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The big thing happening in the economy that is not well understood is that there are two very different parts of the economy. There's the part where there's rapid technological change and very rapid productivity improvement. In that part of the economy, you would include things like media -- podcasts versus radio is a great example of rapid technological change. Streaming versus broadcast TV and so forth. Retail is obviously going through massive productivity improvements and changes. Manufacturing -- the price of televisions has dramatically collapsed in the last 10 years, and the TV [you can buy] now for 400 bucks is like science fiction compared to what you could get 10 years ago. Cars are going through rapid productivity changes now. You've got these sectors that have gone through these massive productivity changes. They are characterized by rapidly improving quality, but also collapsing prices and rapid productivity growth.

You've got this other, second part of the economy that's the exact opposite -- where quality is not improving and prices are rising. There you talk about health care, where it feels like every year you pay 10 or 15 percent more and you get some new stuff, but you don't get a lot of new stuff for the money. You talk about education, where the rising cost of a modern college education is just staggering. Actually, it's funny -- all forms of media are collapsing in price, other than textbooks. Textbooks are rising in price exactly the same as college tuition, which is a good illustration of the difference between the two sectors. Construction, real estate -- there's been a lot of conversation recently about how we're still fundamentally wedded to physical location way more than you would think at this point with the internet and everything else.

In the industries where there's rapid productivity growth, everybody is freaked out, because what are people going to do after everything gets automated? In the other part of the economy, that second part, health care and education, people are freaked out about, "Oh my God, it's going to eat the entire budget! It's going to eat my personal budget. Health care and education is going to be every dollar I make as income, and it's going to eat the national budget and drive the United States bankrupt!" And everybody in the economy is going to become either a nurse or teacher. It's really funny, both sides of the economy get polar opposite emotional reactions.

I go through all of that to say that the tech industry has been able to build startups and new technologies against that first category but not that second category. Tech is super present in retail in the form of e-commerce, we're super present in media in the form of internet, we're super present in consumer electronics in the smartphone. We are very much not present, in what we would consider to be a healthy way, in education, health care, construction, childcare, senior care. The great twist on that is that second category -- that's most of the GDP. Most of the spending is most of the GDP, and these are the areas where we have not yet been able to crack the code.

The big thing happening in the valley right now is valley entrepreneurs are getting much more aggressive at starting tech companies in that second category. We are seeing a lot more startups going into, especially, health care, biotech, different applications on that side. We're seeing a lot of startups going into education. We're not so much seeing startups going into construction, but we're seeing lots of startups going into the collaborative work: Slack and GitHub and telepresence and Skype and all of these things, that in theory, in the long run, will make geography less relevant and maybe solve the cost of housing and access to economic opportunity.

Financial services has had rising costs, not falling costs, which it really shouldn't have -- we're seeing a lot of fintech startups going into that. It's this reorientation, and the valley is still doing all of the first category things, but it feels like we're now layering on a lot of the second categories.

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