Why You Will Never Again Earn Interest Rates Higher Than Zero (or, why capital wants to be free in a post-information, entrepreneurial economy)

In The Fourth Economy, I argue that capital no longer limits. We now have trillions in capital and unsurprisingly, returns to capital have fallen. When the market is flooded with potatoes, the price drops. When the market is flooded with financial capital, the price drops. The price of capital shows up as risk-free interest rates, and those seemingly want to be zero. Or less.

Frances Coppola concludes her post today with this (emphasis added)

 I suspect the post-Depression natural (real) rate is lower than we would like it to be, and it's just taken us best part of a century to understand this. If so, then this is not simply a matter of getting fiscal and structural policies right. It raises serious questions about the ordering of society. After all, a large number of people depend on there being significantly positive real returns on essentially risk-free assets. If significantly positive real returns on risk-free assets are a thing of the past, we owe it to those people to stop pretending we can restore their lost returns through "confidence-boosting fiscal consolidation" and "growth-friendly structural reforms". They simply aren't going to be able to live comfortably in their old age on the interest on risk-free savings.
The truth is we do not know when, or if, positive real returns on risk-free assets will return. If the future path for growth in future is low to zero, then they may never return. If this is the case, then the solution to the "Great Divergence" must be for nominal risk-free rates to drop. Permanently.

Gavyn Davies at the Financial Times questions whether the Fed might be wrong to raise rates this year. If Yellen is wrong about the economic recovery, and triggers a recession, she'll have little room to maneuver. Rates will still be low and she won't have many options then. Better, he suggests, not to risk another recession just yet and to keep rates at zero for a while longer.

Pete Spence reports on Sweden's Riksbank in the Telegraph. They have lowered interest rates to below zero.  Sweden has the third highest savings rate in the developed world and unemployment is still high. They have plenty of capital but low interest rates still don't seem to stimulate investment enough to create jobs.

What does this mean?

During the Industrial Economy from about 1700 to 1900, financial and industrial capital was the limit to progress. There was not enough of it and returns to capital were high. Returns to capital made the West rich.

During the Information Economy from about 1900 to 2000, knowledge workers were the limit to progress. Creating the public school systems to educate them took a lot of capital. So did creating the corporations for them to work in, the R&D labs, the information technology, and the factories able to produce the new products they designed. Between the demands of government and the burgeoning private sector, capital was still in demand and the price of capital - interest rates - was still high.

We seem to be past the limits of capital and knowledge work now. That doesn't mean that capital and knowledge workers are unnecessary.  It means that they no longer lead progress. Entrepreneurship is the limit.

Last century, we popularized knowledge work. In the US in 1900, less than 10% of 14 to 17 year olds were formally enrolled in education. By 2000, less than 10% were not. In a century, we transformed from an industrial economy dependent on child labor to an information economy dependent on adult education. The knowledge workers who were rare - who were often forced to be autodidacts who taught themselves during the 1800s - became the new normal.

Now, we will popularize entrepreneurship. Entrepreneurs who were largely self made in the last century will increasingly become the product of the system, just as knowledge workers are today. Along with a growing number of entrepreneurs, more employees will become more entrepreneurial.

This matters to capital because it gives capital a place for a return. Risk-free returns for government and corporate bonds may remain close to zero. Perhaps even negative. There is an abundance of capital. But all of these entrepreneurial ventures - most of which will fail - will require enormous sums of capital. The entrepreneurial economy will mean higher risks and higher returns for capital but of course those can be mitigated as corporations and investors diversify.

There are so many implications for this new, entrepreneurial economy. But from the perspective of capital, it means that it is going to be harder to get a return on investments without actually taking the risk to finance something new. And it means that we'll continue to have bubbles with startups as long as entrepreneurship remains the limit.

Probably for the next decade or two, capital will chase returns in corporations and IPOs. Already corporations have more money than they know what to do with, sitting on trillions in idle cash. The IPOs that really do have great potential - the products of great entrepreneurship - will command ridiculous equity valuations. It is going to be awhile before we manage to popularize entrepreneurship to the point that entrepreneurship no longer limits. Until then, stocks and IPO prices will be highly volatile, with trillions in capital chasing too few new opportunities.

But there is so much good that follow from shifting into this fourth, entrepreneurial economy. Among other things, it will do for unemployment what economic progress since medieval times has done for starvation. All of these startups will require employees. Just as the 20th century saw a growing proliferation of products, in the first half of this century we will see a growing proliferation of companies.

For now, central banks are flummoxed by capital markets. Given that capital no longer limits, though, it doesn't make a huge difference when they flood the market with more capital. And given that there is an abundance of capital even without central bank intervention, there is little or no reason to raise interest rates. Risk-free interest rates will stay close to zero in the developed world.

All of this means that governments are going to have to come up with a whole new bag of tricks for spurring development. And this time, the effective new tricks won't center around monetary or education policies that make it easier to invest or become a knowledge worker. This time the new tricks will center around the popularization of entrepreneurship.

The Republican Party Has the Same Problem as Islam

According to a 31 August poll from Quinnipiac University,

Only 8% of Republicans approve of the job Obama is doing as president.
Only 6% of Democrats approve of the job House Republicans are doing.

That is not a big difference. And it is hardly surprising given how different are the opinions of Democrats and Republicans about what makes for good policy. But the poll gets more interesting when it comes to each party's view of their own.

86% of Democrats approve of the job Obama is doing.
23% of Republicans approve of the job the House Republicans are doing.

That is a huge, nearly 4 to 1 difference. Most Democrats like their Democratic president. Few Republicans like their Republican House.

Obama's low approval ratings can be attributed to a difference in ideology between the Republican and Democratic Party. The House Republicans' low approval rating, by contrast, has to be attributed to a difference in ideology within the Republican Party.

I'm old. I can remember when Republicans were the more pragmatic party. You could question their policies but they were the first to point out that Democrats' starry-eyed proposals to end all suffering might not be practical or that certain regulations might make it nearly impossible for a small business owner to continue to operate. It's not like that now.

For a certain wing of today's Republican Party, pragmatism is an ugly word.They don't care about practical. Would freezing the debt ceiling and suddenly pulling 10% of GDP out of the economy actually trigger a recession? So what. It has to be done in order to protect their ideals of a smaller government. Would shutting down the government over funding for Planned Parenthood hurt the economy and potentially put people out of work? So what. It has to be done in order to protect the sanctity of life. For them, to give in a little on ideals is like being just a little pregnant. Compromising on ideals is proof that you aren't sincerely idealistic. It's proof that you are ... pragmatic.

Right now, the Republican Party has a fight similar to the one between factions of Muslims in the Middle East. On the one side are pragmatic moderates who are more interested in progress than ideological purity. On the other side are ideologues who are convinced that God is with them and to compromise with moderates shows a lack of faith, corrupts something pure. Whether you hate or love Muslims or Republicans, you better hope that the moderates among each win. Because ideologues prefer war to compromise.

Quinnipiac Poll numbers here:

Why House Leader John Boehner Should Be Replaced by an Algorithm

John Boehner is retiring from his job as Speaker of the House 30 October. The next day, on Halloween, he might just dress up as someone with actual power.

If you look at history or even across the world now, it seems obvious that as countries advance, power is dispersed. Theocracy gives way to religious freedom. Monarchies are replaced by democracies.

What we sometimes miss is that this matter of democratization, this continual dispersal of power to more and more people, doesn't stop. The founding fathers of this country forced aristocrats to share their power. Later generations forced the founding fathers' type to share power even with people who weren't Protestants, weren't land owners, weren't men, and weren't white. Power continues to diffuse.

John Boehner has had to negotiate deals with conservative fundamentalists who have been prepared to wreck the economy in order to limit debt and de-fund Planned Parenthood. It's not enough that he has to negotiate with the White House and Senate, or even House Democrats. He has to negotiate with extremist factions of his own party.

The problem is not John Boehner. Or even these radical conservatives. The problem is the process for negotiating deals in the House and Senate.

A good process is realistic. The model of Speaker of the House negotiating in backrooms assumes that power is still concentrated in an individual or small group. John Boehner doesn't actually have much power. But neither does any other congressperson and any model that assumes they do is bound to be frustrating and flawed.

Liberals and tea party conservatives seem pretty excited about making it to Congress. The problem is, no matter what promises they made to their constituents, a single Congressperson has no power to affect change. Well, not "no power." Just "very little power." To be precise, as one of 435 representatives, the power of an individual Congressperson is 0.2%. That's two-tenth of one percent.

Rather than expect someone to negotiate a deal between rural conservatives and urban liberals, why not just turn vote mediation over to an algorithm? A simple spreadsheet could suffice.

One congressperson wants to increase defense spending by $30 billion. Another wants to cut it by $20 billion. 433 other congresspeople would like to change it by varying amounts. Why not simply let every congress person submit a budget and simply take the average of those? If the average of all congress person's votes is to cut defense spending by 7% or raise it by 13%, that's what gets sent to the Senate for vote there. (A vote that could be done in the same way, only with 100 senators instead of 435 representatives.)

This does more than disperse power. It means that the most conservative rural Kentucky district gets the same representation as the most liberal San Francisco district. Exactly. Regardless of who is in the majority.

Among democracy's many flaws is this: it can easily leave 49.9% of voters feeling like losers. Their guy doesn't get in and they feel like they've lost their voice. Better to let everyone have a voice - and with it the message that with 307,000,000 other Americans, their voice is just one of many. Everyone will expect to be heard and everyone will expect their shout to become a whisper as it is averaged with the views of hundreds of million other Americans.

It probably won't be on October 31, but eventually, John Boehner will be replaced by an algorithm. It's not just because of the evolution of technology. It's because of the evolution of power. It's no longer enough to give it to just 50.1% of the voters. Averaging in everyone's views will disperse power to something closer to 100% of the population. And that is the direction this dispersal of power is going.

State and Local Spending Finally a Boost to - Rather than a Brake on - Economy

We are finally at the point in the recovery when spending at the state and local level can be a boon to the boom.

The Commerce Department revised its final estimate of second quarter GDP growth upwards today. In current dollars, GDP is up 3.9%. In current dollar GDP is up by 6.1%, an increase of $264.4 billion, which brings GDP to $17.9 trillion.

Why is it up? In large part because personal consumption, exports and home construction are up. New home sales are at their highest since before the Great Recession. The revised numbers for July report that new home sales were up 12%, a fairly stunning leap. Sluggish home construction and home sales have been a brake on the economy until recently. The same could be said of government spending.

Federal spending has gone down in each of the last 3 years. During 2012 - 2014, on average, federal spending dropped by 3.3%. State and local spending dropped by nearly 1%  per year on average. Now, in the most recent quarter, federal spending was unchanged and state and local spending rose a remarkable 4.3%. This trajectory could continue, helping to prime local economies.

Most of the states mandate balanced budgets. Taxpayers have this naive notion that this makes for sound policy, arguing that households have to balance their budgets and so should government. This is absurd, of course. What it means in practice is that during a recession, states are a huge drag on the economy and during a boom, their spending is likely to overheat the economy. During a recession, states have to layoff employees, adding to the employment carnage. They might also raise taxes to help fund services like, say, third grade classrooms; this adds to the pressure on households to cut back on spending, further exacerbating the recession. During a recovery, this amplification process is reverses. States spend more because they have more, and that adds to the boom. Even if they "given the money back to taxpayers" through tax cuts, they stimulate the economy because now households have more money to spend. Mandated balance budgets is a farce fueled by confusion. And at least for now, it is going to work in our favor.

Headlines I'd Like to See for Pope's Visit to US

Pope visits White House gift shop: passes on "I Slept in the Lincoln Bedroom" t-shirt and buys Supreme Court Justice souvenir robe instead

Pope visits NY, is kicked out of performance of Book of Mormon for laughing too loudly and shouting, "19 Year Old Proselytizers! Damn that Joseph Smith!"

Pope spokesperson apologizes for pope's behavior next day. Says pope was still confused that something as innocently named as a "hoppy ale" could be so disorienting.

Pope visits Philadelphia and adds his signature to Declaration of Independence. Shouts, "Down w/ the Church of England! Damn that King Henry!"

Pope spokesperson apologizes for pope's behavior next day. Says pope is sleeping off his first Cheese Steak and Hard Cider, still confused that a cider could be so disorienting

Pope weary of Explaining that He Was Not Referring to Doris Day in His Speech to Congress, snaps at reporter

Pope misquotes Yogi Berra in New York: Hell? Nobody Goes There anymore. It's Too Crowded.

Pope, driving Fiat, is pulled over by a New York cop for driving onto sidewalks, pulling up beside frightened hot dog vendors and shouting, "Is this the drive up window? Could you make me one with everything?" before turning to reporters to confess, "I stole that joke from the Dalai Lama." 

Pope spokesperson holds press conference to apologize for pope's behavior next day. After scanning sea of reporters, folds his notes, sighs, and just walks to the back of the room to help himself to a hard cider.

Vonnegut's Rule Predicts the Political Furor Over the Pope

The rarely seen dual pope

Vonnegut once quipped, "Thanks to TV and for the convenience of TV, you can only be one of two kinds of human beings, either a liberal or a conservative." You might consider this Vonnegut's rule.

Of course it is true that a century ago, in the days before TV, politics in this country was rich and varied. We actually had anarchists and communists, progressives and conservatives, royalists (yes - still) and robber barons, people whose politics centered around issues like abolishing religion and marriage or people whose politics was defined strictly by staying out of all foreign entanglements, from Cuba and the Philippines' movements' to gain independence from Spain to World War I and of course peace mongers who saw the League of Nations as prelude to one world government that would end war (Einstein was in this last group). Politics was fascinating and more varied than it is today.

TV today has to be quick, though. They don't have time for that much variety and confusion. They have commercials to get to. Any political stance that takes more than 2 minutes to fully explain won't be heard. This isn't just true of casual commentators on TV talk shows. Even candidates running for office have to stop talking after 90 seconds by most debate rules. Concision compels conformity to pre-existing conditions.

Now, the Pope is here and liberals are upset that conservatives are upset about his positions on climate change and income inequality. Popes - who predate Charlemagne, Machiavelli, Cromwell, John Locke, Thomas Jefferson and even Ronald Reagan - are now required to neatly fit into a pre-made mold of conservative or liberal that hasn't even remained static since the 1980s. And of course people tend to forget that this pope is free to take chances. Pope Benedict is still alive. For the first time in 600 years, there is a back up pope. If you have no quarterback on the bench, you play him carefully. If, on the other hand, you do have a backup quarterback, you can run plays that include comments about atheists making it to heaven, the acceptance of gays, criticism of capitalism, and riding around in a toy-sized Fiat rather than an imposing SUV or pope-mobile.

Of course it is absurd to think that the pope would fit so neatly into boxes designed for maximum reaction and minimal thought. You don't ask the world's last remaining absolute monarch what party he belongs to. And even if he did belong to a party, it certainly wouldn't be the party of a foreign country. His position on contraceptives and abortion, and women's role in the church aligns him squarely - perhaps even to the right of - most of this country's conservatives. And his position on poverty and income and wealth inequality aligns him neatly - perhaps even to the left of - most of this country's liberals. It's not just his fashion choices and hats that make him hard to neatly categorize.

And in this sense, the pope is probably like more of this country's population than the parties would care to acknowledge: a character whose sensibilities defy easy categorization. But we don't have time for nuance or elaboration before the commercial break. Besides, nothing is more exhausting than actually having to consider someone as unique. So, the pope, like everyone else, is required to abide by Vonnegut's rule. He's either with us or with them. Even with that distinctive hat, he can't be allowed to stand outside of our clearly demarcated lines.

The President Reminds us Where The Economy Was 7 Years Ago

I read a wide variety of sources. Still, I don't see anyone as simply report the facts as the president. No wonder his approval ratings remain low: his focus on facts makes him an atypical politician.

Here is an excerpt of remarks made by President Obama about the economy the day after the GOP debate.

Seven years ago today was one of the worst days in the history of our economy. If you picked up the Wall Street Journal that morning, you read that the shocks from AIG and Lehman were spreading worldwide. The day before, stocks had suffered their worst loss since 9/11. In the months after, businesses would go bankrupt, millions of Americans would lose their jobs and their homes, and our economy would reach the brink of collapse.

That’s where we were when I became chief executive. Here’s where we are today: Businesses like yours have created more than 13 million new jobs over the past 66 months -– the longest streak of job growth on record. The unemployment rate is lower than it’s been in over seven years. There are more job openings right now than at any time in our history. Housing has bounced back. Household wealth is higher than it was before the recession. We have made enormous strides in both traditional energy sources and clean energy sources while reducing our carbon emissions. And our education system is actually making significant progress with significant gains in reducing the dropout rate, reading scores increasing, math scores increasing. And, by the way, more than 16 million people have health insurance that didn’t have it before.
So this progress is a testament to American business and innovation. It’s a testament to the workers that you employ. But I’m going to take a little credit, too. It’s a testament to some good policy decisions. Soon after we took office, we passed the Recovery Act, rescued our auto industry, worked to rebuild our economy on a stronger foundation for growth. Other countries in some cases embraced austerity as an ideology without looking at the data and the facts, tried to cut their way out of recession. The results speak for themselves. America has come back from crisis faster than almost every other advanced nation on Earth. And at a time of significant global volatility, we remain the world’s safest, smartest investment.
Of course, I will not be satisfied -- and we as a country shouldn’t be satisfied -- until more working families are feeling the recovery in their own lives. But the fact is that what I’ve called middle-class economics has been good for business. Corporate profits have hit an all-time high. Slowing health care prices and plummeting energy costs have helped your bottom lines. Manufacturing is growing at the fastest clip in about two decades. Our workforce is more educated than ever before. The stock market has more than doubled since 2009, and 2015 is on pace to be the year with the highest consumer confidence since 2004. And America’s technological entrepreneurs have continued to make incredible products that are changing our lives rapidly.

Now, you wouldn’t know any of this if you were listening to the folks who are seeking this office that I occupy. (Laughter.) In the echo chamber that is presidential politics, everything is dark and everything is terrible. They don’t seem to offer many solutions for the disasters that they perceive -– but they’re quick to tell you who to blame.

Social Inventions Determine Whether Bright, Irreverent, Charismatic Kids Become Head of Apple or Head of ISIL

How you do in life is largely defined by a few lotteries that happen before you are conscious. We could mitigate that but it would require taking social evolution and social invention - what I'll just call memes - more seriously than we do now.

The first and most obvious lottery is parents. Do they have resources and wisdom to pass on? Or are they distracted by their own drama and deprivation? Are they connected to dozens of people who can help your career or are their friends drug dealers and ex-cons?

The second is the lottery that determines when you are born. No matter how well things are going, your life can be devastated - ended even - by being born shortly before a major war or plague or natural catastrophe. There were a lot of prosperous, intelligent, hard-working and ethical Jews who had the bad luck of being born in Europe before Hitler became Chancellor. Being born in Medieval Times means fewer options than being born in 2050. Being born so that your career begins with a major recession means lifetime earnings that are 10+% lower than had you started your career during a boom.

The third lottery to define your life is your nationality. Born in Canada or Sweden in the late 20th century? Or born in Iraq or Syria at that same time?

Which brings me to this poignant shot of Homs, Syria posted by Kumar Thangudu.  Steve Jobs' father was born and raised here and now the city itself has been razed by Assad's military. This community - like so many in Syria - is itself a casualty of the Civil War. This picture of Steve Jobs' father's home town reminds us of the vast gulf between Silicon Valley and Syria. Jobs was not raised here; he was instead raised in Sunnyvale at the dawn of the personal computer era. Here's what we know: there are kids streaming out of Syria now, displaced by devastation and death threats, who could have become the founders of Fortune 500 firms. They might yet, but the odds are so much lower than they would be had their parents raised them in Sunnyvale, CA instead of places like Homs, Syria. Their development has been stunted and every month their potential shrinks. Before the civil war, 97% of primary aged children attended school and now about 2.2 million children within Syria and about 500,000 who are refugees are not receiving education. These are not just normal kids who are being displaced, their lives disrupted. One of these kids was going to devise the cure for the cancer that will now kill you. Another was going to found the company that would have provided you with a great job so that you no longer have to rely on intermittent contract work. It is not just that their lives are made worse by this tragedy. Our lives are too.

Finally, the two lotteries that determine when and where you are born matter because at different stages of social evolution, in different places, you are born into a different sea of memes. Genes define biology; memes define society. One of the reasons that Medieval times were worse than now is because the memes were less evolved. People looked to supernatural explanations for a dead cow or neighbor rather than a biological cause. Today, if you get sick you might be asked to take a particular medicine in order to get well but rarely are you told to pay penance by praying 4 Hail Marys in the hopes that will make you well. Being born into a time when diagnosis that focuses on natural causes is common means that you'll be more healthy than people born into a time (or place even today) when the first cause is suspected to be supernatural, where people cast spells, chant incantations, burn incense or read palms for clues about what is wrong with you. Superstition and science both look for causes but the meme that says, "let's do science," makes for a better community than the meme that says, "let's do superstition."

The memes that make a country a great or awful place to live have a similar impact. A meme that says that Jews or the Irish or blacks or Hispanics are lesser people and should be treated as such are memes that can make the difference between a child who grows up performing at piano recitals and studying for the SAT and a child who learns to define her goals as simply avoiding violence.

Memes matter and in the same way that a complex set of genes orchestrate to create a leg or even a predisposition for a particular sort of heart disease or schizophrenia, memes orchestrate to create a prosperous, open community or one that's violent and oppressive. Memes define policies, governments, and cultural norms.

Few San Diegans know that when Jonas Salk founded the Salk Institute in 1960, his original intention was to gather the best and brightest to study social evolution. He felt that humanity's progress now depended on social evolution, not biological evolution that that social evolution deserves serious study. Nothing has happened since to suggest that he is wrong.

Get memes wrong and irreverent, charismatic, brilliant kids grow up to become Abu Bakr al-Baghdadi, head of ISIL. Get memes right and those kids become a Steve Jobs. It is the memes kids grow up with, not the genes they grow up with that define them and their options. Communities can shape memes and the processes by which memes accidentally evolve and are intentionally changed (social evolution and social invention) deserve at least as much funding as research into genetic engineering. There is too much at stake to leave the evolution of memes to random mutation.

Am I the Only One Who Thought ... at the GOP debate

Am I the only one who ....

Watching the candidates parade out in their identical business suits

... thought, "You can't help but admire their commitment to fiscal austerity to go so far as to buy their clothing in bulk."


Am I the only one who ....

Listening to Marco Rubio and Ted Cruz say that they'd put Rosa Parks on the 10 dollar bill

... thought, "Hmm. This year's conservatives are essentially last century's liberals. It's like those poorer countries where you see technology that you'd forgotten about, like old style Coke bottles in Mexico. If Sanders is an iPhone, even Rubio is a flip phone. (Well, okay, I guess that would mean Huckabee is still a can on a string. And Jindal is rotary dial. And Trump just looks like a phone until you try to speak back and then you realize that it's not a phone at all. He can't hear you. But I digress.)

Am I the only one who ...

When Jeb said, "As it relates to my brother, there's one thing I know for sure. He kept us safe."

... thought, "Well, yeah, except for that whole 9-11 thing."


Am I the only one who ...

When Rick Santorum talked about the minimum wage, saying, ""Republicans are losing elections because we aren’t taking about [workers], all we want to talk about is what happened to business, there are people that work in those businesses."


... thought, "Well doesn't that show a great mix of self-reflection and compassion?"


Am I the only one who ...

When Carly Fiorina said, "We doubled the size of the company [HP]..."

... thought, "Well yeah, by acquiring Compaq," and then got lost in a tangent that went something like this? Hmm. I wonder what country we'd be able to acquire under her presidency? Canada? Maybe something smaller and more profitable, like Luxembourg? And would she do it with military force or with debt financing? This could be as big as the Louisiana Purchase. She is a bold leader."

Am I the only one who ...

Watching the candidates get so excited about putting troops on the ground in Iran and Syria and Iraq (again)

... thought, "Did they actually pay any attention to the Iraq War? The one that killed thousands of American and allied soldiers and hundreds of thousands of the Iraqis we were pretending to liberate? The war that created 4 million refugees who - along with displaced Syrians - are streaming across Europe now? That war? Do they actually think that war turned out well or do they just think that the way to make it better is to go back into Iraq and add Syria and Iran to the list of countries to invade and rebuild? Is denial really that integral to the Republican identity now?"

Am I the only one who ...

Every time Lindsey Graham spoke about the war on radical Islam

.. thought, "Has any closeted gay ever gone to greater extremes to appear masculine than to demand an invasion of every middle eastern country? Does no one here realize how mad this is, as if he's trying to create an anti-Caliphate? He doesn't need a podium. He needs a psychiatrist's couch."


Am I the only one who ...

When listening to Ted Cruz and Bobby Jindal and Mike Huckabee express their anger with the Supreme Court and Congress

... thought, "He's not running for president. He doesn't want a balance of powers. He is running for king."



Am I the only one who ....

Every time Scott Walker looked into the camera with that oddly vacant expression


... thought, "We need a poster of him with this expression that simply says: "I couldn't make it through four years of college but, with your help, I'd very much like a chance to make it through four years in the Oval Office. This time, I think I can make it work."

Am I the only one who ...


When Rand Paul said, "Iran is now stronger because Hussein is gone. Hussein was the great bulwark and counterbalance to the Iranians. So when we complain about the Iranians, you need to remember that the Iraq War made it worse.
Originally, Governor Bush was asked, was the Iraq War a mistake, and he said, 'No. We'd do it again.'
We have to learn sometimes the interventions backfire. The Iraq War backfired and did not help us. We're still paying the repercussions of a bad decision."

... thought, This is why some people love Rand Paul. Here is a perfect example of reason and honesty about the limits of our ability to change any and every political problem around the globe.

Am I the only one who ...

Each time Republican candidates bragged about how they would face down Putin - arguably the world's most intimidating leader, a centa-billionaire despot with nuclear weapons -

... thought it odd that they would demonstrate their courage by pleasantly demurring from the moderator's invitation to actually elaborate on some accusation they'd made of a fellow candidate standing next to them, saying, "Well, you know, that's not what I really said ..."


Am I the only one ...

Who every time a candidate would rant about how terrible the economy is

... thought, If this is bad, I wonder what you would call it during the time you guys had the White House and both houses of Congress, when Dubya walked away from a crashing market and job losses of 796,000 in his final month in office. What adjective properly describes that? And what conceivable theory do you have for this catastrophe? Would that - too - simply be something that needs to be remedied with tax cuts?

Am I the only one ...

Who wondered when the Republican Party would look at the progression from Lincoln to Eisenhower to Reagan to Dubya to Trump and decide it might be time to change direction?

A Nation Prejudiced Against the South: What Ahmed Mohammed's Case Reveals About Group Psychology, Social Media and the Rush to Judgment

A black high school freshmen named Ahmed Mohamed was arrested in Texas for bringing a clock to school. Excited about the device he'd made, he brought it in to show his teacher. Soon he was walked into a back room to face four cops who insisted he tell them what it was. When he repeated that it was a clock, they accused him of being vague and put him in handcuffs.

And at this point, the rest of the nation kicked into its own prejudice, quickly judging Texas for its quick judgment of a black Muslim kid. The Texas authorities were accused of racism. Of being prejudiced against Muslims. The rest of the nation has such narrow views of the former confederacy that it's nearly its own kind of racism. It certainly falls into the category of judging a whole group of people by stereotype.

And it turns out, the rest of the nation was wrong. The arrest of 14 year old Ahmed had nothing to do with race or religion. Texas authorities had simply heard that Ahmed's invention involved science.

The Eventual GOP Winner Will be in Tonight's JV Debate

In August, Republicans had so many candidates that they held two debates. The main stage had the 10 top candidates and then there was a junior varsity (JV) debate that included the 7 "also-rans."

Now, a month later, the second tier group has only 4 left standing.

You can project this trend. 7 last month. 4 this month. That means there will be just one candidate in next month's JV debate. Think about that. A national platform without competition. An audience that would dwarf any that Donald Trump or Bernie Sanders could hope for. The ability to make your points without interruption or contradiction from other candidates. The luxury of acting stately, above the petty bickering that will surely define the more crowded stage later that day. To be the last JV candidate standing would surely catapult any candidate into the lead, perhaps the White House.

Keep an eye on the four JV candidates tonight. One of them is a strategic wizard, angling for a coveted solo debate slot that the rest of the GOP hasn't even considered.

Why We Should be Glad that Teachers are Not Treated like NFL Players

This video is hilarious because it contrasts the way we treat NFL players with the way we treat teachers.

My wife is a teacher and she works as hard - puts in as many hours - as any corporate client employees I've worked with. And it is no mean trick keeping 28 7 year olds engaged all day, every day. They learn in various ways, they come in - and go out - at different levels, and unlike university students, their behavior is her responsibility. I have huge respect for teachers. And I also know that teachers should be glad that they are not treated like NFL players.

The median salary for elementary school teachers is $42,000. That is a pretty stark contrast to the $2 million average salary for NFL players. It does seem outrageous that we show so little respect for teachers in comparison to grown men who run around dressed like 10 year old Pop Warner kids. 

But there are between 3 to 4 million teachers nationwide. There are only 1,700 NFL players. It's true that the NFL pays its players a lot of money but collectively, they make only $3.4 billion. By contrast, this nation pays teachers about $150 billion each year. If we paid teachers the same average of $2 million a year, they would cost us $7 trillion a year. To give you an idea of how much that is, the US is the only country in the world - out of 200+ - with a GDP of more than $7 trillion a year.

It certainly is possible that teachers will eventually be treated with the same respect, held to the same difficult standards, made to compete for a few select slots the way that NFL players do. In 20 years, it may be that it is teachers who students pay to learn from and not universities. Some modern version of YouTube might give students an immersive learning experience that comes complete great lecture, personalized conversation tailored to your speed, background, and potential, and simulations of experiences as varied as touching a whale and sitting on the ground during a battle. Traditional teaching could be dead and the new means of teaching could depend on a talented personality who gets the pay and respect normally accorded to a professional athlete, a news anchor, or a popular singer or actor.  

At that point, teaching could become a career structured more like the music industry or professional sports. A very few will make quite a lot and many will make little or nothing. Popular teachers - like popular singer / songwriters - might make all the money previously paid in tuition to schools and universities. Less popular teachers might fret about how to get more "hits" to be able to earn enough to move out of their parent's basement.

For now, teaching is a good, even if not lucrative career. In a generation or two, it could be a lucrative but not good career, supporting so few families that career counselors will dissuade most kids who think about pursuing it as a career. Like acting or music, aspiring teachers will be advised to have a fallback plan that is more reasonable, advising them that maybe - just to be safe - they should consider a career like professional sports.

Why Ted Cruz is Lunging Past Rand Paul to Vacant Anarchist's Slot in GOP Primary

Ted Cruz is threatening to shut down the government unless teenagers stop having sex. In the race to the right in the GOP primary, he's sprinted past Rand Paul's libertarian philosophy and seemingly put in the first official bid for the party's empty anarchist slot. Hard to imagine a more vivid anarchist's dream than a landscape littered with citizens (or whatever they call them in anarchy land) engaged in free sex unencumbered with any government representatives or regulations.

Okay, he wouldn't put it like that. Cruz would say that he's trying to stop funding for Planned Parenthood and will stop any budget coming through Congress with funding for the group. He can't get enough votes to stop Planned Parenthood funding but he might be able to get enough votes withheld from any budget that includes it. He can hold over opponents the threat of government shutdown, once again playing that popular Fall classic of chicken with the American economy.

Cruz is courting the Republican base which is literally dying off. People in their 70s and 80s really like this sort of courage in the face of poor women with the temerity to have sex. Meanwhile, young women who are dealing with the complicated reality of being female are the ones who are literally raising the next generation. They're outraged that he'd try to take away one of their rare healthcare options.

Cruz and the neo-theocrats (which would not be such a good band name), are not just pushing an agenda. By courting the dying by alienating the young, they're not just putting the economy at risk. They're hastening the demise of the Republican Party.

You might push back to say that Republicans still have - and conceivably will have for some time - Congress and a majority of state governor's mansions and legislative bodies. You're right. They won't lose their hold on certain swaths of this country any faster than the confederacy lost its ideological grip on the south. But in terms of serious bids for the White House (and Congress within a decade), they're out.

So why would Ted Cruz do this? He could just be stupid but I don't think so.

In her book, The March of Folly, Barbara Tuchman defines folly as the pursuit of policies that are harmful to the institution. Why did Renaissance popes do the very thing that seemed to encourage the Protestant Revolution? Well, their lives of excess and wealth may have been bad for the church but they were pretty delightful for them. If you have to live during the early 16th century, it's pretty nice to do it as pope.

Why do folks like Huckabee and Cruz make so many odd and outrageous comments guaranteed to alienate the average voter? There is good money to be made in speaking fees and talk radio contracts. While you need roughly half of the 300 million Americans to win an election, you need only one percent of them to win a lucrative contract at Fox. Their lives of excess and wealth may be bad for the Republican Party, but they are pretty delightful for them. And so the race to the right continues.

The Secret to Being a "Real American"

Obama is criticizing the anti-immigrant sentiment in this country as "un-American."
Fox news feigning outrage over the fact that new citizen Emily Blunt doesn't like the GOP candidates, is accusing her of being "un-American."

Emily Blunt and the xenophobes (which, by the way, would make a great band name) are probably wondering, "Well how could I be American then?" It's pretty simple.

From right to left on the political spectrum, there is nothing more American than calling someone else un-American. Blunt and the xenophobes just have to choose a group to accuse.

One Fundamental Flaw in the Stock Market

When you buy a stock, you are paying one price today for all of its future profits. If their sales or profit margins go up more than expected in the future, the stock rises. It is that simple. And that complicated.

It is not just future profits that you are trying to predict. That's hard enough. A new competitor or a new technology could steal your sales. Tastes could change overnight. Or you might come up with a new process that automates a step that used to be expensive, causing your profits to jump.

You also have to predict the value of those future profits. If you discount next year's profits by 10% and interest rates rise, you need to discount profits by 15%, lowering today's value of future profits. If currencies drop in value, future profits might rise.

There are so many moving variables that can drive predicted future profits up or down that it is no wonder that the market is continuously moving. But the most fundamental problem with all this has to do with margin of error.

You might estimate profits into the future but the further you forecast, the larger your margin of error. This is just a fact. The problem with this, though, is that the margin of error for the whole stock market is probably 5% to 20%, a swing as big - up OR down - as the movement in any given year. Even with really good forecasts, the difference between, say, $8 or $10 for the price of a stock is really just a difference in where you - arbitrarily - choose to land within your margin of error. "Big" market movements can be the equivalent of normal variation.

One fundamental flaw with the market is that we give precise prices to stocks that could more reasonably be given a price range. And because assumptions are continually shifting, so are those prices. This guarantees market volatility.

Time for US Candidates to Name Their Shadow Cabinets?

You don't exactly vote for a prime minister in the UK. You vote for the party and - of course - everyone knows that the head of that party will become the prime minister. 

In the US, the Democrats and Republicans are already engaged in a primary process that will result in a presidential candidate. By the end of it, Republicans and Democrats will have their candidates for whom folks vote. It is, in a sense, the same as the UK in that the result is a "party leader," but a little different in that you're voting directly for this candidate.

In the UK, though, they also have a shadow cabinet. Right now the Labour Party is out of office but they have a Secretary of Foreign Affairs, Transportation, Education, etc. Or more precisely, they have a shadow secretary of Transportation, etc. Barring last minute changes, when voters bring in the Labour Party, they would not only be clear about who will be prime minister but who will be in each of the cabinet positions. The shadow cabinet members are known and they could be interviewed about policy, etc. 

It would be fascinating for US candidates to name their shadow cabinet. It could tell us a great deal about their policy plans. At a minimum, one interesting question in a debate would be, "Which of your opponents would you most want in your cabinet? And in what position?"

I would give bonus points to any of the GOP candidates who answered, "Donald Trump. In a fetal position, still shell shocked about the way the country first seemed to love him and then turned on him like hungry wolves." But I digress.

How to Create an Entrepreneurial Revolution - Isenberg on Entrepreneurship as Self-Expression

Harvard Business Review's July 2010 issue featured an article by Daniel Isenberg about how to start an entrepreneurial revolution. Isenberg is a policy adviser on entrepreneurship ecosystems who works with Harvard, Columbia and Babson College.  Babson College sponsors the Global Entrepreneurship Monitor (GEM) that tracks changes in entrepreneurial activity from around the world, so he's drawing from a wealth of data and experiences. You can hear Isenberg's interview with Karon Dillon here.

What most resonated with me though, were his closing comments about the definition of entrepreneurship. One of my closing arguments in The Fourth Economy is that the popularization of entrepreneurship will mean a change in the individual from someone who is defined by their institutions to someone who defines those institutions. Isenberg does a brilliant job of articulating one often overlooked reason that entrepreneurship matters at the close of this interview.

KARON DILLON: What’s the single biggest mistake a local or national government could make in trying to stimulate entrepreneurship?

DANIEL ISENBERG: Well, I think the single, biggest mistake is to look outside the country too much. Of course, it’s important to learn from everybody and to use best practices or better practices or any practices from anywhere else. But the most important thing that all governments should understand is that first of all, entrepreneurship is part of the human spirit. It exists everywhere and it exists in their societies now. It may be buried, it may be hidden, it may be suppressed, but it’s there.
The most important thing that governments can do is encourage it to express itself. Entrepreneurship is really no different in that respect from art, music, poetry, and other endeavors that have an element of creativity in them. It’s a way of expressing yourself.
So certainly entrepreneurship is a way of generating financial wealth, but it’s also a way of self-expression. It’s, I think, the most important thing that governments can do is encourage people, to empower people, to try their ideas out, to try and make something happen. You’d be surprised at how far that encouragement can go.

Thanks to Jason Brunson for the tip on this at his Rise of the Fourth Economy site.

The Burden to "Never Forget" - The Families of the 9-11 Victims

Joe Biden was on Colbert's new show last night and Colbert asked him about the recent death of his son, Beau Biden. Joe had the presence of mind to say that his loss was not unique. He was sure that there were quite a few people in the audience who had suffered similarly but what made his different was the fact that as a public figure, he has had an enormous outpouring of sympathy and support that so many other people don't have.

The friends and family of 9-11 victims have something similar. Every day, there are acts of violence and tragedy that unexpectedly end lives. Thye leave behind family who are shocked and mourning. The families of 9-11 victims are no different in this respect except, of course, the incredible outpouring of public support for their mourning. It wasn't just the sympathy, the memorials, the events, and the reporting that showed such enormous respect for their suffering. Congress even passed a bill that paid each family of the victims an average of $2,083.000.

In this sense, no victims of tragedy have ever had more support from the American people. On an average day in this country, 44 people are victims of homicide. About every two months, we lose as many Americans to homicide as we lost in the 9-11 tragedy. To add a layer of tragedy to what families suffer in this loss, those deaths are just part of the background noise of daily life. We don't stop - we can't stop - to acknowledge each one because then, our lives turned into perpetual mourning and reverence, what would there be to mourn? Death would be a release from solemnity and sadness, since that would define our days. So these families are forced to grieve while the world around them goes on as if nothing extraordinary has happened. By contrast, the families of 9-11 victims have gotten the proper respect for something so tragic. The world stopped to grieve with them. This doesn't happen in normal, personal tragedies.

But this could also be a tough thing for those 9-11 families. It's been 14 years. Life is about feeling loss and pain. It's also about moving on and letting go of the solemnity and sorrow that comes with a loss like that. I wonder if that isn't harder to do when every year the entire country reminds you of your loss and you - likely - feel obligated to awaken feelings of pain and loss that you may have finally released sometime in the last year. This could make survivor's guilt feel particularly acute, as if you aren't just letting down people around you but letting down an entire nation when you move on with your life and begin laughing about things even on the anniversary of the most shocking tragedy in your life. While 9-11 victims' families have had special support from this country, they've also had a special burden placed on them to "never forget." That can't be easy.

The Truth About Addiction - Another Reminder that Context is Everything

Everything that follows is a quote from Johann Hari writing about research by Bruce Alexander, a professor of psychology at Simon Fraser University in Vancouver, BC.  I don't feel the need to elaborate.

Get a rat and put it in a cage and give it two water bottles. One is just water, and one is water laced with either heroin or cocaine. If you do that, the rat will almost always prefer the drugged water and almost always kill itself very quickly, right, within a couple of weeks. So there you go. It’s our theory of addiction.Bruce comes along in the ‘70s and said, “Well, hang on a minute. We’re putting the rat in an empty cage. It’s got nothing to do. Let’s try this a little bit differently.” So Bruce built Rat Park, and Rat Park is like heaven for rats. Everything your rat about town could want, it’s got in Rat Park. It’s got lovely food. It’s got sex. It’s got loads of other rats to be friends with. It’s got loads of colored balls. Everything your rat could want. And they’ve got both the water bottles. They’ve got the drugged water and the normal water. But here’s the fascinating thing. In Rat Park, they don’t like the drugged water. They hardly use any of it. None of them ever overdose. None of them ever use in a way that looks like compulsion or addiction. There’s a really interesting human example I’ll tell you about in a minute, but what Bruce says is that shows that both the right-wing and left-wing theories of addiction are wrong. So the right-wing theory is it’s a moral failing, you’re a hedonist, you party too hard. The left-wing theory is it takes you over, your brain is hijacked. Bruce says it’s not your morality, it’s not your brain; it’s your cage. Addiction is largely an adaptation to your environment.[…]We’ve created a society where significant numbers of our fellow citizens cannot bear to be present in their lives without being drugged, right? We’ve created a hyperconsumerist, hyperindividualist, isolated world that is, for a lot of people, much more like that first cage than it is like the bonded, connected cages that we need. The opposite of addiction is not sobriety. The opposite of addiction is connection. And our whole society, the engine of our society, is geared towards making us connect with things. If you are not a good consumer capitalist citizen, if you’re spending your time bonding with the people around you and not buying stuff—in fact, we are trained from a very young age to focus our hopes and our dreams and our ambitions on things we can buy and consume. And drug addiction is really a subset of that.

—	Johann Hari, Does Capitalism Drive Drug Addiction? (via beemill)

The Camry-Effect (or why inflation is actually even lower than its already low reported rate)

Inflation is under-reported because products are evolving faster than prices are rising. This should color the Fed's decision about raising rates this week.

There is no good way to adjust this year's incomes to account for the fact that you can buy things that didn't exist last year. Before 2000, drivers in the US couldn't buy a hybrid car, in-car navigation, or an iPod (or iPhone for that matter) to be used for playing favorite tunes while commuting.

How do you capture inflation or deflation on products that didn't previously exist? Imagine an inflation report in the year 2002: "The price of a loaf of bread went up 2% this year. The price of a camera phone either soared or plummeted, we're not sure which. The argument for its price soaring is that last year it cost nothing and now it costs something. The argument for its price plummeting is that last year you couldn't buy one for any amount of money and this year you can afford one for some amount of money. Our inflation-calculators aren't sure where to go on this one."

The rate of new product introduction even muddies the true price of old products. Cars, for instance, continue to accumulate new and better features.

Let me illustrate this with a Camry, one of the most popular cars sold in the US.

You can buy a 2015 Camry LE (their basic model) for $22,970. At the start of the century, you could buy that Camry LE for only $20,388. If you were to calculate inflation assuming that the 2000 LE and 2015 LE were the same product, you would say that prices were rising 0.8% - less than one percent - a year. That is a low-rate of inflation but even that estimate may be too high.

As a product, the 2015 LE is actually more like the 2000 XLE - Toyota's top of the line Camry. The 2000 XLE sold for $24,068. If that is the comparison, prices have actually been dropping at about 0.3% a year, not gradually inching upwards.

How does the 2015 LE compare to the 2000 XLE? Is the old fancy the new plain?

The 2015 LE engine gets better mileage and has more horse power than the 2000 XLE. The mpg has gone up. In 2000, the XLE got 30 mpg highway and in 2015, the LE gets 35 mpg, an uptick of 17%. It is not just more efficient. It is more powerful. The 2015 LE's horsepower is 30% higher than the 2000 LE. At its core - its engine performance - this year's base model is better than 2000's luxury model.

What about features?

The 2000 XLE has two features that you'd have to pay extra for on the 2015 LE: automatic climate control and a power moonroof.

By contrast, the 2015 LE includes eleven features that weren't even available on the 2000 XLE: MP3 compatibility, steering wheel mounted audio controls, delay-off headlights, outside temp display, low tire pressure warning, electronic stability, traction control, brake assist, dual-front side airbags, overhead airbag, and a knee airbag. What was once not even an option on the luxury car is now standard equipment.

If I could bring the 2015 LE back in time to sell alongside the 2000 XLE,  I could actually sell it for more. Today's standard car is more luxurious than 2000's luxury car. But let's be conservative and say that the XLE;s moonroof is enough to offset its less impressive engine and other features. Let's simply say that today's LE is worth the same amount as the 2000 XLE. To repeat, today's LE sells for $22,970 and the 2000 XLE sold for $24,068. If you could buy LE's today and - with a time machine - sell them in 2000, you'd actually make money. That's something but whatever it is, it's not inflation.

The Camry is not unique. Products are getting better faster than they're getting more expensive.

Since the summer of 2012, inflation has hit the Fed target of 2% only a couple of months. The Fed already knows that it is low. And obviously, the experts know about this Camry-effect but calculating its impact on the inflation consumers experience is tricky. Again, do you assume the prices of new products or features has soared or plummeted? This assumption makes a huge difference to your basket of goods.

Things that are scarce - like beach front housing or any urban housing with a reasonable commute - are going up in price. As long as incomes and / or populations continue to rise, so will the prices of such scarce goods. But things that can be mass manufactured are going down in price. And the twin forces of globalization and product innovation are going to continue to put downwards pressure on these prices.

Since the 1970s oil shocks jolted prices upwards, there have been jeremiahs predicting hyper-inflation. Every time the Fed engages in something like Quantitative Easing - QE - by pumping billions or trillions into the economy, people get nervous about inflation. But the inflation never comes.

Obviously, it is still possible to have inflation kick in because of reckless monetary policy. Less obviously, that possibility has never been lower.

What is the punchline in regards to the Fed's decision next week to raise interest rates? Inflation isn't just low: it's lower than you think it is. Monetary policy is not too accommodating. If anything, it is not doing enough to allow for the rate of innovation and progress in products. If we want that progress to continue, there is no reason to start fighting inflation with higher interest rates.

I think the word that you are searching for is ...

Kim Davis bookended by Mike Huckabee and her third husband

I think the word that you are searching for is neo-theocrats.

I am honestly not offended by the fact that Davis considers herself a good Christian in spite of the fact that she ignores the words of Jesus prohibiting re-marriage after divorce.

I am honestly not offended that she thinks that same-sex marriage is wrong in spite of the fact that Jesus never once said a thing about homosexuality. (And if you think that homosexuality wasn't present in the ancient world of Greeks and Romans, you might consider reading Plato's Symposium, for example, a work that holds up as a model of mentoring a curious mix of pedagogy and pederasty.) 

Kim Davis and Mike Huckabee are part of a religion that calls itself Christian but only loosely aligns with Christ's teaching. I don't have a problem with that. It's pretty normal.

I do have a problem with the fact that Huckabee doesn't dress more like Davis's husband. It would better signal what to expect when he talks.

From Marriage to Currency to Countries and Ownership - It's All Made Up (and that's why it's so important to get it right)

Marriage is made up. Some religions practice polygamy and some practice monogamy. King Louis XIV had a wife through whom he had children who were heirs to the throne. This was business. He also had a mistress who he turned to for love. At one point in history, Inuit men considered it good manners to offer a wife to a overnight guest traveling through. A people in southern China are curiously matrilineal. Once a young woman reaches a particular age, she is given a room that opens directly to the outside world. She is free to never take a lover, pair with one lover for the rest of her life, or take two different lovers every night. These lovers are not really a part of her family, though. She raises the children with her mother and siblings and her lover(s) is presumably back home helping his sister(s) to raise their children.

Money is completely made up. Money has been clam shells, tobacco leaves, cigarettes, bank notes, gold coins, a magnetic strip on a piece of plastic and blips stored on a server. Central banks like the Fed can create or destroy a trillion dollars with a change in policy. One day a certain pile of currency is worth enough to buy a house and the next it is not enough to buy coffee.

Government is made up. In some governments, only spokesmen for God decide what is legal. In other governments people profess to trust God but follow the advice of pollsters. In some countries, a dictator makes every decision. In other countries, the fate of a person or piece of property is subject to review by a myriad of councils, committees, and government branches so convoluted that even experts can't be sure what is legal.

Even nation-states are made up. Civil wars are reminders that the decision about where to place a border is the product of (sometimes violent) agreement. In an alternate reality, the Kurds have a country that spills across the northern part of Iraq and southern part of Turkey and the United States includes parts of Canada but not the former confederacy.

So much of what we experience of life falls into the category of social construct or social invention. Work, school, religion, business, markets, marriage, family, and government are all made up. It is not that companionship or learning or transactions don't occur spontaneously and "in nature." They do. But agreement between two people who can shake hands is not the same as having laws, markets, and jobs that let even total strangers cooperate. One of the reasons that the modern world is so much better than the ancient world is because of this ability of strangers to collaborate to create products and services, and that rests on layers of social invention.

To say that all of this is made up is not the same as saying that it doesn't matter. A 747 is made up. It is the product of imagination, engineering, art, design, and manufacturing. And if you are sitting in a 747 about to fly, you are not casual about whether this "just made up" jet can actually fly. The 747 is just made up but how it is made up matters enormously. It determines whether it is safe, whether it is affordable, whether it can fly across only a lake or an entire ocean .... Your experience as pilot or passenger is defined by how well it is made up. And as we get better at making up things like cars and jets and air conditioning, our experiences get better. It is the same with governments; the government that casually allows slavery creates worse experiences than one that insists that even children have legal rights.

If you just watch someone from 100 yards away work, you might not be able to tell if they are working as a slave, a contractor, an employee, or a part-owner. Slave, employee, and part-owner are just social inventions but the reality experienced by people in those roles, the consequences in terms of quality, creativity, and engagement are very different. These roles are just made up. The consequences of one or the other are not.

If you re-make something like government, you can unleash unprecedented levels of creativity, wealth, and autonomy. Government in the West was most notably re-invented by Enlightenment thinkers of the 18th and 19th century. Today, we in the West see government as a tool that is to be used by the common person. It is no longer the case that we have kings and subjects, people who are tools for the king's will. Instead, we have public servants who are tools for the commoner. The result of re-making government is that we live in a world that people of 1775 could not imagine, much less experience.

Which brings me to the corporation. It is time to re-make it. The fact of default ownership being a product of the financial capital of outside investors instead of the intellectual capital of employees is just made up. The fact of CEOs having the power to create and change the business while knowledge workers within it are given specific roles is just made up. The fact that the corporation spends so much effort trying to enhance the customer's, the user's experience of a product but so little effort to enhance the employee's, the producer's experience of making or designing the product is just made up. The fact that we think of employment as "doing time," paying someone a monthly wage instead of thinking of employment as creating wealth is just made up. The fact that the Fortune 500 will send back a trillion dollars to investors instead of investing it into intrapreneurial ventures from within the firm is just made up. The fact that we expect employees to do a job rather than create a business is just made up. The fact that we make employees accountable for areas of fairly narrow responsibility instead of diversifying investments of time and money into multiple, parallel ventures to capitalize on what we've learned about portfolios to maximize returns not by minimizing risk but by diversification is just made up. We want employees to feel a sense of ownership. The easiest way to do that might be to give them ownership. Once upon a time, employees mostly did manual work. Today many do knowledge work. Next in the evolution? More employees will become more entrepreneurial.

Everything is made up but the consequences are very real. Having trouble creating enough jobs? Popularize entrepreneurship, making more employees more entrepreneurial (in addition to simply creating more traditional entrepreneurs who are employee to no one). Having trouble creating more wealth than debt? Task employees with creating businesses rather than just creating products. Suffer from income inequality? Stop giving only CEOs the authority to orchestrate businesses in ways that are lucrative.  "We are all priests," Martin Luther said when he decided to re-make the church. It's time to make everyone an entrepreneur or CEO. Does all of this sound foreign, like the talk of democracy probably did to people in the 17th century? Re-make education to teach entrepreneurship and social invention, changing the expectation of children before they even come to the stage of questioning how to fill these new roles. Through education and the media, make these expectations part of the new norm.

So why stress the fact that civilization and its institutions is just made up? Because if we believe that this is just the way that things are, we're simply prisoners of these social inventions. They are, for us, not social inventions but instead social reality. One consequence of the realization that these are inventions just like our cars and can openers is a sense of possibility. And while the beliefs that these are social realities or that these are social inventions is just made up, there are very real differences in the consequences of such beliefs. If we think that all of this is just social reality to which we must conform, we feel helpless. If we think that all of this is social invention that we can participate in defining, we feel responsibility and engagement. Because while this view about things just being made is itself just made up, the consequences of holding such a view is not.

I Still Believe in the Bible's Definition of Marriage

Yesterday a couple of friends posted this:

You can hardly blame a person for wanting some constancy in a world in flux. It's not enough that he suffers from job uncertainty or that he has to ask his kids to teach him how to use his new phone: even the institutions that define families are changing. It's disconcerting.

So what is the bible's definition of marriage?

Abraham married his father's daughter by another mother and sent his servant to find his son Isaac a wife from among his kin. The servant came back with Isaac's cousin, who Isaac married.

About 4 or 5 centuries later, in Leviticus, God forbids marrying half-sisters, which would make Abraham's marriage illegal. There is no prohibition against marrying cousins, so while his parents would have been in a forbidden relationship, Isaac would have still been fine under Levitical law.

Later, King David had either four or five wives (it's not clear) and sometime after he died, God is quoted as saying, "Have you considered my servant David? He is perfect." Polygamy was perfect (well, for a man) in Old Testament times. David's son Solomon certainly seemed convinced of this. He had 700 wives (and somehow still found time for 300 concubines).

A man could also get a divorce and re-marry. Jesus speaks out against that practice in the New Testament. Curiously, he doesn't speak out against the practice of polygamy, although this somehow seems implied, It would make little sense to ban someone from re-marrying if they could marry more than one woman at a time.

Paul went further than Jesus. Jesus thought it was wrong to re-marry and Paul thought it was wrong to marry.  He wasn't exactly a champion of family values, holding that it made little sense to marry given the world was about to end. But he seemed to grudgingly accept that some people would be unable to live without companionship and intimacy and thought that marriage was the best place to find such solace.

What, then, is the bible's definition of marriage? Something that was evolving. Just like it is today.

Labor Day Weekend Special: Republican Candidates Come Out in Strong Support of Workers Tired of Being Told What To Do

Kim Davis is a county clerk in Kentucky who has refused to issue marriage licenses to same-sex couples. Republican candidates Marco Rubio, Ted Cruz, Mike Huckabee, Bobby Jindal, and Rand Paul have all said that they support her.

I like this. I'm glad to see Republicans coming around to the side of labor. We should do more to support any employee who is just tired of doing what their boss says she should do.

So I imagine one of them - Rubio? - will soon release a campaign ad that opens in a diner, the camera panning pass various impatient looking customers. It finally stops at a weary waitress sitting with her back to them.

"Oh yeah! Well I'm tired," says Iowa waitress Belinda Myers. "Those customers can just stand up and get their own damn coffee while I sit here for a bit."
"I'm going to fire you," retorted her boss Brian who - to be fair - was tired from his own long hours.
"I object," Marco Rubio jumped out of his booth to say. "I don't think that you should get in the way of her personal freedoms by making her do work she doesn't like."
"But it's her job," Brian retorted.
"That's not the point," says Rubio, turning to the cameras.
"It's not?"
"No!"

And like that, Marco Rubio would sagely turn the Kim Davis situation from a partisan issue into something that would unify workers everywhere who are just tired of being told what to do.

I just hope that he gets his campaign ad out in time for Labor Day. If he does, I think this could tip the primary in his direction.

Bad News Drives out Good (Why the Trade Deficit Improved While You Were Busy Panicking About China)

Last month, China's economy appeared to slow. The stock market promptly lost about $2 trillion in value in a few panicked days.  What happens in China matters, but there are about 6 billion other people on the planet and there was some good news from Europe that was drowned out by all the shouting about the apocalypse.

Unemployment in Europe fell to its lowest level in about 3 to 4 years. Europe's economy is warming up. This is good news to offset the bad news from China.

Today the Commerce Department reported a drop in the trade deficit of 7.3% for July. One reason cited? An increase in exports to the European Union. As more Europeans get jobs, they buy more American goods.

It is odd that Europe's good news was so thoroughly drowned out by China's bad news.

China's is the second biggest economy in the world, at $9 trillion. Well, second if you rank by countries. The European Union's economy is actually twice as big, at $18 trillion. (Even though its population is about half as large, at only 500 million.)  If Europe begins to grow at healthy rates it will be more than enough to offset the fact that China's growth levels are dropping from extraordinary to just great. Today's drop in our trade deficit is just one reminder of that.

There is always bad news somewhere and when it comes to media coverage, the bad news will drive out the good. Pessimists aren't much fun but they do hold our attention. Bad news gets thrown in your face. Good news you have to go look for. Europe's change from no recovery to slow recovery isn't particularly exciting news but it should be.

The Popularization of Entrepreneurship Continues: Google Becomes Alphabet and Entrepreneurship at Record Levels

In The Fourth Economy, I argue that last century we popularized knowledge work and now we will popularize entrepreneurship. Google's recent announcement that they are restructuring the company to become Alphabet and the new Global Entrepreneurship Monitor (GEM) Report offer more evidence that we're making progress in the creation of a new, entrepreneurial economy.

The popularization of business entrepreneurship will play out in two ways. One is that we'll see more entrepreneurship as normally conceived: more people starting more businesses. The other is that within companies, more employees will become more entrepreneurial. Last year, both kinds of entrepreneurship rose.

Yesterday, researchers at Babson and Baruch Colleges released their annual GEM Report. This is as important as the jobs report released each month by the BLS that is (rightfully) tracked and analyzed by an entire industry of analysts and pundits. The jobs report tracks how many new jobs have been created. GEM tracks entrepreneurial activity, which tells us how many jobs will be created.

Levels of entrepreneurship are their highest since the report began in 1999 and are rising within organizations as well. Here are a few key findings.

• Entre­preneurship levels among the U.S. working age popu­lation edged upward to 14 percent in 2014 (an estimated 24 million Americans) - reaching the highest level recorded in the 16 years GEM has assessed entre­preneurial activity.

• Optimism is at the highest recorded level. More than half the U.S. population (51 percent) believes there are good opportunities for starting businesses.

• 6.5 percent are starting businesses within organizations; an indication that entrepreneurial initiatives within a larger corporate environment coexist alongside independent startups.

Tomorrow, bls.gov will announce another month of job creation. This will make 59 months in a row, breaking the old record of uninterrupted job creation by 11 months. (A record set in the late 1980s.) This GEM Report suggests that this streak could easily continue for years. Years. As if breaking the old record of 4 years by a year is not extraordinary enough.

But this last bullet about the millions of Americans who are starting businesses from within organizations ties to Google CEO Larry Page's announcement that Google will become Alphabet. This is just as promising. Obviously, Google is a search engine that sifts through petabits of information and brings back cash. Less obviously, it is a giant incubator that could give us the first self-driving cars and innovative medical products like glucose-sensing contact lenses, unleash an army of service and delivery drones, and extend the human lifespan. Founders Larry Page and Sergei Brin now plan to create a parent company called Alphabet that will have beneath it various companies, the most obvious of which is Google itself. I think it's a brilliant idea because it offers a new model of the corporation, a sort of conglomerate / incubator hybrid. It is a great example of social invention, the necessary partner to technological invention in the dance of progress.

Venture capitalist Marc Andreessen pointed out in a recent interview that CEOs have become very conservative, with really small investment horizons. This year, the Fortune 500 will give back a trillion dollars to investors through buy-backs. Rather than invest profits into new ventures, they will send the cash back to investors. These investors - who have communicated to CEOs that they want returns now - then take this money into private ventures and tell those founding CEOs, don't worry about profits yet: we want to build a business.

There are some advantages to this. It suggests a division of labor between established companies and startups. But it is fraught with waste as well, assuming as it does that really smart, driven young people who often don't know how to operationalize the difference between, say, design and performance qualifications should get investment dollars to create the next generation of products rather than employees within a company. A startup has to create so much from scratch whereas an established company has so much knowledge about the important nuance of customers, products, process and technology. A model that makes more employees more entrepreneurial could tap into that knowledge and may even do it more efficiently and effectively.

Fortunately, the GEM Report confirms that millions of entrepreneurs are working within organizations and Alphabet suggests a way such entrepreneurship could be institutionalized. Years before Larry Page announced that Google was becoming Alphabet, I wrote this in The Fourth Economy. 

One compelling example of a company that does blur the boundary between running the business and creating a new business is Google. Google has a curious rule that allows them to promote entrepreneurship from within the company: they ask programmers and engineers to devote about one day per week - on average - to pursuing a project of their own. This is not the classic R&D that managers approve and fund centrally. These are projects conceived and pursued by individuals without going through central boards for approval. This is Google management showing the same kind of confidence in individual initiative as do capitalist governments. Gmail and Google Earth are among the initiatives that began as individual projects.
One of the fascinating things about this is that Google is treating the resource of knowledge workers like venture capitalists do money. That is, Google is using a scarce resource - its programmers and engineers - and investing a portion of their time into new ventures that have a very high probability of failure. This seems like a silly short-term policy. Odds are good that they are just diverting precious attention into projects that will not pay back. Long term, however, this seems brilliant. They need only one spectacular success every five to ten years in order to maintain a growth trajectory that even corporate giants like GM and Microsoft have been unable to sustain. And in truth, Google may not pull this off. Yet if this meme catches on and many companies try this, we will have more entrepreneurial ventures and as a result will have more products, services, jobs, and wealth. It seems a fact that any one venture like this is destined to fail and any larger community that regularly invests in such ventures is destined to thrive.
The important question in the eighteenth and nineteenth century was “how do we create and attract more capital and make it more productive?” At that stage of development, all other advances followed from smart and creative answers to that question.
The important question in the twentieth century was “how do we create and attract more knowledge workers and make them more productive?” At that stage of development, all other advances followed.
Now the question ought to be, “how do we create and attract more entrepreneurs and help them to be more successful?” At this new stage of development, all other advances will follow.

It's a beautiful thing when people as sharp as the ones at Alphabet (nee Google) are asking that question because you can bet that theirs will be creative answers that could help in the transformation of work and business. And that is the business of the fourth economy.