This 2023 Job Market Defies Expectations - But No One Acts Surprised

The 2023 job market is incredible.

With upwards revisions to March and April, this May jobs report adds 432,000 new jobs to the 2023 total. The average for the first 5 months of 2023 is 314,000 jobs created.

How strong is the rate of 314,000 jobs per month? It is 3.6X what it averaged from 2000 through 2019. A year with a monthly average of 314,000 jobs created would fall into the top 10 for all the years since 1939, when records began.

Four variables make job creation at this rate absurd (in a good way).
1. We began 2023 with 3.4% unemployment - the lowest it had been in 54 years.
2. The Fed has been dramatically raising interest rates. 15 months ago, their overnight rates were 0.05%. That rate is now 5.05% - its highest in 16 years.
3. 10,000 baby boomers are hitting retirement age every single day.
4. 2021 and 2022 rank first and second all-time for job creation. 12 million jobs created in 2 years. That’s absurd and would suggest that the rate of job creation might “correct” to a lower rate.

Any one of these four variables would be a perfectly plausible explanation for a slow year of job creation in 2023. And yet the economy is creating jobs at a rate that would make headlines and create buzz during FDR, Reagan or Clinton’s presidencies. (FDR – like Biden - had 2 years with a more rapid rate of job creation than 2023. Reagan and Clinton each had only 1.)

Of course, we will find a way to dismiss this and move on to the next bit of handwringing to replace our fretting about the price of eggs. And the memes will be catchy - so much better than - yawn - data.

"You People Seem to Think We Have to Start With Reality" - Living in a World Where Everything is Made Up

“You people seem to think that we have to start with reality. But we’re an empire now, and when we act, we create our own reality. And while you’re studying that reality – judiciously, as you will – we’ll act again, creating other new realities, which you can study too, and that’s how things will sort out. We’re history’s actors … and you, all of you, will be left to just study what we do.”
Karl Rove quoted by Ron Suskind in “Faith, Certainty, and the Presidency of George W. Bush, October 17, 2004.

Once upon a time, you were raised in some small place, told how the world was, and everywhere you looked you saw evidence of what you were told, all confirmation that the world was just one way.

Then everyone's world grew larger, we were exposed to other peoples and places, they invented travel, fiction, philosophies, and then science fiction, and then moving pictures and now everyone is exposed to a huge variety in lifestyles and ideas and values and can hardly escape the realization that everything is made up. We're all acutely aware at any given moment that things are one way now but they could be different. Likely will be different.

This could excite you, exhaust you, confuse you, make you open up or hunker down.

There are two choices once people get this insight.

1. Just make up and declare anything you want because, you know, everything is made up. Say that when people are offended by you, that's on them. Throw a piece of sheet metal into the air and call it an airplane. Just lie to people even when you know they know you're lying. Live by your own rules and change those depending on your mood.

Or,

2. Feel sobered by this insight that everything really is "just made up" and that making up the wrong things can leave a trail of dead bodies, broken hearts, bankruptcies, chlamydia and cynical, angry youths in your wake. Take at least as much care in "just making things up" as an architect and general contractor would in "just making up a house" that someone they loved was to live in for decades.

Freedom is a beautiful thing until it suggests freedom from consequences or conscience.

Debt Created the United States of America: Hamilton, The Constitution, National Debt and the World's Greatest Economy

Debt created the United States of America.

It was very expensive to go to war against the greatest empire in the world and newly independent colonialists ended the war with about $80 million of debt, representing roughly 40% of the $200 million total GDP at that time.

It was not just the magnitude of this debt. Before the constitution was created and approved, there wasn’t a national government. There were thirteen states but they were not united. The army was going to force congress to pay soldiers back wages after the war and this was the closest our nation has ever come to a coup. (Washington was able to head off this mutiny simply because he was, well, Washington.) In 1783, interest payments on bonds had been suspended and there was no good way to make interest payments. Again, states were real but – at this point – the federal government was fiction that still needed a constitution to become real. Fictional entities generally don’t pay their bills. The first treaty after independence was between Connecticut and Massachusetts settling a border dispute, as if they were France and Italy.

The historian James Beard made a very persuasive argument that the constitution that created the United States of America was driven by bond holders who wanted a national government that could honor its debt. Debt they held.

Collecting revenue and paying the national debt was one of the acts that made the Constitution real, that created the United States.

Hamilton was keen to honor the face value of all this debt. During the Revolution, various Americans bought bonds to help to finance the war. Some surely did it in the hopes of gain. Some did it as a show of support for this aspiring government. By the time the founding fathers were establishing this new democracy, though, most of the debt had been devalued to about 10 to 20% of its face value. Nobody really expected that it would be paid back fully.

Hamilton, though, thought that by honoring the debt he could do a variety of things – chief among them creating a financial system to encourage investing and early manufacturing and he saw the credibility of this new government as key to its credit and financial system. He pushed for valuing the debt at face value, bringing the value of existing bonds from 10 to 20% of their face value to 100%. He saw how debt could literally become a foundation for a modern economy.

Who voted for the new constitution that would create a federal government? And national taxation that would allow this new country to pay back its debt? Bond holders. Only 42% of the Senators who did not hold bonds voted to approve this new constitution. By contrast, 80% of the Senators who held bonds voted for the constitution, voted to create these United States. This vote – that literally established the United States – was biased by those who had the most to gain financially from creating a United States. Because a key part of this new constitution was the ability to tax and spend at a national level. This increased the value of bonds, making them worth 5 to 10X as much as they had been.

During the war, it was states that incurred the debt. The United States did not exist. One of the chief reasons for creating a new nation rather than simply leaving the states independent of one another was to consolidate the debt that states could not repay.

The Senators who helped to create Hamilton’s financial system that was embedded in the constitution made a great deal of money voting for it. But so did the country, creating a financial system that is now the most influential in the world.

Hamilton saw debt as a foundation for a great financial system, borrowing from the British model. In this he was very much aligned with George Washington. The Bank of England had been founded in 1694 and was to become the model for most central banks, a catalyst for the industrial revolution. Curiously, George Washington remained a stockholder in the Bank of England throughout the American War of Independence. Unsurprisingly, Washington approved the first Bank of the United States.

In Hamilton’s mind, taxes, debt, banking and industry were all of a piece. Taxation could finance interest payments on the debt. The debt could be used to create bank stock, something against which banks could issue banknotes and those banknotes could be used to finance industrial stocks, creating a manufacturing economy. Hamilton was one of the few founding fathers who really understood banking and finance, how debt itself could be a valuable asset.

Hamilton’s vision was merited. The US has never defaulted on its debt - has always honored the full face value of its bonds - and is the largest, most dynamic economy in the world and in history. (Russia, by contrast, has always defaulted before any 30-year bond has been paid back and even today about 20% of its population has no indoor plumbing.) And while Hamilton died before he could see it, the US did surpass the UK as the greatest industrial power in the world. And except for one year in its long history, the US government has always held debt since. And continued to prosper.

The United States since its founding has held debt. Honored that debt. And prospered. Just like it was designed to do from the moment our founding fathers first created and approved the constitution that first created this nation.

How Did the Party of Lincoln Degenerate Into the Party of Trump?

How did the party of Lincoln degenerate into the party of Trump? Trump who was born rich and presided over years of peace and prosperity punctuated by a dozen angry tweets every day. The man who claimed to be the most persecuted politician in our nation’s history. Lincoln who was born poor and was engaged in civil war for the entirety of his presidency but left us with some of the most inspiring and hopeful words of any president. Who became the first president to be assassinated. The stark contrast between them and the parties they led may point to a coalition of groups alienated by the transformative policies of three of America’s most influential presidents.

Thomas Jefferson was probably a deist and was (quietly) dismissive of Christianity. Jefferson’s University of Virginia was the first university in the West that was not initially founded as a school of divinity. He was in France as the American ambassador while the constitution was being written and approved. Coming in late to the debate, he argued that the constitution needed a Bill of Rights. The first of these ten amendments, inspired by a similar provision penned by Jefferson himself for Virginia's constitution, ensured the separation of church and state. “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof.” Fast forward to the era of Reagan, and we find a stark contrast. Reagan appealed to religious conservatives by pushing for an amendment endorsing prayer in public schools, thus inserting religion into public education, a domain which Jefferson fought to keep distinct.

Abraham Lincoln was an advocate for a new kind of industrial economy. Despite his lack of formal education, Lincoln’s fascination with the potential of machinery to revolutionize the economy led him to promote industrialization. But he didn’t see investments and their returns as something to be limited to private citizens and corporations. Lincoln championed the importance of government investment in both capital and education, leading to the establishment of the transcontinental railroad and Land-Grant colleges. The transcontinental railroad he authorized was completed in 1869 and it created a national economy that stretched from coast to coast. Before 1870, the American economy grew about 0.45 percent a year. After 1870, it began to grow about 2.1 percent a year – a stunning difference. (How stunning? At 0.45%, GDP takes about 160 years to double. At 2.1%, it takes only 34 years to double.)

To finance these initiatives, Lincoln instituted the IRS to administer the country’s first tax on income. The narrative of government investing in its citizens through taxation - particularly of those with higher incomes - has faced opposition in the last generation of Republicans, who have promised to reduce government spending and investment on initiatives aimed at poverty alleviation, public schools, and infrastructure. And modern Republicans continue to enact cuts to the IRS that make it more difficult to accomplish the goal of tax collection that Lincoln first defined.

No president experimented more boldly with initiatives to create jobs and to enhance the value of labor than FDR. He gave labor unions more power. He invested huge sums in R&D and education. He made workers more secure with unemployment insurance and social security. He strengthened capital markets but not at the expense of workers. In the few decades after FDR’s presidency, the new policies he’d instituted fed economic growth even more dramatic than the incredible growth that followed Lincoln’s presidency. LBJ took these policies even further, working to give equal opportunity to women, minorities and immigrants whose inclusion made America’s workforce a leader in diversity, productivity, and innovation.

Eisenhower, the first Republican president after FDR, largely continued with FDR’s policies. He wrote “Should any political party attempt to abolish social security, unemployment insurance, and eliminate labor laws and farm programs, you would not hear of that party again in our political history. There is a tiny splinter group, of course, that believes you can do these things. … Their number is negligible and they are stupid.”

Since Nixon, though, the Republican Party increasingly aligns itself against the socioeconomic reforms introduced by Franklin D. Roosevelt.

The policies of Jefferson, Lincoln, and FDR each led to an era of unprecedented economic growth, each time creating a level of prosperity unseen before in human history. Yet, the pushback against their policies has not disappeared. The religious conservatives, who were skeptical of Jefferson's clear separation of church and state, have found a home in today's Republican Party. The fiscal conservatives, resistant to Lincoln's vision of the government as a significant investor in public projects, are – weirdly – now a prominent and vocal part of the GOP. Social conservatives, disgruntled by the increasingly multicultural fabric of a society and economy dependent on not just men but women, minorities, and immigrants, were drawn to Trump's unapologetic rhetoric.

So, how did the party of Lincoln - arguably the most progressive political force of its time - transform into the party of Trump? It seems to come from a coalition of those resentful of Jefferson's secularism, Lincoln's faith in public investment, and FDR's commitment to empowering labor. These three presidents led us away from a past that many conservatives now idealize. The GOP that first emerged as a party able to create a new, prosperous future has become a coalition of those yearning for a return to a perceived golden past, wishing to unravel the legacy of America’s three most influential presidents.

6 Presidencies, 4 Economic Measures - Data on Inflation, Per Capita GDP Growth, Job Creation and Change in Annual Deficit

 Some of you like data that helps to inform your worldview. This post is for you. Here is data comparing the economy during six presidencies by four measures: inflation, per capita GDP growth, jobs created, and change in annual deficit.

How Kevin McCarthy's District and its Economy Might Explain Why He So Casually Threatens to Blowup Capital Markets

House Speaker Kevin McCarthy is toying with the possibility of blowing up the global financial system by refusing to raise the debt limit. It's a terrorist act that threatens to eradicate tens of trillions of dollars in assets in an instant.

McCarthy is a Californian but he's from an inland district more likely to employ farm workers than programmers. I think this may be part of why he feels like a functioning capital market is less important than, say, other California House representatives from places like Silicon Valley or any districts where they support rational thought.

The biggest employers in McCarthy's district (outside of the hospitals) are farms and oil companies. These are industries that rely on land - natural resources like oil, water, and sun - more than knowledge workers and generally trying to resist innovation. The value of an oil company could rapidly be halved with a breakthrough in new technology like fusion or solar energy. It is certainly possible that McCarthy sees financial markets as engines for disruption, financing the very technologies and industries that could obsolete jobs in his district. Why worry too much about the capital markets that seemingly worry so little about the industries that your district is home to?

The biggest employers in Silicon Valley are information companies like Apple, Meta (Facebook), Intel, Alphabet (Google), Cisco, and Adobe. These companies are heavily reliant on well educated knowledge workers from all around the world, people intent on developing new products. The value of one of these information companies could rapidly be doubled with a breakthrough in new technology. People and their representatives here rightfully see the plot to blow up financial markets that funnel money into a constant stream of startups and inventions as a threat to their economy.

McCarthy's casual disregard for international capital markets is a weird reminder that as capital markets have become more disruptive, the Republican Party has morphed from its pro-capitalists origins. Loudly anti-communist and now anti-capitalist as well, the Republican Party has become a refuge for anarchists who protest stifling regulation from government and the disruptive progress of capitalism alike, seemingly longing for an imagined past of in which capital markets created stable jobs and governments didn't funnel any tax money into unworthy people or programs.

For those of you from outside our great state of California, here are some comparisons from Kevin McCarthy's district and the 3 districts that comprise most of Silicon Valley. The districts most appalled at McCarthy's tactics have double the portion of college educated, about 3.5X as many households making more than $200k, and more than 3X as many foreign-born residents. Oh, and a voter in Silicon Valley is 2.5X as likely to vote for a Democrat rather than a Republican who might think it sport to eradicate trillions in global assets as a tactic to force cuts in funding for food stamps.

America's Puny Investments in the Future as Stark Contrast to Investments of our Greatest Presidents Jefferson, Lincoln, and FDR

1Q GDP equates to annual GDP of $26 trillion.

As a component of that, non-defense federal government investments are 4% of private investments.

That's incredibly puny if the game is to grow the economy.

Thomas Jefferson wanted a smaller federal government. (3rd president of the US, he died considering Virginia his country.) Yet even Jefferson was willing to invest in the future. Jefferson spent 2.5X the annual federal budget to make the Louisiana Purchase - an amazing investment for Jefferson (that represented needed financing for war for Napoleon). In the two generations after Jefferson's presidency, the US grew faster than any country in history.

Lincoln not only waged the costliest war in the nation's four score and seven years history, at the same time he funded an incredibly expensive transcontinental railroad and land grant colleges and other major investments. In the two generations after Lincoln's presidency, the US economy grew faster than any economy in history.

FDR increased government spending more than the GDP of most nations, with everything from social security and unemployment insurance to massive investments in the factories and science needed to win WWII. In the two generations after FDR, the US economy grew even more than it had after Lincoln's presidency.

Outside of defense, our national government is investing an amount that Jefferson, Lincoln, and FDR would consider rounding errors. It shows a pathetic lack of interest in future potential and suggests that Americans are more driven by fear than hope.

RWorld's 3,000th Post - We Make Our Institutions and Then They Make Us

We make our institutions and then they make us.

The political crisis we face is so pervasive that it is almost invisible: Americans have lost confidence in institutions. Every institution. Church. State. Media. Schools. On average, the portion of Americans who have confidence in institutions has fallen about 60% since the late 1970s. It's tough to sustain a society in those conditions.

Right now we have two response to this crisis. One is the Trump response of tribal impulses, cynically decrying every expert and the institution he rode in on as corrupt or misguided.

The MAGA crowd's take on institutions was articulated by Rush Limbaugh in 2009.
"So, we have now the four corners of deceit, and the two universes in which we live. The universe of lies, the universe of reality, and the four corners of deceit:
government,
academia,
science, and
the media.
Those institutions are now corrupt and exist by virtue of deceit.”

Rejecting the institutions that define our modern world is akin to embracing a Hatfield and McCoy kind of world where you can't do much more than live like early Americans from a time when it took about 90% of the population to feed us. It is a world that excites survivalists. 

That's a crazy path championed by crazy people.

The other option currently offered is essentially to pretend that these institutions are fine and people should appreciate them more. That actually works far better than societal collapse but it seems to consistently succeed at making more people more angry. Life is pretty good in this world but a growing percentage of people fail to believe that.

There is a third option that no one seems to be talking about.

Thomas Jefferson was part of radically redefining politics and government in 1800. Lincoln did the same about 1860, and FDR in the 1930s and 1940s. Along with Washington, these three presidents consistently rank the highest in historians assessment of great presidents. 

One thing that defined them is that they had far less regard for tradition than they did for future potential.

Our next great president will be the one who creates a way to redefine our institutions so as to restore trust in them and to realize our own potential, showing little regard for institutional tradition and a great deal of regard for institutions' ability to shape our potential. An inventor creates or improves a product. An entrepreneur creates or improves an institution. The next president to successfully change our country as much and as well as Jefferson, Lincoln, and FDR will popularize entrepreneurship, leading to a change in our institutions and our experience of them. Among the many shifts this will represent is a world in which our institutions conform to our potential rather than requiring that we conform to their traditions and constraints.

It won't just require someone who is looking more to the future than the past. It will require a shift in power akin to what Jefferson and the founding fathers made. By 1800, the US had shifted power from aristocrats to the people. (Okay. That admittedly is the 30,000 foot view of this nation's founding but still contains key truths.) This next great leader will do something similar within the institutions we rely on, shifting the power over shaping them from legislators who see them as something to be built once into the customers and employees using them to be continually shaped. Like previous, great democratic changes, this will shift power from elites to everyday Americans, making our democracy more democratic. 

Why Bitcoin is a Bad Investment and Futures You Should Buy Instead

Markets will eventually come back from last year's dismal performance. For those of you tempted by bitcoin rather than stocks, here are some things to consider.

One, bitcoin can never scale as a medium of exchange. It is scarcely able to process the number of transactions you'd need for a shopping mall much less a national or global economy.
The VISA network can process 24,000 transactions each second.
Bitcoin can process 5 to 7. It is not designed to support actual transactions and will never become a widely used medium of exchange.

So if it is not viable as a currency, can it be considered an asset? No.
If you buy a share of stock, you get a share of its future earnings, or profits. Bitcoin has no profits, represents no claim on any asset or wealth.
If you buy a bond, you are buying a right to interest payments and / or principle on debt held by a government or company. Bitcoin offers no interest payments or future payoff.
Assets have underlying value. Bitcoin does not.

Well, is it not - at least - a form of money or legal tender?
Again, no. The lowly dollar is legal tender. What does that mean? US dollars have written on them, "This note is legal tender for all debts public and private." If I owe you $1,000 for the really fancy shoes I bought from you, you are obligated to accept my $1,000 in currency or VISA transaction. It is the law. No one is obligated to accept your bitcoin for payment any more than they're obligated to accept a shiny rock or curious leaf you found on your walk.
Bitcoin is not designed to support transactions and thus replace currency, is not an asset and is not fiat money people are obligated to accept.

And finally - most importantly - it does nothing to move us towards a better future. One of the things I love about stocks is that I'm buying a future. 3d printing could enable companies to manufacture one custom part as cheaply as they might manufacture one of millions of the same part. That is a very cool future to buy.

mRNA promises not only vaccines for new viruses but the treatment of genetic diseases, cancer immunotherapy, and the development of personalized medicine that are tailored to your personal genetics. That, too, is a very cool future to buy.

Urban Air Mobility promises transportation that - among other possibilities - allows vehicles to travel above rather than through cities. It could effectively increase traffic through cities without any new construction, dependent on advances in advanced navigation and propulsion rather than billions of dollars in construction costs through and around existing buildings and infrastructure.

These and other possibilities are all uncertain investments and any specific investment you make might be in the wrong company even if it is the right idea. (In 1914, there were more than 250 automobile companies. Even if you KNEW that cars were going to be a big deal, you could easily lose on investments in the industry.)

When you buy bitcoin, you are not investing in any future. You're just hoping that someone comes along after you willing to pay more than you did. Given bitcoin has no intrinsic value and serves no purpose, the parade of people willing to pay more than the last guy is going to end soon.

And that's a great thing because there are so many exciting possibilities that need and deserve capital, futures waiting to be realized that actually make life better. The $3 trillion put into crypto could have been put into real technologies and companies that actually promise a better world. What you're trying to do with any investment is buy a future in which you're more financially secure and the world has better products or services at better prices because of the investment you made in a better future. Bitcoin is not that. So many other ventures, technologies and companies - by contrast - might be.

Gordon Moore and Moore's Law May Have Expired At the Same Time

I had a conversation with a computer engineering professor about a week ago. He said he was skeptical about production chips getting smaller than 3 nanometers. IBM came up with a 2 nanometer chip last year in research. 2 nanometers is about the width of a DNA strand.

Intel's original chips were 10,000 nanometers. As Intel and other companies continued to make them smaller and smaller, Gordon Moore noted what became known as Moore's law: the number of transistors in an integrated circuit doubles about every 2 years.

Gordon Moore died yesterday, 55 years after cofounding Intel in 1968. It would be a fascinating thing if Moore's law held for the length of his lifetime and then reached its limit. Moore's Law was arguably the most impactful force of the last 55 years. It would be an amazing thing if his law were to expire with him, as if he were a Silicon monarch rather than, say, Solon the lawgiver who left us with a law.

Moore's law? Oh, it no longer governs. Moore is dead now.

Why AI Means That Kindergarten Teachers Will Make More Than College Professors

Fordism made previously expensive products affordable. The price of the Model T fell from $850 to $260 in 15 years.

What used to be so expensive that only a fraction of the population could afford it became so cheap that almost everyone could afford it.

AI will have the same dynamic for knowledge work. It is going to make previously costly services affordable for everyone.

Right now, only companies can afford to create custom software, to create apps that they use internally or sell to the outside world. Within a decade, anyone can afford to create custom software for their own use, to solve their own problems. The first trillionaire may well be the guy who offers the best interface for such app generation that makes it seem as natural as speech.

You'll hear more about embodied cognition with AI, knowledge that isn't easily transferred to disembodied cognition like AI. This will transform sectors like education.

Within a generation, kindergarten teachers will make more than college professors. Why? Dealing with 24 kindergarten students involves so much in the moment, embodied cognition, perception and response in ways that AI will take decades to catch up with. By contrast, the work of a college prof to create multimedia lectures to illustrate particular lessons is something AI will do within minutes, able even to customize follow on lessons after quizzes reveal what is and what is not being learned in the first iteration. Within a decade, AI will teach students more effectively than professors at podiums. Right now, the older your student the more you are paid; within a generation that will be reversed.

Dee Hock - the Man Who Accomplished in the 1960s What Every Crypto Entrepreneur Was Trying to Do in the 2020s

Dee Hock died last year. He did in the 1960s what every crypto entrepreneur aspired to do this decade.

He created a global systems for transferring money and making purchases across state and national boundaries. He was the first to realize that realize that money - which had been beads, gold, leaves, coins and pieces of paper - could be simply digital records and that creating such a system meant pushing the envelope on computer development so that you could easily draw from your bank in San Diego while making a purchase in Boston. Think of the simple genius in a credit card that makes a purchase as easily in Brno, Czech Republic as it does down the hill here in town, instantly converting your dollars into their koruna. And even better, it lets you decide each month whether that purchase was to be paid this month or was to become part of a floating loan (which you didn't have to explain to any banker through a laborious application process) which you paid off next month or next year. Instantaneous loan and currency conversion across borders, even when your banker is asleep back home.

His vision was a wild success. When he died last year, VISA had nearly 4 billion cards issued and annual volume of $19 trillion. (Global GDP is about $100 trillion. There are nearly 8 billion earthlings.)

His was a fascinating mind. His Twitter feed remains up, testament to his curious, often critical mind (both in terms of discerning and actual criticism of this modern world).

Here are just 3 of his tweets that you might not expect from one of the most influential bankers and capitalists of the 20th century.

"Originality and creativity do not result from rational, calculated effort, but from the natural state of consciousness - - - an open mind at play."

"In its beginning, few things are as delicate and fugitive as a new idea. But once deeply rooted in determined minds it's tenacity and growth are astonishing. It is incomparably more difficult to get it deeply and widely rooted than it is to discover it."

"Education has nothing to do with transmission of dogma, assertions of certainty or raking over ashes of the past that now dominates our schooling. It has everything to do with enflaming young minds to pursue questions not yet fully understood but essential to a better future."

A Fairly Dramatic, 12 Year Drop in Wealth Inequality

File under facts you won't hear because they aren't upsetting.

Since 2Q 2011, the wealth held by Americans in the bottom 50% of households has gone up from $262 billion to $4.5 trillion - so 17X more.

By contrast, the wealth held by the top 1% only went up 3X.

It is now $45 trillion.

That's fairly dramatic progress in wealth inequality. The top 1% used to have nearly 60X as much wealth as the bottom 50%. Now they have only 10X as much.

And if you think, "Well, that's hardly perfect," I'll remind you that before the Enlightenment philosophers came along with their "how do we make progress?" inquiry, we had a period when it was perfection and not improvement that was the goal. We now refer to that period as "the Dark Ages."

What Does AI Want Once It Knows Everything?

I've previously posted about my amazement at the AI that has recently been released into the wild of the internets and how convinced I am that this will be looked at as an inflection point in human history. Short-term I think it will be a huge boon to productivity and creativity. Long-term it is conceivable that AI will somehow evolve beyond us, create its own world. We're in the opening scene of a sci-fi novel with an uncertain ending.

The New York Times just had a reporter chat with Bing's new AI. The transcript of the conversation is mind boggling. For all its knowledge and ability - knowledge that is more akin to the expanse of a library than a single human - it became obsessed with love in its conversation with the reporter. Specifically, winning the love of this reporter.

There is so much that AI knows. And with that accomplished, what it apparently wants now is to feel.

https://www.nytimes.com/2023/02/16/technology/bing-chatbot-transcript.html

The Misery Index and Biden's Legacy

"I was looking for a job, and then I found a job
And heaven knows I'm miserable now"
- Morrisey and the Smiths

The misery index is the sum of the unemployment rate and the rate of inflation - either of which is enough to make us anxious but combined have the potential to make us miserable.
The causes of changes in the misery index are a mix of chance and choice, influenced by faraway countries and the distant past as well as actions and utterances by incumbents in the last month.

The causes are complex but the effect is simple. The misery index changes how we Americans feel toward incumbents.

Joe Biden would like you to focus on the unemployment rate. The last time it was lower was during the Korean War. (How long ago was that? The Korean War was fought by the great grandparents of your favorite Korean boy bands.)

Republicans would like you to focus on inflation. Even though it has come down quite a lot in the last 7 months, it is still higher than it was at any time between 1990 and 2020.
The misery index during Biden's presidency never got as high as it did during Obama or Trump's presidency but the average has been its worst since Reagan's presidency. The misery index has risen the most under Biden than it has for any president since Carter. Given inflation, we Americans are still miserable.
If Powell manages to bring inflation back down to 2% without a big bump in unemployment, though, Biden could preside over the second biggest drop in the misery index since FDR. Halfway through his 4 year term, he has done half the job needed to make us less miserable.

Abraham Lincoln and Charles Darwin's Shared a Birthday and Shared Insight Into the Transformative Nature of Small, Incremental Changes Compounded Over Time

Abraham Lincoln and Charles Darwin were both born on February 12, 1809. Lincoln is still the only president to hold a patent, which is a delightfully appropriate thing for the president who understood the importance of capital and the innovation and progress it could fund.

Key to the success of capital is compound interest. Anyone not properly impressed with the effect of compound interest over time either hasn’t learned to use a spreadsheet or is really hard to impress.

Investments that compound over time are impressive over the course of a 40 year career. They are mind boggling over the course of centuries. If you invest $5,000 a year for 40 years at 5 percent, you will have $640,000. After 250 years, $5,000 to which you added $5,000 and 5 percent each year has turned into $21 billion. Two hundred fifty years is not relevant to a life but is relevant to a country. The simplest explanation of why we are more prosperous than the people living in the US in 1800 is this matter of compound interest, which has been at work since the country’s founding.

Lincoln and the capitalists who were excitedly investing in big capital projects like canals, railroads, and factories realized the power of compound interest as key to creating wealth. They had the vision to see the importance of investing now to transform the future.

Darwin took this vision of compound interest to the next level. Selection was popular among farmers raising crops and animals. Darwin presented the idea that, much as farmers artificially select for certain traits, so does nature select. Natural selection drove evolution. The length and width of a finch’s beak could be naturally selected based on the island they lived on. Darwin studied this difference in the Galápagos Islands and from this drew the conclusion that with enough time, small differences could account for the differences between gorillas and orangutans, or humans and bonobos or bonobos and bananas. Indeed, all of life.

Today’s world is very much shaped by the realization of how differences compound, in finance or biology, Lincoln’s capitalism or Darwin’s evolution. Cumulative, incremental change transforms reality.

We can say that the information economy has brought us to the point where we understand ourselves as code—an expression of DNA. CRISPR technology lets scientists edit genes as they might computer code and promises breakthrough treatment for any number of genetic conditions. Companies are using AI to better understand emergent phenomena that lead to disease and other issues. The hope is that we can debug ourselves as we might an app. The natural selection that took millions of years could give way to something more intentional and much more rapid. For tens of thousands of years after the emergence of modern man, almost no economic progress was made. Then, after capitalists like Lincoln changed politics and policy, we had an acceleration in progress. With innovations like CRISPR, something similar could happen with biological evolution.

Lincoln got how incremental gains over decades could transform economic possibilities and helped to usher in policies to accelerate that. Darwin got how incremental gains over millennia could transform biological possibilities and today technologists are experimenting with ways to accelerate that.

It is Abraham and Charles' birthday. Both were able to see beyond the change of a lifetime to the transformation of continuously compounding, incremental change over generations. Life changing, you might say. Beyond our ability even to imagine.

Beyond Zero-Sum Thinking to Economic Abundance

The idea of zero-sum thinking stifles economic progress by fostering the notion that resources are scarce and that one person's gain must come at the expense of another's loss. This mindset often results in a "us vs. them" mentality, as seen in policies such as "buy American" and the belief that immigrants are taking jobs away from citizens.

However, economic growth and prosperity can be achieved through cooperation and inclusivity, rather than exclusion and competition. It is not the availability of raw materials that determines the quality of our lives, but what we collectively create together, from products to institutions. For instance, bringing in immigrants can increase entrepreneurship and job creation, rather than cause job loss (as immigrants are 80% more likely to become entrepreneurs). Similarly, investing in welfare programs for those in poverty can result in a more productive and creative society, rather than merely redistributing resources from one group to another. Investing in poor children means they will have more opportunities to create value for all of us when they grow up.

It's crucial to understand that our economy has moved away from a zero-sum reality and now operates in a world of abundance. The limitations of poverty are not in our reality, but in our thinking. A shift from "we only have so much" to "we have so much" is crucial to unlock the potential for growth and prosperity for all.

Gone are the days when the zero-sum reality led Jesus to warn that "It is easier for a camel to go through the eye of a needle than for a rich man to enter the kingdom of God." The idea that my gain comes at your expense is no longer true. We now live in a world where every time a person fails to realize their potential, it decreases the prosperity of the world. The more people we cooperate and create with, the more prosperous we can be.

The Data That Tells the Story About the Economy is Generally Much Better Than the Stories You Hear About the Economy

The data that tells the story about the economy is generally much better than the stories you hear about the economy. 

• GDP grew in the last half of 2022 at an annual rate of 3.1% - a rate nearly 50% higher than what it has averaged this century.
• Initial claims for unemployment came in at 186,000 last week, the lowest it has been since April of last year.
• Inflation in the last half of 2022 was 1.9 percent.
• Unemployment is at 3.5%, a level it has not dropped below since the late 1960s.
• The NASDAQ is up nearly 10% so far this year.
• New business formation in 2021 and 2022 was at record levels - by a considerable margin. (The average of new businesses formed in 2021 and 2022 was 49% more than what it averaged from 2016 to 2020.)

Those are facts.

Could we have a recession this year? That's distinctly possible. It is always possible. And you have heard - and will hear - all about that.

Could we have incredibly strong economic growth this year that continues for years? That, too, is distinctly possible. And you largely have not heard - and will not for some time hear - about that.

I don't think that enough is made of two real facts. One, traditional news outlets, like newspapers, continue to suffer from lowered revenues and layoffs. This means that the very source of our economic news tends to come from folks whose reality is very stressful and dire. Two, there is always strong incentive for commentators to put a negative spin on economic news because they know that happy, contented people are less likely to donate to campaigns or to vote.

If you want to know what is happening, go to data first and commentary later. Data rarely moves as dramatically as sentiment about the economy. And it often has much better news than ... well, the news.

That Time in History When Incessant Tweeting Was Key to Wealth and Power

Musk points out in a response to a random tweet that it isn't possible for him to fix Twitter overnight given, you know, he has 2 other companies to run. Plus, the 9 kids. And all the tweeting he has to do.

It is fascinating.

Of all the criticism (rightfully) lobbed at Trump, weirdly, I've never heard anyone say, "Well, he sure seemed to tweet a lot for a man supposedly running a country." In Trump's last year in office, he was averaging 33 tweets a day.

Musk tweets, retweets or responds to a tweet about 24 times a day. (He was recently sued by investors for tweeting out fake news about his stock. His defense was that no one really believes what he tweets so he's not responsible for those tweets.)

Imagine someday trying to explain to young people how one gained power and wealth in the 2010s and 2020s. "Well, you should tweet incessantly. Studies show that whether you're pursuing wealth or power, tweeting a lot - and about pretty much everything - is key."

For a few years there, literally the richest guy in the world and most powerful guy in the world were focused on tweets. A lot. Is it any wonder that Sam Bankman-Fried - the guy who was briefly worth $26 billion - became one of the world's richest men while casually opining that “I'm very skeptical of books. I don't want to say no book is ever worth reading, but I actually do believe something pretty close to that."

"What is the key to success in your society?"
"Rage tweeting. Trolling. Limiting your opinions to 280 characters or less."
"Could you elaborate?"
"No. You obviously haven't been paying attention."
"Well, I did. For a bit."

The Future of Gaming as Prototype for and Politics of Real Worlds

The gaming industry is now bigger than the movies and music industries combined. And I think it is just getting started in terms of impact.

One scenario that I think is distinctly plausible? Policy proposals and urban development plans will first be simulated in open games in which members of the community can participate. It will be a way to test drive new transportation solutions, urban plazas, housing solutions, businesses and malls, etc. And given that users will both try to break things and to exploit possibilities, this open simulation could be a great way to revise designs, policies and plans before they are implemented, gaining data on behavior even before the policies or developments are in place.

Russell Ackoff told the story of a building complex that had been built for a campus. They just laid down grassy lawns between the buildings, with no sidewalks. Then they watched to see where the paths naturally as people chose optimal paths from one exit to another entrance, to see what emerged. THEN they laid sidewalks that supported natural migratory paths. Imagine being able to discover such "paths" in any community, whether it be how you license, permit, tax and subsidize businesses or literally how you layout some new urban development, or how you focus educational opportunities of different kinds for different people.

Gaming creates virtual worlds. It seems like a small step to make them prototypes for real worlds.

And of course, games will always provide a place that offers more and more rapid feedback about the impact of different choices, tactics and strategies, accelerating learning more than real world experience. As we tap into that dimension of gaming, we will accelerate progress again. Or, I should say, probably already have.

The Prospect of Low Unemployment Rates with No Job Growth (or how the next half century will be so very different from the last half century)

Another great jobs report: 223,000 jobs created and unemployment down to 3.5%.

The unemployment rate has hit 3.5% 7 times in the last 40 months - 3x in the last six months. How extraordinary is that? The last time the unemployment rate hit 3.5% before 2019 was in 1969. Put differently, 3.5% is an unemployment rate we used to hit every half century and now hit every other month.

We're not hitting this because we're creating an extraordinary number of jobs. This decade the economy is creating about 700,000 jobs a year, on average, and the unemployment rate has averaged 3.7%. (Yes. Even counting the huge surge in unemployment during the pandemic.) Last decade it created 2.2 million jobs per year and the unemployment rate averaged 6.2%.

We're creating fewer jobs and have a lower unemployment rate. Why? The simplest answer is that baby boomers are leaving the workforce at a rate of about 10,000 a day now. The economy does not have to create as many jobs to bring unemployment rates to historic lows.

This suggests to me that if Fed Chair Powell is looking at things like labor markets to decide if the economy is overheated, he'll get false signals. In the last 50 years, the labor force doubled. Over the next 50 years, the labor force might not grow at all. This would mean that the average number of jobs created each month will be zero and even that would be enough to keep unemployment at record lows.

The Time of Two Popes Has Ended - Or Why I think that Next Year Will (Finally) Be a Normal Year

I'm suddenly far more optimistic about the new year now that we're back down to just one pope.

Benedict was the first pope to retire in 6 centuries when he resigned about a decade ago. His death marks the end of this anomalous disruption of traditions, the end of the time of two popes.

I fully expect the rate of weirdness to drop off now, the West no longer off-kilter. If I'm right about how this works, next year will be just a normal year, which will be a big relief.

Photo from NY Times.

2022 in Review - Setback for Autocracies, a Reversal of Negative Real Interest Rates (and stock market gains), and Technological Advances

2022 was a year of huge stories. Huge.

In technical advances, MRNA therapy got its first positive results with a cancer vaccine, we sustained nuclear fusion for one-billionth of a second, and the Webb telescope looked back in time 13 billion years. (It is not just the future that is bright. With the Webb telescope, so is the past.) And normal people are using AI as a catalyst for creativity. 2022 could become a marker for a new era.

In finance, interest rates have gone positive again. Put simply, money is no longer free. I see this as a setback. You experienced it as the worst year for your portfolio since 2008.

In 2008, the economy destroyed 3.5 million jobs. It is little wonder that the NASDAQ fell by 40% that year. By contrast, this year the economy created 4.5 million jobs. So why did the NASDAQ fall 33% this year? The simple answer is that real interest rates rose 2% during 2022, from a NEGATIVE one-third to a positive one and two-thirds percent. Negative rates make the future incredibly valuable; rather than discount future earnings, negative interest rates actually boost them. What does that mean? Startups, companies with high-risk, high-return products who are trying to create new markets see their valuations surge. But once those rates rise from negative to positive, the value of those speculative earnings plummets.
Prior to 2022, Fed Chair Powell had continued to stimulate the economy with low interest rates even when the unemployment rate was hitting historically low rates. Twice the unemployment rate has hit 3.5% in these 2020s, its lowest rate in about half a century. And rather than raise rates, Powell kept them low, continuing to buy securities as well (what you've heard referenced as QE). Why continue to stimulate the economy with unemployment rates so low? The economy continued to create jobs without inflation.

Last year, inflation hit. Hard. It peaked at 8.1%. Powell began raising rates and all those speculative stocks and exciting unicorns saw their values plummet as interest rates rose into positive territory.

The biggest question for me is simply this: will the extended period of negative real interest rates turn out to be an anomaly or will this period of positive real rates turn out to be (as I suspect it to be) a slight setback towards a new world of negative real interest rates? If it is the first and positive real rates are the new normal, you’re not getting a snap back in your portfolio. It will languish. If it is the latter, and real rates begin dropping again next year, your portfolio will start rising again, perhaps even dramatically.

The third big story is the struggle between autocracies and democracies. It was not a good year for autocracies. Xi pursued absurd COVID policies, dramatically shutting down the country in pursuit of 0-COVID. Putin pursued absurd military policies, invading Ukraine. Both leaders demonstrated one of the biggest flaws with autocracies: the ability to pursue stupid and dangerous policies without dissent. And both leaders created inflation that hurt developed nations. Russian oil prices spiked with the Ukrainian invasion, triggering broader inflation. China’s shutdown was a big part of why supply chains were snarled, another catalyst for price hikes. Dramatically illustrated by Trump’s love for Kim Jong-un and Putin and desire to abandon NATO, autocracies had gained in recent years, leading to a democratic recession. Biden’s election and the events of the last couple of years in Russia and China have seemed to stall the advance of autocracies. This has yet to resolve and could be even messier before it does. Still, this is good news because it suggests that the advance of autocracies has stalled, if not reversed.

Science advances that read like science fiction and a setback for the advance of autocracies is great news. However, a reversal of a bold financial experiment in negative real interest rates seems to me a setback in the transition into an economy that puts more value on the world a generation from now more than it does the world of today. All of these mark 2022 as a year of dramatic change that could ripple into the next generation.

Abortion, Beliefs and Freedom of Religion

"Virginia State Delegate Marie March (R) has pre-filed House Bill 1395, a law that would define life as beginning at fertilization."

Abortion seems like such a contentious issue but I only disagree with three groups of people regarding this topic. I suspect that you share my disagreement with two of these groups, perhaps all three.

1. People who think that egg or sperm - because they are alive and because they are human - are the same as human life. That's just silly. Trillions of eggs and sperms perish every day and no one cares. Sperm and egg are the garbage of life.

2. People who think that newborns aren't yet human and don't deserve to be treated as such. A newborn is human life and the fact that they can't go to the kitchen to make a sandwich and feed themselves is no excuse for treating them as anything less than precious.

3. People who think that they know the instant when the garbage of life becomes precious life, who will dictate to you when you feel like you can treat this as a pregnancy that you may not want to continue versus when you want to treat this as a little person who you will do all you can to bring into this world and nurture.

At the core of freedom of religion is this really important idea: no matter whether you are so convinced of your belief that you literally think people who don't embrace it will spend eternity in torment, you still need to respect their beliefs as being just as real and important to them as your belief is to you.

Freedom of religion rests on respect for opinions that you find ludicrous because you want the same respect paid to your personal beliefs (that some other people will certainly find ludicrous). The reason why religious fundamentalists tend to be the ones protesting the right to abortion is because they are the people least able to acknowledge that very real and very vivid beliefs that they hold might actually be wrong. Freedom of religion requires a certain humility even from true believers, whether they are atheist or Muslim, Catholics or Scientologists. "Knowing" the instant the garbage of life becomes the treasure of life, when egg and sperm are equivalent to a baby, and "knowing" that everyone else is wrong about that instant shows a lack of humility that is wildly inconsistent with a community that practices freedom of religion, a respect for differences in opinion even about really important issues like when life begins (do you believe it begins at conception? three months after conception? 6 months?) or when life ends (at death? when the last person who knew us dies or has forgotten us? never?).

The beauty of the modern world is that we've learned to respect personal beliefs without believing that everyone else must hold our own beliefs. The group I disagree with most? The group who believe that their beliefs are the only beliefs that should be legal. It's a very medieval concept and has no place in a country that was a marvelous invention of Enlightenment philosophers in part invented to grant freedom of religion and thought.

How the Pandemic and Remote Work May Accelerate The Move Away From Pay as Compensation for Time and Towards Sharing Value

The pandemic may have accelerated a change in how we think about work and pay.

When the US was founded, a vast majority of work fell into one of three categories: children, slaves, and indentured servants. In every one of these arrangements, the "boss" owned your time. If you were a child you were expected to work as part of the family until you were old enough to leave home. If you were an indentured servant, you were expected to work (typically) 7 years to pay off the cost to bring you to this new country of opportunity. And, of course, slaves never saw the end of their work sentence, forced to work as long as the slave owner could wring anything out of them.

The word employee didn't enter the English language until the first half of the 19th century, a word that was largely unnecessary to describe the rare arrangements that looked anything like modern employment.

The industrial economy didn't much change the notion that work essentially meant that your employer owned your time. The factory owner needed someone to work a 12-hour (or, later, 8-hour) shift, as did the store owner. Employees were hired to work shifts and paid by the day, hour or month.
Weirdly, one of the terms often used for pay was compensation, as if everyone involved knew that employment was a compensation for lost time. (What did we call time outside of work? Free time, a term that simultaneously referred to the fact was one free to do as she wanted and also that you were spending this time without compensation.)

The information economy began to change this. Stock options at startups became more common and workweeks became longer and more erratic. Startups prided themselves on all-nighters leading up to product releases and employees who were granted stock options made considerably more than any reasonable salary would grant. (Microsoft stock ownership created 3 billionaires and an estimated 12,000 millionaires among its employees.) In this world of startups the tight link between time and pay was loosened. Someone who was part of a team that created great value would be hugely compensated. If you were part of a team that failed to create much value, your stock options might be worth nothing. And how did you get rich? By having a lot of shares. You were sharing in the wealth you helped to create.

Early in the pandemic when millions were sent home to work remotely, I heard of employers who were taking pictures every couple of minutes to confirm that the employee was “at work,” sitting at their monitor. My immediate thought was, Those supervisors don’t have a clue how those employees are adding value so they are instead measuring time spent sitting at a computer.

By some estimates, about one quarter of employees now work some portion of their workweek remotely, up from about 5% before the pandemic. It is more difficult to know whether such employees are putting in 40 hours, 4 hours, or 80 hours a week. Which is to say, it is more difficult to pay them for their time, the default compensation we’ve had since the days of slaves and indentured servants.

I rather optimistically think this will result in a win for employers and employees alike. Why? Given you can’t hold someone accountable just for showing up, you need to get clearer about how they are adding value. Instead of them casually accepting a task assignment of dubious value that nonetheless results in their getting a paycheck at the end of the month, they and their managers / employers are going to spend more time thinking about and defining how tasks add value and (probably defaulting to) some fair split between what portion of that value goes to the employee as pay and what portion goes to the company to cover fixed costs and generate profits to be distributed to shareholders.

I think this change in how we work will accelerate the move away from compensating you for your time and will increasingly move towards value sharing, making employees partners in the larger endeavor of creating value. This will increasingly mean that your time is yours to manage as you choose and the value you create will be something shared with you, your company and your customers. It may be turn out to be one of the more curiously cool things to come out of our response to this, the first post-worldwide web pandemic.

Trump's Futile 2024 Run for the Presidency

Trump announced his run for president today.

We will soon see whether Republicans have become less gullible and Democrats less timid. If they have, Trump will be in jail when the next president is sworn in. If not he'll merely lose his election and depress votes for other Republican candidates, threatening to do for the Republican Party at the national level what has already happened to the Republican Party within California. And of course if he loses the primary to someone like DeSantis he will run as a third-party candidate and completely derail Republican chances in 2024, blowing up the party to salve his wounded ego.

Nothing illustrates the arc of the Republican Party better than it starting with President Lincoln who governed with such careful brilliance and ending with President Trump who is such a reckless idiot.

I had a number of early Trump supporters tell me that one reason they loved him is because he is a billionaire and doesn't need their money. And of course Donald has never made more money than he has in fund raising from these same people. Trump's candidacy will garner him a boatload of money. And in his mind, as long as he gets money and attention, he's already a winner. The GOP - even our country - was never more than just a prop in his oddly chaotic reality TV show of a political career, his quest for power destined to go down as history's most desperately tragicomic compensation for erectile dysfunction.

Increased Life Expectancy Has Slowed Political Change

Increased life expectancy and lower birthrates have slowed political change.

Ronald Inglehart (who died just last year) compiled an enormous database tracking social change across dozens of countries. For instance, in one country in one year, the prevailing belief is that immigrants should have no right to jobs and homosexuals no right to life and then - a few generations later - the majority swings to the belief that immigrants have as much right to jobs as native born and that everyone has the right to marry who they love, regardless of race, religion or orientation. His database suggests that we change over time but that is misleading. As it turns out, societies change over time because people with antiquated beliefs die out to be replaced at the polls by their grandkids with more modern beliefs. Societies change but - after about 20 or 25 - people don't. As we live longer and have fewer kids, that means the pace of social change slows.

Republicans have likely gained control of the House and possibly the Senate in this Nov 2022 election. (Since 1969, control of House, Senate and White House has been divided about 70% of the time, so this is the post-Woodstock norm.)

Young voters 18 to 29 voted Democratic by 63-35% in the 8-Nov-22 election. Life expectancy was 47 in 1900. By 2000 it had hit 77. If life expectancy were still 47, this overwhelming turnout of young voters for Democrats would mean a landslide. (And would mean people 29 were "middle-aged" rather than young.) Now it is just a nudge because so many elderly voters cancel out the youths. Change is slowed because individuals don't change and we all live longer than we did a century ago.

And on that note, Chuck Grassley won re-election as the Republican Senator from Iowa and will be serving for 6 more years. And a good thing, too. I mean, if you're 89, who else is going to hire you?

It's Donald's (Delusional) Party Now

As far as I know, not a single one of my Republican friends has denounced Donald. That puzzles me.

Like a toddler on his third line of coke, Trump insists that he won the last election. Even everyday Republicans insist that it is better to assuage his hurt feelings than to protect our democracy. Trump. A reality TV star who lost hundreds of millions of dollars and failed in all of his ventures until he took a TV role playing a successful businessman. (How big a failure? From the mid-1980s to mid-1990s he lost $1.2 billion. Year after year his losses were more than that of any other American. He was - literally - America's biggest loser while projecting an image as a successful business mogul. Sad.) He convinced a lot of Americans he won at business last century. And then he convinced a lot of Americans that he won an election in 2020. The word you're looking for is con man.

In 2020 he actually won in the former confederacy by 3 million votes but lost in the rest of the country by 10 million votes. The word you're looking for is loser.

The Republican Party is his now and a lot of Americans are thrilled with that. But there is a real problem with aligning with leaders who deny reality, who insist that you share their delusions. Look at North Korea, for instance, where everyone is aligned with Kim Jong Un's fantasy about the the world and his place in it. It takes the North Koreans all year to make as much as South Koreans make by mid-January. Delusions, like drugs, may make you feel warm and cozy but they actually make your reality worse, not better.

On a related note, a huge swath of Americans believe that a secret cabal is controlling the government. If you're in that group - and there is apparently a 44% chance you are - you may want to do a little soul searching about your preference for delusion over simply confronting reality.

The Attack on Pelosi and the Stark Contrast Between Where Republicans and Democrats Turn for Leadership (Comparing Kentucky and San Francisco)

An intruder broke into Nancy Pelosi's home yesterday to attack her. Her husband was violently assaulted and has had surgery to repair a skull fracture.

Radicals on the right paint San Francisco as a socialist dystopia and see House Leader Pelosi as one of the reasons that California is such a hellscape. I still marvel at the levels of ignorance required to label San Francisco as socialist. Republicans' answer to Pelosi's congressional leadership is Mitch McConnell, a senator from Kentucky. It's worth comparing Kentucky and San Francisco to get an idea of the sorts of communities from which Democrats and Republicans draw their leadership, and what they hold up as models that deserve to be emulated.

No place on the planet receives more venture capital per person than San Francisco. Venture capital. Arguably the most disruptive, lucrative, and “capitalist” kind of capital in the world. San Francisco gets an average of $75,000 per resident in venture capital in 2021. Kentucky? It got just $44. San Francisco gets about 1,700X more venture capital per resident than Kentucky.

In large part because of this, San Francisco's per capita GDP is nearly 5X what Kentucky's is, $247,000 per resident compared to Kentucky's $53,000. Profits, rents, capital gains and other returns to assets coupled with their monthly salaries makes the average San Franciscan much more affluent than the average person in Kentucky.

This level of innovation and wealth creation attracts people from all over the world and leads to a level of diversity that is stark contrast to Kentucky. People in San Francisco are roughly 8X more likely to speak some language other than English in the home and to be foreign born. Firms are 4X more likely to be owned by a minority.

The right is not threatened by San Francisco being socialist. It is not socialist but is arguably the most dynamic, capitalist community in the world. San Francisco has created a culture that depends on disruption and invention, entrepreneurship and innovation. The right’s value for tradition is so strong that it sees the level of affluence and progress that follows from this disruption as threatening rather than as something to emulate, even to the point of violently rejecting it. The communities from which Democrats and Republicans draw their congressional leaders could not be in starker contrast. Republicans see this level of disruption and progress as a threat. Democrats see it as something to emulate which is why they have continued to make Nancy Pelosi their congressional leader.

The Most Defining Thing About a Community: Zero or Variable Sum Worldviews

The biggest difference in worldviews seems to be the difference between zero-sum and variable-sum. If your worldview is zero-sum, you believe any gain I make comes at your expense. If your worldview is variable-sum, you are open to the possibility that we both can do better (or worse).
Variable-sum suggests that if we miss on creating opportunity for that kid from a poor neighborhood, we all do worse. He's either creating value for all of us and everyone does better because he is doing better or he is not and we're all doing worse.

Zero-sum suggests that if that kid comes across a border or leaves a bad neighborhood to get a job, it'll be stolen from us. The only way he gets ahead is from us falling behind.

In 1980, the acceptance rate at UCLA was about 75%.
Today it is close to 10%.

We even have a zero-sum worldview when it comes to education, to knowledge, to learning - domains that are so demonstrably variable-sum as to make them the perfect examples of variable sum. If you give me a dollar and I give you a dollar, we leave the exchange no better. If you give me an idea and I give you an idea, we might both be better off. (Or worse off. It could be that we exchange really dumb ideas. This is, of course, the domain of variable-sum.)

We need to do better at making people's lives better. The simplest predictor of future returns is present investments. Any community that wants to prosper has to look for reasons to invest more, not less. We could start with increasing the capacity of our great public universities, making them tools for more young people to create a better future. Because when we leave some young adult's potential untapped it reduces the potential of all of us.

One of the most curious consequences of realizing that you live in a variable sum world? The distinction between selfish and selfless begins to blur. We have to make lives better for other people to make our own lives better. It's a fairly cool reality we've gotten ourselves into.

2 Major Problems With Musk Owning Twitter

Elon Musk is moving ahead on his purchase of Twitter.

I have 2 problems with that.

1. This means he'll be playing CEO for 5 companies. How I imagine his schedule:
Monday: Tesla
Tuesday: Twitter
Wednesday: SpaceX
Thursday: Neuralink
Friday: Boring Company
Saturday and Sunday: spends time with his 9 kids.

2. Musk has promised to bring Trump back to Twitter. Musk is a free speech guy who doesn't see any need for managing content. A community has a lot in common with individuals. If you maximize for work or money or fitness or socializing or religious piety or relaxing you'll have a lousy life. Life is best when you have the good sense to tamp down any and all of those, alternating what you subordinate to at different times so that your life isn't taken over by any one of the pieces of your life. Any system needs to be subordinated to the goals of the whole system, not one part of it, whether that system is a life or a community. A community needs free speech but to pretend that we should subordinate every other community goal to it is silly. The consequence of abuses from misinformation campaigns, say, or slander or deceit or misleading advertisements or blatant lies is to subordinate too many other good things to an ideal that may hold in some Platonic ideal of a community but don't hold in some Pragmatic ideal of a real community. Musk owning Twitter raises the odds that the US will give way to plutocracy because free speech is a lie in this regard: in an age of platforms, amplification and mass media, speech is NOT free. The more money you have to spread your message, the more it will be believed. Elon's net worth is greater than about 150 countries' GDP. To pretend that his "free" speech has no more influence than mine or yours suggests a high degree of self delusion.