30 March 2014

"any fool can get into an ocean ..." a poem by Jack Spicer

It's Sunday night. That seems reason enough to post a poem.

“Any fool can get into an ocean . . .”

BY JACK SPICER 1925–1965

Any fool can get into an ocean   
But it takes a Goddess   
To get out of one.
What’s true of oceans is true, of course,
Of labyrinths and poems. When you start swimming   
Through riptide of rhythms and the metaphor’s seaweed
You need to be a good swimmer or a born Goddess
To get back out of them
Look at the sea otters bobbing wildly
Out in the middle of the poem
They look so eager and peaceful playing out there where the
    water hardly moves
You might get out through all the waves and rocks
Into the middle of the poem to touch them
But when you’ve tried the blessed water long
Enough to want to start backward
That’s when the fun starts
Unless you’re a poet or an otter or something supernatural
You’ll drown, dear. You’ll drown
Any Greek can get you into a labyrinth
But it takes a hero to get out of one
What’s true of labyrinths is true of course
Of love and memory. When you start remembering.

23 March 2014

The Most Important Government Policy for Determining Unemployment Rate

In most EU countries, the majority of people report that their government makes it hard to start a business.  Sadly for them, this matter of ease in starting a business seems to be a simple determinant for unemployment. And it makes sense. The harder it is to start a business, the harder it will be for successful entrepreneurs to hire people.

Here you can see the relationship between how hard it is to start a business and the unemployment rate. Do you want a high unemployment rate in your country? Make it hard to start a business.

Obviously unemployment rates depend on a variety of factors, but governments sincere about lowering their unemployment rates would great a great return from making entrepreneurship easier. (I argue incessantly that the task for policy makers in this new economy is to popularize entrepreneurship just as successful policy makers popularized knowledge work in the Information Economy.)

If you want to stymie economic growth in an Industrial Economy, make it difficult to attract or create capital. If you want to stall growth in an Information Economy, make education expensive and unattainable for large swaths of people. And if you want to frustrate growth in an Entrepreneurial Economy, make it hard to aspiring entrepreneurs to start a business. It certainly seems to work for countries like Italy, Greece, and Spain.

Data for the above graph.

Hard to Start Biz Unemployment
 Italy 96% 20%
 Greece 93% 24%
 Spain 82% 25%
 Portugal 80% 16%
 Lithuania 72% 13%
 Latvia 71% 15%
 Slovenia 69% 9%
 Ireland 69% 15%
 Romania 68% 7%
 Slovakia 68% 14%
 Cyprus 67% 12%
Bulgaria 66% 12%
 France 66% 10%
 Czech Republic 61% 7%
 United Kingdom 59% 8%
 Belgium 58% 8%
 Croatia 57% 16%
 Denmark 54% 8%
 Poland 52% 10%
 Netherlands 49% 5%
 Hungary 48% 11%
 Finland 46% 8%
 Germany 46% 5%
 Estonia 44% 10%
 Austria 43% 4%
 Luxembourg 33% 5%
 Sweden 25% 8%
 Malta 21% 6%

19 March 2014

Once Upon Time (1998), Republicans and Democrats Had Nearly Identical Views on Climate Change. Then it Became Political

Up until 1998, Republicans and Democrats were equally likely to believe that climate change resulted from human activity and was already having an impact.

And then it became political. A decade later, Democrats were almost twice as likely to believe that climate change was real.

As it turns out, Democrats aren't smarter or better educated than Republicans. Nor are Republicans more scientifically inclined than Democrats. Randomly select a member from either party and you're about as likely to get someone who couldn't explain their way out of a rain storm. Or for that matter, about as likely to give you a cogent argument based on science. (Note that actual scientific experts, however, are not divided on climate change. I'm making a point about the average layman, the voter who can swing an election.)

Once climate change became political, though, it became a matter of identity, of being in the club. If you have lots of Republican friends, it becomes increasingly awkward to argue for climate change. By contrast, if you hang out with Democrats, it is hard to argue that climate change is not such a big deal.

I think its true that - outside of scientists, philosophers, and prophets - very people seek truth at the expense of alienating friends and family. Most folks would rather hang out with actual people than be alone with ideas or facts. It's peer pressure that seems as likely to shape our beliefs as an objective look at the facts. And now the argument is not scientific: it's an attack on you and your group. To change your belief might mean alienating you from your peer group. That's tough to ask of anyone, unless your peer group is fellow scientists, philosophers, and prophets.

[Last note: the Gallup numbers since 2008 haven't changed much. It's now 79% probable that a Democrat will belief in climate change. Republicans are unchanged at 41%.]

17 March 2014

Gallup Job Creation Index Back to Pre-Recession Levels

Gallup tracks job creation in the US, posting a three-day running average. Its posted values go back six years. Here is a graph that plots only the value on March 16, from 2008 to 2014.

The index is back to where it was just before the recession. It's worth remembering that six years ago, unemployment was 5.1 percent.

This is good news for the obvious reason that a job creation index this high will continue to bring down unemployment. Almost as importantly, as unemployment continues to lower wages will start going up. That is terribly overdue.

I think that this graph showing how household income has stagnated is probably the single most important graph from the president's recent economic report. It explains a host of political and economic issues, showing that household income last year was about where it was in the late 90s.

As household income has stagnated, it has simultaneously put pressure on two political fronts. Liberals, aware of how hard this economy has been on people, have pushed for a better safety net. Conservatives, aware of how hard this economy has been on government debt load, have pushed for less spending. Because of this reality of diminished household income, both sides are hugely disappointed: debt has soared even as government programs have been scaled back. 

Back when household income rose, it was possible to simultaneously increase government revenues and take-home pay; that makes for easy politics. When household income drops, so does take-home pay and money for government programs; that makes for hard politics.

If the rate of job creation rises, it won't just make things easier in households across the country. It will make politics a little easier in capitol buildings in DC and every state.

16 March 2014

The Best Irish Music You'll Hear All St. Patrick's Day

Years ago I briefly hosted a "Celtic Folk for Celtic Folk and Other Folk" Show. On the basis of that and an enduring fondness for the emotionally expressive music of Ireland, I'm going to offer you a few wonderful Irish songs.

First this classic from the Bothy Band, sort of a late 70s super group of Celtic musicians.

Two members of that band, Kevin Burke and Mícheál Ó Domhnaill, perform a song in English, a sad ballad about an expedition lost at the pole.

For a couple of newer bands, here's one of Toronto that reminds us that anything rock guitarists did with tone and rhythm had already been done centuries earlier by guys playing bag pipes.

And then just a ridiculously beautiful song by a modern super group is this number from The Gloaming.

Then the Pogues, who remind us that these Celtic folk musicians grew up down the street from the Sex Pistols and other punk rockers.

This, a heart breaking love song from a contemporary singer / songwriter who may still perform music better than this instant classic.

Finally, Van Morrison. And in this song he reminds us of the romantic poets who first defined the lifestyle and occupation of those modern troubadours we call musicians and the rich literary tradition from which these Irish musicians can draw.

If you know of better Celtic music, I'd love to hear it. Happy St. Patrick's Day.

11 March 2014

Measuring the Future as Well as the Past - Adding Entrepreneurial Activity to Measures of GDP and Unemployment

In the wake of the Great Depression, the US began to measure GDP. Simon Kuznets, in 1937, presented his formulation of gross domestic product to the U.S. Congress for the first time. As obvious and as simple as it sounds, if economic growth mattered and was going to be a goal of economic policy, it had to be measured.

In the 50 years after GDP was defined, GDP grew about 50% faster than it had in the 50 years before. Management 101 is "measure what matters."

Which brings us to entrepreneurship, for which no simple equivalent to GDP exists. Making the rash assumption that it matters, it seems worthy of a Simon Kuznets for the 21st century, someone to create a measure that would - in a single value - capture the rise and fall in entrepreneurial initiatives.

The Global Entrepreneurship Monitor (GEM) offers a candidate for this measure. The good and the bad of their data set is that it is rich. You can compare Total Early Stage Entrepreneurial Activity across countries, investment rates, growth expectations, etc. This is a delightful database for serious students. It is less helpful for a simple report akin to "GDP rose from 2.3% to 3.3% this year." 

The OECD has developed International Metrics for Entrepreneurship (with financial aid - and presumably advice - from the Kauffman Foundation) that allow comparisons across countries and also guide in policy formulation. (Note how much better the UK's recovery has been than the US recovery in this regards.)

Stock market investors look for leading indicators, measures that predict what will happen to stock prices. (Weather prediction that would then influence crop yields was one of the original leading indicators.) That matters. But what matters more to a community are measures of activities that will create - rather than just predict - future prosperity. In this regards, it is hard to think of a more important measure than entrepreneurial activity.

Curiously, in Obama's annual report, entrepreneur ( or entrepreneurs or entrepreneurship) is mentioned only 6 times in 410 pages. By contrast, the UK has done more than merely make mention of entrepreneurship. In November of last year, the UK announced its 10,000th startup loan. It doesn't seem like an accident that the UK's rate of new enterprises is up 40% since before the recession while the US's rate has yet to fully recover. The UK is laying policies for future economic growth that are already showing up in increased rates of business formation. Look for the UK's future GDP growth to outpace that of the US for this reason alone. 

Every good manager and policy maker knows that intentionality precedes results. Managers who want high performance don't just shrug and tell their teams, "Whatever." On a similar note, policy makers intent on creating economic growth are intentional about everything from infrastructure investments to tax policies to education and permits. Entrepreneurship is as likely to respond to government initiatives as is education. And one of the simplest way to communicate what matters is to begin talking about what desired results look like. For this, a measure can be a good thing.

As it is, the awareness of the rate of new business formation is paltry in comparison to awareness to the unemployment rate; and yet it is the first that will do the most to change the second. Unemployment rate is not a cause. It is an effect.

If you want to measure past economic performance, measure GDP and unemployment. If you want to measure future economic performance, measure entrepreneurship. That's reasons enough to standardize and publish easy metrics to explain our entrepreneurial performance.

10 March 2014

Everything You Needed To Know About the President's Economic Report in 6 Simple Graphs

President Obama and his economic advisers have just released their annual report. It offers good news for this year and sobering news about the reality of household income at the start of this century. Also, there are a couple of curious facts that might surprise you.

Obama is predicting GDP growth of 3.3% for 2014, a big gain on 2013's 2.3%. Here are the reasons for his optimism.

Household debt

Household debt service is the lowest it has been since they began collecting data in 1980. As you can see in this graph, there has been a sharp downturn in both debt owed and current loan payments on debt. As consumers become more confident, this trend will likely reverse, driving up consumer spending (which makes up nearly 70% of GDP).

Household wealth
Household wealth rose sharply in 2013. Stocks were up 31% and house prices up 11%. This suggests that the ratio of net worth to income rose about 50%. Add that to a drop in debt and it suggests that households will spend more this year.

Government Job Creation
After shedding 700,000 jobs in the wake of the recession, state and local governments actually added 32,000 jobs during 2013. (This austerity has been a major drag on the recovery compared to past recoveries.) State and local governments will likely increase jobs again this year, adding to private sector gains.

Additionally, the federal government has stabilized. Congress has already agreed to budgets for this year that will stabilize spending rather than  cut it as last year's sequester did. (The CBO estimates that last year's budget deals slowed GDP growth by 0.6 percentage points and cost the equivalent of 750,000 full-time jobs.)

The deficit has contracted sharply during this recovery. In no four year period since WWII has the deficit shrunk so rapidly. In 2013 alone, the deficit shrunk by 2.7% of GDP. That won't happen in 2014, which will make it easier for the economy to grow.

All this means that the public sector will no longer be putting its foot on the brake even as the private sector tries to accelerate.

Europe and Japan are Recovering
At the close of 2013, the 28-country European Union experienced its first 3 consecutive quarters of GDP growth since 2011.

Japan's GDP grew 2.7% in 2013 after a 0.4% decline in 2012.

As our trading and investment partners' economies improve, it will help ours. Japan's prolonged recession and Europe's continuing woes have been a huge drag on our recovery.

Household Income Is Stagnating

A recovery is much better than a recession, and that is what 2014 promises to enhance. But while a recovery will define how many people are working, it is long-term issues that define their standard of living.  The president's report also highlights some bad news about the gains so far this century.

Median family income is lower than it was at the start of the century.

Finally, there are a couple of curious facts that seemed worth reporting.

One, health spending per capita is growing at its lowest rate since the 1960s. That's good news for businesses, entrepreneurs and households but of course it is bad news for the healthcare sector.

Two, for all the talk of solar, it is wind energy that has grown most rapidly this century. Couple that with increases in oil and gas production and domestic energy production is finally greater than the value of our imports.

A Very Bad, No Good Recession is Followed by a Very Slow, Fairly Anemic Recovery

The average downturn since World War II
Jobs Lost: 2 million
Months to regain lost jobs: 10
Length of Recovery: 59 months
Ratio of Jobs Gained During Recovery to Lost in Recession: 6X
Ratio of Months Recovering to Months in Recession: 3X

Put simply, on average it took the economy less than a year to regain the jobs lost in a recession. On top of that, the average recovery kept going about 4 more years after recovering the lost jobs, creating about 6 times as many jobs as was lost. On average we gained about 11 million jobs in a recovery after losing about 2 million during a downturn.

The Great Recession and current recovery
Jobs Lost: 8.7 million
Months to regain lost jobs: 48 (and counting)
Length of recovery: 48 (and counting)
Ratio of Jobs Gained During Recovery to Lost in Recession: 0.9X
Ratio of Months Recovering to Months in Recession: 1.9X

That is, 4 years into the recovery, the economy has not yet created as many jobs as was destroyed during the Great Recession. During the 2 years of the Great Recession, we lost jobs 3X faster than average for a recession. Since then, we are growing jobs more slowly than average. That's a terrible combination and it explains why 4 years is still not enough to fully recover.

At our current rate of job creation, it will take 4 more months to completely recover the jobs lost between Feb 2008 and Feb 2010.

At some point policy makers have to realize that the policies that yielded us such spectacular job creation rates in the last half of the 20th century are in need of revision. This century seems different.  We've never had a better educated workforce or more capital available for credit or investment. Still, the economy is creating jobs more slowly than it used to.

In 1873, Walter Bagehot wrote Lombard Street, explaining the role of central bankers to provide credit and liquidity during a crisis. An economy limited by capital was not able to create jobs or wealth; good policy during the Industrial Economy meant abundant capital. By early in the 20th century, the leading economies of the day were increasingly reliant on an educated workforce; economic development had to include public education, from kindergarten to universities and good policy during the Information Economy meant an abundance of knowledge workers.

And policy makers still focus on just those two things: capital and knowledge workers. They don't demonstrate an awareness that anything has changed in this century.  For them, if only we put money into education and capital markets, the economy will respond with more jobs, more wealth, more growth. That linkage seems a little less obvious in this new century.

Until policy makers in this century find similarly creative ways to stimulate the supply of entrepreneurs, our economy will continue to fall far short of its potential. We have unprecedented access to finance, information, and education. Our technologies are as promising as ever. Consumer markets are emerging in China, India and around the world; billions more are now connected to the global economy as consumers and workers. We have an abundance of everything except entrepreneurs.

Few people in 1900 would have believed that simply being upper middle class would mean staying in school into one's mid-20s. Few people in 1800 would have believed that it would take trillions in easy credit to keep an economy running at full employment. Today, few people can comprehend how much we need to popularize entrepreneurship to hit a new rate of job creation.

Entrepreneurship creates jobs, not capital or education. Today we can automate manual labor with machines and knowledge work with software. It takes fewer people to create value which means we need more entrepreneurs to create jobs at a rate that will lead to full employment. To create jobs more quickly than we automate them is going to require unprecedented levels of entrepreneurship. For this reason alone entrepreneurship - and not capital or knowledge workers - now limits our economic development and growth.

Someone is going to begin working towards policy that encourages entrepreneurship in the same way that in past centuries leading communities began implementing policy that created more capital or knowledge workers. Until that happens, we will just need to lower our expectations.

07 March 2014

Millennials as Social Inventors in the Fourth Economy

From marriage to religion to politics, millennials are less likely to identify with institutions of any kind than are previous generations. My prediction is that they'll become a generation of social inventors.

Pew reports that Millennials (18 to 33 years old) are about one third again more likely to identify themselves as political independents (at 50%) than are Gen X (34 - 49, at 39%), Boomers (50 - 68, at 37%) or the Silent Generation (69 - 86, at 32%). 

They are twice as likely as boomers and three times as likely as the Silent generation to have no religious affiliation. 

They've had a steep decline in marriage from previous generations, a continuation of a trend.

And yet these are not disconnected people. Measured by number of Facebook friends (admittedly a number biased by the inclination of young people to use social media and to socialize) they have a large network of friends.

My interpretation? This generation is not subordinating their definition of self or their relationships to existing institutions: instead, they are likely to reinvent institutions to better fit who they are. This is not revolution by the barrel of a gun that would seize control of existing institutions. Instead, it is a revolution that simply walks away from those institutions to create something new and different. They aren't fighting over the ball; they are creating new sports.

In the Fourth Economy I tell the story of economic progress as invention. And indeed, technological inventions like steam engines and computers rightfully get a lot credit for making our lives enormously better. But social invention - acts like the creation of the modern corporation and bank - have been just as important to the transformation of our world and sense of self as any technological inventions. 

Last century, technological invention became the new normal. Today, anyone who buys a car fully expects a better model to emerge within a few years. Anyone who buys a smart phone fully expects a better model to emerge within a few months. We expect constant evolution and occasional shifts in technology. 

This century, social invention will become the new normal. It is gradually dawning on average Americans that our definition of marriage is going through an historic change. What's curious about same-sex marriage is, of course, that gays are showing such an interest in marriage even when millenials are showing less and less. But the reinvention of this social invention we call marriage is hardly the only reinvention that millenials will experience and pioneer. This is the generation that grew up playing video games as much as they watched TV or listened to music; they are used to having participation in, some control over, their experiences. You may not be able to change the outcome of a song or movie but you can change the outcome of a video game. This generation is not going to simply accept the social inventions they've inherited: they are going to expect to be able to change them to adapt to who they are and to reality as they see it.

Same-sex marriage will seem like a paltry change within a few decades. Millenials will popularize entrepreneurship twice: once in the traditional way by starting more businesses than any previous generation and a second time by extending entrepreneurship as social invention into the re-creation of education, government, and the corporation. Their leadership style will be less about ascending to the position of CEO than about creating a successful startup; and this will be true not just in the business world but across the various kinds of relationships they have, from personal to financial to religious to political. 

Economic progress has been the product of technological and social invention. We've already made technological invention a constant. It's the millenials who will make social invention a constant. 

It's little wonder that Pew reports that millenials are also optimistic about their economic future.

04 March 2014

Will Corporations Lead Governments in Addressing Climate Change?

Today, Sir Richard Branson wrote an interesting piece in which he sided with Apple CEO Tim Cook. Conservative stockholders have recently criticized Cook for pursuing sustainability programs and his response was to advise them to get out of Apple stock. Branson seconds this sentiment, adding that it is not just profit that drives corporations but purpose.

In Galileo's time, the laity put more trust in priests than scientists; in our time, voters put more trust in politicians than scientists. People distrust scientists because they don't understand them; priests and politicians are easier to believe because they speak in a language that doesn't require us to think hard. By contrast, businesses are used to thinking rigorously about issues, which gives them a real advantage over Congress in dealing with reality.

I've written before about how the popularization of entrepreneurship is something that will transform the corporation. As employees become more entrepreneurial, control over the corporation and the definition of policies will be dispersed more broadly within the corporation. (The corporation will be democratized in ways that parallel the transformation of the church and state centuries earlier in the West.) Senior managers in one country might feel blase about policies that negatively impact employees or residents across the globe. As employees throughout the corporation have more power to define policies, they are likely to put as much value on their own air, water, and climate as they are profits. Management here may not be concerned about habitats there but employees everywhere will be concerned about habitat everywhere. (And, of course, given the dynamics of climate change, everything going on over "there" are just as likely to impact us 'here.")

Corporations may not be people but they are comprised of people. People within a corporation are as likely to care about the earth as people within a school, park, shopping mall or city hall. As more people get to shape corporate policy, it should benefit more people. Churches became better when power was dispersed from the popes to the people. Nation-states became better when power was dispersed from monarchs to voters. Corporations will become better, too, when their power is dispersed from CEOs to employees. And that's already happening as decisions become too complex for any leader to keep pace with.

Sir Branson has called our attention to this before: he thinks that corporations will take the lead on addressing climate change. I think he's right. The issues around climate change revolve around business practices and business is - of course - the domain of the corporation.

01 March 2014

Predicting a Record Number of Civil Wars

This decade could be really messy. Already countries like Iraq, Syria, and the Ukraine are making headlines as forces within the country struggle for independence or control.  Given the stage of development so many countries are at right now, we will likely see quite a number of civil wars in the next 20 years or so.

Iraq became a country because some British administrator drew a line around the region. Iraq now includes two or three very distinct groups that don't think of themselves as one nation but instead as three. It seems obvious to say but it's tough to create a nation-state when more than one nation - more than one people - wants to be represented. The Kurds in the north of Iraq have very different values and interests - perhaps irreconciliable differences - from the Sunnis and Shiites in the south.

Before the English and French invented the modern nation-state, the West was mostly defined by city-states, empires, and tribes. A state refers to a form of government. A nation refers to a people who define themselves through some blend of common language, beliefs, culture, history, potential, etc. One nation might include many states. (Think of Italy before 1861, made up of city-states like Milan, Florence, and Venice.) One state might include many nations. (Think of the Holy Roman that at one time or another included Germans, Dutch, Italians, French and Poles.)  A nation-state by definition aligns a nation and a state.

As it now stands, it seems difficult to create a modern democracy without first creating a nation-state.

The Ukraine seems to be comprised of two nations right now. The west faces Western Europe, is liberal, better educated and intent on economic and social freedoms. The east faces Russia, is conservative, less educated and speaks Russian. While it is possible to align these two groups, it is very difficult. And the more that the people define their own policies -as happens in a representative government - the more glaring will be these differences, the harder it will be to reconcile. A strong-man leader makes these differences less important simply because these differences have little chance to be expressed; but as information technology, media, and economic power shifts from the center of a country to its people, such differences become more obvious. It seems as though one of the first things revealed in the transition towards a democracy is that these countries are rarely nation-states; instead, they are petty empires of multiple nations that have been ruled over by a strong central government.

Because of this, civil war almost seems like an inevitable step towards the creation of a nation-state. (It happened in the US when the economy and politics developed to the point that states became less defining of the continent than the country, when united States gave way to The United States.)  Because of this, it's hard to imagine that the number of civil wars will drop any time soon. This is going to be painful.

P.S. Here's a piece that not only adds a different perspective on the Ukrainian crisis from what you might get in most Western media but seems to buttress the notion that a fundamental problem is that there is no organic whole that encompasses the Ukraine, a country that was pieced together by outsiders after WWII.
Jack Matlock, Ukraine: the Price of Internal Division