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Michio Kaku says physics could create a perfect capitalism

Michio Kaku sitting at a crowded event

Michio Kaku at a crowded event Image: Mike Maguire/Flickr

Klaus Schwab
Founder, Executive Chairman, World Economic Forum
Thierry Malleret
Founder and Managing Partner, Monthly Barometer
Michio Kaku
Professor, City University of New York (CUNY)
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Davos Agenda

This article is part of: The Davos Agenda

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  • Michio Kaku, Professor, City University of New York, US, says that precedent has shown that physics can drive industrial revolutions and is the future of wealth.
  • Perfect capitalism relies on innovation and people, and social systems can adapt to the fallout that comes with advancing technology.
  • This interview served as input for The Great Narrative, a new book by Klaus Schwab and Thierry Malleret.

The dedication of Michio Kaku's life work to the theory of everything merged with his fascination with science fiction when he realized that physics and the future were one and the same.

He argues that wealth is a derivative of physics, that ever-evolving and perfect capitalism is dependent on innovation, and technology will be largely linked to our brains.

The below interview with Michio Kaku served as one of 50 inputs from global thought leaders for The Great Narrative, the new book by Klaus Schwab and Thierry Malleret that describes how we can create a more resilient, inclusive and sustainable future post-COVID-19.

Have you read?

Could you share with us something about yourself that we won’t find on the web?

On Wikipedia, you won’t find what happened when I was eight years old – something happened which changed my life completely. A great scientist had just died; the newspapers printed a picture of his desk with the unfinished manuscript of his greatest work, and the caption read something like this: The greatest scientist of our time could not finish this book.

I was fascinated by this story. What could be so hard that a great scientist couldn’t finish it? Why didn’t he ask his mother? Why didn’t he look up the answer at the library?

So I went to the library and found out this man was Albert Einstein. And that book was the unfinished unified field theory (the theory of everything), an equation that would allow us to “read the mind of God.” It was an equation, perhaps no more than one inch long, that would summarise and unify all the laws of the universe. I was hooked. I wanted to dedicate my life in pursuit of this equation.

Well, that’s what I do for a living. The leading theory today is called string theory. All the hundreds of sub-atomic particles are nothing but musical notes on a tiny, vibrating string. So physics is the harmony one can make on vibrating strings. Chemistry is the melody one can play on strings. The universe is a symphony of strings. And the “mind of God” is cosmic music resonating through hyperspace.

One version of that equation, string field theory, is my creation. My equation is one-inch-long and it allows you to summarise all laws of nature. It’s not the final theory; we now know there are membranes in addition to strings.

But when I was eight, I was also fascinated by science fiction, the Flash Gordon series. I saw starships, monsters, aliens, cities in the sky and antigravity beams. But years later, I realized that the two passions of my life, physics and the future, were the same: if you want to understand the future, you have to understand physics.

You must understand it at the atomic, molecular and cosmic level, and that gives us deep insight into what’s possible, impossible and plausible. Sometimes, when I see predictions made by my colleagues, I shake my head: they don’t understand the laws of physics. Certain things are harder, and some are much easier than what most futurists project. I like to put the weight of real science behind all my predictions.

Industrialisation is driven by physics

When you say that if you want to understand the world and think about the world tomorrow, you need to learn physics, you’re not talking about the physical world, are you? You’re talking about the social and economic world, our societies.

To understand economics, you must understand where wealth comes from. If you talk to an economist, the economist might say, “Wealth comes from printing money.” A politician might say, “Wealth comes from taxes.” I think they’re all wrong – the wealth of society comes from physics.

For example, we physicists worked out the laws of thermodynamics in the 1800s, which gave us the Industrial Revolution, the steam engine, and the machine age. This was one of the greatest revolutions in human history. Then we physicists solved the mystery of electricity and magnetism, which gave us the electric revolution of dynamos, generators, radio, and television, and then we worked out the laws of the quantum theory, which gave us the transistor, computers, the internet, and laser. The three great revolutions of the past all came from physics.

We’re now talking about how physics is creating the fourth great revolution at the molecular level: artificial intelligence, nanotechnology and biotechnology. That’s the fourth wave, but we can also see outlines of the fifth wave beyond that. That one is driven by physics at the atomic level, e.g. quantum computers, fusion power and brain-net (when the human mind is merged with computers). So when you look towards mid-century, we’ll be in the fifth wave, and what drives all these waves? Physics. And how is it manifested? Through the economy.

So, taxes and printing money are not where wealth comes from. Those things massage, distribute, and manipulate wealth, but they don’t create it. Wealth comes from physics.

You’ve had a rich career. What’s your big, main idea?

I have two things to say about this. First, physics is the origin of all wealth. Second, where is that wealth going to? It’s going to create something I call perfect capitalism. What is capitalism? It’s private ownership where prices are set by supply and demand, but that doesn’t explain where the direction of capitalism is going in the future.

In the future, capitalism will have infinite knowledge of supply and demand. For example, the internet will be in your contact lens and, when you blink, you’ll see the prices of every object around you. You’ll know the laws of supply and demand infinitely precisely; you’ll know who’s cheating you, what the prices are really like, the profit margins, who the middlemen are and where to find the bottlenecks.

Why is Jeff Bezos one of the richest men in the world? Because he digitized the middleman, part of the friction of capitalism and eliminated in perfect capitalism. That’s why people like Jeff Bezos, whatever you think of him morally, are part of perfect capitalism. He’s making capitalism more perfect by eliminating middlemen – unnecessary, redundant layers, bottlenecks and friction. Perfect capitalism is where it’s all headed.

Artificial intelligence and computers have just accelerated that trend. The trend is towards perfect capitalism, where all the middlemen, layers and choke points are eliminated, giving us direct contact between supply and demand. (This, of course, says nothing about the morality and ethics created by perfect capitalism, only that perfect capitalism is the inevitable byproduct of these technological revolutions.)

In the future, capitalism will have infinite knowledge of supply and demand.

Michio Kaku, Professor, City University of New York, USA

But if we’re heading towards a world that’s totally transparent, doesn’t it risk also becoming a dystopian world? Is there a risk of everything being accessible to everybody? Can it be useful for nefarious purposes, for example?

There will always be hiccups because we’re human beings, and because we’re human beings, we’ll use laws and social media to stop the march towards perfect capitalism by saying it’s unfair to others, for example, the middlemen, like brokers. But stockbrokers no longer sell stock – you can buy stock on your wristwatch. So why do you go to a stockbroker? Because you want something that a computer can’t give you. Computers cannot give you what human stockbrokers can: experience, savvy, the inside story, analysis, gossip, i.e. intellectual capital.

We forget that computers today are just sophisticated adding machines, lacking creativity, innovation, analysis, and leadership, etc. So middlemen, like stockbrokers, can survive and even flourish under perfect capitalism if they provide what computes cannot, intellectual capital.

Now, privacy is another problem, but it’s a social problem because mores change with time. People must decide how far they want to go to embrace a digital lifestyle and in the process expose their life and personal finances to potential criminals on the internet; that’s a social problem. This is a universal problem. For example, Mother Nature has spent 3 billion years combatting viruses. Nature is in a constant, never-ending battle with viruses. Similarly, we will also be in a perpetual battle with viruses. But how far we are willing to go to stop hacking, viruses, malware, etc. depends mainly on the political climate, not technology.

So, I’m talking about the big picture – we’re heading towards perfect capitalism, where middlemen, to survive, must sell intellectual capital. We’re making the transition from commodity capital to intellectual capital. That’s the big transition in the marketplace. Commodity capital includes oil and gold, but that’s the wealth of the past. The big billionaires today don’t make their billions on gold – they make it on data because that’s the new wealth of the future.

And that gets us to another question; how far will the robotic revolution go?

There are three types of jobs that robots cannot replace. The first is they can’t do semi-skilled blue-collar work. Robots can’t fix a broken toilet, pick up random garbage or hammer a nail, and they can barely open a door. Garbage men, plumbers, carpenters and construction workers will have jobs in the future. Semi-skilled, non-repetitive blue-collar work will flourish in the future – to see this, talk to the Pentagon.

The Pentagon has been trying to perfect the robot soldier for decades, but they failed miserably because of problems with pattern recognition and manual dexterity. The second thing robots can’t do is conduct human interaction; robots can’t be lawyers, counsellors, professors or people involved with human relations. Only a lawyer can talk to a judge and a jury; robots can’t do that at all because they don’t understand human mores and changing values.

And third, robots can’t be intellectual capitalists – the people who make the economy work because of innovation, leadership, new ideas, new energies and imagination. Robots have none of the above. That’s where humans will come into play. It will be a human-machine partnership. But certain jobs that are repetitive will be eliminated. We don’t have blacksmiths anymore, but we don’t cry about that because the automobile worker replaced the blacksmith. And automobile workers will have to be educated to become semi-skilled, blue-collar non-repetitive workers or human-relation workers or intellectual capitalists.

The Great Narrative by Klaus Schwab and Thierry Malleret
Image: Forum Publishing

Lasting capitalism requires innovation

The perfect capitalism model applies to the United States and Western democracies, but capitalism is currently in retreat. In fact, a model of autocratic capitalism is prevalent in Asia and China. Do you see perfect capitalism as a global phenomenon or something that will be confined to democracies in the West?

One reason for the Soviet Union’s collapse was because many people realised that prices were based on a fiction – a simple bureaucrat was saying, “Eeny, meeny, miny, moe, what is the price of this object?” It totally disregarded the marketplace or what reality would create in the black market. The black market was more aligned with supply and demand because that’s, of course, where criminals made their money.

Governments don’t care about supply and demand.

China has a hybrid system where they realise they must have the capitalists’ technology. What do they do? They beg, borrow and steal; they absorb whatever technology they can get from established venues, as long as they are in control.

But that’s not a permanent solution because it doesn’t create new value and new industries. It simply steals, replicates or copies existing value and doesn’t create new ideas. The process of creating new industries and technology from virtually nothing but an idea is called lowering entropy.

To lower entropy requires an enormous amount of freedom to concentrate imagination, creativity, and brainpower. The Chinese system works because they’ve mastered one art: copying. They do not create entirely new industries, which requires lowering entropy. And as long as they copy, they’ll be at the forefront of the economy only because they have a lot of labour to go behind it.

But capitalism requires more than that, otherwise, it stagnates or ends up as what the Soviet Union became – a stagnated economy where prices had no relationship to actual demand in the society itself.

So, your vision is that this future of perfect capitalism will engulf the world because only capitalist countries can innovate properly.

How does physics create wealth? By creating two important things: energy and information. Physicists are masters of the two because we created new forms of energy and information. In a system like China’s, they can’t generate new forms of energy or information; they can copy it at the speed of light by borrowing, begging or stealing it, but they can’t create entirely new industries.

Now, the Chinese aren’t stupid. They have a hybrid system, but they always want to be in control; the supremacy of the Communist Party is of paramount concern. As long as they are on top, they’ll tolerate a lot, but the bottom line is they won’t innovate if it endangers their control, and that creates a huge problem if they want to become a cutting edge leader in technology.

In other words, to be a technological leader and not a follower requires freedom of ideas and concepts, something which the Chinese government is reluctant to tolerate. This lack of freedom and innovation will become more acute as they try to become leaders in the world economy, not just followers.

The big billionaires today don’t make their billions on gold – they make it on data because that’s the new wealth of the future.

Michio Kaku, Professor, City University of New York, USA

What’s the major change that will make the world a better place? In fact, if I hear what you’re saying, it’s to let innovation flourish, correct?

One thing that will happen is brain-net. The future of the internet is not digital – it’s neural. We’re in the process of digitising the human brain so that we’re compatible with the internet. We can already record memories and send them on the internet. These are simple memories – memories in mice; now we’re recording memories in primates.

The formation of memories takes place in the hippocampus of the brain, and they can be encoded and put on the internet. In fact, at the Massachusetts Institute of Technology, they’ve created false memories, which leads to all sorts of legal and philosophical problems. Next will be Alzheimer’s patients; we’ll create a brain chip and, with a push of a button, memories will flood into their minds. And the US Pentagon will pay for it because of all the GIs who returned from Iraq and Afghanistan with spinal cord injuries and were paralysed.

Eventually, the internet will become the brain-net. You will think and your thoughts will control the world around you. Already people who are totally paralysed can type on a computer screen, exchange and write an email; anything you can do on a computer they can also do with certain limits. For example, the 2014 World Cup in Brazil was opened in São Paulo by a person who was paralysed. He wore an exoskeleton yet could still kick a football. A billion people saw a paralysed man start the World Cup games.

This will revolutionize communications. Why will you watch TV or go to the movies? They’re nothing but two-dimensional screens with sound – who wants that? In the future, you’ll want emotions, feelings and memories, and you’ll want to be one with the actor or actress.

Look at Charlie Chaplin. He was one of the most famous men in the world until we physicists and engineers perfected mechanical sound. Well, out went silent movies because who wants to see an actor just dance? You want to see them sing or talk. In the future, you’ll want to see actors feel as well. That’s also going to reduce borders between people.

Sometimes when someone says that certain people are suffering, one response is to say, “Yeah, I don’t believe it.” But if you could feel the suffering of other people and realize that it’s genuine, that will change the way we view human relations. This will also affect the fate of nations. Children already play video games with people from another country or continent. They may feel more affinity with a neighbour in a different continent than with someone in their neighbourhood. And when they grow up, they will feel differently about people in other countries than adults today.

Think of what teenagers might also do: instead of putting a happy face at the end of every sentence, they’ll put an emotion, a memory of their first date, first kiss, first prom, first dance. This is big. No wonder Elon Musk is checking this out – he’s not stupid.

We, physicists, have been working on this for decades. MRIs allow us to scan thoughts in the human brain. If you’re looking at me, I can extract the image of myself from your brain using an MRI scan; the MRI machine can decompose your brain into 30,000 pixels and reassemble them into a human face. We’ll also be able to record dreams in the future.

The first dreams are being recorded as we speak at [the University of California at Berkeley – I’ve seen the pictures (which, I admit, are very crude). But the very fact we can talk like this is amazing.

I was going to ask you about what makes you optimistic, and it seems to be the fifth wave. When will the fifth wave occur?

By mid-century, we should have an operating fusion reactor and a workable quantum computer entering the marketplace. Brain-net will take a few decades more to get off the ground, but investors are already jumping into it.

Let me end on this note: I disagree with most futurists. Most will say technology is morally neutral – a hammer is morally neutral, a sword can cut against your enemy or against you. Most futurists will say there’s no moral direction. I would disagree. Because of computers and the internet, there’s a moral direction since the internet spreads information, spreading empowerment. People realize they don’t have to live like this. Why should they tolerate a dictator? Or poverty? When other countries have dealt with and solved these questions, it energizes people in poverty-stricken countries to promote democracy.

So, the democratization of the planet is being driven by the internet, good or bad (there are bad aspects of it too, of course). But there is a moral direction. When brain-net comes along, you can feel the joy and suffering of other people and realise they aren’t faking it. If they’re suffering, there’s a reason for it, and people can share this common experience, which will bring us closer together.

Lastly, let me say that one of the keys to creating a bright future is to educate your people. When I was a child, I learned something called “the sick man of Asia.” China and India, I was told, would be perpetually poor because of their huge population. But today, we learn that China and India could become superpowers in the future. What happened? An ignorant, uneducated peasant is indeed a burden on society, but once they become educated, they can change the destiny of the world.

This interview served as input for The Great Narrative, the new book by Klaus Schwab and Thierry Malleret that encapsulates the Davos Vision, and explores how we can shape a constructive, common narrative for the future.

The book is on sale now on Amazon. You can order a Kindle or paperback copy in the,,,,, and any Amazon store around the world. It is the second instalment in The Great Reset series.

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