Four things I'm curious about in 2024

Curious or worried, your call

Hello friends, I am on PTO until the New Year but couldn’t shut up that long. So, here’s four things that I am curious about in 2024. I also have an essay bubbling on the end of the Figma-Adobe deal, so drop me your email if you want that next week!

Hugs and love to you and your family. — Alex

Can anyone make real progress on low national birth rates?

There are several ways to think about a country’s population over time:

1. You can consider gross year-end figures, inclusive or exclusive of immigration.

2. And, it’s possible to track a nation’s total fertility rate, or the average number of children born per child-bearing person. (There’s some net/gross nuance to total fertility rates, but we don’t need to go that deep.)

Most of the headlines concerning population decline lean on total fertility data, and it’s incredibly stark. For a stable population rate, you need ~2.1 births per person able to bear children. In South Korea, the average number of kids born to a child-bearing person has fallen to somewhere around 0.7. Japan is around 1.2 today, and it is seeing births hit record lows. China is struggling with a declining population and a fertility rate around of around 1.1 in 2022. Births there are at record lows as well.

It’s not just Asia. Total fertility rates are in decline in many parts of the world. You can find troubling headlines about countries in Europe, Latin America, and elsewhere; it seems that nearly anywhere you look, fertility rates are falling, often rapidly. UN data charts this trend clearly, showing a decline of around five births per woman¹ in the past to just over two by 2021. A few ticks more and the global fertility rate could drop below replacement levels.

In developed countries this is a crisis, thanks in part to longer life expectancies and the costs thereof; you need more kids to pay into the system to make it work than are being born right now. Even France, which has long had a total fertility rate above its peer nations, is seeing declines.

Given that I am far from being a degrowth type, I find this to be a very concerning situation. The sticky point is that there’s no easy fix.

Everyone has ideas on how to shake up the current trend and get more babies born. Most are tied to other beliefs.

Conservatives in the United States bemoan no-fault divorce—despite it lowering female suicide and domestic violence rates for all genders—and the decline in nuclear family procreation as the chief driver of new baby formation.

Liberal folks here at home tend to focus more on wages and prices, pointing out that rising real estate costs are harming the ability for families to form, period. This is especially true in nations like China where household ownership is tied towards cultural views of marital preparedness.

Personally I think that family formation and childbearing rates in economies where dual-incomes and forty hour (or greater) work weeks are the norm will be incredibly hard to lift.

National economies are predicated on strong participation amongst all adults, so the idea of having a large portion of the working population stop providing economically-valued labor to allow for more tots is not feasible without material economic dislocation.

But perhaps a movement towards shorter working weeks for working folks would free them up to have more kids?

In my personal circle of new parents, there’s surfeit married couples in happy relationships and stable careers with plans for one or maybe two kids; I don’t know of anyone aiming for more. You need these folks — myself included — to want to have more. Given how much we all work, I doubt that that’s going to happen.

So in 2024, can any nation with a total fertility rate of less than two really start to bend that curve up? And can they do so without doing what we’re seeing in certain authoritarian countries, namely the restricting of reproductive rights to force more births (more here)? I don’t have to explain to you how disgusting I find that concept. It’s a non-solution.

Can hundreds of billions of dollars worth of private-market equity find liquidity?

I apologize for bringing a pet work focus into a newsletter that I have mostly kept personal, but goddamn it has been glacial out there for startups. And not just in terms of venture capital temperatures for many young tech companies, no I mean the wording more literally: In 2023, liquidity was frozen.

Sure there were a handful of tech IPOs on the American markets, but a full one-third of that count was a company (Arm) returning to the public markets after a pause in the hands of SoftBank. So, two. That’s not many.

The issue at hand is that there is a massive amount of wealth locked-up in the world’s private markets today, and there’s little happening that will unlock a sizable fraction of that capital. What this means in more prosaic terms is piles of investment unable to recirculate until a bunch of companies go public.

And it really is a bunch.

Using top-line valuation statistics, Crunchbase counts 1,496 private-market tech companies in the world last priced at $1 billion or more. Those companies have raised $913 billion, and are worth a collective $5 trillion. Now, some of the valuations that went into that final figure are specious and over-inflated, simply waiting on a down-round or underwater exit, but the numbers are big enough that even with fair caveats to the data it’s clear that the backlog is terrifyingly large.

One thing that I have learned in watching business cycles and economics more generally is that it is possible to be correct, but so early that you are actually wrong. Or as Keynes is credited with having said: the market can stay irrational longer than you can stay solvent.

For example, I wrote a piece years ago arguing that the Chinese real estate market was heading for a hard landing. That actually started to hit in late 2021 and continues to this day, despite effort by the CCP to fudge the data. I was also far, far too early in 2016 when decrying slow unicorn exit rates. Well, here we are now and the overhang is the worst it’s ever been, just as we are closing the pages on a missed year for startup liquidity.

Can this finally turn around next year?

Can the CCP’s economic leaders manage a soft landing?

I didn’t mean to presage this particular question, but I suppose given the scale of the Chinese economy and its present issues the matter is inescapable.

It would take too long to walk through how the Chinese economy got to where it is today with the majority of household wealth stored in real estate thanks to an economic miracle partially predicated on massive over-investment in housing and other structures. But suffice it to say that the Chinese economy is straining to find a new method of growth, a task made more difficult by a declining and aging population, rampant youth unemployment, huge hidden debts, and other issues.

There’s probably no economic path forward in China without quite a lot of pain. For example, the CCP could allow the bottom to truly fall out of real estate prices, and force non-performing companies to go through a normal bankruptcy process. Such an effort would be messy, but it would help the country’s domestic market work out some of its inefficiencies and move forward. The Chinese government could also unshackle private business and sharply reduce its meddling in private life.

All of those moves would help lessen the country’s economic issues. But as none of those choices are politically palatable, it’s unlikely to happen.

So: In 2024, can China manage as soft a landing as possible without an outright recession (unlikely), or merely a short one (slightly more likely)?

Can democracies regain their teeth in the face of rising authoritarian threats?

While a number of authoritarian countries turn to one another with increasingly close economic and political ties (the loser caucus of China, Iran, Russia and their client states), there’s a chance for democratic alliances to not only bolster their working relationships, but also rebuild their teeth.

The fact that the United States cannot build enough shells to ship to Ukraine is an embarrassment. (The Russian army being supplied by North Korea is a separate, if related matter.) But the fact that EU nations and NATO members are spending so much to help Ukraine defend itself from Russian aggression is encouraging by itself.

I will not go so far as to say ‘we still got it’ but I have been heartened that most everyone — the majority in the lower American congressional chamber notwithstanding — agrees that we should support democracies when they are under threat from external, non-democratic powers.

Can we see more of that in 2024? Here’s hoping.

The democratic countries of the world also need to do some house cleaning. In India, to pick just a single, salient example, the government is using religious divisions inside of its borders to create a cult of personality around an increasingly autocratic ruler. That’s bad. Very bad, in fact, because not only is India a critical bulwark against China for the rest of the world, it’s also the largest democracy, period.

Here I am optimistic over the long run, if worried in the near term.

Still, the end of any year is a moment to sit back, reflect, and hope. And act, if we can. Consider sending aid to Ukrainians fighting for self-determination this holiday season if you can, or a similar cause. We can only do a little individually, but together we can really do quite a lot.

I didn’t write anything about AI in this missive because, frankly, everything that could possibly be said on that topic in 2023 has already been written.

Article edited by Holden Page.

1. I prefer more inclusive terminology, but it gets a bit chunky in English, so please bear with me.