12 November 2018

What if the Senate is Obsolete?

As economic power and population shifted from rural farms to industrializing cities in decades around 1900, Britain and Germany changed how their parliaments were defined. US legislature hasn't made that shift in representation and probably should. This is going to be contentious.

As Britain pioneered the industrial revolution, Manchester's population exploded. A center for industrialization, Manchester grew to become the UK's third largest city (after London and Glasgow) by 1901. Between 1700 and 1800 it grew from fewer than 10,000 to about 90,000.  Manchester's population doubled between 1801 and 1820 and then doubled again by 1850.

Yet when it began its growth, Parliamentary representation was granted to districts. Manchester did not even elect its own Members of Parliament (MPs) in the early 19th century. It was just part of the Lancashire district.

Meanwhile, in "rotten boroughs," a paltry few could elect two MPs. How few? In one borough, 7 voters got to elect 2 MPs. Dunwich had literally fallen into the sea, leaving just 32 voters clinging to land; they, too, got to elect 2 MPs. In a sense, this was representation by acreage.

The economy changed how population and power was distributed. Industrialization brought workers into cities like Manchester and left behind smaller populations in the little rural communities that - in part thanks to industrialization - needed fewer people to raise crops and tend livestock. While the population and economies of cities grew, their political representation had not.

This changed in the UK (the disparity between Dunwich and Manchester began to be addressed with legislation in 1832) and, later, in Germany, Austria and France through a series of parliamentary reforms starting in the early 1800s and continuing through the first world war. As the economy shifted from agriculture to industrial, as the important factor shifted from land to capital, these communities shifted political power to give voice to the members of this new economy.

The need for such a shift in the US is less dramatic. At least in the House. Divided into 435 districts by population (obviously a number that grows every decade), the US is not going to have anything as egregious as 7 people electing two representatives.

Nonetheless, the Senate is still structured around the notion that acreage deserves representation. Like the early forms of British parliament that found themselves antiquated by urbanization and industrialization, the US Senate gives disproportionate representation to owners of land rather than capital or knowledge. Two states, Wyoming and Vermont, have populations smaller than Washington DC. Those states have four senators and DC has none. 21 states with a population of 36 million get 42 senators; California with a population of 39 million gets 2 senators. In one part of the country, you are just one of 850,000 voices your senator must represent; in another, you are one of 19.7 million voices

California has helped to pioneer the information and entrepreneurial economies and that has made it successful in industries like aerospace, communications, silicon, software, biotech, and the internet. Of the 100 most valuable companies in the world earlier this year, the market cap of companies in California represented $4.2 trillion of the US's $14.1 trillion (and of the world's $21.2 trillion). California represents 12.4% of the American population and 30% of the value of the country's biggest companies. Like Manchester in the early 19th century, California's lead in creating jobs and wealth has not yet translated into commensurate representation.

In 1790, when the US was founded, 90% of workers were in agriculture. Acreage was a pretty good proxy for good representation at that time. Agriculture now employs fewer than 2% of American workers. Acreage is now a terrible approximation of how representation should be calculated. (And yes, I know that technically the Senate is a way to represent states not acreage but it does effectively do that. State representation does not follow people around as they move; states "govern" over a constant and stable area, not a constant and stable population. What this effectively means is that Senators represent acreage.)

As it now stands, the politics in the US is going to be disproportionately defined by the least populous and least affluent areas of the country because of how the Senate is structured. It's hard to imagine us ignoring that for too much longer or imagine that addressing this issue will ever be easy.


11 November 2018

The Lesson of World War One (That is too costly to learn twice)

Today is the 100th anniversary of the end of "the Great War." This war killed 15 to 20 million people but within a generation we had a second world war that killed 60 million. In between, the Great Depression caused so much economic misery that it gave power to communists and fascists throughout the world.

The decades after the first world war were a time of misery. The decades after the second world war were a time of peace and prosperity.

Between 1350 and 1950, there was at least one major military confrontation between European powers in every decade. What changed after 1950 is that we created international institutions.

There is a quip that nations either exchange goods or gunfire. Economic development and trade have been a boon to peace. The West also has institutions that link it together: NATO, the UN the IMF and the EU. These didn't really exist until after WWII and they do a great deal to explain why the time after the second world war was so starkly different from the time after first world war.

Just as the institutions of families, city councils, federal governments, corporations, churches and banks all deserve continual criticism and drive to improve them so that they adapt to changing realities and new possibilities, so do these post WWII institutions. They need improving. Without institutions we are like the other primates, though. We can't afford to neglect or discard them. And the West without these post-WWII institutions would be more like the world of Stalin, Franco, Mussolini, and Hitler than JFK and Reagan, Thatcher and Blair, Trudeau and Mulroney, de Gaulle and Chirac, and Kohl and Merkel.

The lesson of WWI is that without creating institutions that transcend nations we again slip into the the madness that goes by a variety of names (patriotism, nationalism, self-interest) and devolves into the worst kind of competition rather than raise us to the best kind of cooperation. It is a lesson too costly to learn twice.

06 November 2018

What is Certain in Today's Election

We live in a probabilistic, not deterministic world. The Democrats will probably win the House and the Republicans will probably hold the Senate but .... we don't know. Yet. Fivethirtyeight gives Republicans a 15% chance of keeping the House and the Democrats a 15% chance of winning the Senate.

Reality is choosing among possible paths as rapidly as it can but there are so many of them. We can simulate reality so much faster than reality can play out because reality does not simplify.

One of the things that we will learn is how unique is Trump. It is very normal for a Republican to win the presidency after two terms of a Democrat in the White House. In that sense, the 2016 election was boring and normal. But of course Trump is a bizarre character who seems to most of us to be hugely different than a typical Republican. If he really is, the backlash could be bigger than what is captured in current probabilities; if typical Republicans and swing voters think he is really no different than a normal Republican, there will likely be a swing towards Democrats but it won't be very dramatic; about enough to win the House but still be still be a minority in the Senate.

What is certain? 

Democrats could win by 6 points nationally (53 to 47) and still lose the House. Because of gerrymandering and the fact that individual voters in big cities have less influence even in House races, Republicans have about a 5 to 6 point starting advantage for Congress. That strikes me as the most remarkable thing about politics in this second decade in the 21st century.

Related, the counties that voted for Clinton represent two-thirds of GDP. It is the areas of the country that least understand how to create jobs and wealth that thought Trump's anti-trade, anti-immigrant, nationalist agenda sounded like a good idea.


As it now stands, our policy is being decided by minorities as counted by the number of voters and GDP. That's certain. And that is certainly weird.

What else is certain? The House will decide whether we learn what Mueller has learned about Trump. The House will decide whether Trump will - for the first time in his life - experience any negative consequences for any negative deeds. Voters today will decide whether we continue to have a Republican-led House that merely enables Trump or a Democratic-led House that checks his worst excesses. 

What is certain is that Trump will be more dangerous with a Republican-led House. I'm certain that I don't want two more years of a Congress that merely acquiesces to his every whim; I wish I could be certain we'll get that.

Finally, as I think about today's election, the words of Tiny Tim repeat in my head: God bless us everyone.

30 October 2018

Rise of Entrepreneurial Economy and Fal(tering) of the Information Economy

Here is the table from The Fourth Economy. One of the central arguments is that we're living through a shift from the information economy to an entrepreneurial economy.



Google Ngram is an interesting way to track the usage of various words and terms.

Here you can see the steady rise in the use of the term "entrepreneurial economy."


And here you can see how the use of "information economy" has begun to fall (even though it is still used considerably more than the term "entrepreneurial economy").




So apparently a long way to go but the fourth economy does indeed seem to be (oh so slowly) gaining on the third, information economy in terms of mention in writing. My argument is that it is emerging but we're still not quite attuned to it so it is becoming harder to ignore but still not completely appreciated.

Oh, and for bonus points, here are the three most recent intellectual revolutions. Given we build on each previous stage, and given that we've had centuries to become aware of the importance of the Enlightenment and Pragmatism, it makes sense that systems thinking is only now beginning to rise in general use and awareness relative to those.




29 October 2018

Saving the Nation with Poetry

Looking through my mail-in ballot and sad to see that there is still no proposition to tax pop songs to fund actual poets.

You think I'm being whimsical. If so you don't understand what nations are built on. The Grimm Brothers were nationalists and they wandered the country that was not yet Germany to find the stories Germans could tell themselves about who they were and were not. Focus too much on technology and not enough on the stories people use to inform them about what it means to be a particular kind of person and the technology will turn on you.

Imagine regularly hearing songs like this poem from Walt Whitman.

COME, I will make the continent indissoluble;I will make the most splendid race the sun ever yet shone upon;
I will make divine magnetic lands,
With the love of comrades,
With the life-long love of comrades.

I will plant companionship thick as trees along all the rivers of
America, and along the shores of the great lakes, and all over
the prairies;
I will make inseparable cities, with their arms about each other's
necks;

By the love of comrades,
By the manly love of comrades.
For you these, from me, O Democracy, to serve you, ma femme!
For you! for you, I am trilling these songs,
In the love of comrades,
In the high-towering love of comrades.

18 October 2018

Progress and the Marketplace of Ideas (or, how our love of villains and heroes is an obstacle to understanding systems)

There is a marketplace for ideas. It doesn't necessarily reward more effective ideas. It does seem to reward ideas that are easy to explain. Often, simple explanations that are wrong will triumph over more complicated explanations that are right.

One thing that is easy to understand it villainy. Bad guys and good guys, heroes and chumps. We love the movies that show the lone guy against the system, Bruce Willis taking on bad guys, bad officials and an entire skyscraper.

As it turns out, systems do more to define people than people do to define systems. I speak English. I never chose that. I was born into it and even the question of whether I would learn another language came to me in English. So much of who we are is not even our choice.

Much of what happens is the consequence of systems, not the people within them. Stories lend themselves to blame or credit to the people in these systems, though, and so those are the explanations we offer.

***********

Progress doesn't really impress people. We make about 6 to 8 times what people made a century ago and can buy things that they couldn't even imagine. The thing is, nobody is really impressed with that. We don't compare ourselves with our great grandparents. We know that they didn't have smart phones. What matters is whether our smart phone is two years older than our friends. We compare ourselves with our peers. We have this tendency to care less about progress than status.

How we are doing relative to our grandparents is a variable sum game. It is possible for all of us to do better than all of them.

How we are doing relative to our peers is a zero sum game. It is impossible for all of us to do better than all of us.

The more we teach kids to focus on relative status the more unhappy and disengaged they will be. Not only is that a lousy way to walk through life in terms of happiness but even in terms of progress it is bad: unhappy, disengaged people will be less effective at making life better relative to their grandparents.

The politics of status will be fear-driven and angry. It promises villains, heroes and quick change.

The politics of progress is slow. It actually works across generations. It is less concerned with villains and heroes than the systems that throw people into such a role. It is a less engaging, less simple story. That doesn't mean that it'll always be rejected, though.


***********

Progress is boring. I suspect that people are ready for that now.

08 October 2018

How Systems Thinking Will Define the Evolution of Democracy Within Your Lifetime

There is still a popular myth that our founding fathers fought a revolution in the late 18th century that - by the time they'd ratified a constitution in 1789 - culminated in democracy for all.

It was a much slower process than that. And understanding this process can give us a sense of how democracy will evolve.

Aristocracy were landowners. They inherited land and with it titles, privileges and power. Land was the basis of wealth during the emergence of nation-states and given that nation-states had borders it made sense that you'd look to the owners of the land within those borders (the king was often the chief landholder) and give political power to them.

In 1776 Adam Smith wrote Wealth of Nations and James Watt perfected the steam engine for use outside of mines. This birth of capitalism coincided with the birth of democracy across the Atlantic and what they represented was a shift in the basis of wealth from land to capital. The British had already seen a broadening of political power from landholders to capitalists even before the Americans designed a government that did away with royalty (the ultimate aristocrats) altogether.

At first, the vote in the United States was limited to landowning, Protestant, white men. It took nearly 200 years to guarantee the vote to minority, atheist, 18-year old women who rented. (A timeline for how democracy progressed from KQED is here.)

Commoners were allowed into the legislature throughout the West by about 1850. This dimension of democracy had to do not just with who could vote but who could craft legislation. About a century later, California gave voters even more power when the proposition allowed voters to completely bypass the legislature with a popular vote. By the time of Roosevelt's New Deal, voters weren't just able to vote for the folks who would craft their legislation but could actually craft their own legislation and put it before their fellow citizens for a vote.

Just like your car or computer, democracy has continued to evolve. And just like your car or computer, it has not yet reached its ultimate state. It will continue to evolve and I think that systems thinking will be a big part of what happens next.

Thomas Jefferson and our founding fathers understood how important education was to democracy. (Jefferson was apparently about as (more?) proud of founding the University of Virginia as he was in helping to found the United States.) Education still matters enormously to a functioning democracy but now it needs a new dimension.

Our lives are wildly dependent on systems. Ecosystems, financial systems, economies, healthcare systems, information systems, education systems, etc. If we get these wrong we get terrible outcomes; if we get these systems right we get wonderful outcomes. The most important political policy defines variables within systems and even the creation or change of systems. We can't make intelligent decisions about how to change or impact these systems without understanding their dynamics.

Systems often have lags and some causes explode to become a big deal and some causes dissipate into little or no consequence. Cause and effect in systems is complicated to understand and our systems thinking can be enhanced with the right kinds of simulations.

Cocaine makes you feel great but apparently isn't that good for your health longer term. Right now the American economy is phenomenal; 96 months in a row of uninterrupted job creation has doubled the old record (since records were kept in the late 1930s), unemployment at 3.7% is its lowest since 1969. Oh, and Republicans have doubled the deficit to one trillion dollars, its highest since the worst year of the Great Recession. We have a huge stimulus with unemployment under 4%. That makes for an interesting experiment but it also could be like cocaine binges that Trump's Economic Council Director Larry Kudlow was famous for in the 1980s. We may end up in rehab once the longer term consequences of this play out.

Even folks who study economies cannot say with certainty whether we're now creating a bad bubble (one like the bubble leading up to 2008 that raised home prices but didn't really create more economic capacity) or a good bubble (like one leading up to 2000 that actually created lots of new internet knowledge and capacity that would change what was possible). But we expect the average voter to make a judgement on policies and the politicians who support them without any real chance to play with simulations that would help them to understand dynamics.

Simulations can help to create new understanding. I think smart communities will tap into this.

Democracy will evolve to include massive online participatory simulations of the systems we depend on. One of the reasons I love history is that it lets us quickly - in the course of a book, chapter or even turn of the page - see how dominoes fall, even if those dominoes took a generation or two to fall. Like history, simulations don't require us to actually spend years or lifetimes to learn outcomes.

Simulations are not perfect but they do let you learn about dynamics in ways that you would not from prose. You can set up a model to capture what data and / or common sense tell you about cause and effect (e.g., raising interest rates will lower borrowing but increase the value of your currency on foreign exchange markets) for lots of variables and then run simulations to see what range of effects are possible as you tweak the knob on those variables. You're obviously hoping for a good model for predicting the future but almost as important as prediction (which is always hard and is at best probable, not precise), is learning more about dynamics that none of us are smart enough to keep track of ourselves. Simulations can sensitize us to cause and effect that isn't instantaneous and can be mitigated or exacerbated by other variables.

As democracy evolves to include simulations we participate in, it will make us smarter. Very few of us can calculate mortgage rate changes to reflect 20 vs. 30 year mortgages or a 3.2% vs. 4.1% rate but with a computer we can all easily discern that ourselves without reliance on an expert. Very few people can get across town in 15 minutes by running but with a car most of us can. Tools enhance our capabilities. Systems simulations seem like the most important tool one can imagine for any democracy that needs to navigate and manage the systems that so define our lives.

Whether it be tax rates or emission levels or research funding, in the future such important decisions will be accompanied by systems models that simulate these phenomenon. Will these simulations be perfect or even great? Definitely not and probably not. Will they be immeasurably better than reliance on prose and statistics to make the same determinations? Undoubtedly. And will future generations wonder how we could pretend to vote on such issues in the past without the aid of simulations, in the same way that we wonder at how people got around without cars? Definitely.

Progress isn't done yet. Democracy will continue to evolve, just as it has for centuries. The popularization of systems thinking will be a big part of that.


04 October 2018

The Most Important - and Largely Uncovered - Lesson from the New York Times' Article About How Trump Got His Wealth

This New York Times story about tax schemes used by the Trumps is a story of 3 things, only 2 covered by the media.
link:
https://www.nytimes.com/interactive/2018/10/02/us/politics/donald-trump-tax-schemes-fred-trump.html?smid=tw-nytimes&smtyp=cur

1. It clarifies how dependent Trump is on his father for his wealth. His father gave him over $400 million in various ways (Trump was a millionaire before he was out of grade school.) Trump is definitely not self-made and his net worth is not much different than what it would have been had he simply invested his life time of gifts into a stock index fund.

2. It itemizes the various ways the Trumps cheated to avoid taxes. A massive amount of tax. In one instance, they turned about $900 million worth of real estate into an estimated value of $40 million in order to avoid millions and millions and millions in tax.

All that the media covered. What they don't cover is item 3.

3. This is really a story about origins. Trump became who he is because he hasn't known normal consequences. The most succinct way to illustrate how his father covered his bet is this: Trump owed a bond payment on his failing casino in 1990. He did not have the money. Fred Trump - his dad - sent a trusted employee down to the casino to buy $3.5 million worth of chips simply to infuse Trump's business with enough cash to enable him to make the bond payment. (And even that was not enough; he also wrote a check that day to Donald for another $150,000.) Donald could take risks knowing that his father would cover that risk, do what he could to protect his favorite son. A pundit once quipped of George W. Bush that he was born on third base thinking that he hit a triple; Trump, by contrast, stands triumphant at the plate simply because his dad owns the stadium.

We teach our kids consequences. They learn that if they are rude to someone, they could lose them as a friend. They learn that if they spend all their money for the week by Wednesday they are penniless until Friday. We do things and sometimes good things follow and sometimes bad. We use that feedback to adjust who we are, to learn how to survive or even prosper within our world.

Trump never had to do that. His father protected him from normal feedback and thus normal learning. Trump never had to adapt to the world; he had money enough that it adapted to him. Here, from the story, is how Donald was raised:
By age 3, Mr. Trump was earning $200,000 a year in today’s dollars from his father’s empire. He was a millionaire by age 8. By the time he was 17, his father had given him part ownership of a 52-unit apartment building. Soon after Mr. Trump graduated from college, he was receiving the equivalent of $1 million a year from his father. The money increased with the years, to more than $5 million annually in his 40s and 50s.
For our purposes, the biggest problem with this is that it insulated Trump from normal consequences. He could be rude. He could be crude. He could spend money lavishly or invest it recklessly. And in the morning he would still have more income than 99% of the adults around him.

Fred Trump is now dead and gone. He's not around to cover his son's bad bets. Who now does? I think it is us, the American people. Donald has yet to suffer any negative consequences for anything he has said or done. We already do and we're not even done with the payments.

28 September 2018

The Simple Reason Kavanaugh Does Not Deserve to Be on the Supreme Court

If you wondered what people mean when they talk about white male privilege, you have to look no further than Kavanugh's testimony yesterday.

I was sick yesterday and was sleeping all but a few hours of the day, so my impression of Kavanaugh was gleaned from just twenty minutes or so of his testimony. (I saw nothing of Dr. Ford.) He made me think of Navy Seals who train here in San Diego. 

There are 2,500 Seals. It's a real honor and it is incredibly tough to become one. They are (rightfully) so proud when they make it and nobody thinks they deserve it. You have to earn that and the program is designed to weed out people. Designed to. And when they've made it they feel this combination of pride and honor when they realize what they've achieved. A friend of mine broke a bone in the training / audition process and was thrown out. Nobody owes you a place in the Seals. It's like making it into the NBA. It's not enough to be athletic, tall, calm in the face of adversity, fit, driven, a team player, competitive, a great shooter, etc. You have to be all of those to varying combinations. And there is no inside track; Michael Jordan's sons did not make it to the NBA and nor did his best friends from college.

The Supreme Court is so much more elite than the Navy Seals. Only 9 members, not 2,500. And it is an appointment for life, not just a few years. It makes sense to me that qualifying for the Supreme Court would be an incredibly demanding process. Any little thing should be enough to throw one's nomination into question in the same way that someone would be thrown off a list of top 10 NBA players for being a great player except not able to consistently hit a 3-point shot. It doesn't take much to keep you off the starting team and even less - far, far less - to be kept off the top 10 list.

So people questioned whether Kavanaugh really deserved to be there. They threw in one extra round of questioning. For a lifetime appointment.

Kavanaugh couldn't make it through one extra round of questioning without becoming rude (to senators?), angry, and crying? Really? This is how tough he is? And he was obviously outraged that anyone would dare to question whether he deserved to be on the court. Really? Not honored to be included but outraged to be questioned as to whether he should be included. That sense of entitlement baffles me. White male privilege, if it is anything, is this sense that I deserve this and you have to convince me why I don't. It's the opposite of, "I'll do everything I can and it still may not be enough. Oh, and if I do make it I'll feel so incredibly honored." Maybe it is a product of having never gone to public school. Maybe it's the product of being connected his whole life. He demonstrated none of the wisdom, the self awareness, or ability to remove his emotions from his judgement that one would expect of the most powerful judge in the country. If this was a tryout for a team, he missed all the 20-footers after making his layups the week before. We should expect more of someone supposed to be in the top 10.

Bill Clinton and George W. Bush put up with 8 years of steady criticism. Some of it highly personal. Some of it unfair. Attacks on character, their past, their intentions, their judgement, their intelligence, morals, etc. 8 years and I never saw an emotional outburst like this. Kavanaugh did not make it through 8 minutes of being challenged without expressing a real outrage that anyone would question whether he was qualified to hold one of the most powerful positions in this country. For life.

I felt like he should be eliminated for his obvious contempt for being questioned as to whether he deserved this incredible honor of a lifetime appointment to the highest court in the land.  He doesn't have the emotional intelligence to deserve that much power. I was aghast.

And then I went back to sleep.

------------
After posting the above, I saw this from my Senator.

https://twitter.com/SenFeinstein/status/1045708646527782915


22 September 2018

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 20th century to the first couple of the 21st 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 21st 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


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