Rich Karlgaard: The Future Is More Than Facebook

By RICH KARLGAARD

In March 1986, Microsoft ended its first day as a public company with a market capitalization of $780 million. Its value grew more than 700 times that over the next 13 years and made Bill Gates, in 1999, the richest man ever with a net worth of $101 billion. When Facebook goes public this Friday its market cap could easily hit $100 billion, bringing founder Mark Zuckerberg's net worth to more than $18 billion. That's about 50 times what Mr. Gates was worth after Microsoft's IPO.

Facebook's big payday should be cause for celebration in a liberal democracy. Instead it has provoked two kinds of anxiety. Both imply America's best days are over.

The first is that America's innovation engine, Silicon Valley, is again overheating. Evidence: Last month Facebook swapped $1 billion in pre-IPO shares and some cash for Instagram, a two-year-old start-up with 11 employees and no revenue. A week later, another Silicon Valley start-up called Splunk, slyly allied with the decades's two hottest buzz generators—cloud computing and big data—went public at a $1.5 billion value on just $121 million in sales this year. Yet shareholders swooned for Splunk and bid up its $17 IPO share price to $37 in the first two days of trading.

This has to be a bubble, right?

The second worry is that only a certain kind of company is getting rich in the Obama economy. These are outfits that make algorithms—bits of software code cleverly strung together to take the form of an iPhone operating system, a LinkedIn social network, or a proprietary trading scheme.

The modern-day code rockers are not mere nerds, either. They form an Algorithmic Army of slightly surreal folks like, well, Mr. Zuckerberg. They seem to be pale men with oddly flat voices and faraway gazes who prefer to hide out in the bathroom during the IPO roadshow. When finally coaxed onto the stage to face investors, the great Zuckerberg appeared in a hoodie.

That can't be America's future, can it?

The debate about whether America will own the global economy in the 21st century or else become a dude ranch for rich Chinese and Brazilians hinges on whether innovation can break out of the box. Can it go mainstream and transform the really big things: transportation, energy, electricity, food production, water delivery, health care and education?

If it can't do that—or if it is thwarted by high taxes and complex regulation—then welcome to the new normal of 2% annual growth. Our future will become sadly familiar. Just follow Spain, France and Great Britain down history's sinkhole of lost status and influence.

But America can do better than that, and it will. In fact, the seeds are being planted now. In Silicon Valley, investing in social-media companies is already passé. Last year, as private investors were bidding up Facebook's valuation to $100 billion, the veteran Silicon Valley investor Roger McNamee said "the next 500 social-media companies will lose money." He's broadly right. The time to make big returns in Facebook and in social media has passed.

There's a growing interest among bright minds to apply "exponential technologies" (the phrase used by Ray Kurzweil and Peter Diamandis, founders of Singularity University) to solve problems much larger than whom to friend on Facebook. Transportation is one of those big deals. Would you rather own a car, an iPad or a Facebook membership? Thought so. By 2050 the planet will have nine billion inhabitants and three billion cars. This will create huge demand for fuel and road access.

Silicon Valley's biggest new thing, therefore, is not Instagram or Splunk but Google's robot-driven car. The Google car is only four years old. In 2008, it could barely get around pylons in a parking lot. Last year it got down San Francisco's snaky Lombard Street with no human driver and today it races over mountain passes with only R2-D2's second cousin behind the wheel. This rate of progress is normal in the algorithmic world, but it is new in the physical world.

Manufacturing? America will own the mid-21st century. Geopolitical instability and rising oil prices will wreck the late 20th-century rationale for outsourcing. Chinese labor costs are rising 20% a year while robotic costs are dropping by 30% a year. Do the math.

"Made in the USA" is set to have a major comeback. The showstopper will be 3-D printing, which makes physical objects from a digital file. It will turn our artists into artisanal manufacturers and reward American-style creativity.

Energy? America's natural-gas and shale oil boom will bridge us to 2030 or so when solar energy and algae-based fuels will be closer to market parity and begin to make a real contribution. As long as I'm on the topic of the natural-gas boom, what key technology made this happy surprise possible? High-tech horizontal drilling. Who knew? We were all too busy fiddling with our iPhone apps to see it coming.

Question: If America could have only one of the following—Facebook, Twitter or horizontal drilling—which would be the smarter choice?

Happily, we don't have to make that choice. America remains the world's innovator, a country without limits.

Mr. Karlgaard is publisher of Forbes.