interacts with the rest of the economy, we often extend our research to related fields, such as energy, health care, China, and productivity.
Not infrequently, our research disagrees with the prevailing conventional wisdom. For example:
- in the early 2000s, as the economy reeled from the tech crash and a supposedly overbuilt Internet, we said digital cameras, smartphones, and online content would create a flood of Web video that would require far more network infrastructure and wireless spectrum than was then being projected.
- in the mid-2000s, as energy prices soared and theories of “peak oil” gained widespread acceptance, we said new shale technologies (including infotech) would unlock vast stores of oil and gas and dramatically reduce energy prices.
- today many economists say information technology is a spent force and warn of “the demise of economic growth.” Our new research on productivity, however, shows that three-quarters of the private economy is operating well below potential. And that many of these lagging industries are poised for tech-led transformations. We are thus projecting faster productivity and economic growth in the decade ahead.
What is “entropy”? Some think of the thermodynamic “chaos” or “wasteful heat” of jiggling atoms. Others equate it simply with “disorder.” But we embrace a more general concept based on information theory, where entropy is the potential for news, surprise, or unexpected bits. It is, in a sense, invisible information.
We adopt as the guiding force of economics and technology the key insight of our longtime friend George Gilder:
“A high-entropy message requires a low-entropy carrier.”
The written word is most easily read on a clean white page. A phone conversation is best heard when there is little intruding noise. We transmit high-entropy voices and videos around the globe and across the galaxy. We do this by exploiting the maximally regular frequencies of the electromagnetic spectrum and the crystalline purity of silicon (microchips) and flawless silica (fiber optics).
In biology, the infinitely diverse anatomies, capabilities, and personalities of the animal kingdom rely on the supremely uniform structure of DNA.
Entrepreneurship and innovation, likewise, comprise all real economic growth. Building new, complex, low-entropy machines and business models is itself a high-entropy exercise. The new, predictable, efficient, low-entropy machines and models, moreover, create a more solid foundation for further high-entropy experimentation. There is yet another layer describing this system: these information-rich spikes of creativity require a stable foundation of property rights, predictable laws, free trade, and an unchanging value of money.
Dynamic growth and innovation require undynamic low-entropy foundations. This is the principle of entropy that guides our research and strategic insights. For a summary of our worldview, see the essay: “Ignorance, the Ultimate Asset”.