Leading the Revival of Individualism & Self Reliance

When Uber Left Austin: How Regulations Negatively Impact Consumers

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When Deborah Tatum’s son Greg was killed by a drunk driver, she was absolutely devastated. “It’s an everyday pain that you live with,” Tatum told a local Austin news outlet.

While still mourning the loss of her 20-year old son, Deborah and the rest of the Tatum family decided they needed to act quickly and do whatever they could to prevent drunk drivers from getting behind the wheel. This is what ultimately led the family to become such avid supporters of the ridesharing industry.

The Tatum family firmly believes that ridesharing services, like Lyft and Uber, save lives by offering options to those who may have had a little too much to drink and are not in a position to drive themselves home. By keeping these potentially deadly drivers off the road, the Tatum family feels as though they are doing their part to protect other families from the suffering they continue to endure.

Greg’s brother, Brian, began driving for Uber shortly after his brother’s passing. “When Brian had the chance to drive for Uber that was his goal. To take as many drunks off the road to save the families from going through what we’re going through,” Tatum said.

However, after the city of Austin passed burdensome regulations on the ridesharing economy in 2016, Uber and Lyft both decided to cease operating within city limits. And in the months after both companies left Austin, driving under the influence (DUI or DWI) arrests  spiked according to the Austin Police Department’s own data.

Before Uber came to town in 2014, Austin Police Department’s data showed that the city had an average of 525 drunk driving arrests per month. When these numbers were revisited a year after ridesharing came to Austin, drunk driving arrests had dropped by five percent. This trend continued the following year when the number of drunk driving arrests dropped by an additional 12 percent, bringing the average number of arrests to about 438 per month.

In May of 2016, the same month Uber and Lyft made the decision to leave Austin, the monthly rate of drunk driving incidents was down to an average of 358. However, within the first few months of Uber and Lyft’s absence, the number of DUI arrests increased by 7.5 percent from the previous year. In the month of July alone, the city had 476 drunk driving arrests.

Though many Austin residents, including the Tatum family, predicted these new regulations would result in increased drunk driving arrests, being correct in their assertions has given them no pleasure.

“Nobody wants that phone call. No one wants a knock on the door that says you’re loved one has died from something that can be prevented,” said Tatum.

With the affordability and convenience provided by ridesharing services, it makes it much easier, and safer, for potential drunk drivers to tap their smartphone screens and have a ride come to them within minutes. No longer needing a search for cash or an argument with a cab driver about accepting a credit card, ridesharing has made it so simple to make the right decision after having too many drinks at the bar.

Though the Austin Police Department was hesitant to draw any concrete conclusions from the rise of DUIs in such a short amount of time, they did issue a statement saying the “data set is too limited to draw any conclusions. However, any time we experience an increase in DWI it is cause for concern.”

Luckily, legislation was passed a year later that made Uber and Lyft feel comfortable returning to the city.

Lyft spokesperson Chelsea Harrison issued a statement after the bill passed the Senate saying:

“Ridesharing in Texas took a tremendous step forward today. Thank you to Senator Schwertner and Representative Paddie for defending consumer choice and all the stakeholders who have helped create safer roads and expand reliable, affordable rides for Texans. On behalf of the entire ridesharing community, thank you to all of the legislative champions who have helped guide this bill through the Capitol.”

When governments pass burdensome regulations on businesses it is not just the businesses themselves that suffer. Consumers prosper in a market robust with choice. And in the case of Uber and Lyft, having options also make the roads a safer place for Austin.

The Elitists’ Carbon Dividends Miracle: Price Controls, Taxation, And Redistribution.

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The recent wave of populism spreading across America and Europe has captured the imagination of strange bedfellows. The election of President Donald Trump, the vote in favor of Brexit in the UK, and the rise of nationalist movements elsewhere, has really made an impression on global central planning elites.

Among these is the Climate Leadership Council, whose founders include former Secretaries of State, Treasury Secretaries, Harvard professors of economics, an heir to billions, a venture capitalist, and a think tank visionary with lots of political pull. In other words, the usual muckety-mucks. Their pet project is called the Carbon Dividends Plan, and their founding PR tactic is to hijack “the increasing frustration and economic insecurity that many voters feel the political establishment has failed to address.” Its stated objective “is to redirect this populist energy in a socially beneficial direction.” How nice, but how?

“The first pillar is a gradually increasing tax on carbon dioxide emissions at the mine, well, or port. A sensible carbon tax might begin at $40 per ton and increase steadily over time.” As an idea borrowed from the federal government’s baseline budgeting scam; the increases do not end. In the second pillar, “all the proceeds from this carbon tax would be returned to the American people on an equal and monthly basis” via direct deposit; and for the unbanked, PayPal or Western Union. The third pillar creates “border adjustments for the carbon content of both imports and exports to protect American competitiveness and punish free-riding by other nations.” Lastly, unnecessary regulations would be eliminated by “the enactment of a rising carbon tax whose longevity is secured by the popularity of dividends.”

A Rational View of Free Markets

The second tactic of this manifesto is to load the plan with references to “the principles of free markets” and the promise of “durable economic growth.” Before anyone invokes the glories of free markets, they should understand what that means. According to economist Murray Rothbard:

The free market and the free price system make goods from around the world available to consumers. The free market also gives the largest possible scope to entrepreneurs, who risk capital to allocate resources so as to satisfy utthe future desires of the mass of consumers as efficiently as possible. Saving and investment can then develop capital goods and increase the productivity and wages of workers, thereby increasing their standard of living. The free competitive market also rewards and stimulates technological innovation that allows the innovator to get a head start in satisfying consumer wants in new and creative ways.

But the Carbon Dividends Plan is actually a forced price system. It levies a tax at “the first point where fossil fuels enter the economy,” and an absurd system of tariffs and subsidies at our borders. Also, the scope to entrepreneurs only applies to “large scale substitution of existing energy and transportation infrastructure” in order to “stimulate new investment.” Just like hurricanes and vandalism do. Economic philosopher Frederic Bastiat explained this phenomenon a long time ago with his Broken Window Fallacy.

The Proof is in the Pandering

The Carbon Dividends Plan also claims to satisfy the desires of consumers, but with one little catch. The dividends “would be earned based on the good behavior of minimizing our carbon footprints.” The emotional tug is to pander to nationalist pride by invoking the US Constitution with “We the People deserve to be compensated.” The populist feeling “that the American political and economic system is rigged against their interests” would be soothed by a new system that “would tip the scales towards the interests of the little guy.”

And it will also increase the productivity and wages of workers. But not really, everyone gets the dividend. And not wages either, those require voluntary trade. But who cares, incomes will rise, something like a bribe. As far as rising living standards, the Carbon Dividends Plan would allow “forward-looking households” to borrow against future dividend income, but only for purchases that conform to the planner’s “effective, popular, and equitable climate solutions.” In other words, monetize an unearned asset, convert it into debt, and fund purchases from government subsidized cronies.

Like any authoritarian system, this dividends plan wouldn’t be complete without hijacking language. In this case, the debasement of the word dividend, and by extension, earned profit. The foundational tenet of free markets, advanced civilizations, and the root cause of peace and prosperity of everyone, debased along with it. So how does the Climate Leadership Council keep a straight face? Veronique de Rugy, a Senior Research Fellow at the Mercatus Center has a possible answer.

Despite the breadth of the current political divide, it appears that there is at least one thing that all politicians can agree upon: energy sector cronyism. The only real dispute is over the preferred beneficiaries.

Of Cronies and Climate

Since the Carbon Dividends Plan is riddled with unworkable ideas masquerading as sound economic policy, there must be some payoff somewhere. Is it good old fashioned regulatory quid pro quo, or is it royalties for the intellectual elites who are merely gilding their reputations as planet saviors? Yes, and power over the means of production. And while the manifesto admits “the extent to which climate change is due to man-made causes can be questioned,” it doesn’t matter. Their plan is a “simple idea” that “could strengthen our economy, benefit working class Americans, reduce regulations, and protect our natural heritage.” And it could give pigs wings, freeze hell, and invent water.

What’s really sad is how badly these planners are disconnected from reality. They think this populist surge is founded in stupidity, and can be harnessed with more crony pandering. But who is really stupid? They claim “we need an insurance policy” against those “fostering a needless climate divide” with the “international mainstream.” What they really want is an insurance policy against the spontaneous order of free people; people who are pursuing their own rational self-interests. Yes, the ones that renders their international mainstream irrelevant.

 

Crowdfunding College Tuition Is a Better Option Than Student Loans

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The student loan crisis is a serious issue in this country, especially for the many Millennials struggling to make monthly student loan payments. It is currently estimated that 70 percent of all Americans graduating with bachelor’s degrees will leave college with a burden of debt on their shoulders. Left with the prospect of making student loan payments for years after they finish their degrees, many students are looking for new avenues to fund their education that does not require federal student loans.

One North Carolina high school student is taking to the internet to raise funds for his college education through crowdfunding. A local CBS affiliate in North Carolina reported that Michael Farrington, a native of Guatemala, has been working tirelessly on a social media campaign to secure the funds needed to attend a summer college program at Harvard University.

For many students dreaming of getting accepted to Harvard University, it is a wish they may never see fulfilled. As of 2014, an applicant to Harvard only has a 5.9 percent chance of actually getting accepted to the Ivy League school. In Michael Farrington’s case, however, Harvard emailed him directly, asking him apply to a secondary school program put on by the university for several weeks during the summer. “Harvard sent us an email just inviting me to apply. And I applied and by God’s grace I got in,” Farrington told reporters.

Though he is only sixteen, Farrington will be earning college credit during his seven-week stay on Harvard’s pristine campus. His coursework will include classes like macroeconomics and the American Presidency. However, as excited as Farrington is to have been given this opportunity, the cost of this program will be $11,550, a tough payment to manage at sixteen years old. Though Farrington has submitted a scholarship application, he has decided to create a GOFUNDME page in the meantime. “That is the main way that we will be able to send Michael to Harvard. We don’t really have the capacity to send him at this stage,” said Farrington’s mother, Tracy Plant.

Michael Farrington is not alone in his quest to raise the money for his education through GOFUNDME. In 2014 alone, the site was able to raise over $13 million dollars for education-related campaigns.  Currently, there are 100,000 other students trying to raise the money for their education through GOFUNDME pages.

Though Farrington still has a long way to go, he has been able to raise about $1,225 in the past few weeks. With just two months left until the total sum is due, Michael Farrington and his family are hoping to hear back from Harvard about the possibility of an academic scholarship.

“Some of them have left me a note of encouragement. Some have said they really like what I’m trying to do, what my goals are,” Farrington said of those who have donated to his campaign. He went on to say, “I really want my future to be at an Ivy League college and then perhaps get into politics and get a degree in law.”

Median Income Is 148 Times What It Was In 1973, Calculated By The Government’s Own Method.

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Who can we believe? Certainly not those who quote government-manufactured statistics to make a political point. The New York Times wants us to believe that real median incomes in 2016 are lower than those in 1973. What’s real?

The effect of entrepreneurial capitalism is to make everyone’s standard of living and quality of life better. Entrepreneurs rival each other in offering consumers the goods and services of betterment. The consumer judges, by buying or not buying, using or not using. The feedback helps the entrepreneurs to continuously improve their offerings. Life gets better every year. But the New York Times and the government don’t want you thinking that way. Hence the Bureau Of Labour Statistics (to name just one useless bureaucracy, totally dedicated to producing nothing of value) invents a methodology to refute the empirically observable facts.

Andy Kessler exposes the fraud.

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As election season approaches, chants about the hollowed-out middle class predictably grow louder. Wages have been flat for decades, we’re told. “In 1973, the inflation-adjusted median income of men working full time was $54,030. In 2016, it was $51,640,” the New York Times breathlessly reported last year. Sounds awful. Except it’s nonsense. Cast a leery eye on anyone who uses 1973 as a base—it was a high-water mark before a deep recession. But the real red flag—what makes this argument totally bogus—is the phrase “inflation-adjusted.”

Enter The Bureau Of Labor Statistics.

The odoriferous offender is the manufacturer of inflation data, the Bureau of Labor Statistics. After the creation of Social Security in 1935, Congress would occasionally bestow vote-winning gifts on retirees in the form of benefit increases. In 1975 Congress switched to automatic cost-of-living adjustments based on a consumer-price index, or changes for “a market basket of consumer goods and services.” That’s food, rent, electricity, T-Mobile, Netflix .

Forget for a moment that some of that didn’t exist in 1975. As consumer items got more feature-rich and complex, the BLS simply couldn’t note the absolute price of, say, a microwave oven. So the bureau came up with the indulgently named hedonic quality adjustment, defined as “decomposing an item into its constituent characteristics, obtaining estimates of the value of the utility derived from each characteristic, and using those value estimates to adjust prices when the quality of a good changes.”

Let’s Do Our Own Hedonic Adjustment.

It’s a better measurement but still inaccurate. Here’s a thought experiment: Think about your car’s automatic emergency braking, sometimes known as precrash or collision avoidance. It has been an increasingly popular option in recent years. By 2022, it will be standard on most cars. Some silicon sensors and a few pieces of code—today it costs maybe $50 to produce. But what’s it worth?

Let’s do a little hedonic decomposing of our own. Before these sensors, you would have had to hire a person to ride shotgun and constantly watch for potential collisions and slam on the brakes for you. In 2016 the AAA Foundation for Traffic Safety estimated the average driver spends almost 300 hours a year in the car, logging more than 10,000 miles. Paying someone even $10 an hour to stare into traffic means that over five years, collision avoidance is worth nearly $15,000. Double if you want someone to look out the back window, too.

Does this show up anywhere in the consumer-price index? Of course not. One of the most lifesaving features has dropped in cost by three orders of magnitude in less than a decade. To the BLS, it’s practically nonexistent.

Then there’s that hunk of glass and plastic in your pocket. Your smartphone is your newspaper deliveryman, librarian, stenographer, secretary, personal shopper, DJ, newscaster, broker, weatherman, fortuneteller—shall I go on? The mythical man of 1973 certainly couldn’t afford $100,000 or more for dozens of workers at his beckoning.

By the time the BLS puts something new in the CPI basket, it’s already cheap, so it misses the massive human-replacement price decline. The CPI is good at freezing a lifestyle and standard of living and showing how it gets more expensive over time. Great. But the CPI absolutely doesn’t take today’s technology-infused lifestyle and work backward to show how much more expensive it would have been in 1973. Yet that’s what pundits infer when they talk about a hollowed-out middle class. How would the BLS reverse-decompose artificial intelligence and Alexa? Good luck with that.

The Currency Debasement Index.

The CPI is obsolete. The feds should more accurately rename it the CDI, for Currency Debasement Index. Most hedge-fund managers I know rely on the CRB Commodity Index, which tracks everything from oil and hogs to molybdenum and orange juice, as a proxy for inflation. The Bureau of Economic Analysis and the Fed also use hedonic adjustments for inflation, meaning that official measurements of gross domestic product and productivity are also massively understated.

Worse, that undermeasured hedonic cost decline driven by technology has allowed price increases to sneak in elsewhere without triggering classic inflation fears. Have you bought tickets to a professional basketball game lately? Studied your hospital bill? Rented an apartment? Bought smelly cheese, organic balsamic vinegar or a textbook?

Don’t Believe The Government’s Numbers.

Don’t believe the numbers—at least not the government’s numbers. Former Fed Chairman Alan Greenspan was on to this in 1996, saying the optimal level of inflation was “zero, if inflation is properly measured.” Freezing today’s lifestyle and going backward, I estimate a “true” median income of $347 in 1973 against the $51,640 of 2016. Today’s middle class isn’t hollowed-out. It’s living high on the hog.

 

Think Twice before Demonizing “Sweatshops” in the Developing World

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Despite its shortcomings, America is still by far the greatest country in the world. For those of us who are fortunate enough to live here and are, thus, able to enjoy the luxuries provided to us by our American way of life, we often make the mistake of assuming our way of life is the only way of life.

It wasn’t so long ago when music sensation, and a prominent figure of female empowerment, Beyoncé Knowles, came under fire when it was discovered that her athletic clothing line is being produced by women in alleged “sweatshops” in Sri Lanka.

The media, of course, used this news to criticize Beyoncé for the circumstances surrounding the production of her clothing line. Aside from the typical arguments associated with supposed “sweatshops,” since Beyoncé is such a vocal advocate of feminist issues, the fact that the factory responsible for making her products is filled with mostly women seamstresses has given critics more ammunition to cast in her direction.

Vilifying the factory where Ivy Park clothing is made, The Sun initially ran the story, which referred to these factory workers as “sweatshop slaves.” Capitalizing on a story that was sure to grab the attention of its readers, Vice Media published its own version with the title, “How Much it Sucks to be A Sri Lankan Worker Making Beyoncé’s New Clothing Line.”

True, the workers in the Sri Lankan factories are only making the equivalent of around $6.23 a day which, to any American, immediately sounds absurd. Surely, no one can live off such a low wage! Though we are beyond fortunate to live in a country where this sentiment is the norm, we need to consider the economic realities in Sri Lanka.

In The Sun’s piece, a 22-year-old factory worker is interviewed. She tells reporters that she is not making enough to get by. However, her monthly salary, which is the equivalent to $380, according to the Daily Beast, actually surpasses the country’s mandatory minimum wage by $178 each month. All things considered, this means Beyoncé’s factory is actually doing quite a bit to help its Sri Lankan employees, who would most likely be making less money if employed elsewhere.

Additionally, the factory responsible for producing Beyoncé’s clothing line is known for its above average working conditions and safety record. Though an American taking a trip to Sri Lanka might not find this factory satisfactory according to their own scale, again, this is because we are so lucky to live in America where free markets and technological advances have allowed us the luxuries of “first world” life.

For these Sri Lankan seamstresses, this factory allows them to provide for themselves and their families and gives them an access point into the labor force, something they might not otherwise have had access to.

Additionally, cheap labor in East Asia allows developing countries to do business with first world nations and participate in the global marketplace, something that has to occur if they want to prosper.

Most of the Sri Lankan population lives in rural areas. Aside from the garment industry, Sri Lanka is mostly an agrarian society. For those growing up on a farm, there is not much hope of escaping that life, unless you are fortunate enough to get a job in a factory, like the one producing Beyoncé’s clothing. For these women, a factory job is far better than the alternative options, or lack thereof.

“We have to ask ourselves: what would these women be doing if they didn’t work in a garment factory? Would their lives be better? Absolutely not,” said Mushfiq Mobarak, Professor of Economics at Yale University and co-author of a 2015 study in the Journal of Development Economics, Manufacturing Growth and the Lives of Bangladeshi Women.  Having studied the garment industry in the South Asian Region extensively, Mobarak is an insightful resource into these garment factories and the opportunities they provide to workers.

The garment factories give these women the opportunity to earn more money than they otherwise would have had. Additionally, many of these factories require basic literacy and math skills, which many rural Sri Lankans simply do not have. As a result, many of these women are going to school, sometimes for the first time in their entire life, all to learn the skills necessary to securing employment in the garment industry.

For those women coming from more urban areas, a significant portion resorts to more degrading means of providing for themselves. As prostitution and other sex work are common for both girls and women in this region, these factories can potentially put them on a much more productive and dignified path. This aspect of the garment industry is clearly aligned with Beyoncé’s message of female empowerment.

According to the Daily Beast’s interview with Mobarak:

“When factory jobs become available in these countries, we see returns in skills that people develop. If a young woman gets an education in the 5th grade, then her labor opportunities change.”

To be sure, in spite of the positive elements associated with factory work in developing countries, there are still many concerning issues that need to be addressed. Factories of this nature have had a history of inhumane treatment of their employees, sometimes even denying workers the right to use the bathroom.

To ignore the existence of inhumane factories would be ignorant, and to praise the actions of these institutions would be wrong, but there are ways to encourage change that would not result in a loss of factory jobs, and thus, a loss of opportunity for these Sri Lankan women.

As Mobarak said, “We need to figure out how to incentivize buyers and retailers from the U.S. and the U.K. to invest in factory safety. Retailers need to collaborate and jointly invest,” he said, “so that not everyone who is investing is at a competitive disadvantage of having to sell more expensive clothes.”

Above all, businesses utilizing inexpensive labor in developing countries are looking to maximize their profit. This means there is an incentive to do business with these factories in order to reduce overhead costs and offer products to consumers at a competitive rate. In order to do this, businesses must appease its consumers.

In a time when PR is everything, many companies understand the importance of consumer feedback. Sites like Yelp have given consumers a mouthpiece to both compliment and complain, keeping business owners accountable for their actions. Associating themselves with inhumane factories will only serve to anger first world consumers, anxious to take up a cause, which could then result in decreased revenue.

Before demonizing these garment factories, and throwing around the term, “sweatshop,” it is important to consider how they contribute to the lives of their workers. We need to judge these work environments by standards which may be foreign to our own. After all, most places are not as prosperous as America.

This State Just Passed A Law Protecting Free-Range Kids

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Over the last several years, childhood has come under attack by state authorities. Where it was once perfectly acceptable for a parent to send their child down the street to play at the local park unattended, this seemingly benign act is now grounds for government intervention. In fact, horror stories have been told of children taken away from their parents and put into state custody for the mere crime of parents letting their children be children.

Just a few years ago, two Texas parents were charged with a felony for letting their eleven-year-old son play outside. The boy, who was only outside for about 90 minutes, had forgotten his key after returning from school. While waiting for his parents to come home, he passed the time by playing basketball outside of his own home. A neighbor saw the boy and called the police to investigate, which resulted in both parents being arrested. But this is hardly an isolated instance.

In Maryland, another family faced prosecution over the decision to let their children walk to school unattended. The parents were completely okay with letting their children, ages 10 and 6, walk around their neighborhood without parental supervision. However, after a neighbor called the police after seeing the two children walking one day after school, the children were taken into state custody.

As a society, we used to take great pride in teaching our children independence and self-reliance. And by giving kids opportunities to assert their independence, by walking to school or the park alone, they are better suited to tackle the obstacles that await them in adulthood, when whether they like it or not, independence becomes necessary. But the modern nanny state seems determined to keep kids trapped in a state of arrested development.

Luckily, one state is taking measures to protect the sanctity of childhood, by explicitly protecting the right to “free-range” parent.

Utah Protects Free-Range Parenting

Over the last several years, free-range parenting has risen in popularity. After helicopter parenting yielded high-stress and rather coddled young adults, many started wondering if, perhaps, there was a better way. Instead of restricting our children for fear of what the world may do to them, free-range parenting encourages parents to let children be children. This means letting children play outside for long periods of time and respecting your children’s choice to do so. Free-range parenting also encourages parents to trust their kids to experience life without constant parental supervision.

But this has resulted in a clash with state authorities who are all too eager to penalize parents for alleged “neglect.”

The reason many states are able to take action against parents who, for example, let their children walk somewhere unattended is because it is considered to be “neglect” from a legal standpoint. However, a new bill signed into law in the state of Utah has changed the definition of neglect. This will help protect parents against legal backlash.

Commenting on the new law, one of the bill’s sponsors, Sen. Lincoln Fillmore said:

“It’s not neglect if you let your child experience childhood. The message is you need to protect your kids but we are not doing kids any favors if we shelter them to the point where they are not learning how to function.”

This bill has led to a lot of excitement in Utah, where free-range parenting is extremely popular. But Utah is not the only state that is moving away from helicopter parenting.

Since  Lenore Skenazy’s book, Free-Range Kids began gaining traction over a decade ago, many parents and educators have been rethinking the way raise our children. Instead of teaching them to be obedient followers capable of sitting still in a desk for eight hours a day, free-range parenting allows children to explore the world around without arbitrary rules. It also teaches children how to be independent, critical thinkers capable of thinking outside the box.

Utah’s new law is the very first of its kind in the nation. And since its passage only a few weeks ago, other states are now modeling their own legislation after Utah’s. And this is something to be excited about.

When we allow children to be children, what we are really allowing them to do is become their own unique individuals. Laws that prohibit children from being independent do little but squash this spirit of individualism and increase a child’s need for arbitrary authority. But thanks to Utah, we might soon be seeing more states protecting the rights of free-range children.

Collaboration Has Replaced Competition In The Capitalist Lexicon. Maybe Now The Anti-Capitalists Will Come Around.

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One of the attributes of the anti-capitalist mentality is a tragic misunderstanding of the concept of competition. The enemies of capitalism describe competition as a never-ending dog-eat-dog slasher movie, in which the most vicious weaponized players utilize uncompromised tactics in destroying any entity that vies with them for market share or revenue. They see capitalism as red in tooth and claw, to quote Tennyson.

Metaphors Influence Our Beliefs And Our Behaviors.

Metaphors are important ways we shape our understanding, and they influence our behavior. The language of war becomes the language of business: Marketing Warfare was the title for a popular 1980’s business strategy book, and Sun Tzu’s The Art Of War was fashionable to quote in the 1990’s. Today, a book like Red Team tells us to refer to anyone who doesn’t think like us as The Enemy.

This kind of talk about competition is a perversion of economics. True economics is an information system in which consumers provide feedback to producers about which goods and services please them and which do not. Positive feedback results in more production of those services that please; some entrepreneurs will seek and find ways to make those services even more pleasing, at either higher quality or lower cost or, sometimes, both. This is the true form of competition.

Negative feedback tells producers that their efforts did not quite hit the mark. Consumers have found that they can fulfill their needs better via another service from another provider. They don’t buy the one that they deem inferior. Producers that are not favored by consumer acceptance have a choice of responses. Maybe they decide to shift businesses and move into a field where they can do a better job of earning consumer approval. Maybe they look for ways to further improve their current offering to ask again for consumer adoption and purchase. In any case, the negative feedback function of the consumer economy results in improvement of the consumer experience.

Entrepreneurs And Corporations Are Servants Of Consumers.

The consumer is boss. A tough boss. The consumer insists that their demands are met, otherwise they move on to an alternative offering. The successful entrepreneur is not an ogre of aggressive and vindictive market behavior. He or she is what Ludwig von Mises described as

“a servant of the consumers, bound to comply with their wishes. He cannot indulge his own whims and fancies. But his customers’ whims and fancies are for him ultimate law. He is under the necessity of adjusting his conduct to the demand of the consumers.”

Capitalism is best thought of as a system of co-ordination, bringing consumer demand and producer output into alignment. It’s a system of dynamic efficiency, using feedback to get better and better at service.

Competition Is The Wrong Metaphor For The Networked Economy.

Now that networks are the common organizational form for business, and communications across networks is becoming faster, more accurate, and more available to all, the system of dynamic efficiency is changing in significant ways.

For example, individuals will not compete for jobs (although they might still use that metaphor if they don’t refine their network strategies and skills sufficiently, and feel like they “lost” opportunities). The integration of the right people in the right jobs exercising the right skills in the right project will be a task for profile matching software, not interviewees jousting with interviewers. The profile-matching bot of a project will sort through individual profiles to find the best match and secure a new member for the project team. It’s important for individuals not to use the “compete” metaphor, but its opposite, the “uniqueness” metaphor. How do my skills and experience make me unique? How can I best communicate my uniqueness?

Similarly, commercial strategy will no longer use the metaphor of competition and fighting for market share, in constructs like “ Where To Play, How To Win”. Firms will be asking the network economy questions, “Where Do We Fit In”” and “How Can We Contribute?” They’ll find answers based on their own uniqueness in meeting the specific needs of a highly specific target audience. They won’t compete, they’ll serve. Governments call this unique service offering monopoly. Peter Thiel called it the only sane way to build a business.

Entire economic sub-systems will adopt this new metaphor and become re-shaped and rebalanced around customer-centricity. Healthcare is a great example. As consumers take more and more control of their own healthcare data, such as their own individual DNA map, and become empowered to make their own decisions about which medical services to select, the matching process will revolve more around which providers can offer for consideration the service attributes and knowledge that are most highly customized to the individual patient. The patient chooses. This is not “competition” it is collaboration between patient and provider to discover the best match of unique service to unique needs. These knowledge-mediated exchanges will happen millions and billions of times, and the healthcare service provider universe will evolve into a finely tuned community of unique (i.e. non-competitive) suppliers of customization to a unique set of patients.

We Should Adopt The Collaboration Metaphor, Based On Interpersonal Empathy.

The collaboration metaphor extends to the patient community. Patients will exchange their learning and their experiences with fellow-patients through a rating system or some similar kind of knowledge sharing. This is becoming standard practice in the platform delivery of service, knowledge, and information from amazon.com to tripadvisor.com.

Dog-eat-dog is no longer a valid metaphor for commercial rivalry to improve the customer experience. Competition is a term to be struck from the lexicon of capitalism. Collaboration is a better, and more applicable term.  It functions as a result of the most important attribute of service: empathy.

How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortunes of others, and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it.

(Adam Smith, The Theory Of Moral Sentiments, 1759.)

 

How the Regulatory State Hurts Small Business Owners

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For over two decades, “China Fun” was a culinary staple in the Second Avenue neighborhood of Manhattan. Known throughout the community as the go-to spot for peerless soup dumplings and piquant General Tso’s chicken, many locals were heartbroken to learn that their favorite restaurant had decided to close its doors forever last year.

The decision to shut down the family-owned business was not an easy choice to make. However, the Wu family claims that excessive government regulations left them no other option.

In a letter posted to the front doors of the restaurant last week, the owners wrote, “The climate for small businesses like ours in New York have become such that it’s difficult to justify taking risks and running — never mind starting — a legitimate mom-and-pop business.” The letter continued, “The state and municipal governments, with their punishing rules and regulations, seem to believe that we should be their cash machine to pay for all that ails us in society.”

The sentiment reflected in the Wu’s farewell letter sheds light on the great regulatory burden afflicting many small business owners across the country today. In addition to the numerous licenses, permits, and fees required to open a small restaurant like China Fun, government-sponsored healthcare programs and mandatory increases to the minimum wage disproportionately affect these mom and pop establishments.

For small business owners operating within the state of New York, these regulations are only getting worse.

Interestingly enough, the closure of China Fun coincided with the implementation of New York’s new increased minimum wage policy, which is set to incrementally rise each year until it reaches $15 an hour by 2021. As Albert Wu, the son of China Fun owners Dorothea and Felix Wu explained, these types of costly mandates have forced the restaurant to significantly raise its prices over the years.

“When we started out in 1991, the lunch special was $4 a plate,” Albert explained. “Now it’s $10, $12. The cost of doing business is just too onerous.”

Instead of recognizing the fact that these regulations cost local business owners both money and numerous hours spent filling out the necessary paperwork, a spokesperson for the de Blasio administration responded by saying, “The NYC Department of Small Business Services makes it easier for businesses to start, operate, and grow, including by helping businesses navigate important City regulations.”

Albert Wu and other small business owners disagree. “In a one-restaurant operation like ours, you’re spending more time on paperwork than you are trying to run your business.”

Unfortunately, the Wu’s predicament is not an isolated occurrence and it demonstrates the unintended consequences that overregulation has, and will continue to have, on entrepreneurs. 

How Can I Contribute? You Can Start By Mopping.

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In the hierarchical economy, young people contemplate the ladder of success and how to climb it. They collect college degrees, accreditations and skill certificates that they believe will accelerate their upward progress, or give them a start on a higher rung, or at least get them an interview with a higher-up who may become a mentor and career advisor. The mindset is all about climbing, often over others. This hierarchical mindset is not conducive to collaboration.

In the new, networked and highly interconnected Individual Economy, “How can I climb?” is the wrong question. The first question is, “Who Am I?” It helps you to understand your own uniqueness. “Who Am I?” is not about so-called strengths and weaknesses, it’s about confidently finding your own uniqueness.

What’s the purpose of finding uniqueness? It’s to answer a further set of questions: “Where do I fit in?” and “How can I contribute?” In a networked economy, success is not the result of climbing up a vertical hierarchical ladder by doing what you are told to do by higher-ups. It’s a process of providing useful services horizontally to other nodes in the network, and receiving commensurate benefits in return. The individual may be an employee, or a contractor, or an individual contributor to a project who enters to perform a service and exits when the task is completed. In all cases it’s a horizontal exchange of a needed service from a uniquely qualified provider. The more the individual demonstrates excellence as a service provider to other nodes, the greater the demand for service. It’s  a positive feedback loop that can advance you through life.

Tyler Bonin illustrates this principle with a beautiful example from his personal experience. His advice is impeccable: don’t feel entitled, ask how you can contribute.

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Every commencement season, thousands of graduates are treated to something I call “standard keynote language.” Everyone can recognize these tiny, easily digestible nuggets of wisdom: “Don’t be afraid to take risks,” or “Be courageous.” And the classic: “Follow your passion.” This is sound, albeit clichéd, advice. What would I recommend? “Mop your way to success.”

A mop, used for cleaning floors, isn’t a magical tool for success. Rather, it is a reminder that there should be no

When I was a student at Duke, I worked in a retail store. Many of my co-workers were also college students, some in graduate school, and one was on her way to dental school. Many of my colleagues hated mopping, which required going into the haven of filth that was the public bathroom. I had plenty of practice in this area as a former Marine Corps private, so I always volunteered for the job.

My managers noticed. They named me employee of the month and promoted me to management for the holiday rush—a small success at a small store. I learned that a sense of entitlement is a burden. People who believe themselves above something, or entitled to something more because of past achievements, will find that new opportunities slip away.

I volunteered for the necessary task, signaling my work ethic and dedication to the organization. I simply wanted to do my job as best as possible. Perhaps I didn’t realize it at the time, but I was emulating senior Marines who would roll up their sleeves and get dirty when the job required it.

I have met countless others who tell similar stories. A successful consultant told me that after graduating from a top-tier university, he spent a year piecing together tedious part-time jobs while volunteering at startups—only to prove himself. As competitive as the U.S. economy is, efforts like this are only becoming more common.

This may seem unfair considering the hurdles young graduates face today. Older generations didn’t have to deal with the dehumanization of the hiring process through automated résumé-parsing software. And the levels of experience required for entry-level jobs seem only to increase. The generations that pushed for college education for all never struggled with these obstacles. It’s an unfair but natural product of the evolving economy.

Certainly there is a time to be bold, but there is also a time for humility. A task once considered beneath you could actually be the key to your success. Do the job nobody wants, because, believe it or not, somebody appreciates it. Volunteer to learn and to provide value to others. Find a dream job by first doing the rote tasks in that field, without complaint. Pick up a mop.

Mr. Bonin teaches high-school economics and history in Raleigh, N.C.

This article appeared in the print edition of The Wall Street Journal on May 29, 2018.

The Civilizational Moment When Blockchain Adds Billions Of Entrepreneurs To The Private Property Economy.

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We are living in a civilizational moment of great promise and great consequence. Patrick Byrne expressed this opinion in a conversation about blockchain and his new property rights register for people whose lack of such rights condemns them to inescapable poverty.

Blockchain Offers Us The Potential For Institutional Innovation.

Blockchain stands at the nexus between technology and institutions. Our institutions are failing us and we are losing trust in them. Without trust, the institutions are no longer valid. They are no longer fit for the function for which they evolved to perform.

Financial institutions provide us with a glaring example. Big banks exercise an intermediary role between lender and borrower, between buyer and seller, and between other financial counterparties. It’s important that we trust them to perform this role with integrity, safety, confidentiality and impartiality, and to act to cut out financial risk. But that trust level is eroding. Banks take our deposits and give us a claim on that deposit in return. Then they lend out those deposits to borrowers nine times over in a process called fractional reserve banking. Now not one party but 10 parties believe they have a claim on the deposited amount. The bank makes the bet that all 10 claims will not come up at the same time.

Such a monetary system is facilitated by the central bank, a joint venture of the big private banks and government. When the Federal Reserve creates money and expands credit, the benefit goes first to the institutions who are closest to the source. This includes the big private banks. They get money at the lowest possible cost – close to zero interest rates. Elsewhere in the economy, credit card borrowers are paying 20+% interest, and small business borrowers and pay day loan borrowers may be paying 30+%. The distance between Wall Street financial institutions and everyday borrowers is unfathomable.

The Scourge Of Wall Street.

Patrick Byrne has been called the scourge of Wall Street. He sniffed out specific corruptions in financial institutions and reported on them in a website called Deep Capture. But more important than his condemnations of the financial institution status quo are his efforts to create an entirely new set of institutions. If you can’t beat them, innovate.

Initially, Byrne was both a thought leader and execution leader in Bitcoin and blockchain. He was early to see the potential of Bitcoin as an alternative currency, likening it to a return to the gold standard that provided the stable financial support for the greatest age of innovation and growing prosperity we have so far seen. “It’s like online gold”,  he was quoted as saying. “The supply of the digital currency is controlled by software running across a worldwide network of computers, and its value is decided not by the feds or the big banks, but by the people. It can make our country more robust.” He saw the civilizational potential before anyone else did.

His company, Overstock.com, quickly became the first major online retailer to accept payments in Bitcoin, letting people buy everything from patio furniture to smartphone cases with the fledgling digital currency. Byrne himself converted many of his US Dollars to Bitcoin. His commitment is not merely philosophical.

The Unleashing Of 5 Billion New Entrepreneurs.

Now, Byrne has advanced the idea of blockchain as a civilizational moment to a whole new level. His goal is to bring 5 billion more people into the private property entrepreneurial economy. He believes that doing so will alleviate poverty, grow wealth and turn back terrorism all over the globe.

His partner in the enterprise is Hernando De Soto, one of the most influential economists of all time, and possibly the most important in the world today. In his book The Mystery Of Capital, de Soto established that the capability of capitalism to achieve adoption in any individual country and to raise the GDP per capita and living standards in that country is governed by the legal structure of property and property rights. Every developed nation in the world at one time went through the transformation from predominantly informal, extralegal ownership to a formal, unified legal property system. In the West we’ve forgotten that creating this system is also what allowed people everywhere to leverage property into wealth.

Formalizing property rights can unleash economic power among financially subjugated people. Generating strong formal property rights not only alleviates poverty, it counters the militant terrorism that can take over poor, undeveloped nations. People stop operating in black markets, where terrorists thrive, and start new businesses based on self-reliance and enterprise in a private property economy. De Soto demonstrated this in Peru, where his property rights registration campaign kickstarted an economic miracle.

His method was painstaking. He distributed leaflets to individuals throughout the country, inviting them to bring evidence of informal property ownership, and converted the information into a standardized database, so that individuals can protect their wealth, identify themselves, and to use their assets as guarantees, as investment tokens, and as a means for corporate organization.

Transformational Technology.

Today, the powerful technology of blockchain can be utilized to bring efficiency to De Soto’s method, and to add digital scaling and network effects.  This is where Patrick Byrne comes in, bringing his blockchain expertise and the power of large investment. He believes the solution will change the world.

That’s why he calls the adoption of blockchain and Bitcoin a civilizational moment. From a world in which elites control the creation of money, as well as the intermediation of all money based exchanges and financial institutions, and all the permissions required to do business in such a world, he sees a movement towards a people’s money, and disintermediated peer-to-peer exchanges anchored in a secure private property economy registered on the blockchain. If he is successful in bringing 5 billion more individuals into the entrepreneurial economy, elitist corruption and control will be highly diluted and the black-market fueled violence of exploitative terrorism will be thwarted. A civilizational moment, indeed.

 

Image courtesy of Wired magazine.

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