How Inequality Presents Billion-Dollar Opportunities
Education, healthcare, and housing will create some of the biggest companies of our generation.
In the first months of the Covid-19 pandemic, I wrote about the accelerating trends of digital transformation, market concentration, and inequality. Two years later, the pace of these unfolding trends has exceeded my expectations. Of these, growing inequality troubles me the most because I believe it is a symptom of some of America’s most pressing problems - namely the availability of quality education, healthcare, and housing.
The optimist in me believes that technology and innovation will ultimately allow us to untie this Gordian knot. To do so requires innovators to create cheaper, more scalable solutions to provide quality education, healthcare, and housing to the masses. That’s why I believe there are enormous opportunities for entrepreneurs that tackle the major sources of inequality today. In doing so, they’ll not only build billion-dollar companies for themselves, but they’ll also build a better world for everyone else.
Just how bad is it?
Inequality in the U.S. is worse than in almost any other developed economy. The United States’ Gini coefficient of 0.48 is at the highest it’s been in 50 years. And inflation, which hits those at the bottom of the wealth bracket the hardest, is higher than it’s been in 40 years.
As a millennial, the growing frustrations of my generation are often top of mind. Many are stuck in hourly wage jobs with no benefits. Those with career prospects are oftentimes hindered by crushing student debt. Starting a family and buying a house are long-delayed for many, if not completely out of reach.
The r/lostgeneration community on Reddit gives countless anecdotes of the frustrations, bitterness, and hopelessness of an entire generation. Unlike in the Gilded Age, when a worker may only hear about the lives of those who are better off in passing, social media has now made it front and center. Not only is today’s society more unequal, but it is also more conspicuously unequal. Though mostly US-centric, these anxieties are echoed across the world.
The role of tech
The irony is that tech, which creates so much upward economic mobility, is also a big contributor to the inequality we see today. Just ask anyone who’s lived in the tech hubs of San Francisco, Seattle, and Boston in the past 20 years. These cities have managed to suck profits from across the world and concentrate them in very few places and amongst very few people.
Amazon is a great example. When the world was less flat, local ownership of commerce on Main Street kept wealth within local communities. Now, all the profits flow back into Amazon HQ in Seattle, while Main Streets and malls across the U.S. are decimated.
The fundamental reason why tech has had this effect on inequality is scale. One good idea or product can now be sold to millions across the world. The internet and the ensuing infrastructure built around it for e-commerce, content creation, information distribution, etc. have allowed a few superstars to benefit tremendously while hollowing out what was before a middle class.
Scarcity breeds inequality
Tech has concentrated wealth on a few by making products and services more abundant and accessible for the many. Take entertainment, for example. A single Netflix subscription can substitute for movie tickets, Blockbuster rentals, and a large cable TV bill.
Yet, tech has thus far failed to do the same for education, healthcare, and housing. Unlike non-renewable resources that are inherently scarce, the scarcity of quality education, healthcare, and housing is largely due to underinvestment and the inherent difficulty of scaling these services and products. A good teacher can only teach a handful of students. It still takes a small village of providers to give quality healthcare to a patient. Building a house is largely done the same way it was a hundred years ago.
These three sectors have an oversized impact on experienced inequality because they are some of the largest in our economy. Education, healthcare, and housing account for approximately 6%, 20%, and 15% of U.S. GDP, respectively. Compounding their impact, these three sectors also account for the majority of the inflation over the past few decades.
Inequality is opportunity
Fortunately, there are ample opportunities for innovators to tackle inequality in ways that governments have thus far failed to do so. The most immediate opportunity is for those in tech to make these scarce resources more accessible and abundant. Technological advancements driven by improvements in machine learning and robotics will be core to solving these problems. Innovation will allow for the scalability of individual human efforts and may even replace the roles that people fill altogether.
For example, here at One Way Ventures, we’ve invested in BuddyAI, an AI tutor that teaches children English. Buddy is both a tool for English tutors to augment their classroom time and a replacement for those who wouldn’t be able to afford tutors. Mighty Buildings is another example. Mighty Buildings is perfecting the tools and infrastructure needed to mass-produce houses via 3D printed panels. If we can produce housing like we produce smartphones, then perhaps all housing can become affordable housing.
I hope to see more companies that focus on making quality education, healthcare, and housing affordable and accessible. As we see more entrepreneurs invest in these areas, I’m optimistic that they will also create some of the biggest and most impactful companies of our generation.
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