Leading the Revival of Individualism & Self Reliance

Physical Retail Stores Are Getting Smarter about Competing with Amazon

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Healthy competition makes every single one of us better. It allows us to come to terms with our limitations and challenges us to push ourselves to achieve bigger better things. And it is competition that drives the market and technological innovations that make our world more wondrous with each passing year.

However, competition is not always welcomed by businesses that have long dominated their industry and thus feel as though they have earned some sort of market tenure.

However, after losing consumers to the convenience of Amazon and online retail in general, many brick and mortar locations are finally realizing that they must either innovate or cease to exist. And this change in attitude is in part thanks to the new Amazon Go location in Seattle.

Amazon Go

Amazon has completely changed the way consumers purchase items, and brick and mortar retail establishments are not happy about it. Amazon is great at what it does, so much so that consumers prefer to order almost everything they could ever want online from the comfort of their homes, rather than patronize physical establishments. But more Amazon shoppers means fewer people visiting physical stores. This has caused so much outrage, even President Trump has chimed in on Twitter, calling for a regulatory crackdown on Amazon.

Yet, even in the era of abandoned shopping malls and dying retail chains, Amazon has found a way to reinvent the brick and mortar experience with its new Amazon Go location. And this new Amazon experience is finally forcing some retail locations to raise their game.

Amazon Go is unlike any other store you have ever visited. Completely automated, Amazon Go puts the shoppers in control of their experience. To enter the store, each shopper must scan the Amazon Go app on their smartphone. After gaining entry, shoppers need only grab what they want, and then leave the premises. It’s as simple as that. The store shelves have sensors that know when a shopper has picked up an item. If the shopper changes his or her mind and returns an item to the shelf, their Amazon Go cart will adjust the total accordingly. And since the app is connected to their debit or credit cards, payment occurs automatically and without having to wait to see a cashier or use the self-checkout.

The Uber Example

The most obvious modern example of businesses trying to avoid healthy competition is the “Uber vs. Taxi” war that has raged over the last several years. The taxi companies had enjoyed an 80-year stranglehold on the market simply because there was no better way of doing things at the time. But instead of encouraging innovation, protectionist policies like New York’s infamous medallion laws limited who could enter the market, so as not to threaten those already in it. But this gave these existing taxi companies absolutely no incentive to change.

So when ridesharing came into existence, rather than innovate their own outdated models, cab companies used the state to attempt to regulate ridesharing out of existence. They didn’t see this competition as a challenge to grow, but as a threat to be nipped in the bud, even though it meant limiting consumer choice.

However, even though the big cab companies did enjoy mild regulatory success, consumers were still crazy about Uber and Lyft, preferring them to hailing a cab, which allowed ridesharing to triumph in the face of protectionism.

And while the cab industry’s war on Uber has subsided a bit, a new battle is occurring between Amazon and traditional retail establishments.

Competing with Amazon

As Martin Hitch, the chief business officer of Bossa Nova Robotics, a company that works with stores like Walmart to help with inventory management commented on Amazon Go, saying:

“Unanimously, there was an element of embarrassment because here is an online retailer showing us how to do brick and mortar, and frankly doing it amazingly well.”

Retail companies who have managed to stay afloat in the era of online shopping would do well to take notes from Amazon Go’s model, as Hitch points out. And this is exactly what Walmart and other retail stores around the globe are looking into and trying out now. Specifically, China retailers are aggressively innovating their own models to compete with the Amazon.

The Chinese startup Bingo Box is aiming to open 100 automated grocery stores that function almost exactly like Amazon Go. The Chinese retailer, JD, is also moving towards automation by putting chips in all its retail items, making the scanning and checkout process easier. Additionally, Alibaba, one of the largest internet companies in China, has announced it will be opening 35 of its own automated stores that will allow customers to order groceries on a mobile app in advance, and then use facial recognition to complete the checkout process once in the store.

And in the United States, grocery giant Walmart is considering similar moves.

Already, Hitch has helped Walmart move towards more automation in select stores. So far, this new plan would utilize robots to keep tabs on inventory as well as mislabeled products. It would also allow shoppers to use their smartphones to pay for the items in their cart without having to wait for a cashier. The grocery chain Kroger is also taking this competition with Amazon seriously. Currently, Kroger’s plan is to test mobile purchasing apps in more than 400 of its 2,700 U.S. stores.

This retail competition has also presented new opportunities for startups dedicated to modernizing the way we shop in and check out of physical grocery stores. And while Amazon is taking the lead on automated grocery stores, the race is definitely on to see who will be able to a viable competitor with the online retail giant.

Alan O’Herlihy, as chief executive of the Irish company Everseen, which works with checkout technology for retail stores commented, “There’s a gold rush feeling about this.”  And the fact that retail establishments are taking the Amazon Go threat seriously is great news for consumers. Currently, there is only one Amazon Go location in the United States. While it is rumored that there are plans for additional locations, as of now their influence is limited to those in the Seattle area. But if these other retail stores are able to get these new projects up and running, Amazon may finally have a worthy opponent.

One thing that is for certain, more of these futuristic grocery stores means more options for consumers. Prices are likely to go down as stores vie for customers. Amazon Go has finally given brick and mortar stores the stimulus they needed to shake up their outdated models, and this is something to be celebrated.

“Greedy” Capitalists Are Often the First to Lend a Helping Hand

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Private corporations have become the punching bags of many, who are under the belief that socialism is needed to create a charitable society. In their minds, without government, human beings are not likely to give back. But by casting capitalists as the villain in every story, these critics neglect, or purposefully ignore, the many instances when private companies have given back to their communities. In fact, when national disasters strike, for example, it is often private organizations that arrive first on the scene.

Wild Fires

Of all the “greedy” capitalist entities, there is perhaps no one judged more harshly than oil companies.  Yet, when a large forest fire consumed more than one million acres of land in the province of Alberta, Canada, the oil companies, along with other private entities, pulled together to lend a hand.

As it continued to burn for the better part of a month, the fire caused more than 60,000 residents to flee their homes. Many homes were destroyed and the city of Fort McMurray was left in ruins.

Commenting on the fire, Tristin Hopper of the National Post highlights specific relief efforts sponsored by local oil companies in Alberta. Hopper mentions how local oil companies provided free food and shelter to over 25,000 community members affected by the fires. Likewise, as the fires continued to spread and began cutting off easy access to the roads, Brion Energy arranged to have perishable foods delivered each day via truck shipments.

But the acts of charity were not limited to these oil companies alone. Shell Albian Aerodrome actually helped many residents escape the scene by providing buses for their evacuation. Suncor’s Firebag Aerodrome, also helped with the evacuation efforts by using its own company-chartered commercial jets to help over 7,000 residents escape the fire. But this is far from the only instance of private entities giving back.

Walmart Gives Back

Touching on the charitable acts of private entities in the Wall Street Journal, economics professor Steve Horwitz writes:

“That shouldn’t surprise anyone who knows what Walmart did after Hurricane Katrina hit the Gulf Coast in 2005. The company shipped thousands of trucks of water and other supplies into the area, well ahead of the lethargic Federal Emergency Management Agency. It even beat the Red Cross in many areas.”

In addition to the Walmart’s charitable acts, McDonald’s also handed out free food to first responders and Marriott offered up free rooms for those who had been displaced.

Though these private corporations are so often thought to be cold, unsympathetic, and disconnected from the experience of the typical American, they are, in fact, still members of their respective communities who rely on the patronage of the locals.

In return, these private entities are there to meet the needs of the consumer, which, under these circumstances, has meant giving the community what it needed most, acts of charity. In addition to serving their communities when it is most needed, the private sector offers something that the government has never been able to master; efficiency.

Driving this point home, Horwitz writes:

“These firms have experience that makes them distinctly effective during and after disasters. Walmart constantly responds to changing market conditions, moving people and resources where they are needed. FEMA and other agencies don’t regularly engage in this sort of behavior.”

Before casting stones at private corporations based solely on their desire to make a profit, it would be wise to first look at what these companies have done for their surrounding communities. Additionally, before praising the government for simply creating agencies meant to aid those in need, it would be wise to take a close look at how these agencies are run and ask ourselves if what is being done by government cannot be performed more adequately by the free market.

Why Is the Cost of College Tuition Becoming So Pricey?

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There have been several articles written, providing alternatives to the traditional college model. But many do not expand on why these alternatives are so badly needed. One of the many reasons the traditional college route may not be for everyone is its high cost.

Over the last decade, college tuition has risen over 40 percent across the board. With such a drastic increase in tuition, many students have turned to the government to subsidize their education costs. However, with the total amount of American student loan debt now surpassing the total amount of American credit card debt, there can be no denying that there is something seriously wrong with our system of higher education.

While many economists, politicians, and pundits tailor the origins of the higher education crisis to meet whatever ends they are endorsing, there have been multiple opinions offered as to why tuition continues to rise and why student loan debt seems almost impossible to pay off.

Refinery29 once even released a video which claims to explain the tuition hike and student loan debt crisis currently impacting a large portion of the population. However, the video fails to tell the entire story, specifically neglecting to place blame on one of the biggest contributors to the rise of college tuition: the federal government.

The video claims that federal and state funding for higher education has steadily decreased since 2008, which has resulted in rising tuition costs. As colleges attempt to financially survive without the additional government subsidies, they are left with no choice but to raise tuition. However, this claim is completely untrue.

Traditionally, states have spent more on higher education than the federal government. In fact, in the years leading up to 2012, states outspent the federal government by 65 percent when it came to higher education. However, in the last decade, this trend has changed dramatically.

Before explaining why state funding has been outspent by federal funding, it is important to understand the difference between state and federal funding. Traditionally, state funds allocated to higher education purposes go towards supporting specific public institutions, like a state or community college. Federal funding, on the other hand, tends to go directly to the student through Pell Grants or student loans.

According to a report released by the Pew Charitable Trusts in June 2015, federal funding surpassed state funding as the main source of public support for higher education in 2010. This was also the same year when the number of Pell Grants awarded to lower-income students reached an all-time high, amounting to $36 billion.

The Pew Charitable Trust report also takes a closer look at Pell Grant funding in the five years leading up to 2013. Though Refinery29 claims that both federal and state funding began decreasing in 2008, this appears to be incorrect. In actuality, Pell Grants, which are funded through federal subsidies, actually increased by 72 percent since 2008.

Despite the claim that government funding has been dramatically reduced over the years, the actual numbers tell a much different story. As government money continues to flow freely into colleges and universities it is also important to understand why increased subsidies have resulted in higher tuition.

In July of 2015, the Federal Reserve released a report entitled, Credit Supply and the Rise in College Tuition: Evidence from the Expansion in Federal Student Aid Programs, which found that government subsidies were responsible for rising tuition costs. The report states that:

“We find that institutions more exposed to changes in the subsidized federal loan program increased their tuition disproportionately around these policy changes, with a sizable pass-through effect on tuition of about 65 percent. We also find that Pell Grant aid and the unsubsidized federal loan program have pass-through effects on tuition.”

To put it simply, as Cato Institute economist Neal McCluskey did in April 2012:

“The basic problem is simple: Give everyone $100 to pay for higher education and colleges will raise their prices by $100, negating the value of the aid.”

In addition to the report released by the Federal Reserve, in September 2015, Grey Gordon and Aaron Hedlund conducted research for the National Bureau of Economic Research, which also sought to explain the rise in college tuition. In Hedlund and Gordon’s white paper, “Accounting for the Rise in College Tuition,” the duo found that government subsidies were causing tuition to rise, just as the Federal Reserve report showed.

“With all factors present, net tuition increases from $6,100 to $12,559. As column 4 demonstrates, the demand shocks — which consist mostly of changes in financial aid — account for the lion’s share of the higher tuition,” the Gordon and Hedlund paper states.

Though these are not the only inaccuracies presented in Refinery29’s video, they are by far the most concerning. In order to properly address the situation facing America’s higher education system, it is vital that we properly identify the causes that led to our current predicament. Without a clear understanding of why tuition costs continue to rise, we are doomed to continue this perpetual cycle of increased government subsidies resulting in increased tuition, and thus, higher loan amounts being borrowed.

Consumer Sovereignty Explained: Car Makers Pull Back From Making Cars.

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American auto makers are embarking on a historical shift away from passenger cars, as more-profitable sport-utility vehicles and pickup trucks continue to expand their share of the market. According to the Wall Street Journal, small cars have fallen out of favor amid low gasoline prices and efficiency improvements in SUV’s. Now, large sedans are on the chopping block.

General Motors will end production of the Chevrolet Sonic subcompact as early as this year, according to people familiar with the matter. GM is also considering discontinuing the Chevy Impala big sedan in the next few years, these people said. Ford Motor Co., meanwhile, plans to stop building the Fiesta small car for the U.S. market within the next year, and will discontinue the large Taurus sedan, said people briefed on the plans.

At the same time as the Wall Street Journal reporters were writing their story, an article by Bob Murphy was posted on the Mises Institute website explaining Consumer Sovereignty, a core concept of Ludwig von Mises and Austrian Economics. Murphy posts this quote from Mises’ Bureaucracy, in which he contrasts management for profit with bureaucratic management.

The real bosses [under capitalism] are the consumers. They, by their buying and by their abstention from buying, decide who should own the capital and run the plants. They determine what should be produced and in what quantity and quality. Their attitudes result either in profit or in loss for the enterprise. They make poor men rich and rich men poor. They are no easy bosses. They are full of whims and fancies, changeable and unpredictable. They do not care a whit for past merit. As soon as something is offered to them that they like better or is cheaper, they desert their old purveyors.

Unaware of the Wall Street Journal reporting (his original article preceded the news quoted above by several years), Murphy used an automotive industry analogy to illustrate his point.

The metaphor of “consumer sovereignty” is carried to its utmost when proponents (such as Mises himself) liken the operation of a market to a daily plebiscite, in which every penny spent is a vote by the consumer indicating those products and services to which society’s resources should be devoted. If the great mass of consumers dislike purple cars with green polka dots, then a society based on private property will not waste resources in the production of such odd cars.

His analogy of purple cars with green polka dots was intended to illustrate, presumably with humor, the possibility of a design mistake on the part of the car maker, and the correction that such a mistake would trigger in the consumer marketplace.

Unfortunately, the design mistakes in the real world case are made by the government and their interventionist bureaucratic departments. Their mistakes are worse than ridiculous; they risk consumer lives, divert productive resources, and squeeze producer profits. The bureaucrats issued regulations to force automobile manufacturers to achieve fuel economy targets that were set at levels dictated by political theater rather than market reality. To comply, auto manufacturers had to balance their sales portfolios, offsetting sales of lower mileage pickup trucks and SUV’s (which consumers like and are buying in increasing numbers) with offerings of high-mileage small sedans. To achieve the high gas mileage the government mandated, these sedans are lightweight, underpowered, under-equipped, flimsy and dangerous.

Consumers are always smarter than government bureaucrats. And, as Mises pointed out, their marketplace power is demonstrated not only by buying, but also by abstaining from buying. In the case of the flimsy high-mileage sedans on offer, they abstained in droves. “They are no easy bosses,” as Mises said.

To reinforce Mises’ point that “as soon as something is offered to (consumers) that they like better or is cheaper, they desert their old purveyors”, the WSJ article tells us that “GM, Ford and Chrysler have suffered when gasoline prices rise and dealers are left with a stale ….selection of fuel-efficient offerings”.

Even if the government fails to recognize consumer sovereignty, the automobile manufacturers do not.

It is a consumer shift “we really haven’t seen before”, Toyota U.S. sales chief Bill Fay said at an industry conference….Another Toyota executive forecast the sale of cars shrinking to 30% of the American market in the near future, and said the Japanese auto maker might need to expand its SUV lineup.

Consumer sovereignty is a concept of Individual Economics. The individual as consumer retains market power, and makes subjective decisions about what purchases will improve his or her personal circumstances. The government can insist that it’s better for us to drive high mileage, lightweight and flimsy cars (or purple cars with green polka dots for that matter). Consumers will follow their own value preferences and will not be dictated to by bureaucrats.

This Ridiculous Occupational Licensing Law Is Hurting Local Entrepreneurs

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The state’s love of control is most succinctly demonstrated by its desire to oversee and control professional development through occupational licensing. This strict licensing structure prevents would-be entrepreneurs by placing barriers in their path. Individuals who would like to take a particular skill and go into business for themselves must first seek government permission. But this isn’t as simple as it may sound. Not only does the state require mountains of paperwork and sometimes thousands of dollars, they also often require training or schooling that is not directly related to the business in question at all. 

One such example of this comes from Tennessee, where local licensing boards threatened two entrepreneurial women for massaging performance horses, without first obtaining a veterinary license legally allowing them to do so. 

A Voluntary Labor of Love

Laurie Wheeler is a professional jazz musician with a strong love of horses. It should come as no surprise, then, that she decided to name her own horse, Jazz.

Wheeler holds a certification in equine myofascial release, a type of healing massage that is extremely helpful for performance horses. It should also be noted that Wheeler does, in fact, hold a license in massage therapy, however, it is specifically for humans and not the equestrian species.

Wheeler has been assisting horses for years, never asking for compensation along the way. For her, helping out a horse in need is a labor of love and not a skill she uses to provide for her livelihood.

However, she was shocked when she received a letter informing her that she was breaking state law and threatening to take further actions should she continue to treat horses without first fulfilling the veterinary degree requirements made by Board of Veterinary Medical Examiners—a board within Tennessee’s Department of Health.

What was most appalling—and confusing—to Wheeler, was the fact that she had never even received compensation for massaging horses. Even so, the official letter from the state of Tennessee promised to fine and arrest her if she continued treat horses, regardless of whether or not she received payment for her services.

As Wheeler does not rely on massaging horses in order to pay her bills, she agreed to stop doing so after receiving the letter. However, a few months after the state contacted her, Wheeler witnessed a horse suffering terribly from an impaction formed in his intestines.

As this is one of the many ailments that can be treated through equine myofascial release, Wheeler could not in good conscience sit idly by while an animal suffered unnecessarily. Disregarding the state’s threats, she stepped into action. “I didn’t care. I put my hands on [the horse’s] belly for a while, maybe three to four hours, and he passed his impaction that night,” she continued, “If I’m needed, I go. Period.”

Taking Bread out of Their Mouths

Unlike Wheeler, Martha Stowe relies on equine massages to pay her bills. Also certified in this specific method of massage, Stowe funded True Equine, where she provides services to a large clientele.

“For performance horses, this is important,” Stowe told the National Review, “you want them to have complete range of motion.”

Two years after starting her business, Stowe’s husband was deployed to Iraq. Luckily, Stowe’s skills allowed her to provide for their family of four while her husband was away.

As is relatively common among those returning from war, Stowe’s husband has not yet reentered the workforce since returning to the states. “I became the sole breadwinner,” Stowe says. But in April 2016, the state sent Stowe a letter similar to the one Wheeler received. The letter threatened to fine Stowe $500 or to give her six months of jail time.

While logic would lead many to at least hope that Tennessee would take Stowe’s family circumstances into consideration, that didn’t seem to play any sort of role in the state’s decision to go after True Equine.

Explaining her situation, Stowe said:

“I was terrified, I didn’t do any myofascial from the day I received the letter until about June, but then I realized there was no way we could pay our bills if I didn’t do it.”

The state is putting Stowe and her family in the uncomfortable position of having to choose between feeding themselves or complying with the odd state statute.

Government Hates Competition

One would hope that Tennessee’s unwavering dedication to the enforcement of this law would be backed by sound reason, but unfortunately, that is not the case. Like most, if not all, occupational licensing laws, Tennessee’s law exists to protect the veterinarians from unwanted competition, and not the health and safety of the animals involved.

In order for both Stowe and Wheeler to continue doing what they do best, the state is demanding they complete veterinary school. According to a site dedicated to answering questions from those wanting to pursue a career as a veterinarian, the average cost of a four-year program within the United States is between $147,000 and $250,000.

Adding to the state’s hypocrisy, it should be noted that veterinarian schools do not actually teach or even require a discussion on the practice of equine myofascial release. Paying such a steep price for a veterinary degree that does nothing to further either of their specialty skills does nothing but line the pockets of those atop the veterinarian hierarchy.

The only real benefit to be gained from forcing these women to get veterinary degrees is the state’s reaffirmation that it has sole control and power over the livelihoods of its citizens. This point is especially exemplified when looking at other veterinary-related activities that do not require a license in the state of Tennessee.

According to Braden Boucek, the director of litigation for the Beacon Center who is helping these two women fight the state’s ridiculous laws, “The list of things you can do legally to animals without a veterinary degree includes castration, dehorning, artificial insemination, and transplanting a frozen embryo.”

By making this point, Boucek is seeking to prove that Tennessee is depriving both Stowe and Wheeler of their Constitutional right to equal protection under the law. Additionally, Boucek is arguing that this statute further violates Constitutional rights by violating the 14th Amendment, which requires states to comply with Constitutional protections, such as owning private property and using that property to earn a living.

Boucek gave the Board of Veterinary Medical Examiners until the end of February to begin taking the initial steps towards reforming the law that lumps animal massage therapy together with veterinary medicine.

Not to give the government any more bad ideas, but following the state’s logic, chiropractors and acupuncturists working with humans would also have to hold medical degrees before working on clients, which would not only be absurd, it would also bar many people from earning a living.

This Leading Nordic Socialist Heads An Extractive Political Institution.

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The concept of Nordic Socialism became fashionable among supporters of Bernie Sanders, and we’ve pointed out that it is neither as benign nor as successful as it is made out to be. All forms of socialism depend on replacing the open, accessible, inclusive and pluralistic institutions of Western civilization with what F.A.Hayek called “extractive political institutions”. In extractive institutions, a political elite, incapable and incompetent at practicing the economic way of creating value, indulge in the political way of extracting value that’s been created by the productive members of society, and repurposing it for their own political goals.

The leading Nordic Socialist of the day is Margrethe Verstager, the European Union’s competition commissioner. She is not content with imposing Nordic Socialism on her fellow Danes in her own country. Rather, she uses her power as an EU commissioner to impose it on the citizens of the world, and most notably on those of the United States.

She does so through the extractive and punitive activities of her EU commission. Under her watch, the commission has:

  • Fined Google 2.4 billion Euros for “abusing its dominance” in European markets for search and shopping.
  • Ordered Apple to pay 13 billion Euros in alleged “unpaid” taxes.
  • Fined Qualcomm nearly 1 billion Euros for payments it made to Apple that Ms Verstager said were “illegal”.

Her actions are purely political, with no grounding in economics, and precious little in law. Apple Chief Executive Tim Cook called the allegation that the company had paid an ultra low tax rate in Ireland and thereby evaded payment of taxes elsewhere in the EU “total political crap”. Even Ireland appealed the EU’s decision, alongside Apple’s own appeal. Google has appealed the EU’s ruling on the basis that its logic and conclusions are flawed. Qualcomm said that it will appeal its fine. The Information Technology And Innovation Foundation has stated that Ms Verstager is merely picking “big, juicy targets” as a “popular position for her to take in Europe”.

She is stretching competition law to cover issues and situations that her predecessors never intended, or at least never imagined. For example, she has created a doctrine that “dominant” companies “have a special responsibility not to abuse their power”. The abuse is, of course, perceivable only from a Nordic Socialist perspective.

Anti-capitalists like Margrethe Verstager fail to recognize- or even to understand – entrepreneurial order and its consumer-beneficial dynamism. First, companies like Google, Apple and Qualcomm began as innovative entrepreneurial start-ups. Their shared goal was a better experience for consumers. If they were able to deliver it, they would reap marketplace rewards. They grew bigger simply because consumers were, and continue to be, grateful for the innovation.

Do consumers believe that Google, Apple and Qualcomm have become too “dominant” and “abusive”? If they do, they’ll signal their permission for new innovations to take their place. New start-ups will emerge, present their case for a new and better experience and win consumer support. The consumer decides who wins in the marketplace.

We have clear evidence from our own history of extractive institutions here in the US. (Yes, we have them, too; it’s the natural and inevitable stance of politicians. Fortunately, US consumers have a little more economic freedom left than their European counterparts.) In 2001, the US Justice Department sued Microsoft for “anti-competitive practices” in the bundling of its Internet Explorer web browser with its Microsoft Windows operating system. What a massive threat! Today, the Internet Explorer brand has been abandoned by Microsoft, and the company has ended mainstream support for Windows and does not even have a corporate division devoted to personal computer operating systems. Consumer perceptions and preferences change and dynamic market innovation moves quickly, while the idiotic and sclerotic anti-trust mechanisms of the U.S. Government grind slowly on.

In the 1980’s IBM had its own 13-year antitrust battle with the U.S. Justice Department. The case was ultimately dismissed “without merit”, but burdened IBM with huge legal costs and a massive shift of its attention from competing in the marketplace to defending itself in the courtroom. IBM’s offense? It was too “dominant”, especially in mainframe computers. While the Justice Department’s case droned on, the marketplace shifted to PC’s. The government eventually abandoned its tainted effort entirely, but not until they had drained innovative energy out of IBM and initiated a decade-long financial slide.

The extractive institutions of government destroy commerce. They are driven by the politicians’ bitter, envious and vicious mindset. Margrethe Verstager is a lifetime professional politician. She has always followed the political way, never the economic way.

People like her, and the extractive political commissions like the one she heads, are a threat not just to innovation but also to the civilized open institutional framework that makes it possible.

How the Government Stands in the Way of Entrepreneurship and Self-Reliance

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Entrepreneurship is a powerful tool. So powerful a tool is it, that it has been helping to lower recidivism rates for those exiting the correctional system. But when the government passes strict licensing laws on the workforce, many miss out on the opportunity to be self-reliant innovators.

For much of the incarcerated population, getting out of out prison and starting a career as a barber or as a cosmetologist sounds like a great plan. These are stills that many already possess, but these career fields come with so many certification requirements, it is almost impossible for those just reentering society.

In fact, this is such a widespread problem, the issue was even addressed on a recent season of the Netflix series, Orange is the New Black. Since many former convicts are not formally educated, searching for gainful employment after being released is a difficult obstacle to overcome. But many are unable to find work at all. And for those unable to find a steady job, resorting back to the behavior that resulted in a prison sentence, to begin with, is a hard cycle to break. Yet, it isn’t a problem of not possessing the skills necessary to find jobs. Many have these skills, but finding an employer who doesn’t mind the criminal record is another feat entirely.

This is why it makes sense to go into business for one’s self. By doing this, former offenders do not have to face the embarrassment of having to mark a box on a job application that forever ties themselves to the mistakes of their past. But for those who already have a particular skill they would like to monetize, they are met with an entirely different set of obstacles from state licensing boards.

In one episode of Orange is the New Black, one inmate is faced with the bitter realities of planning for a future outside of prison. As her release day quickly approaches, the pressure to build a life on the outside without any formal education preys on her mind. Unable to master the GED test material, she is encouraged when she realizes she can make a living by doing what she does best–manicures.

Not only is this an area she is skilled in, it is also one that brings her immense pleasure. She is rejuvenated by this plan and begins to fantasize about opening her own salon and becoming a small business owner. However, that dream is soon dashed as another inmate informs her of all the licenses and permits she must obtain before she can open a business.

Occupational licensing laws have completely squashed the dreams of not only for former felons but also for all hopeful entrepreneurs.  Individuals should be able to make their own way in life, regardless of state authority. However, it has now become a nation where government-issued licenses are required before someone can earn a living.

Entrepreneurship inspires while the government restrains. Those who want to work and create value should be allowed to do so without having to beg for the state’s permission.

There Is A Private Property Solution To Our Concerns About Facebook.

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Many of the problems we wrestle with in modern life would be solved if we lived in a private property society. Immigration is one. If all property were private, individuals would choose whom to invite on to their land or whom to employ in their entrepreneurial companies. Equally, they would choose whom to exclude, since the law of association includes the right not to associate. In the article below from WSJ Online, Andy Kessler makes the same argument about our personal data on Facebook. He includes not only the content we post, but the behavioral data we create through our clicks and Likes. He envisages the appropriate economic incentives to voluntarily maintain privacy or to share, and to receive advertising or not. And hopefully, the private property mentality will exclude or massively reduce regulation and government intervention.

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Facebook has been on fire lately—but not in the way it usually is. Its stock is melting and congressional grandstanding (i.e., hearings) about privacy and security begins Tuesday. Facebook is a threat to democracy and society, critics now argue. I’ve lost track of how many professors are demanding the feds regulate or even break up the social-media giant. Don’t they teach classes anymore?

Apple CEO Tim Cook joined the pile-on last month: “I think that this certain situation is so dire and has become so large that probably some well-crafted regulation is necessary.” Be careful what you wish for. Sure, no one wants Russian bots controlling their minds, but targeting consumers’ minds based on detailed demographic information isn’t new. Bud Light has perfected it. Dilly dilly.

Techies have an expression for Facebook’s model. It’s “free as in beer”—in the sense of costing no money. You pay in other ways. I propose a simple fix. Let’s flip the whole thing—make it about property rights, 21st-century style. America was built on property rights. Congress can deliberate for 90 seconds and then pass the Make the Internet Great Again Act. The bill would contain five words: “Users own their private data.” Finis.

Contrast this with the European Union, which adopted its General Data Protection Regulation in 2016. It is more than 250 pages of confusing rules, exceptions and fines. But it doesn’t change the flawed model of today. It only adds regulations that make the situation even more confusing.

A Better Way to Make Facebook Pay.

What would the world look like under the Make the Internet Great Again Act? If you upload to Facebook photos from your last beach vacation—though please don’t—you still own them. But if I go to your page, zoom in to see whom you’re drinking with, click on a nearby ad, message you about it, or even “Like” it, that information about me should remain private too. I should still own it. Same for whatever I search on Google or buy on Amazon. I control it.

Facebook would store this info in a virtual locker, and users would control access. The social network already has this data. It simply needs to corral it into two billion virtual lockers. It’d take an overnight hackathon to implement, really. Each user could then share or not.

But if you don’t share, Facebook can’t do its magic and provide a robust News Feed. It will be all cat videos, all the time. Similarly, Google can’t provide pertinent search results, which, like prizes on “The Newlywed Game,” are selected especially for you.

You’re going to want to share. Here’s the good news: Facebook is going to pay you to share. Then they’ll turn around and charge you a similar amount to cover the cost of servers, electricity, coders and Mark Zuckerberg’s hoodies. This way they can still show Wall Street the profits it expects. Worth it? Your call.

Now users’ wants and desires are no longer free for the taking, even though nothing, except who owns the data, has changed. At last, consumers get an economic proposition to decide how to use services like Facebook. Put a price on it. Facebook can still anonymously aggregate collective likes and interests so advertisers can reach people with similar tastes. That’s what TV networks do. But every time someone opens your locker to determine your individual wants, money changes hands and you get some of it.

This is where it gets fun. Facebook would provide a sliding scale for sharing. The more information you deem shareable, the more you earn. In effect, it becomes a revenue-sharing arrangement with advertisers that want to reach you. If you don’t mind the barrage of ads, share away and a virtual wallet inside your virtual locker grows and grows, probably to be spent on new Facebook services like games, music or videos. Real competition in a real marketplace, rather than the charade of today.

Your locker would also contain a trust component, to combat fake news and to pay trusted content creators, like, say, The Wall Street Journal. To flag fake news and clickbait Facebook recently added an information button to links and will soon verify political ads, with insight about the source. Next, they need a trust factor or score determined by an algorithm with human input. As Facebook runs out of new global users, they can squeeze out more revenue per user. A business model with an upside. This virtual locker holding your data can be easily implemented at Google and Amazon. Where it’s especially needed is with consumer-facing apps like Uber and Airbnb. As more voice-activated Amazon Alexa-like devices enter more homes—Facebook for good reasons recently delayed introducing theirs—it’s critical that the industry, or Congress, set rules on who owns the data from everyday conversations. It should be simple: I own it, you can rent it.

Image https://thoughtcatalog.com

 

Let’s Free Our Minds From Their Postmodern Capture By Envy And Guilt.

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“Are Americans really stupid?” The question is one of hope and despair; and begins chapter 2 of Czeslaw Milosz’ non-fictional book The Captive Mind. Its meaning is like that of the opening question from Ayn Rand’s trailblazing novel Atlas Shrugged: “Who is John Galt?” But in this case the question is a real one, asked by a man living in post-World War II communist Warsaw. The book is the seminal account of the self-delusion suffered by Stalinist intellectuals in Poland. Their job was to indoctrinate the masses to the glory of Mother Russia.

As described by Milosz, this New Faith was sold as “the trireme of the totalitarian state, speeding ahead with outspread oars, appearing indomitable.” And what a great metaphor: crews of rowers of synchronized mind and body, propelling the fleet toward their collective goal as directed by the command crew. And it was the Eastern intellectuals who became the pipers of the trireme’s deck crew. Their socialist realism propoganda set the ship’s harmonic rhythm, and painted the vision of their collectively earned peace and prosperity.

Decadence And Despair In The West.

They were also searching the horizon for something from the West. Being on the upper deck of the ship, they were allowed a vantage point from which to access information. What they sought was a signal from the Western intelligentsia that would offer hope, offer an understanding about the evils of the “great Stalinist epoch,” and that the West would act accordingly. But because of the filters imposed on their vision by the bureaucrats of the Center, they could only report decadence and despair from the West. And since they couldn’t understand a culture without the distinct social classes of “intelligentsia” and “people”, as in the East, America seemed to be a stupid society.

Silent Stalinist Sympathizers.

But to philosopher Ayn Rand, Western intellectuals did exist, and they were silent. In sympathy with Stalinist ideals, they had turned their backs on the romantic achievements of the Age of Reason. They had failed to project a school of philosophical thought that championed individualism over collectivism, capitalism over socialism, and freedom over submission. Despite the end of the brutal war in Europe and the total defeat of totalitarianism, the flickering light of Stalin’s New Faith was being kept lit in America. Western intellectuals were quietly taking command and reconstructing our institutions of media, education, and government. Instead of needing to be part of the next big thing like in the East, they were going to own it, and lead us to a socialist utopia in such a way that we would enjoy the ride.

The Left Is Better At Branding Than The Right.

All our tour guides needed was better public relations. Communism was replaced with liberalism and progressivism: Branding! The Method of shackling intellectuals and state violence was replaced with egalitarianism: Core Values! When asked the difference between communism and socialism, Ayn Rand responded communism is slavery by force, socialism by vote. In order to acquire power through voting booths the old political ideology was renamed Social Democracy: Marketing Campaign! And Pricing? Forget about it.  The call to action became social justice: Differentiation!

The Mirage Of Social Justice.

But isn’t all justice social? Can anyone agree on what it is? Even the name of this movement sounds stupid. Perhaps social justice intellectuals are not intellectuals at all. According to economist Friedrich Hayek, their ideas reveal an “absence of responsibility for practical affairs.” To overcome this, language had to change to control what people say and think; and be reinforced with the emotional tug of guilt and envy. Freedom now means freedom from want, equality means equality of outcomes, and progress means political correctness. That’s how today’s social justice warriors have been taught to think. Allowing themselves to be so easily mobilized to march and carry stupid slogans is evidence of their self-delusion.

Jordan Peterson’s Take.

Psychiatry professor Jordan Peterson condemns the teaching of equity, diversity, inclusion, white privilege, and systemic racism. It is not education, it is nothing but postmodern indoctrination, and it’s an insidious movement. Psychiatrist Carl Jung opines, “It requires no art to become stupid; the whole art lies in extracting wisdom from stupidity.” In other words, bestow the parrots of postmodernism with certificates of membership in the new Enlightenment! As such, Milosz’ indictment of the servile intellectual rings as true as ever: “his chief characteristic is his fear of thinking for himself.” In 1950’s Stalinist Europe it was fear of spies, prison camps, and firing squads. Today it is fear of public ridicule and social ostracization if you don’t submit or you think for yourself.

Let’s Choose Individual Values.

Welcome to post-modernism and the resentment it sows. But life is too precious to let that seethe and fester. We have a choice, become captive to the envy and guilt our elites are selling, or expose the man behind the curtain and reclaim ownership of our lives. We can let the collective consciousness of society shape our ideas, or we can win the future as individuals armed with reason, pursuing our values, and ready to defend the right of anyone else to do the same.

Exponential Growth In Entrepreneurship: #1 Repeal Of Scale Economics

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The economic future looks newly promising because the innovation and economic energy that comes from the free initiative of individuals and small groups is casting off the constraints imposed by big-company bureaucracy and government regulation.

Curt Carlson was President and CEO of SRI International in Silicon Valley from 1998 to 2014. During this time, SRI’s revenue tripled and SRI became recognized as one of the world’s most productive innovation enterprises, having helped create Siri, HDTV, Intuitive Surgical, and many other world-changing innovations. Dr. Carlson helped create over two dozen new companies and has advised ministers and prime ministers around the world on innovation practices and innovation policy. He is currently a member of the scientific advisory boards of the governments of Singapore and Taiwan.

Scale Is A Barrier To Innovation.

In a recent interview with Jeff Saperstein1, he talked about the difficulties big companies and big governments face today in encouraging innovation.

Think about the enormous total resources big companies have. They have brilliant people. What encumbers them is not the people, it is not the technology, but it is really their inability to put together nodes within the company—a small community within a bigger community—that can actually behave this way. At SRI, we created an incubator, which was run by Silicon Valley rules, not run by the $500 million part of our business. They had different rules, metrics, and license to do everything. Running by those local, start-up rules, we were able to issue or create one multibillion-dollar business after another. Most big companies find it impossible to do that.

Managing The Signal To Noise Ratio.

He talked about one of his themes, the “signal to noise ratio” within organizations, and the challenge in focusing on the signal (true information that points towards innovation opportunities) versus noise (bureaucratic rules, politics, infighting, HR, planning and all the other corporate and governmental activities that get in the way of innovative activity). His answer is global interconnectedness of agile and nimble teams of the best players.

Let’s assume a government and an organization remove the noise to enhance innovation. Once you get that in a reasonable position, the big problem is how do you identify those opportunities and assemble a team that can actually solve them? Increasingly, the best talent is all over the world, so increasingly the whole idea is the guy who wins is the guy who pulls together the best team wherever they come from, and actually knows what they are doing, and finds the signal in the noise, and gets out there first. And, if you can do that, you can create a billion-dollar business today.

The Repeal Of Scale Economics.

Historically, scale has been a barrier to entry for new companies and a barrier to innovation. Classical economies of scale resulted from increasing the size of a producing business unit so that costs were spread over a larger unit volume, reducing unit costs and creating an entry barrier to new start-ups. Consultants talked about the experience curve: ascend it by making more and more units, and the accumulated experience and learning of doing so will increase expertise and efficiency and create another barrier to entry.

Large scale companies created another form of barrier to entry by clogging up all the established distribution channels and leaving no room for small companies, small brands and new independent entrants. Big manufacturers, for instance, would buy up all the rights to shelf space at big stores like Walmart, both raising the price of retail distribution and leaving no physical room for the innovative start-ups looking for shelf visibility.

Today, small companies can get their scale from the Internet. They can access world class computing power at marginal unit cost from cloud providers like Amazon Web Services, and can find leading edge analytics and algorithms and open A.I. from similar sources. They can have equal computing power to the largest companies. They can find “supply chain as a service” from a set of vendors who set up, automate and monitor supply chains. And they can sell direct to consumers on their own websites, or on amazon.com or on Alibaba. They can contract with manufacturers who will finance their inventory and ship into the supply chain on demand, reducing downstream storage and warehousing costs to a minimum.

Scale is no longer a barrier to innovation. The result is the creation of new opportunities for the small companies and teams that Curt Carlson describes. They are now unleashed to pump ideas-based innovation into the economy at speed.

More Barriers Are Being Removed.

The repeal of the laws of economies of scale is just one of several convergent economic developments that point to an explosion of individual economic freedom and entrepreneurial innovation. The others include:

Augmentation: The use of A.I., networks and global exchange platforms to augment the capacity of individuals and small teams.

Disintermediation: The elimination of middlemen, institutional bureaucracy and rules, and proprietary infrastructure in order to increase speed, lower cost and reinforce security through peer-to-peer exchange on the blockchain.

Interconnectedness: The connections made possible by the internet and new connection and communication technologies makes every individual smarter and actually creates, in and of itself, an innovation ecosystem of unpredictable yet limitless productivity.

Well be writing about these convergent developments in future posts.

 

1 In The Interconnected Individual: Seizing Opportunity in the Era of AI, Platforms, Apps, and Global Exchanges; Business Expert Press, To be released July 2018

 

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