29 June 2012

Culture is a Gadget - Vonnegut

Kurt [Vonnegut] was fascinated by how cultural anthropology examined people’s values, symbols, and ideas. What he had believed about himself, his family, American society, he realized-all of Judeo-Christian civilization, for that matter-was contingent upon Western theories about time, knowledge, morals, law, and custom. “Culture is a gadget; it’s something we inherit,” he later wrote. “And you can fix it the way you can fix a broken oil burner.” His ironic distance as a novelist, sounding as detached as an entomologist observing insects, can be traced to his days as an anthropology student. I was confirmed as a cultural relativist, as he University of Chicago brought it home to me that my culture was not superior to anyone else’s or even more complex.”

- Charles J. Shields, And So It Goes. Kurt Vonnegut: A Life 

A Fashionable Political Lie

"Any tax on business is just passed along to the consumer."

This is a great example of a statement that has evolved from a real truth ("Taxes on business are sometimes just passed along to the consumer") to a flat statement, easier to remember but simply false. And it seems to have become increasingly popular.

The equivalent would be,
"Any tax on employees is just passed along to the business that employs them."

It is true that some employees just lose take home pay and that others are able to negotiate higher pay so that the employer, the business, essentially pays the tax. The same is true of businesses. Some can simply charge more for their products, passing along the costs of taxes to the consumer, and some can't.

Romney - Dubya The SequeI?

Dubya's real legacy may be the financial strain left after becoming the first president in American history to finance a new war with a tax cut. Actually two wars. Well, occupations, really, that went on for a very long time. And a big tax cut. The structural deficit that followed from his tax cut (that reduced revenues by trillions) and two occupations (that increased spending by trillions) left it hard to properly - and even responsibly - stimulate the economy after the recession hit.

Romney would like to repeal Obamacare, but beyond that it seems that his two most clear distinctions from Obama are his advocacy for further tax cuts and his willingness to go to war with Iran (while also halting the withdrawal of troops from Iraq and Afghanistan). It takes little arithmetic agility to realize that Romney's  finance-a-war-with-a-tax-cut strategy is both bad math and offers a rerun of the financial success of the Bush administration. And while Bush could sustain this strategy for years, carried by the momentum of the 90s, it's not obvious that Romney would be able to sustain such a strategy for longer than about 18 months, if that.

This does not sound like a sequel worth the admission price.

Change? We've Got Nothing Compared to 1900. Not Yet, Anyway

Found here, what is apparently the first car ad, from 1898.
We like to think that we live in fast changing times. By contrast to 1900, 2000 was fairly sedate. I think that, though, that we're about to be awakened to what real change looks like. For a refresher on the topic, consider the years around 1900 with this introduction to the third economy.

The turmoil and change in the decades around 1900 was mind boggling. This was a time of great change. Freud and William James were exploring consciousness and other products of the mind. James publishing The Principles of Psychology in 1890 and Freud publishing The Interpretation of Dreams in 1899. Marconi transmitted and received radio signals across the Atlantic in 1901. Karl Benz invented the automobile in 1885 and by 1900, automobile factories were producing cars for the public. The Wright Brothers demonstrated heavier than air flight in 1903. In the first decades of the new century, modernists like Picasso, Matisse, and Kandinsky were redefining how people look at art. Literature was being transformed in a similar way by the likes of Henry James (William’s brother), James Joyce, and Virginia Woolf. Kurt Vonnegut said that thanks to TV, there were only two kinds of people: conservatives and liberals. In stark contrast to the world of commerce, our political choices have greatly shrunk since 1900 when political activists espoused ideas as different as anarchy and aristocracy, free markets and tariffs, communism and socialism, theocracies, democracies, and republics. As they had done with royalty and religion, social experimenters rejected the institution of marriage, promoting such seditious ideas as free love and birth control. Even more alarming for some was the fact that women wanted to vote. And if in the face of this tsunami of change you could remain serene, your peace would have been literally shattered by the outbreak of the first World War in 1914.
One thread throughout all of this was the disruption of knowledge and the manipulation of symbols – from art to design and political propaganda – that was to characterize and define this new information economy.   

28 June 2012

Universal Healthcare - It's a Problem But It's a Good One

It's simple, really. I'd rather have the problems that stem from providing healthcare for everyone than the problems that stem from not.

27 June 2012

The Supreme Court's Decision on Healthcare

Tomorrow, the Supreme Court rules on Obama's decision to chose the third of three options for health insurance. The question before them has been worded as, "Can the government force people to buy broccoli?" I think the more pertinent question is, "Can the government force people to pay for the broccoli they'll inevitably eat?"

The first option was to let people choose not to pay for insurance and yet still provide care when they needed it in an emergency. This is the system we have now.

The second option would be to let people choose not to buy insurance and refuse care when they needed it in an emergency. This "let them die" option is rarely supported.

The third option would be to make sure that everyone paid for insurance so that everyone had coverage. This is the option that Obama included in his Healthcare plan.

Tomorrow, the Supreme Court rules on Obama's mandatory insurance plan. Their question is whether the government can force people to buy a product (insurance in this case).

For me, the question is silly. Given that we can't refuse people the product (in this case emergency healthcare), it seems that they can't refuse to pay for it.

In any case, I'm not optimistic that the Court will rule in favor of Obama for two reasons. One is that this Court is persistently partisan, voting along party lines on most issues. This Court is, by default, 5-4 against Obama. Two, the Court doesn't make judgement on right or wrong, just what is constitutional. It is worth remembering that they ruled FDR's ban on child labor unconstitutional.

The really bad news for Obama is that if the Supreme Court rules against him, it's a major blow. If they rule for him (which seems unlikely), it's not really a big victory. So, Obama has a good chance of a big loss and a small chance of a fairly insignificant victory. That seems like a really tough game to play.

26 June 2012

The Fourth Economy: New Website and Free Introductory Section of Book

You can find The Fourth Economy website here and it includes the introductory section (the first three chapters) for free.

21 June 2012

The Tragic End of Karl Marx's Daughter

Here's a paragraph from Andrew Marr's The Making of Modern Britain that packs more intrigue and tragedy than most novels. And, it's true.
"... Eleanor Marx, daughter of Karl. She had nursed him, helped finish Das Kapital and then thrown herself into socialist politics. She lived with Edward Aveling, another socialist, in what the Victorians would call 'sin.' Aveling married an actress without telling Eleanor and then proposed a joint suicide pact, leaving her with the prussic acid. Eleanor killed herself while he quietly left, very much alive. Which was a sin."

20 June 2012

How Would You Like an Hawaiian Island for $2,000?

"Oracle Corp. CEO Larry Ellison has reached a deal to buy 98 percent of the island of Lanai ..."

This sort of thing puts the wealth of the world's richest into perspective. In order to buy the island, Ellison will pay an estimated $500 to $700 million, which would be nearly 2% of his total wealth of $36 billion. 

By contrast, the average value of wealth held by Americans is about $450k and half of Americans have a net worth of less than $100k. Depending on which of these measures you use for us normal people, the strain on Ellison's budget to buy the island of Lanai is equivalent to us paying $2,000 to $8,000 for property. For that amount, though, we would probably get an island considerably smaller than 141 square miles.

19 June 2012

Well That Was Money Well Spent

Since passing its law outlawing the emo phenomenon in February, Iraqi officials have killed at least 42 teenagers for sporting the emo style.

Meanwhile, last year in Afghanistan, $4.6 billion in cash was taken out out of the country through Kabul Airport.

$3.5 trillion doesn't buy what it used to.

Three Stages of Wealth Creation in Corporations

Apple is worth $500 billion. The Apple store has 500,000 apps. The greater the number of people vested in your success, the greater your success?

Amazon's market value is about $100 billion. Apple's value is $500 billion. Microsoft's value is about $250 billion.

There are a lot of reasons for this kind of value but I just want to make an observation about one.

Bezos at Amazon has created a ecosystem as much as he's created a company. If you were to count each self-published author in addition to more traditional retailers, he has hundreds of thousands of entrepreneurs who use Amazon. Bezos has created value in no small part by creating a platform for entrepreneurship. He's made it easier for entrepreneurs to try their hand at a new venture or product.

A similar thing has happened with Apple. Even though Jobs epitomized the "closed" system in which software and hardware were all integrated and controlled, he, too, created a platform for the sale of music and apps that gave thousands of entrepreneurs a forum for their products.

Microsoft's operating system was, along with Intel's CPU, a crucial part of the open system that surpassed Apple's hold on the personal computer market. Part of what fueled the rise of that open system was that thousands of entrepreneurs linked their innovations and hopes to it. They hoped to get rich by offering software or hardware that depended on Microsoft's operating system.

This is not something limited to what we normally think of as the tech industry. Sam Walton became rich in part because he thought to make his employees part-owners. They pulled with him in his quest to create value.

I argue that we're already living into the emergence of a post-information economy. The information economy was a place where communities that actively developed knowledge workers surpassed those that did not. In this fourth, entrepreneurial economy it is the communities that do the most to develop entrepreneurs that will most prosper. And by communities I mean everything from nation-states to neighborhoods to corporations.

Bezos, Jobs, and Gates have gone beyond the model of shared ownership that typified the stock options  and wealth creation of Silicon Valley at its peak. They created ecosystems that gave entrepreneurs incentive to create wealth - wealth that would only make the ecosystems stronger and more valuable as it was created.

If stage one was shared stock with employees and stage two was creating ecosystems in  which outside entrepreneurs could create wealth, then stage three may be transforming the corporation itself into an ecosystem in which employees could create such wealth. Why should these metapreneurs only make it easier for people outside of their company to create the wealth that enhances their own? Why not make it more possible for their own employees to do something similar?

18 June 2012

In Praise of our Remarkably Low Divorce Rate

It takes 2 to marry but only 1 to divorce.
Thus, the number of divorces could be double the number of marriages and yet they are less than 1/2.
I think that it says a great deal about our focus on the negative that no one applauds this.

17 June 2012

Egg, by Hanzlicek (a poem about fatherhood)

I still don't know of a poem that better captures the magic of how fatherhood sneaks up on a man than this.

C.G. Hanzlicek

I'm scrambling an egg for my daughter.
"Why are you always whistling?" she asks.
"Because I'm happy."
And it's true,
Though it stuns me to say it aloud;
There was a time when I wouldn't
Have seen it as my future.
It's partly a matter
Of who is there to eat the egg:
The self fallen out of love with itself
Through the tedium of familiarity,
Or this little self,
So curious, so hungry,
Who emerged from the woman I love,
A woman who loves me in a way
I've come to think I deserve,
Now that it arrives from outside me.
Everything changes, we're told,
And now the changes are everywhere:
The house with its morning light
That fills me like a revelation,
The yard with its trees
That cast a bit more shade each summer,
The love of a woman
That both is and isn't confounding,
And the love
Of this clamor of questions at my waist
Clamor of questions,
You clamor of answers,
Here's your egg.

15 June 2012

Reversing the Newspaper's Decline

This week, Newhouse Media announced that it would soon begin printing the New Orleans daily paper only three times a week.

Newspapers are going through the most dramatic change since their emergence in 18th century Europe. Until their reporting of corporate business is as extensive and nuanced as their coverage of national politics, they will continue to shrink. 

It is no coincidence that newspapers emerged along with notions of participatory government and individual rights. After the Glorious Revolution in 1688, William and Mary were invited by Parliament to be the new English monarchs. Parliament insisted on something new, though. William and Mary were not to be absolute monarchs but were – instead – to be constitutional monarchs. The words in constitutional documents were to now be the ultimate source of authority.

This threw Europe into a new kind of politics, one that relied as much on ideas as armies.  And, Wikipedia reports, the first successful English daily was published from 1702 to 1735, beginning about a decade after the coronation of this new kind of monarch. As government became dependent on words, the newspaper became its new battleground.

Enlightenment thinkers believed in progress but not from divine sources. They argued theories and studied results. Newspapers were as crucial to the process of political experimentation as labs were to scientific experiments. Democracy founders without data, debate, and reports. Newspapers rose in prominence as wider swaths of the population were able to vote. (America’s original founding fathers were gradually joined at the polls by voters who were not landowners, not Protestant, not white, not male, and not 21 or over).  

As democracies had to negotiate the interests of a wider variety of voters, newspapers grew in importance as a forum for presenting news and views. Newspapers taught diversity and tolerance by giving voice to people we might not see around our Thanksgiving table.

But that changed.

First talk radio and then the Internet – with its blogs, tweets, and social networks – became a new forum for conversation. No newspaper could give voice to as many people as did Facebook.  And as governments became more stable in form – a post-Cold War reality dubbed “the end of history” - nuanced political debate captured in op-eds gave way to the starker contrasts of Fox and MSNBC.  Good reporters lost audience to both professional and amateur commentators.

There is, however, a public arena still largely ignored by newspapers and their reporters, one worth trillions to the community.

Love it or hate it, we’re all now dependent on the modern corporation. Towards the end of the last century, average people passed the rich in total stock holdings through mutual funds, pension funds, and direct holdings. The average person is dependent on corporate performance for a job, retirement income, and even the quality of their air or water. As just one small example of their impact, the pension fund problem for San Diego City would never have happened had corporations managed to sustain even a portion of the gain in stock prices that they had experienced in the late 1990s. Corporate decisions determine whether people are hired or laid off, and in what part of the world.

To date, newspapers have done a poor job of adapting to this new institutional reality. They do little to make public corporations public, in spite of how important those corporations are to their readers. Passing along corporate announcements on layoffs, earnings, and new products is good but it simply is not enough.
The closet thing we have to 18th century monarchs is the CEO. Today, a modern American can say vile things about a George W. Bush or Barack Obama without fear of losing citizenship. An employee within a major corporation who said something similar about the CEO would quickly be fired. While corporations are owned by all of us, it is the CEO and his senior staff that manage with little challenge from stockholders or employees.

It took great daring for newspapers to challenge heads of state. (Even today, journalism in less politically developed places like Russia is a dangerous profession.) It might take similar courage and vision for the next generation of media outlets to challenge heads of corporations, creating a forum for employees and stockholders to discuss policy, philosophy, and personalities in the same way that newspapers do in the political realm.

Reporting skills have not changed in importance. What has changed is the relative importance of the corporation. If reporters want to explore how communities are defined, increasingly the answers are found in corporate, rather than government, decisions. Communities and journalists will prosper when the media begins focusing more attention on corporate policy. And curiously, after the average investor, the biggest beneficiary of this new focus could be the very corporations that now own newspapers.

14 June 2012

Touch Me in Rome but not in London

Studying conversations in restaurants in different cities, researchers tallied "touches per hour," or physical contact, as follows:

Rome - 220
Paris - 142
Sydney - 25
New York - 4
London - 0

Given that New York and London are the financial centers of the world, I wonder if touching makes folks more uneasy in those cities because one suspects they may be going after your wallet.

From "The Definitive Book of Body Language" by Allan & Barbara Pease. The stats are on page 105.

12 June 2012

Time for a Big Increase in Government Spending

The only debate of late seems to be whether we should cut spending now or later. I want to make the argument that we ought to instead increase government spending as a percentage of GDP.

For R&D alone we ought to increase spending.

In times when an industry is well defined, D - development - is still costly but it can usually be financed by private companies.The horizon to profits is visible, the patents will last until the technology is commercialized, and the uncertainty about development, application, and market demand is greatly reduced from the R - research - stage of the technology or market.

Yet we are at the R stage of so many markets, technologies, and products. We have the potential to extend life expectancy by decades, for example. There is so much about this that we don't know or understand. It seems wildly optimistic to think that private companies that need predictable profits would finance much in this domain and yet the potential for success in this domain is huge. This alone could justify a NASA moon landing type expenditure, but not for any one company. That is, this alone would be a vitally important justification for a surge in government spending.

Conservatives by definition want to conserve. They are not, by disposition, big on disruptions to the status quo. For this reason alone they are rarely going to invest as much money on creating the future as they do on sustaining the past. Conservatives are more likely to subsidize existing business than create new ones. Yet this is what R&D does.

There are a variety of other technologies and possibilities that have huge promise. The problem is, these technologies are so poorly defined, so unclear in timing and market potential, and offer such uncertain market value for any one company that they are lousy candidates for private investment and yet wonderful candidates for public investment.

The list of public investment possibilities include (but are by no means limited to):

  • Low, or no carbon energy options
  • Pandemic protection
  • Research into happiness and economic development, looking for the highest leveraged routes to happiness that may or may not involve traditional measures of prosperity but would do more to address issues like depression, anxiety, ennui, etc.
  • Ocean restoration programs
  • Social evolution and social development principles that could be used for aid in taking countries past abject poverty or even past mass consumption
  • Anonymous information collection, tracking, and analysis that would allow communities to protect themselves from terrorism without compromising privacy
  • Collision avoidance
  • Holograms
  • Robots
  • Mental focus
  • Drive or desire

Never have we lived in a time of so many uncertain but promising possibilities. This alone seems reason enough for more government spending.

10 June 2012

Progressives' Blind Spot to Progress

Katrina vanden Heuvel, editor and publisher of the Nation, made an interesting comment the other day on NPR's Talk of the Nation (I think it was). She casually spoke of the "pro-corporate" crowd. In this I think she highlighted a blind spot of progressives.

The corporation is a fabulous institution. More effectively than any previous institution, it creates wealth and high-paying jobs. It is true that it also has an increasingly powerful influence over politics. It's doubtful that any candidate seriously opposed by the "pro-corporate" crowd could get elected.

If Katrina vanden Heuvel were talking about the social and economic problems of, say, 1600, she might speak dismissively of the pro-state crowd. That, too, was  an emerging force that seemed better able to enrich its elites (back then it was royalty rather than CEOs) than the common person. But the problem was not the state so much as how power over it was concentrated to a few. As it turns out, the nation-state was a wonderful institution, key to progress and prosperity. And its efficacy in increasing quality of life became more clear after democratic revolutions that dispersed the power over it to more people and its policies benefited a wider swath of its citizenry than just the aristocrats.

The modern corporation - in many ways - is at least as impressive as the nation-state. Its problem is that it is at a similar stage of development as the nation-state in about 1650. 

It still seems like media everywhere ignore what should be the biggest story within the West: how corporate policies are creating wealth and improving quality of life for people outside the board room. Communities without corporations or corporate influence are not prosperous enough to matter in conversations about progress; communities with corporations will inevitably be greatly influenced by them, even in the realm of politics. The relevant question is not how we go back in time to when corporations had less power and influence. The relevant question is how we reform corporations so that they - like the nation-state a century or two earlier - are made the tools of communities rather than elites.

Until progressives as savvy as Katrina vanden Heuvel see that we've no more option about being "pro-corporate" than 18th century Europeans had about being "pro nation-state," we're not going to shift the conversation towards the policies that will facilitate rather than de-rail real progress.

08 June 2012

Obama's Real Problem - Tone Deaf to Entrepreneurs

An article in the Economist and an opinion piece in Investor's Business Daily make a similar claim: the US does a lousy job of attracting entrepreneurs and making it easy for them to start a business.

The simplest leading indicator for job creation is start up activity. Jobs reports are caused by start ups and expansions. Any administration wanting to lower unemployment will make it easy for entrepreneurs to start companies.

When I wrote my book about the emerging entrepreneurial economy, I assumed that Silicon Valley was just one bit of evidence that the US led the world in creating conditions for traditional entrepreneurship. It seemed to me that the US had largely pioneered this matter of traditional entrepreneurship. For me, the next big hurdle was within corporations, getting them to create conditions within that they sought without. That is, making employees more entrepreneurial, offering them similar autonomy and rewards that countries offer entrepreneurs. But it seems as though I've overlooked something: the US is hardly doing all it can to encourage traditional entrepreneurship.

While it is true that we've learned a great deal about traditional entrepreneurship, it would seem that we're not so particularly good at applying that. By contrast, we don't know that much about how to make employees more entrepreneurial: we'll have to invent our way through that. I understand not trying things we don't yet know; I still don't understand not doing things that we've already proven. I still believe that we'll need to transform the corporation so that it creates entrepreneurs rather than just manages knowledge workers, but it's less obvious how that is going to happen in an environment in which traditional entrepreneurship is neglected.

If there was one silver bullet that Obama could use for the economy, it would be entrepreneurship. Entrepreneurs create wealth (something that could neatly offset excessive debt) and jobs (something to neatly offset unemployment). Why Obama wouldn't do all he could to encourage entrepreneurship escapes me.

Excerpts from the articles here:

Investor's Daily editorial:

According to the Census Bureau, the startup rate, measured as a share of all firms, has plunged to 7% from 9% in 2008 and from 11% in 2006. The pace, moreover, is almost half the 1980s' peak of 13%.
Entrepreneurs started 544,109 new firms in 1987 compared with 394,632 in 2010 — a drop of 28%.
Economist article:
MOST governments say they want to encourage entrepreneurs. Yet when foreigners with ideas come knocking, they slam doors in their faces. America, surprisingly, is one of the worst offenders. It has no specific visa for foreigners who wish to create new companies. It does offer a visa for investors, but the requirements are so stiff—usually an initial investment of $1m, or half that if the firm is in a depressed neighbourhood—that the annual quota of 10,000 visas is seldom filled. 

America’s scorn for skills is extraordinary. The share of permanent visas granted for economic reasons (as opposed to kinship) fell from 18% to 13% between 1991 and 2011. In Canada it rose from 18% to 67%.

A New Dark Ages?

I argue in The Fourth Economy that we're on the cusp of a new economy. I don't argue that this is inevitable nor immediate. I only argue that it is necessary.

One key to this new economy is the need to adopt systems thinking as our new operating system, our new way of making sense of the world. In order to create a sustainable economic system, we'll have to create and re-create the systems that define us - systems like our energy systems, transportation systems, and political systems.

The transition from our current system could be like the transition from Roman Empire to the Renaissance. This transition was, obviously, punctuated by centuries of what we now call the Dark Ages..

Or the transition could be like the one from the industrial economy (what I call the second economy) to the information, or third, economy. That is, it could be so seamless that most people at the time don't even know that it is happening.

Of course, if you think that there is nothing unsustainable about our current systems, than the question of how we'll transition seems moot.

The NAACP Drifts Off Message

The NAACP has recently lost members because it has come out in support of gay marriage. 

I don't even understand why the NAACP would risk alienating members over this issue. Whether only 1% or 95% of its members would support gay marriage, it would seem like that agenda item would have nothing to do with the problems of race in this country. A black man has a much lower life expectancy, and can't expect lower wages, and higher unemployment rates than a white man. Until that has changed, it's not clear to me that the NAACP can afford to lose any members over an issue outside of its charter.

06 June 2012

From Pension Plans to 401(k) Plans (and the income gap widens))

From KPBS:
Voters overwhelmingly approved a measure to cut retirement benefits for government workers in San Diego on Tuesday.It would provide most new hires ... with a 401(k) in which a retiree’s income depends on how well their investments perform.
This shift from defined pension to defined contribution has already swept through the private sector and now it is beginning to enter the public sector. This just increases differences in wealth and income.

If you pay into a defined pension plan, your money is managed by professionals in a pool. They don't know if you will die at 102 or 62 but they can tell you with great accuracy what percentage of the pool of retirees will be dead by 72, by 82, and by 92. Also, they can't tell you which stocks or investments will do great and which will do poorly but they can tell you with some accuracy how investments will do over a period of 10 to 40 years. Their good and bad investments will balance out, some. 

Compare this with a 401(k) plan. Here an individual has to calculate at least two things that are largely unknown: their own date of death and their own rate of return on their portfolio. Based on this, they have to decide how much to save. And they have to decide in what to invest.

There are at least two ways that the shift to 401(k) plans increases income inequality. 

First, different people managing a 401(k) will make different choices about where to invest. The guy who invests in high-risk, high-return options in a bull market decade will find his wealth gallop ahead of the more cautious investor ... and find it collapse in bad times. With markets as volatile as they are now, there will inevitably be some people whose average returns are double-digit and some whose average returns are barely positive. Compounded over years, this means that two co-workers making the same salary may retire with wildly different amounts. (Two people, each contributing $7,000 a year. One has miserable luck and averages returns of 1% a year. The other has great luck and averages 15% a year. After 25 years, the first has less than $200,000 to live on; the second has nearly $1.5 million.)

Second, one may die soon and the other late in life. Even assuming that two people retire with $1.5 million, the estates they leave their children will be wildly different. If one lives to 105, his children may inherit debt. If the other lives to 65, his children may inherit a million. This, too, exacerbates differences in wealth and income, in the same way that being born to aristocracy or peasants will compound differences in wealth and income.

The movement into 401(k) plans is just one more way that the modern economy seems to be increasing the gap between the rich and the poor. On that basis alone it seems like a bad idea.

Arab Spring - Politics and Religion

I'm not sure how one would do algebra without first learning arithmetic. Nor is it clear to me how a community makes political reforms without first making religious reforms.

Heard this morning a report on Tunisia's problems with alcohol. The good news is that the tyrant is gone. The bad news is that a majority of the population believes that religion is a public - not private - affair and so is working to purge the country of alcohol, closing bars and liquor stores.

Until a majority of Tunisians believe that beliefs are private and should be respected, they'll have serious problems with democracy. For democracies to work, it is not enough to have majorities determine outcomes. In order to not have a tyranny of the majority, democratic outcomes need to rest on a foundation of rights and the chief right is for a person to have a different belief about what can't be disproved.

Until a community embraces some version of Locke's ideas on the separation of church and state, its democracy will simply be a different kind of tyranny.

“I esteem it above all things necessary to distinguish exactly the business of civil government from that of religion and to settle the just bounds that lie between the one and the other. If this not be done, there can be no end put to the controversies that will be always arising between those that have, or at least pretend to have, on the one side, a concernment for the interest of men’s souls and, on the other side, a care for the commonwealth.”
-  John Locke

Constantine, the one way, and the Dark Ages

You probably can't tell that I'm a little pleased to be standing in the Coliseum in front of Constantine's Arch. I tried an unrehearsed, extemporaneous video about the Arch, and here is what I wish I had said.
I'm standing in the Roman Coliseum, perhaps the most iconic symbol of Western Civilization. But I'd like to make the argument that Constantine's Arch behind me is even more symbolic, the sign of a change that helped to usher in roughly a thousand years of what we now call the Dark Ages.
The simple story is that Constantine was the emperor who made Christianity legal. (And within the century, it was not just legal but was the only legal religion.) But that glosses over something at least as important. In making it a state religion, Constantine drove the need for a standard, a clear definition of what was meant by Christianity. It is really just in the last century - with discoveries of scrolls at Nag Hammadi and the Dead Sea - that we've come to appreciate how varied was the Christian world in the centuries after Christ. In that fourth century – through mechanisms like the First Council of Nicaea in 325, Constantine worked to create unity within Christianity, to define beliefs, books to be included or excluded from the Bible, and how to worship. Constantine also banned gnostic religions and home churches that couldn't be regulated. And he did this through the Roman bishop who - when this started - was roughly on par for power with at least a half a dozen other bishops but, by the time the Roman empire had collapsed a century later, inherited the title previously used only by emperors: Pontifex Maximus, soon just pope.
You could argue that Christianity, shifting the emphasis from the natural to the supernatural, from reliance on crude science to crude superstition, brought Europe into the Dark Ages. I'd argue that it was this emphasis on the one way that did it, this intolerance of diversity in belief, thought, and practice. This arrests economic development partly because if you and I have the same everything, we have nothing to trade. (Or even if we have different goods there is still no value to be created in trade if we distrust rather than value what the other has.) By the year 1,000, life expectancy was 18 years, and people's world, rather than sprawl across the whole of Europe into Britain and south to Africa, was limited to a radius of about 5 miles. The Dark Ages was a time of poverty, violence and oppression.
What I call the first economy was a time from 1300 to 1700 when we came out of the Dark Ages. The Protestant Revolution meant that the Christian community became nearly as diverse as it had been in the centuries after Christ. Global trade was proof that diversity - at least in its rawest, economic form - was valued. And this first economy, this shift from an emphasis on one true way to encouraging a variety of ways, began a trajectory of progress and prosperity that did not just bring Europe to the level of Rome but beyond. We stand here amazed at the remnants of their civilization; think how much more amazed they would be at ours
And this arch behind me? Constantine’s Arch? It was a bridge from the Roman Empire to the Roman Catholic Church, from Europe’s largest ever empire into the Dark Ages. This, for me, makes it the most symbolic monument in all of the West.

03 June 2012

George Soros Labels the European Union a Political Bubble

“… in light of the ongoing interaction between markets and regulators it is quite misleading to study financial markets in isolation. Behind the invisible hand of the market lies the visible hand of politics. Instead of pursuing timeless laws and models we ought to study events in their time bound context.”
-          George Soros

George Soros has a really deep understanding of the modern world. His financial success (he's one of the few people on the planet to have made more than a billion dollars a year in more than one year), is seemingly rooted in a model of the world much broader than just financial markets.

Among other things, he believes that bubbles are as common as - perhaps even more common than - stable equlibriums. This sets him apart from most economists, but Soros argues that given how dependent market value is on perceptions, it is as easy to argue that prices (whether of gold or stocks or currency) are driven by perceptions as it is to argue that perceptions are driven by prices. In physics, causation flows from object to observer. A rock and a feather falling in a vacuum fall at the same speed whether or not you thought they would. By contrast, if society thinks that an ounce of gold (something "solid and real") is worth more than a share of Facebook (something "speculative and iffy"), than it will be. If, instead society thinks Facebook's ability to create profits is greater than that of an ounce of gold, than a share of Facebook may sell for more. Causation flows both ways when it comes to social realities. That is, sometimes underlying "real" value drives perceptions and sometimes perceptions drive "real" value or prices.

Soros studies bubbles and one fascinating point that Soros makes in a really illuminating speech about the nature of the euro crisis is that the European Union itself was a bubble, a political bubble.

I contend that the European Union itself is like a bubble. In the boom phase the EU was what the psychoanalyst David Tuckett calls a “fantastic object” – unreal but immensely attractive. 

You can read the speech here.  It will provoke you to think.

01 June 2012

Creating Jobs in the Fourth Economy

The job numbers for May were bad; the economy created a mere 69,000 jobs. Even before the Great Recession, the American economy struggled to create jobs. In the four decades from 1960 to 1999, it had created an average of 2.5 million jobs per year. In the first decade of this century, it averaged job losses of 100,000 per year.

Throughout the West, the policies of liberal and conservative administrations are ineffectual. In the United Kingdom, Conservative Party PM David Cameron made bold moves to reduce the deficit by simultaneously cutting spending and raising taxes. In response, the UK’s recession has begun its second dip. By contrast, Obama has managed to squeeze through a variety of stimulus measures, cutting taxes and raising spending since he has taken office. While the US economy has done better than the UK, it continues to falter between full recovery and recession. France has just replaced one of its most conservative presidents of recent times with a socialist and this month posted its worst job numbers of the new century. With few exceptions, the West is doing as poorly at job creation as it has during any time since the Great Depression.
While it seems absurd to claim that these economies would create more jobs if only government spending were slashed, it is still true that government spending and tax cuts have been more effective at creating debt than jobs.
Jim Clifton, Gallup Poll CEO, in his new book The Coming Jobs War, claims that their polls suggest “demand” for about 3 billion formal jobs around the globe but supply of only 1.2 billion. That is, worldwide, we’re short jobs by about 1.8 billion.
During the last century, we changed our economy so that it began to produce a quantity, quality, and variety of products that had scarcely been imagined in the past. It is possible to again change our economy so that it is able to do a similar thing with the creation of jobs, but this will require different strategies.
What if we’re in a new economy, one as different from the information economy in which we grew up as that was from the industrial economy before it? What if central banks really are doing all they can – and still it is not enough? What if governments are already teetering at the edge between the need to limit debt and stimulate the economy? What if it is not the policy failure of states or banks that has led to such anemic rates of job creation? What if the problem is that a new economy is demanding a change of corporations that is as significant as the change demanded of states during the transition into our industrial economy, or of banks during our transition into the information economy? What if communities have been holding governments accountable for failures of corporate policy?  
There are only four things that factor in the creation of economic value: land (or natural resources), capital, labor, and entrepreneurship. All economic value is created by some mix of those four and it seems that our first three economies have been led by the first three factors. Since the Dark Ages, the West has gone through three distinct economies: the first, agricultural economy was led by land, the second, industrial economy was led by capital, and the third, information economy was led by knowledge workers, or labor. Communities that did the most to create capital and get the most from it – whether from innovations in financial markets or factories – led during the second, industrial economy. Communities that did the most to create knowledge workers and make them productive – whether from innovations in education and management or information technology – led during the third, information economy.
First - Agricultural
Second – Industrial
Third - Information
Fourth - Entrepreneurial
Knowledge Workers
Period (roughly)
1300 – 1700
1700 – 1900
1900 – 2000
2000 - 2050
Institutional Revolution
Defined anew for the West

Now, it seems, we have access to resources – or land - anywhere on the globe, capital sums in the trillions, and a steady stream of university graduates. And yet economic growth is slow and job creation rates are anemic. It might just be that the good and bad news is that our economy has developed to the point that its limit has once again shifted. It seems that our economy has developed to the point that it is now limited by the most advanced of the four factors. The limit to this fourth, entrepreneurial economy is entrepreneurship.
There are many implications to a new economy. For one thing, these new economies have forced a transformation of the dominant institution.
The third, information economy, for instance, required a massive change to the bank. Capital that was scarce during the second, industrial economy was treated as plentiful rather than scarce during the third. Debt everywhere – on corporate balance sheets, in credit card balances, for mortgages, and for government spending – rose and brought the economy along with it. After about 1900, what limited progress was knowledge workers and the trick to prosperity was to create knowledge workers and keep them employed – even it if doing that required creating debt. The bank that, in the 19th century, reserved access to credit and investments for an elite few became a retailer to the masses, offering mutual funds and credit cards to households from every class.  
Universities, too, greatly expanded. In 1900, less than 5% of 14 to 17 year olds were enrolled in formal education; by 2000, less than 5% of 14 to 17 year olds were not enrolled in formal education, this being one obvious key to creating knowledge workers.
Corporations and governments both grew spectacularly during the third economy, for much the same reason. Knowledge workers are specialists and rarely create value working alone. Corporations and bureaucracies are home to the knowledge worker, letting the architect and computer programmer create value as part of teams. The rise of the knowledge worker was coincident with the rise of the corporation.
The model of the last century for economic progress and job creation has been – in retrospect – fairly simple. Pump capital into the expansion of organizations, creating larger government agencies and corporations, places where knowledge workers work. Educate an increasing portion of the work force to prepare them to become knowledge workers, with majors as varied as engineering and advertising. Give these new knowledge workers increasingly better information technology – from telegraph to typewriters to fax machines to computers to smart phones. Once you’ve done all this, stand back and watch innovation and growth follow.
But what happens when the next innovation in information technology does as much to distract as inform knowledge workers? What happens when corporate or government bureaucracy is no longer the best way to coordinate the efforts of knowledge workers? What happens when debt in every sector – households, corporations, and governments – becomes excessive? And what happens when universities create more knowledge workers than companies can employ? What if knowledge workers and the innovations they require no longer limit progress?
What if the new limit to progress is entrepreneurship?
Knowledge workers did not just suddenly appear in 1900. If we define knowledge workers as people who manipulate symbols, like blue prints, computer code, and accounting ledgers, rather than things, then we’d had knowledge workers for centuries. But starting in about 1900, their portion of the work force began to rapidly rise. Knowledge work was not created in the third economy but it was popularized. The same will be true of entrepreneurship in the fourth economy.
Entrepreneurs are not new to this emerging, fourth economy. What will be new is the notion that more employees should be more entrepreneurial, the notion that entrepreneurship should be popularized beyond an elite few. Knowledge workers within corporate or government bureaucracies were given roles which they have been expected to execute well. As communities make more employees more entrepreneurial, knowledge workers will act a bit more like CEOs – working with the primary aim of creating equity, secondarily involved in the creation of new processes, systems, products, and jobs.
Entrepreneurs create wealth and jobs. Two of the biggest problems we have in the West today are an excess of debt and a shortage of jobs. More employees becoming more entrepreneurial will reverse both of those problems.
The fourth economy will probably – but not necessarily – emerge in three phases. In the first phase, companies will change their policies and begin to use their hordes of cash to fund more entrepreneurial activities by their employees, expecting employees to not just make products but to make actual business units, to create equity. In the next phase, social entrepreneurs who have created and transformed non-governmental organizations and non-profits will begin to create and transform government agencies. In the third phase, expertise and fluency gained by the popularization of entrepreneurship will be extended into broader swaths of social invention, driving changes in education, work, government and communities in ways that would be as hard for us to imagine as it would have been for those in 1900, at the dawn of the popularization of technological invention, to imagine the myriad products that would be created in that century.
Communities that continue the extraordinary rise in incomes and prosperity that we’ve experienced during the last few centuries will popularize entrepreneurship in the same way that they popularized knowledge work in the last century.
CEOs would leave a community that defined and regulated their roles, possibilities, and income as much as they do for their employees. That is, the community they’ve created within their corporations is typically vastly different than the communities they choose to live in. It is less obviously government policies that are stifling entrepreneurship, growth, and innovation than corporate policies. And corporations are among the largest economies in the world, making up between one third to two thirds of the 100 largest economies. (Wal-mart sales are greater than the GDP of Sweden or the Philippine, for instance.) And while millions of Americans make more than what we pay our president, not a single employee within any Fortune 500 firm makes more their CEO. The corporation has to create more opportunities for entrepreneurship for its employees, institutionalizing entrepreneurship, or social invention, in this century in the same way that it institutionalized technological invention in the last century. And once more employees become more entrepreneurial, our problem will not be that we’re not creating enough jobs; that may become the least of our problems.
If it is true that we’ve entered a fourth, entrepreneurial economy, it is worth remembering one of the lessons of history: the communities that adapt to these new realities first will prosper the most. We have nothing to lose but our unemployed.
Ron Davison lives near San Diego and is a business consultant who has worked with some of the world’s largest corporations. He is the author of The Fourth Economy: Inventing Western Civilization.