From Gates to Bezos - What the Change in World's Richest Man Tells us About a Shift From an Information to Entrepreneurial Economy

On America’s west coast there are examples of what the popularization of entrepreneurship could look like at the regional and company-level.

Silicon Valley continues to attract more venture capital and to create more wealth than any country in the world. The folks in the Bay Area have created an entrepreneurial economy.

Further north in Seattle, Jeff Bezos has created an entrepreneurial company.

Jeff Bezos recently emerged as the world’s richest man and is the world’s only triple-digit billionaire. Bezos is an entrepreneur. He has also created a platform that has popularized entrepreneurship. Not only does Amazon have more than 500,000 employees, it has "2 million sellers, hundreds of thousands of authors, [and] millions of Amazon Web Services developers.”  And, Bezos reports, "In 2017, for the first time in history, more than half of units sold on Amazon worldwide were from third-party sellers."[1] 

Bezos isn’t doing all the entrepreneurial lifting at Amazon; he’s got millions of co-entrepreneurs and the result is that as they struggle to become rich they inevitably increase his net worth. People who create, make or ship products hope to get rich by selling through Amazon. Jeff Bezos is just one of the millions of entrepreneurs who use the platform that his team has built.

Knowledge workers turn raw data into knowledge in the same way that factories turn raw materials into products. A computer makes knowledge work far easier and during the 1980s and 1990s, the personal computer became ubiquitous as knowledge work evolved and became more common. Microsoft provided the PC’s operating system and software like Word, Outlook, and Excel and for Microsoft it was like having a patent on forks and spoons when people stopped eating with their hands.

In 1995, Bill Gates became the world’s richest man by creating tools that enabled knowledge workers to do their work. In 2018, Jeff Bezos became the world’s richest man by creating tools that enabled entrepreneurs to do their work. From the last couple of decades in the 20^th century to the first couple of the 21^st century, the source of new wealth was shifting from making knowledge work easier to making entrepreneurship easier.

Sometimes what is most obvious deserves the closest scrutiny. A region that has created record amounts of wealth. The world’s richest men? Those might just hold clues as to how the economy is changing. Successful economic policies in this century will popularize entrepreneurship.

Three categories of successful 21^st century economic policies will be “follow the lead of Silicon Valley,” create an entrepreneurial track in education, and make it easier for employees to act - and be rewarded - like entrepreneurs

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[1] https://www.sec.gov/Archives/edgar/data/1018724/000119312518121161/d456916dex991.htm

Trump Hikes Taxes - How Tariffs Really Work and Why They Rarely Do (work, that is)

Here in mid-September, Trump just announced tariffs on $200 billion in goods from China.

This is a tax on American consumers that works out to about $60 per American. Americans will pay that much more for items.

Who gets that money? American companies that have already proven themselves incapable of competing. American companies who need protection in the form of tariffs.

There are times when it makes sense to have trade protection in the form of tariffs. If your national policy is working to move from an agricultural to an industrial economy, or from an industrial to information economy it makes sense that you may want to protect some sectors or companies from foreign competition as they establish themselves against global competition. For awhile.

Companies that benefit from trade protection have a few options about what to do with the added revenue. They can increase the wages of hard-hit employees who have been competing against cheaper foreign labor. They can use the extra revenue to invest in new capacity or technology so that they are more competitive. Or they can payout the profit to stockholders and executives in the form of bonuses, using this subsidy from American consumers as a reward for having the political clout to do what they could not do through the market.

Tariffs are essentially a tax but not a tax that go to the government. Government spending can actually help displaced workers by funding unemployment and retraining. Government spending can finance infrastructure building that makes regions more competitive because of better rails or roads or cheaper energy or water. Government spending can go into the basic research that companies can develop into products.

Apple is now the most valuable company in the world, worth more than a trillion. It's most profitable product is the iPhone. The iPhone represents product development that incorporates research advances like touchscreen, satellite, and small chip technology originally funded by government research. (This is well documented in Mariana Mazzucato's The Entrepreneurial State.) Government research can lead to breakthroughs that not only help citizens but that can be the basis for new products that companies develop into highly profitable markets. A few billion in research spending can help to create trillions in value.

Tariffs don't help to finance basic research, infrastructure, education, or the creation of new industries and companies. Tariffs often subsidize companies that have not kept up, doing more to reward executives who have made campaign contributions than executives who have invested in the future. Within the last year, the GOP passed a tax cut that makes it harder to do any of these things. With Trump's new tariffs, it has just reversed that tax cut for the typical American and will now give that tax or tariff revenue to uncompetitive companies instead. 

When Trial by Jury Costs Too Much

I had jury duty the other day. Along with 40 others, I was called into a courtroom to be considered to serve on a trial. Simply put, an individual felt that a car dealership had misrepresented a car to him and he was suing. I wasn't chosen. (Juror 22 of our 40 ended up on the jury; I was juror 23.) Given that, I never learned what he paid for the car but the average price paid for a used car is about $15,000. Taking such a case to jury strikes me as absurd.

Median income in San Diego is about $50,000 a year, which works out to $1,000 a week or $200 a day.

40 of us jurors spent a day on that trial. (Most of that time was spent waiting before being called into the courtroom to be screened.) So, day one of that trial cost us or our employers about $8,000. (40 people at $200 a day.)

The judge and attorneys chose 14 people (jury of 12 plus 2 alternates). The judge had estimated that the trial would be done the following Monday, which meant 5 more days for those 14 jurors. That's another $14,000. Combined with the $8,000 for the 40 jurors on day one, that means $22,000 for jurors.

That does not include the salary for the judge, bailiff, court clerk and various administrative folks we briefly dealt with. Let's say that collectively those folks make the same $200 a day and that there are only 4 of them (assuming that all the administrative folks behind the scene average out to one per courtroom). So this trial costs another $4,800 (let's call it $5,000) in salaries for them, for a total of $27,000 for actual or lost wages / productivity of the folks needed to support this one trial.

$27,000 in salaries for the folks involved in litigating a case that probably had to do with what portion of a $15,000 car purchase a buyer should be reimbursed. As a society, we're spending at least twice as much to settle a grievance as the grievance is worth.

I completely support the right of individuals to sue companies and for companies to sue individuals. Bad things happen and injustices deserve their day in court. It's a great thing that we have our court system and that we're free to sue anyone (within reason). I simply think it's absurd to treat so many of these civil cases as deserving of a jury trial given the labor costs involved.

During a football game, there are set rules and there are referees who penalize teams for breaking the rules. Within the NFL it is about 14 penalties a game, (given the ball is in play only about 11 minutes a game (and no, I'm not joking: you can read the explanation behind that stat here )), that works out to more than one penalty per minute. We do this because we want games to be fair. I think that the world of everyday business and employment is at least as important and while I don't think that we should have penalties levied every minute, I do think that such penalties should be standardized, cheap and common. If you rough the kicker, the penalty is 15 yards and an automatic first down. If you fail to tell a buyer that a car has been in an accident, the penalty is $5,000 or 20% of the purchase price, whichever is more. (Or whatever we decide as a society.) As with referees who know the game and can quickly adjudicate the penalty, these business issues that fall under the bailiwick of a civil suit should have default penalties that expedite the process. Many such incidents should be judged within an hour or at worst half a day and then levied a penalty (or thrown out) by an individual expert or two. It should not cost $30,000 to litigate a case on a $15,000 purchase; at most it should cost a couple of thousand dollars.

If trials were cheaper, we could have more of them, in the same way that cheaper computers or cars have meant that more people can have them. More of a good thing is better and cheaper trials would make life more fair. 

Our court system is too expensive and this notion that every petty case deserves a jury trial is one reason. As with so much in life, experts can do a better job for less and should.  We should have justice. It should not cost society more than it is worth.

The Recovery is Real And Yet We Still Have Poor People. That's How Economies Have Always Worked

I'm seeing a fair bit about how the recovery isn't real or isn't really done because people are still poor. That's nonsense. We have had and always will have poor people. Markets simply don't lift up everyone. Markets are marvelous but they've never taken care of everyone.

The philosopher Karl Jaspers (who died in 1969) argued for an Axial Age. Within a few centuries the foundations for religions we still have today were laid. 

Confucius and Lao-Tse were living in China, all the schools of Chinese philosophy came into being, including those of Mo Ti, Chuang Tse, Lieh Tzu and a host of others; India produced the Upanishads and Buddha and, like China, ran the whole gamut of philosophical possibilities down to materialism, scepticism and nihilism; in Iran Zarathustra taught a challenging view of the world as a struggle between good and evil; in Palestine the prophets made their appearance from Elijah by way of Isaiah and Jeremiah to Deutero-Isaiah; Greece witnessed the appearance of Homer, of the philosophers – Parmenides, Heraclitus and Plato, – of the tragedians, of Thucydides and Archimedes. Everything implied by these names developed during these few centuries almost simultaneously in China, India and the West.
— Karl Jaspers, Origin and Goal of History, p. 2

One theory (I don't think it is Jaspers') is that this happened at this point in history because of the emergence of the city which lead to wealth. Oh, and disparities in wealth. If you are living as a hunter gatherer, you can't accumulate much. If you settle down in a city, you can. And as more people live in proximity there is more opportunity for trade (of goods, ideas and services) and the prosperity that comes with it. This emergence of wealth raised the question of who we should be towards the poor; the major religions emerged - in part - as answers to that question.

There are certainly things we can do to make the poor more self-sufficient, to create opportunities for them and their children. I think that's hugely important. But once we've done that, we will still have poor people. And at that point how we treat them is not a question of economic policy; it's a question of morality, something humans were clear about roughly 3,000 years ago.

Kaepernick, Nike, Police, and a Protest of a Protest of a Protest

I have this thing about institutions. When they use people, they're oppressive. When people use them, they're enabling.  Free people get to use their institutions - from church and state to bank and corporation - rather than be used by them. In oppressive communities, people are tools of their institutions; in free societies, institutions are the tools of people.

I say all that to opine about Kaepernick, Nike, and the The National Association of Police Organizations.

In response to Nike's new ad featuring Kaepernick, the National Association of Police Organizations has protested Nike's campaign and any NFL player who takes a knee during the national anthem. They argue that Kaepernick's protest suggest that the police are systematically racist and so they are protesting his protest.

I'm protesting their protest of his protest.

A police organization ought to focus on the work of making police better, in the same way that NFL teams should focus on making their teams better. Period. That is the purpose of the organization and that should be their focus.

Meanwhile, we live in a country with a first amendment. I know that some of you will say that an employer has the right to dictate what its employees - whether police or football players - should do. I think you're wrong.

If all of the football players want to protest, let them. If only two do, let them. If all of the police officers want to protest that protest, let them. If only two do, let them. Be clear that they are exercising these first amendment rights as individuals though. At the moment of protesting police brutality or protesting people who protest in front of the flag, the people protesting are doing this as citizens, not football players or police officers. No matter what percentage of them do it, they do it as individuals, not as that institution. At that moment they are not a 49er or a police officer. They are Americans.

First amendment rights are not subject to democratic vote or group norms. You have the right to believe whatever religion you want, express whatever opinion you have, assemble freely with whoever you want. The institutions you're a part of don't have the right to dictate any of that - or co-opt your first amendment rights to express those on your behalf.

That concludes my protest of a protest of a protest.

What a great country.

In Other News, Trump Still Has a Penis

This week Bob Woodward's new book Fear and an anonymous New York Times op-ed from a Trump administration official describes a president who is inexperienced but confident, stupid, impulsive, and amoral.

We knew all this before the 2016 election. This was treated as news this week but there is nothing new in these reports. It merely confirms what we've known since Trump came down the escalator to announce his campaign and to accuse Mexicans of being rapists and murderers. In spite of the hoopla surrounding this news, Trump's poll numbers barely moved. Americans know who he is.

What remains so absurdly sad is that given the choice between that and a woman who believed in public service, was incredibly intelligent, disciplined, and experienced .... we chose that. Clinton carefully thought through the consequences of choices; Trump doesn't even have the attention span to think through the choices, much less their consequence. And speaking of choices, given the choice of someone as qualified for the presidency as anyone in our lifetimes, we chose someone who is not qualified to be a mayor.

Hillary Clinton was unable to close the deal that so many thought was done. She won the popular vote by 3 million and came within 100,000 votes in the three states that would have put her over the top in the electoral vote. I can't help but think it is because she was lacking one simple thing that every previous president had: a penis. It was a close race. She lost by inches.

Trump is so many things but maybe the saddest thing is that he is a reminder that even 96 years after women were finally given the right to vote, even the worst man as candidate wins against a woman. Some time ago my son came home from class reporting that one of the students actually said, "I think that women should be treated equal to men. I just don't think that they should be in positions of authority over men."

In Clinton's book What Happened she has a chapter on being a woman in politics. That chapter alone should be required reading. At one point Clinton quotes Frances Perkins, the first woman to serve in the U.S. Cabinet, under FDR, who said, "The accusation that I'm a woman is incontrovertible." But women in politics is only slowly becoming normal. Clinton also writes, "Even the simple act of a woman standing up and speaking to a crowd is relatively new. Think about it: we know of only a handful of speeches by women before the latter half of the twentieth century, and those tend to be by women in extreme and desperate situations. Joan of Arc said a lot of interesting things before they burned her at the stake."

Social change seems to lie somewhere between the glacial pace of evolution and the still leisurely pace of personal development. We have so very far to go before the best kind of woman is able to beat the worst kind of man. We still weren't there in 2016.

Trump will be taught in future classes for so many reasons: the most pathetic may be to illustrate how resistant this country still was early in the 21st century to giving women power.

The American Way - What Amway and Shaklee Had to do with the Popularization of Entrepreneurship

Richard DeVos died today. In 1959 he co-founded Amway with his friend Jay Van Andel. Like Shaklee - founded just three years earlier - Amway had an interesting business model. Rather than manufacture products to be sold in stores by someone else, these new businesses recruited sales people to be part of the business. The bad thing about the model is that it is wildly inefficient compared to, say, a Walmart where sales costs are so much lower and less labor intensive. The good thing about the model is that the product is being sold by people who can explain why it deserves a price premium and - most interesting of all - make money for recruiting people better than them.

My mother was in Shaklee [note that I'm not as familiar with Amway but think it generally has the same model] and one of the really fascinating things about it is that if she recruited someone who was downstream from her, she got some credit for their success. I don't know the exact formula but I do know that she partly had incentive to sell product and partly had incentive to recruit people even better than her. With the right people "downstream" from her, her income was enhanced. She was an entrepreneur (or at the very least a salesperson) who could make more money by recruiting other entrepreneurs (or salespeople) - some of whom might even be better than her.

I think this should be emulated by more traditional Fortune 500 firms. 

Imagine that when hiring someone to join the Fortune 500 firm, each manager wasn't just trying to recruit someone able to do the job and report to that manager. Imagine instead managers trying to bring on board "employees" who had the entrepreneurial drive or perspective that could result in their transcending their designated role to build the business. And imagine that these managers who hired employees who turned out to be even better at the entrepreneurial effort of building the business saw an increase in their income because of the success of the people they'd hired.

For one thing, managers would be happy to hire someone who quickly advanced beyond that hiring manager. You would be happy to have people who quickly outgrew a role and forced you to - sigh - go through the hassle of hiring again. For another, managers would do a lot to develop these new hires because of this incentive. (We invest in things that offer a return.) And the focus on the business would be less about finding people to fill roles in an existing business than in finding people who could build the business. This is not a bad mechanism (albeit just one mechanism) for the popularization of entrepreneurship. 

I kind of like the idea of this being the American Way (or as those two cool Dutch guys abbreviated it, Am'way). 

That's a fairly cool business legacy.

The Silly Debate About Bannon and Free Speech and the Two Reasons That the First Amendment is So Vital

As I write this there is a bit of a furor over the fact that Steve Bannon was invited to an ideas festival hosted by the New Yorker and then disinvited, prompting a flurry of pieces like this one in the New York Times by Bret Stephens.

"The only security of all is in a free press."
- Thomas Jefferson

Steve Bannon is a white nationalist. He believes that white superiority and national economies are nonfiction. There are people who think that he deserves an audience for his tried - and spectacularly disproven - ideas. Some of these people argue that this is a free speech issue.

At some point in the evolution of science, astronomers presumably stopped inviting "scientists" who argued that the earth was at the center of the universe. Like white nationalists, geocentrists had been proven wrong and no longer deserved a hearing.

Free speech doesn't mean that any curator of content like the New Yorker owes you their audience. I wish that were the case because I would sue every major news outlet and conference host (as would every person with a set of ideas they were trying to get out into the world).

There are two reasons for the first amendment that guarantees the right to free speech, assembly, religion, and press, what is essentially freedom of thought and expression.

The first is simply because it is such a vital part of the human experience to hold beliefs and to express those. This is reason enough for the first amendment but there is more.

The second is that a community with freedom of thought and expression will make more progress. If you espouse a really dumb idea, I can refute it with a better idea. As I stand there smug and proud, another person can come along with an idea even better than mine. And as they accept their accolades for such insight and intelligence, another person comes along with an idea that refutes theirs. And so it goes in a parade of progress that all depends on people freely having ideas, sharing ideas, and refuting or refining ideas to evolve a worldview that lets them better deal with reality. The ultimate test of their ideas is whether these ideas enable them to travel across the ocean or sky or space, conquer diseases that once conquered them, feel happy and know how to make others happy, and do other things like create energy or knowledge. The first amendment is not meant as a tool for protecting old ideas but as a tool for creating new ideas that we can act on in new ways.

The real power of the first amendment is that the evolution of ideas drives progress. This evolution is driven by the free expression and exchange of ideas and animated by beliefs we're passionate about.

Old ideas like white nationalism that destroyed a country as great as Germany and resulted in 100 million deaths do not deserve a second chance or a new audience. We already know it doesn't work. The first amendment doesn't mean that it has a right to an audience. Properly understood, the first amendment means that it deserves to be discarded as we move on to something more practical and intelligent.

What Freedom of Religion Has to Do with Abortion

One sign that the Catholic Church is losing its monopoly over the opinions of the Irish is the vote there in May to end the ban on abortion.

Make no mistake about it, abortion is about religious freedom.

And on this side of the pond, here in the States, the Republican Party is strongly supporting a weak president for the simple fact that he'll get them Supreme Court justices who could overturn Roe v. Wade.

One group believes that at the instant a sperm and egg combine they deserve the legal protection of a newborn baby. For them, this is the start of life. At this point we can't even see this "baby." Even months later 99% of us would be unable to determine whether we were looking at an embryo that will later turn into cattle who we will later kill to eat or a child who we would later die to protect. The belief that a sperm becomes a human life at the moment of conception is essentially a religious belief.

Because we have religious freedom in this country, the group that believes zygotes at the moment of conception are no different from children are allowed to act on their belief. In this country women are not forced to abort. Their belief about when life begins is a religious or philosophical belief. We respect such beliefs in this country.

Because we have religious freedom in this country, the group that believes that life does not begin at the instant of conception but instead begins later (whether that be in the first or second or - in some states - in the third trimester) are allowed to act on their belief. In this country women are not denied the right to abort. Their belief about when life begins is a belief that we respect in this country.

The movement to ban abortion, to make it illegal, is a movement to end the religious freedom of people who believe differently from devout Catholics and some evangelists. Belief about when life begins falls into a category more akin to religion than science.

Curiously, it's not a ban against people who believe differently than Christ. We don't have a single word of Jesus pertaining to abortion. Abortion is something added since his time by some denominations of Christians. Most Lutherans think that abortion should be legal and most Jehovah Witnesses's think it should not. (And 57% of all Americans think it should be legal.)

Religious freedom takes many forms. Abortion rights is just one and it deserves as much protection as the right to be, to start being or to stop being a Muslim or Catholic or Jew or atheist. If you dig into the philosophy of someone who wants to take choice away from women you'll find someone who - at heart - does not buy into the notion of trusting individuals with religious freedom. They don't trust women who disagree that a sperm is just one moment away from having a soul.

And finally, let's talk about sex, pregnancy and raising a child. Sex is pretty awesome. A pregnancy with the expectation that you'll bring a little person into the world is kind of magical. But having sex forced on you - being raped - is one of the most traumatic things that can happen to a person. It rarely gets talked about, but it seems to me that having a pregnancy forced on you, being forced to have a child, has to be incredibly traumatic. Women know when they're ready to bring a child into the world and if this isn't that time, their lives are rocked. It's awful. Sex, pregnancy and children are wonderful ... when they're freely chosen. It's unconscionable to force them onto women.

All of progress results in more choice, more freedom. We have fireworks to celebrate national independence. We call this the land of the free. We fight for freedom. We've killed people from dozens of countries to "protect our freedom." Freedom is that cool and that important to the human experience. To deny women the freedom to choose when they bring a child into the world seems like a terribly medieval kind of oppression and one of the worst kinds of thefts of freedom, a theft even worse than stealing someone's freedom of religion.

John McCain and What Might be Trump's Most Incredible Accomplishment

There were things I did not like about John McCain's politics. McCain and his buddy Lindsay Graham seemed intent on sending troops into every hot spot around the world. He gave us Sarah Palin, helping to move us towards candidates whose major qualification is fame rather than understanding. (He obviously regrets that. Palin was asked not to come to his funeral.)

There were things I did like about his politics. Most importantly, he pushed the Bush - Cheney administration away from torture; without him it's plausible that our official policy on torture would be no different from that of dozens of dictatorships around the world. 

Beyond politics, I'm not sure how you would dislike his person. A man who nobly stayed a prisoner of war for years rather than leave behind his fellow prisoners - a price that cost him, among other things, his ability to raise his arms above his head - is a man you can't help but respect.

He was an icon of the Republican Party and yet Trump attacked him.

Even though he was not running against McCain in the primaries, Donald Trump went out of his way to say that McCain was not a war hero. "I like people who weren't captured," said the man who claimed that his own personal Vietnam was avoiding sexually transmitted diseases at Club 54 in the 80s and who avoided being drafted into Vietnam because of "bone spurs." Trump made more than one enemy with that comment.

Trump has also - repeatedly - shown disrespect towards all the former Republican presidents named George Bush.

Here's Trump's remarkable achievement. To side with him, you have to side against both living, former Republican presidents and one of the party's most iconic figures and former candidate for president in John McCain. He has repeatedly shown contempt for those men. They have repeatedly made clear their disdain for him.

Trump has forced his supporters to choose between him and *

• American prisoners of war
• a gold star family (a family who has lost a child in combat)
• every living former Republican president
• the FBI
• his own Attorney General Jeff Sessions
• the American Intelligence community (which includes the CIA)
• Economists who argue for multi-lateral trade agreements like the WTO, TPP, and NAFTA (which includes the overwhelming majority of economists)
• the Editorial boards on 100 of the nation's top 102 newspapers (of the two newspapers that endorsed him for president, one was owned by Jared Kushner, his son-in-law)
• iconic conservative voices like George Will, David Frum, and David Brooks

And Trump has succeeded in this. Republicans have sided with him over all these opponents to his policy and person.

In spite of making enemies of every living Republican candidate for president and every former Republican president, Trump's approval rating among Republicans stays close to 90%.

Based on this, I think it is safe to say that no president has - in my lifetime - changed a party more. Republicans not only love him but are willing to side against so much of what past Republicans have sided with to do that. Most recently they have happily joined with him in his contempt for McCain. (40% of Republicans disapprove of McCain.) To redefine a party that much is an incredible accomplishment.

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* And of course as time goes on, the list of people Trump supporters have to side against grows. His former allies who have turned against him immediately end up on his enemies list. His former lawyer and confident Michael Cohen and former adviser Omarosa Manigault are just the most recent of the people who his supporters had to once revere and now disrespect.