30 June 2014

Is Catholicism What's Wrong with the Supreme Court?

The US was founded by Protestants. For the first time in this country's history, there is not a single Protestant on the Supreme Court. (The court now has 6 Catholics and 3 Jews.)

Henry VIII declared himself head of the Church of England and in one bold stroke made the church subordinate to the state. From then on, the church could exercise only what rights the state granted it. Our country was founded by British citizens who grew up with this as part of their heritage.

Not all of the world was so innovative. Around that same time, the Spanish Inquisition was underway. In Spain, church teachings drove national policy. The church determined who monarchs should be and what policies were appropriate. Politics took its lead from religion. 

It's been centuries since then but cultures take generations to change. I suspect that this sort of difference in history would create different sensibilities, different cultures, with Catholics and Protestants.

Justice Scalia, for instance, has made it clear that his role model is Thomas More. More refused to acknowledge Henry VIII's role as head of the Church of England, a refusal for which he was eventually beheaded by the English and later named a saint by Catholics. It is hard to more clearly state one's revulsion to the church being subordinated to state than the declaration that More is your idol. Had More won in his contest with King Henry, England would have remained under the control of Rome. In Scalia's preferred world, when the Vatican later shut down scientists like Galileo in Italy they would have also been able to shut down scientists in England. Scalia's adoration for More would make more sense in a country more scientifically and socially backwards like Italy, Colombia or even 16th century Spain than 21st century US. Yet here he is, casting the deciding vote and writing the majority opinion on today's decision about religious rights of owners vs. healthcare rights of their employees.

I could be wrong but I suspect that if the Supreme Court still had a few Protestants to balance against a few Catholics, the religious rights of business owners would not have defined medical care for their employees.

The current court:
NameReligionAppt. byOn the Court since
John Roberts (Chief Justice)Roman CatholicG.W. Bush2005
Antonin ScaliaRoman CatholicReagan1986
Anthony KennedyRoman CatholicReagan1988
Clarence ThomasRoman CatholicG.H.W. Bush1991
Samuel AlitoRoman CatholicG.W. Bush2006
Sonia SotomayorRoman CatholicObama2009
Ruth Bader GinsburgJewishClinton1993
Stephen BreyerJewishClinton1994
Elena KaganJewishObama2010

Hobby Lobby Lobbies to Make Sex a Hobby

Today the Supreme Court ruled that a privately held company can refuse to finance contraceptives they object to on religious grounds. The Hobby Lobby lobbied that sex is just a hobby and no more deserves employer subsidies than, say, bowling. They got their decision.

 Ruth Bader Ginsburg's dissent suggests that it would be lucrative for a Christian Scientists to start a corporation. (A summary of her dissent is here.)

She writes,
"Would the exemption…extend to employers with religiously grounded objections to blood transfusions (Jehovah's Witnesses); antidepressants (Scientologists); medications derived from pigs, including anesthesia, intravenous fluids, and pills coated with gelatin (certain Muslims, Jews, and Hindus); and vaccinations[?]…Not much help there for the lower courts bound by today's decision."

Of course why stop with such half measures? Why not a religion that rejects the entire edifice of modern medicine? One could argue, in light of this decision, that Christian Scientists' who believe in prayer rather than medicine shouldn't be forced to finance a medical profession they don't believe in. Of course the fact that this would dramatically lower costs would be merely incidental to the fact that these owners religious convictions would be more important than their employees right to modern medicine.

One can't help but wonder whether there will be a rush to shift ownership to Christian Scientists, similar to the movement of corporate headquarters to states and nations that offer tax breaks.

But, you holler, this is nonsense. That would never happen.

And of course you are right. The exercise of religious rights is not more important than every other right. Only a women's right to be sexual.

And to prove that they are opposed to these contraceptives on purely ethical grounds and this has nothing to do with saving money, Hobby Lobby has invested in pharmaceutical companies that manufacture emergency contraceptives and drugs used to induce abortions. I'm sure it is just a coincidence that if they can make money on it, they are for it and if it costs them money they are against it.

28 June 2014

Why Even Progress Isn't Promise Enough to Make Conservatives Embrace the Future

Pew unveiled some interesting data about the American polity. To me the most fascinating thing is data illustrating the difference between liberals and conservatives in their attitudes towards change.

This could partly be a function of age. The percentage of "steadfast conservatives" over the age of 65 is double that of "solid liberals." [Which I'll just refer to as conservatives and liberals for the rest of this post.] Or it could be a function of education. Twice as many liberals are college graduates, and liberals are 4X more likely to have post-graduate education than steadfast conservatives.

The most obvious, inescapable change is time. Asked about whether America's best days are ahead or behind us, liberals and conservatives are very different: 76% of conservatives think that our best days are behind us and 70% of liberals think our best days are still ahead.

Of course if you're 75, you are likely less impressed with the promise of the future than someone who is 35. Dreading future change is fairly personal (and rational) as you get older. I suspect it is harder to separate out fear about your own personal issues from the promise of life for the average young person in 25 years.

This difference of dread vs. hope for the future can explain so many things. For instance, the attitude towards debt. If you expect things to get better, you don't feel so hesitant to incur debt. If you suspect that things will get worse, the prospect of paying down debt in the future seems like it will just add to your burdens.

 Conservatives see our success as attributable to principles. Things that are constant, that don't change. Again, this is the mirror opposite of liberals. 79% of liberals think that the US is successful because it has changed; 78% of conservatives think we're successful because of our reliance on things that don't change.

This shows up in the most fundamental measure one could imagine: evolution. Conservatives are 4X more likely to think that human beings have existed in their present form since the beginning of time.

During the Dark Ages, the dominant belief was that the state of mankind had gone downhill since Adam and Eve's fall from grace, their expulsion from Paradise. The Renaissance was a major challenge to this belief, arguing that not only had Greeks and Romans made life better from before but adapting their approach to life and science could result in progress.

That conservatives are so gloomy about the future seems to confirm that they still don't trust in progress, in spite of the fact that trust in progress has quite steadily paid off since about 1500.
 This notion that we had pure beginnings that have only been corrupted over time shows up in conservatives' attitudes towards the Bible and the Constitution.
Conservatives are twice as likely as liberals to believe that the Bible is the word of God and 3X as likely to believe that it should be taken literally. It is the conservatives who point to scripture to renounce the claims of a Copernicus, a Darwin, or a feminist. Again, the constant here is that change represents a threat. What was captured in scripture two thousand years ago is still more reliable than today's experts or even an individual's own conscience.

Their preference for past experts is not limited to religion. For conservatives, the reality of current times are of less consequence than our founding fathers's reality.  88% of conservatives feel that what matters most is what our founding fathers intended. Again, liberals' results are almost a mirror image of that, with 84% believing that what matters more is what the constitution means for our own times.

The sad consequence of this aversion to change and dread about the future are voices like Glenn Beck's. Instead of a conversation about alternative futures, about what possibilities progress could create, conservatives get fear-mongering that speaks to their deepest fears. If your reference point is Colonial America or 1st century Israel, anything that modern experts would point to as progress has the potential to be a threat. Women free to work outside of the home looks like a breakdown of the family. Financing innovations that fund public works projects are threats to liberty, an invitation to crippling debt.  Even affluence makes us less self-reliant (as our founding fathers were forced to be) and less spiritually-minded. In the end, even progress isn't promise enough to make the future less threatening.

27 June 2014

Managing Your Employees As if They Were Einstein

It's time for management to focus on focus.

I’ve often wondered what would happen if a power outage or Internet outage were to suddenly free a generation from distractions for a few months, wondered what sort of creative output might ensue as people were better able to focus, even if only out of boredom.

And more realistically, I’ve wondered what would happen if we simply got more serious about creating the conditions that heighten focus, conditions that better helped us to tune out the static of the modern world that masquerades as signal.

In 1666, Newton gave a rather spectacular demonstration of what is possible when a young man fully immersed in new ideas is suddenly free from distractions and left to create. In 1905, Einstein demonstrated what is possible in spite of distractions.

In 1666, a plague closed Cambridge University and Isaac Newton took refuge in his mother’s house in Woolsthorpe, a place so boring that young men apparently watched apple trees for entertainment. That year he developed calculus, an analysis of the light spectrum, and the laws of gravity. I don’t know how you’d even begin to measure his productivity in that year. (And of course if you focused on just that year you would miss the benefits that have continued to accrue in the centuries since.)

Einstein already had a family when he had his most amazing year. A student of his visited his house later and observed as Einstein bounced his youngest son – then a baby – in one hand while he scribbled equations with his other hand, meanwhile assuring his imploring toddler son that he was almost done.  He was notoriously absent-minded but that was probably just a by-product of his preoccupation with explaining all of space and time.

In 1905, in five separate papers, Einstein devised a revolutionary quantum theory of light, helped prove the existence of atoms, explained Brownian motion, upended the concept of space and time, and produced what would become science’s best known equation, e = mc2.

Einstein was so exhausted when he finished in June that his body buckled and he went to bed for two weeks.
Then he and his wife did something unusual: they celebrated together. After he finished the first four of the five papers that would revolutionize physics, he sent an old friend a postcard signed by his wife as well. It read in full: “Both of us, alas, dead drunk under the table.”

It’s hard to imagine any normal 8 to 5 work rhythm allowing that sort of intense, obsessive focus or indulge the resultant exhaustion. Or to imagine to how many decimals one would have to go to compare the productivity of any 8 to 5 work with these amazing feats.

I realize that Newton and Einstein were geniuses. In that sense it is not fair to compare us normal folks to them. But I’m also convinced that the degree of focus a culture or environment encourages can change apparent IQs by 10s of points. People who are forced to frantically multitask aren’t able to think through implications, consider alternate possibilities, and can’t fully attend to the facts, much less their consequences. In short, all the evidence you would collect would suggest that they are dumber than they really are. By contrast, someone who isn’t just able to focus on a task but to ponder it later will see not just the facts but how they connect to other facts and better understand how changes will ripple out to impact other realities. Simply put, they will be smarter, giving every evidence of having a higher IQ. Not because they are innately smarter but because you and they collaborated to create the conditions that enabled them to focus, to think rather than react.

It is doubtful that you've hired the next Newton or Einstein. But I guarantee you that depending on the working conditions you create, you can move your employees closer or further from such genius. You can create a work environment that encourages focus or fractures it. Unless you’re asking them to do something terribly mindless – in which case you have another set of problems – this may be the most important thing your company ever creates.

These accounts of Einstein come from Walter Isaacson's biography of Einstein.  

26 June 2014

Why Obamacare Enrollment Didn't Add to GDP

First quarter GDP fell by 2.9%. That's a sharp decline. The popular story is that we got hit by a polar vortex that made it so cold that people stayed indoors to drink cocoa rather than go outside to work or shop. Maybe. But in addition to drops in exports (was the rest of the world too cold to go outside to buy our stuff? How sweeping was that polar vortex?) and inventory (okay, that might be attributed to a drop in spending), one big surprise was a drop in healthcare spending.

Initially, the experts assumed that because so many more people were signing up with Obamacare, spending on healthcare would go up. As you can see in this chart, it didn't. Healthcare spending went down.

Why? Well, one simple reason came from the simple argument for universal healthcare in the first place. There are 300+ million people in the US. They get sick at a certain rate. If we give more people more preventative care, their total health costs will be lower. But the rate at which they show up in emergency rooms is still a function of the size of population, not a function of how many have insurance. Someone bleeding doesn't stay out of the hospital because they don't have coverage.

Insurance was never needed because we were so hardhearted that we would turn people away at the emergency room simply because they didn't have insurance. So healthcare costs were still high - they just had to be covered through invisible taxes, by charging other people more to make up for the people who couldn't pay. Obamacare didn't change that reality. It just made payment more explicit. The total costs of healthcare - the number that would roll into GDP - didn't change. That was a function of injury and illness, before and after insurance.

The net effect? Fewer people will go bankrupt but healthcare costs are unlikely to change much. (In fact, over the next decade or so they may go down as a percentage of GDP, acting as a drag on GDP growth.)

It's funny. This was one of the arguments for Obamacare and yet the experts failed to forecast it. Hmm.


“We're all going to die, all of us, what a circus! That alone should make us love each other but it doesn't. We are terrorized and flattened by trivialities, we are eaten up by nothing.” 
― Charles Bukowski

24 June 2014

The Illusion of Free Will (is that we can ever escape it)

“My first act of free will shall be to believe in free will.”
-          William James

A friend of a friend made a really intriguing comment on my Facebook page the other day. “On the subject of free will -- the Bible would agree that you can do anything you want to. You just risk the eternal judgement if you go against what God made known, especially for those that known better and ignore or reject it.”

His comment provoked me to articulate what was rattling around in the back of my mind. This is one of the great perks of exchanging ideas: you not only learn what other people think but what you, yourself, think.

Hieronymus Bosch, detail

Free will is inescapable. If you are raised in Indonesia, where 88% of the population is Muslim, it might look as though you have a clear choice between free will and obedience. But the instant you know of the option to be Shia instead of Sunni (less than 1% of Indonesians are Shias), you lose this clear choice between free will and obedience; at this point you have to choose to blindly obey what you knew first or to change. Either choice involves the exercise of free will. At that instant, free will is your only option.

And once you learn about Christianity, you are forced again to exercise free will: convert or stay Muslim?

And once you convert you are forced into free will again: be Catholic or Protestant?

And then you have to choose one of the tens of thousands of Protestant denominations. Should you be Amish or Presbyterian? Calvinist or non-denominational? Meet in a mega-church with tens of thousands or in a home?

And which version of scripture do you accept? Do you include the Book of Mormon as more recent but true revelation? Do you exclude Revelation once you learn that it was only included because the Council at Nicea wrongly believed that the John who narrates Revelation was John the apostle? And do you accept the Biblical teachings that hard times are about testing you or that hard times are about punishment for what you have done or had in your heart?

And when you learn about secular humanism you are forced to choose again. Do you believe only in scientific consensus and your own conscience? Or do you continue in faith in the teachings of others, whether in the form of their writings or their sermons? Do you struggle to obey the voices from the pulpit, from the media, from private-sector or public-sector managers or from inside your own head? If you choose the secular life do you choose to realize your own potential or to enjoy life more sensually, more short-term? Or do you choose not to make it about you at all and instead dedicate yourself to improving life for others? And then which others? Future generations who might benefit from your inventions or philosophy or current generations of poor who might benefit from your volunteer work now? And if current generations, do you focus on those who live close by or people on the other side of the world? Do you follow your bliss or follow the money?

On it goes. The decision trees are endless and are growing more complex every day. One of the biggest differences between the medieval world and modern world is the degree of choice, from what to eat to what to believe. And because of the overwhelming complexity of freedom, you can see why people pretend there is an option to simply obey instead. Freedom is overwhelming.

And it isn't just religious leaders happy to tell you what to obey, sparing you the burden of choice. Political leaders, military leaders, civic leaders, business leaders, advertisers telling you what shows to watch or products to buy or .... well, obedience is always the easiest choice even if you prefer not to make that choice consciously. As I once heard Peter Block say, "The myth of leadership is a collusion between control freaks and people who don't want to take responsibility."

Even if you choose - each time - to stay obedient to your original Sunni faith, you are in each moment exercising free will. It's free will all the way through, no matter how desperately you might want not to be responsible for your own life and judgments. The Dark Ages was in part so dark because so many people gave in to the luxury of not accepting any responsibility for their own lives, rejected the hard work of critical thinking, and simply obeyed.

Some people have thought that free will is an illusion, that our lives are the products of fate, that the very decisions we make are the products of causality too complex for us to understand but inevitable nonetheless. I don't agree.

The only illusion is that you aren't - at all times - exercising free will. You are always responsible for what you choose to believe and can never blame any one verse, person, doctrine or group whether you choose to live your whole life in blind obedience or willful rebellion. This is true whether you were raised a secular humanist or Muslim and then chose to stay that way or whether you change from Muslim to secular humanist or secular humanist to Muslim. It’s true of your big choices and all your little ones.

So maybe I do believe in fate after all. My belief? We all share the same fate: we can't escape free will.

23 June 2014

No More Average Workers

The New York Times Magazine published a really interesting essay by Adam Davidson about "the boomerang kids" who won't leave home. To me one of the most remarkable phrases he writes is, "emblematic of a generation in which there are no more average workers and even less certainty."

This might get worse.

Average is going to be less defining in an entrepreneurial economy. Those who are successful are going to have more money than they'll ever spend. (Unless they are in the habit of buying expensive companies.) Those who are unsuccessful may easily lose a decade of their prime years and not easily find employment after a failed enterprise. Knowing that the average entrepreneur creates, say, $2 million in equity doesn't mean much if that works out to 1 in a 100 who create $200 million in equity and 99 who have nothing.

And speaking of average and its wild distribution, here is a chart that shows the wild disparity in average wages across 820 professions. 

Sex and Christianity - Same Sex Acceptance is Just Another in a Series of Revolutions

For centuries, the Catholic Church taught that every kind of sex was sinful. Well, all but one kind of sex: sex between married people who were - in that very instance - trying to make a baby. Sex between two women who didn't know each other's middle names or sex between a couple who were madly in love after 20 years of marriage was all sin if it wasn't part of creating the next generation.

Pleasure. Strengthening a relationship. Sex for such suspect reasons was sin.

Few Christians today would agree with that. What was so obvious in one century eventually became anything but obvious in another.

Social conservatives like to think that they are holding to something timeless. In fact, they are holding onto some notion of normal they learned when they were first forming their opinions about the world. It's true that what they believe falls into the category of  "how it has always been" but that "always" simply describes all they have ever personally known. Time doesn't even leave continents in one place, much less notions of normal.

History changes everything and you can see why this unsettling fact would lead so many social conservatives to reject the notion of evolution. Once you admit that things have continually changed, you have to admit that there's no reason your generation will be spared from - or ruined by - change.

20 June 2014

Economic Panacea: Start with US Private Sector and UK Public Sector Policies to Promote Entrepreneurship

The International Monetary Fund and Federal Reserve have both made downward revisions to economic forecasts this week. The IMF doesn’t think the US will reach full employment until 2017.[1] If that’s right, it will mean that full recovery took nearly a decade.

It doesn’t have to be that slow.

A couple of years ago, the IMF warned the UK against austerity measures, predicting that the UK’s economy would grow by only 0.7% in 2013. Instead, actual growth came in at 1.7% and is, this year, predicted to hit 2.7%.[2]

So why, even as it was raising taxes and cutting spending, did the UK pull out of a double dip recession? Contemporary economic thought would predict what the IMF did: that sort of policy will drag GDP growth down.

Well contemporary, proven economics suggests that the best way to stimulate an economy in – or recovering from – recession is through a combination of fiscal and monetary policy. Cut taxes. Increase government spending. Lower interest rates. Have the central bank buy back bonds, putting more cash into the economy. And for the most part, the short-term evidence is pretty clear that this helps to stimulate an economy. To a degree.

Banks with more money might simply add to their reserves. Households with more cash from tax cuts might just pay down debt. Corporations with more money might just sit on it. And in fact, in the US these very things happened. Corporate cash and equivalents rose to nearly $5 trillion by the end of 2011[3]. $5 trillion. As of June 11, 2014, excess reserves at American banks was $2.6 trillion,[4] going up roughly $2 trillion since early 2009. And households were paying down debt, reducing their debt service to the lowest it’s been since the Fed began keeping track in 1980. [5] Economists use the image of pushing a string to illustrate the challenge of translating credit into spending. And of course if spending doesn’t go up, it’s hard to create new jobs.

The UK did something else. Or more precisely, something more.

It’s not that the British don’t understand the importance of credit and monetary policy. This is the country that gave the world the model for central banking. John Kenneth Galbraith said of the Bank of England that it is in all respects to money what St. Peter’s is to the Faith. The Bank of England was founded about a century before the Bank of France and about two centuries before the US Federal Reserve. The first to rely on monetary policy, the British may have become the first to realize that there are more direct ways to go after job creation, that while monetary policy matters it is not enough. Pioneers in patent law, central banking and the modern corporation, the British may once again be ahead of us in economic policy.

You can make credit easier, hoping that households and businesses will spend more, thus creating jobs. Or you can fund startups directly, cutting out the uncertainty and the middlemen. Rather than push the string you can pull it. This is what the UK appears to have done as they confounded the able economists at the IMF. It is what the US could do as well to beat forecasts.

Measured by startup activity, the US at the end of 2012 was still below its 2007 level. By contrast, the UK was up 29%.[6] Even during its second dip, its second descent into recession, the UK’s startup activity rose from 117% to 126% of its 2007 level. During that same time the US – even as it avoided a second dip – nonetheless had a drop from 98% to 95% of its 2007 level.

Even during the recession, the US media and pundits seemed critical of funding for startups or expansion. By contrast, by the end of 2013 the UK had help to fund 10,000 startups.[7] This in just its first 18 months of their startup program. The plan is to help fund 30,000 startups. The same ratio of startups in proportion to the US population would be a plan for 150,000 startups. If we had the same program, we’d have helped fund 50,000 startups through the end of 2013. This sort of stimulus would inescapably create jobs and increase spending. It could confound expert forecasts for economic growth.

Opponents of government funding for startups say that the government shouldn’t pick winners or losers. Well, it’s too late to avoid that. The government chooses which kids go to university and which kids go to jail. The government chooses which defense contractors become huge and which go out of business, which businesses get subsidies and which pay taxes. Governments inescapably choose winners and losers. But in the process of choosing which firms to help fund, they can directly create jobs and even industries.

Funding startups is just one tool that could be used for creating more entrepreneurs. There is good reason to believe that the limit to progress has shifted from a shortage of capital – the limit during the Industrial Economy – or shortage of knowledge workers – the limit during the Information Economy – to a shortage of entrepreneurs. If so, the economic lead will go to the communities that do the most to popularize entrepreneurship, making it more common. Last century in the West, economies popularized knowledge work, moving from an Industrial Economy based on child labor in 1900 to an Information Economy based on adult education by 2000. Something similar could happen in this century with entrepreneurship, but it will take a combination of private and public sector initiatives.

The private sector in the US is doing a remarkable job of popularizing entrepreneurship. An average of 325 crowdfunding campaigns start daily.[8] And that rate is doubling every couple of months. Few people realize that to create a net of 200,000 new jobs in a month, the American economy has to create about 4.7 million jobs given the gales of creative destruction are destroying 4.5 million jobs a month. Just as the capital of the Industrial Revolution freed up people from manual work, enabling – and requiring – them to take on knowledge work, the algorithms and software of the Information Economy have enabled (and yes, is increasingly requiring) modern workers to take on more entrepreneurial roles. Work has to change to keep pace. As the pace and scope of automation increases, so must the innovation that creates new products, new companies, and new industries that provide jobs even as automation destroys them. The American private sector – from venture capitalists to kickstarter – are helping to popularize entrepreneurship. Progress in the public sector seems less obvious.

This week the Obama administration has a week-long focus on innovation. Uber has recently made news for sparking riots in Europe. Uber uses information technology to match people with cars to people who need rides. Uber doesn’t need to buy cars, just offer a fee to drivers with cars. Taxi drivers are losing market share to Uber and are protesting. Airbnb does something similar, matching folks with a spare bedroom and folks who need a place to sleep. These businesses don’t require more investment. They use the spare capacity of existing investments. Obama is doing something similar to Uber and Airbnb, opening up federal facilities to entrepreneurs.[9] NASA wind tunnels and supercomputers are among the assets that could be used by folks who could never afford to make such huge investments but could benefit from their use. This could help to stimulate new businesses and products and – given it requires no new funding - is a fairly ingenious way to work around an obstructionist congress

This is nice but it isn’t much.

It is tempting to believe that de-regulation is one way to stimulate entrepreneurial activity. And it’s likely true that – all else being equal – a community that puts up fewer obstacles to starting a business will have more startup activity. But one study of 150 successful entrepreneurs within the US revealed that regulatory environment was mentioned as a factor by only 2%.[10] More important was access to a talented workforce and customers and a community they thought offered a high quality of life, typically measured by natural and cultural attractions. (And quality of life didn’t just make a place desirable for the entrepreneurs: it helped to attract and keep the talented workforce they seek.) San Francisco and New York are two metropolitan areas that are not only expensive but challenge entrepreneurs with expensive permits and require payments to dozens of tax authorities. By one measure, San Francisco’s regulatory environment is twice as onerous as Dallas. And yet, of course, San Francisco’s entrepreneurial activity is booming. And New York is second only to San Francisco in startup activity.

California’s Bay Area is not only number one in the US in terms of startups but it is increasing pay at a time when pay across most of the US is stagnant. In San Mateo County (located at the heart of startup activity between San Francisco and Palo Alto) employees not only saw their salaries go up by more than 10% between September of 2012 and September 2013 but within the IT sector, salaries went up over 100%. When Henry Ford doubled wages to $5 a day in 1913, it rightfully got a huge amount of press; by contrast, this doubling of wages a century later went oddly un-reported.

During the Industrial Economy, employees made products. During the Information Economy they designed them. Now, in Silicon Valley at the dawn of the Entrepreneurial Economy, employees are making equity. For a long time, New York had the highest wages in the country because of Wall St. Now, employees in high-tech – and venture capitalists on Sand Hill Road – have shifted coasts for highest salaries. 3 of the top 4 top-paying counties in the US are in California’s Bay Area.[11] While New York County’s average weekly pay is double the national average, in San Mateo County it is nearly triple (2.7X) the average.

There is another element as well. Invention depends on a disdain for tradition and respect for what works for the individual. Places like Santa Cruz, San Francisco, Austin, Texas and Boulder, Colorado lead the nation in patents per capita and in startups. These are places with a liberal bent and a high degree of tolerance for what we might call non-conformists. It's not just entrepreneurs and programmers who are happy here but hippies, communists and transgenders. This suggests that a community embraces innovation as package – whether it come in the form of same-sex marriage or an app. Entrepreneurship is a form of social invention and social conservatives who prefer the status quo aren’t comfortable with innovations that disrupt the norms they’ve known all their life, whether those norms define the role of women or how someone sends a letter.

In any case, de-regulation doesn’t seem like policy enough. It certainly isn’t what is driving up wages and startup activity in California’s Bay Area.

From The Fourth Economy: Inventing Western Civilization
Market Economy
Limit to Progress
First, Agricultural
Land, natural resources
1300 ~ 1700
Second, Industrial
Capital, Financial and Industrial
1700 ~ 1900
Third, Information
Labor, knowledge workers
1900 ~ 2000
Fourth, Entrepreneurial
2000 ~

It’s possible that a new, entrepreneurial economy is emerging, a new economy limited by entrepreneurship in the same way that the Industrial Economy was limited by capital. This new economy will be led by communities most intent on popularizing entrepreneurship, just as the Information Economy of the last century was led by communities most successful at popularizing knowledge work. Popularizing knowledge work took a mix of public and private sector policies and initiatives. The iniatives included social inventions (e.g., modern universities and corporations) and technological inventions (e.g., Information Technology from telegraphs to the Internet) that helped to create knowledge workers and make them more productive. The popularization of entrepreneurship will require a similar mix.

Judging from regions like Silicon Valley, the US seems to lead the world in terms of private initiatives to popularize entrepreneurship. But judging from stimulus policies like funding startups, the UK may well lead in terms of public policy. It would be nice to get a blend of the two.

In any case, the attention paid to entrepreneurship is miniscule in comparison to that paid to the more traditional tools of fiscal and monetary policy. Google’s Ngram’s demonstrate how little mention it gets.

In this first graph, two of the most frequently mentioned policies related to entrepreneurship are graphed since 1900. The great news is that there has been a sharp upturn in mention of “promoting entrepreneurship,” and “entrepreneurial education” in books in just the last few decades.

But to put things in perspective, here is a graph showing those same terms compared with mention of monetary and fiscal policy. As you can see, entrepreneurship barely registers.

Unsurprisingly, in Obama's most recent annual report, entrepreneur (or entrepreneurs or entrepreneurship) is mentioned only 6 times in 410 pages. One party largely ignores entrepreneurship. The other thinks the simple solution to more entrepreneurship is less regulation. In a country defined by polarized politics there seems to be one thing the two parties have in common: both seem to believe that benign neglect is the route to entrepreneurial success.

If entrepreneurship now limits progress just as capital did during the Industrial Economy, it only makes sense that communities at every level – from cities and small businesses to nations and corporations – and in every sector – from private to public and non-profit – embrace every experiment that promises to create more entrepreneurs and make employees more entrepreneurial. It might be time for us to watch entrepreneurial activity as closely as we watch the monthly jobs reports and quarterly GDP growth. Because now, more than ever, jobs and GDP are going to be the products of entrepreneurial activity. It’s not enough to hope that entrepreneurs will show up. We need to become as intentional about creating them as we did knowledge workers last century. And once we define the problem of economic growth that way, we’ll find a thousand ways to solve it and to make progress – just as we did during the earlier industrial and information economies.

[1] http://www.chicagotribune.com/business/sns-rt-us-imf-usa-20140616,0,6883507.story
[2] http://www.telegraph.co.uk/news/politics/10884632/Do-I-have-to-go-on-my-knees-grovelling-apology-from-IMF-head-for-incorrect-warnings-on-UK-economy.html
[3] https://www.stlouisfed.org/publications/re/articles/?id=2314
[4] http://www.federalreserve.gov/releases/h3/current/
[5] http://rwrld.blogspot.com/2014/05/spending-is-up-but-debt-is-down-this.html
[6] http://stats.oecd.org/Index.aspx?DataSetCode=TIMELY_BDS_ISIC4#
[7] http://startups.co.uk/start-up-loans-backs-10000th-small-business/
[8] http://www.entrepreneur.com/article/234426
[9] http://www.post-gazette.com/local/city/2014/06/17/Obama-to-tout-entrepreneurship-during-Pittsburgh-visit-today-1/stories/201406170142
[10] http://blogs.hbr.org/2014/06/deregulation-wont-improve-entrepreneurship/
[11] http://www.bls.gov/news.release/cewqtr.nr0.htm

17 June 2014

Where Guns are Easier to Find Than Libraries and Museums

What Really Hurts: Odd Views on Pain

As late as the 1950s,  a Catholic theologian wrote that it was wrong to anesthetize pain, particularly in the sinner. It might interfere with his penance.

Up until the 1970s, babies often weren't given anesthetic even for procedures as traumatic as amputation. Doctors didn't believe that babies really felt pain.

* Quick facts from interview with Joanna Bourke, author of The Story of Pain: From Prayer to Painkillers, on the BBC's Start the Week.

16 June 2014

Polarized on Polar Ice

Frequency with which polar ice and polarize is mentioned in books since 1900. It looks neck and neck.

14 June 2014

Is It the Chicken or the Egg? Do Unhealthy Food Options Lead or Follow Obesity?

Steve Martin: I ordered a chicken and an egg from Amazon. I'll let you know.

In the last year or so I've made numerous trips to Boulder, CO. One thing I find remarkable is how easily I can get really healthy food in the vicinity of the hotel. There are a number of places that offer lots of vegan and vegetarian options, and even "traditional" fare is more likely to come with lots of healthy vegetables.

By contrast, once working with a client north of Indianapolis, every restaurant around made it easy to get plenty of fried foods but really hard to get vegetables other than iceberg lettuce.

Gallup has a listing of the metropolitan areas around the US, allowing you to sort them by factors like percentage of folks who are obese. Boulder, CO tops the list with only 12.4% who are obese. Indianapolis? It's more than halfway down the list with 27.4%. A friend who taught in a small town in Louisiana said that there were only two restaurants in the town and both served fried chicken; Louisiana is second only to Mississippi on the list of states with the highest rates of obesity.

It's hard to know whether restaurants and grocery stores lead or follow levels of obesity. Does obesity cause bad restaurants to spring up in an area or do bad restaurants cause obesity? Given the cost of obesity, it would be worth experimenting with various incentives and subsidies to determine how much a change in food offered could change waistlines. I'm convinced that I ate differently in Boulder than I did in northern Indianapolis; I suspect that I'm not the only one.

13 June 2014

Growing Up to Be a Professional Inventor

How could you not adore this bright eyed inventor?

Bill Bishop on How the Real Failure of Leadership is That No One Follows Anymore

Presidential candidates and op-ed writers often lament the lack of leaders, as if entire generations of Americans were born without the skills of a Johnson, a Franklin D. Roosevelt, or a Dwight D. Eisenhower. There are, of course, just as many leaders as there have always been.  What the country is missing is old fashioned followers. The generations that emerged in the last half of the twentieth century lost trust in every vestige of hierarchical authority, from the edicts of Catholic bishops to the degrees of Free Masons to the stature of federal representatives. There haven’t been any new LBJs because the whole notion of leadership has changed – and the whole shape of democracy is changing.
- Bill Bishop from his book, The Big Sort

11 June 2014

Baseball Player Salaries vs. American Presidents'

When a reporter asked Babe Ruth to justify making more money than the president (this at the dawn of the Great Depression), Babe replied, "Well, I had a better year than him."

Today, even an average baseball player is 8X as valuable as the president.

10 June 2014

All This Growth And We're Still Short by 7 Million Jobs

If Haiti had GDP growth of 10% for five years, it would be reason for great optimism. Still, you probably wouldn't want to leave Palo Alto for Port-au-Prince. Improved is not the same as realizing your potential.

I remain optimistic about the future and am happy about the fact that we've had job growth for 44 months in a row. Still, this has been a slow recovery from a deep hole. We have yet to realize our potential.

Pew recently published this graph showing how far off of the steady incline we have fallen: we are 7 million jobs short.

The good news is that we have finally regained the jobs lost during the Great Recession. The bad news is that we've missed out on years of normal growth. There are about 15 million more working age people since the start of the recession, roughly half of whom would normally go into the job market. Had the economy been "normal" during that time, we'd have created another 7 million jobs.

Recovery 1.0 restored the lost jobs. Finally, that box is checked.
Recovery 2.0 will restore the 7 million jobs never created. Once that box is checked it will feel like a real recovery.

09 June 2014

Today's Odd Fact: Americans Like Their Standard of Living But Don't Like the Economy

Gallup tracks Americans' perceptions. There is a curious gap between what people report about their own condition and what they make of the economy as a whole.

80% of Americans say they are satisfied with their current standard of living. 59% expect it to improve in the future. This 139% total is the highest since Gallup began to track this 6 years ago. So personally, Americans like the way things are going.

Meanwhile, only 41% of Americans think that the economy is getting better. 53% think it is getting worse.

Do the math. 59% expect things to get better for themselves but only 41% think the whole economy will: that is a gap of 18%. 80% of people are happy with their standard of living but 53% think things are getting worse: that's a gap of at least 33%.

This might be the product of the media. What do we know about 300 million other Americans other than what the media tells us? Or it could be the product of how we tend to have a higher opinion of ourselves than other people, assuming that while we're okay, they are not so okay.

For whatever reason, Americans are dismissive of institutions. And that disdain might extend to something as abstract as "the economy" along with institutions like church and state.

This tendency to be disdainful of institutions is becoming more pronounced over time but it's not the same as pessimism about life. Millennials have the least faith in any institutions, from church to government, of any generation. Interestingly, While 44% of millennials think marriage has become obsolete, 70% want to marry. We don't believe in big corporations but we will take their jobs and products. We hate government but have no compunction about calling the police or fire department. Congress we hate and our congress people we re-elect by a wide margin. And while we don't believe in marriage we're happy to say, "I do." Our personal economic situation is good but the economy is awful.

It's an odd and interesting gap between what we believe about others and we believe about ourselves. I don't really understand it and that might be one of the reasons I find it so fascinating.

07 June 2014

Households, Government and Businesses Are In Position for a New Boom

The economy is in the best position it's been for all of this century.

Households have paid down debt and increased wealth, now positioned to comfortably begin spending again. That will show up as additional tax revenues for governments and additional sales for businesses.

The government has brought spending and taxes back within the normal range. This doesn't just mean a lower deficit. It also means that the government no longer has to drag the economy down through austerity measures that raise taxes and lower spending.

As households and governments return to business as normal, businesses will boom as well, which will feed back to the other two sectors.

The Government Has Recovered

The deficit has come down one trillion dollars in four years. This deficit reduction during  the recovery has taken 1% out of GDP growth during that time through higher taxes and lower spending, but that drag is likely to stop. Remarkably, we've gone from record deficit to normal within just five years.

In the graph to the left you can see two straight lines representing the average tax revenue as a percentage of GDP (the lower of the two lines) and the average federal spending as a percentage of GDP (the higher).

The line that raises above the band shows actual spending. The line below the band shows actual tax revenues. In 2009, they were both at their most extreme, taxes at 14.6% of GDP and spending at 24.4%.

Since then, austerity measures and the recovery have changed  this. At 17.6% of GDP, taxes this year are projected to run just above the average of 17.4%. At 20.4%, government spending will be just below the average of 20.5%. And reports so far this year suggest the deficit will be even lower than this projection.

Government spending will - at a minimum - now be a stabilizing force on the economy rather than a drag on expansion as it has been throughout this long recovery. Government austerity is one reason it took 6.5 years for the economy to create the jobs lost during the Great Recession. (The other, of course, being simply the massive number of jobs lost during this financial crisis, as can be seen in the graph below.)

Households Have Recovered

Last month the economy hit a milestone: total employment hit a new high, finally restoring all the jobs lost during the Great Recession. This is a big deal for so many reasons. Just as the government has finally brought taxes and spending to within normal bounds, this means that households are finally returning to something like normal as well.

For the first time since 2000, the economy created more than 200,000 jobs per month for four months in a row. These sorts of realities change how people feel about spending. Even people who have kept their jobs have been more cautious about spending or taking out loans when the economy was so bad. The improving labor market helps them to begin feeling more confident about spending. And households are, by some measures, in their best position to begin spending in a generation.

Last year household wealth rose by $10 trillion, finally restoring all the wealth lost during the Great Recession. The stock market is regularly hitting new highs. Home prices are up 20% in the last two years.  While assets have been appreciating, households have also been paying down debt. What households pay to service debt is the lowest it has been since the Fed began to track this in 1980, a generation ago. All of this suggests that households will begin to spend again and that is good news for everyone - from businesses to government to other households.

Businesses, Households, and Government Are Now Positioned to Boom

So imagine this combination.
Households feel emboldened by additional wealth and a healthier jobs market to spend again.
Government spending will begin to grow at normal rates again.
Businesses - facing increased spending from households and government - will begin to invest and expand.
The combination of household spending and business expansion will provide more tax revenues, allowing the government to spend more and to pay down more debt, putting more capital into financial markets.
The combination of household spending and government spending will mean more business for business, allowing them to hire more and pay out more to shareholders.
The combination of government spending and business expansion will provide more jobs and income to households.

For the first time this century, we will enjoy an economy in which all the pieces - government, households, and business - are moving towards full capacity without resorting to excessive debt.

It's been a long time.

And it could result in a boom that will be even more impressive than the ones we had in the 1980s and 1990s.

P.S. 10 June, I would add this graph of the ratio of unemployed workers per job opening from 538.

This shows that there are fewer workers competing for the same jobs, which is great news for job-seekers. That ratio is nearly back to pre-recession levels. Once it hits that level, I predict wages will again start to climb.