Leading the Revival of Individualism & Self Reliance

Economic Growth Precedes And Enhances Economic Equality

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Amity Shlaes is a substantial intellectual whose original research has led her to a differentiated point of view, expressed in a distinctive style. Her book,  Coolidge and The Forgotten Man: A New History of the Great Depression revised history rethinking the value of government intervention in the marketplace.  She now chairs the board of the Calvin Coolidge Presidential Foundation and serves as presidential scholar at the King’s College.

The current article is a long one by Center For Individual norms, but super-valuable and super-instructive because of the analysis of the trade-offs between economic growth and economic equality. The conclusion: we can have both, but they have to be in balance and in the right order. It is growth that brings equality and makes it possible.

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Free marketeers may sometimes win elections, but they are not winning U.S. history. In recent years, the consensus regarding the American past has slipped leftward, and then leftward again. No longer is American history a story of opportunity, or of military or domestic triumph. Ours has become, rather, a story of wrongs, racial and social. Today, any historical figure who failed at any time to support abolition, or, worse, took the Confederate side in the Civil War, must be expunged from history. Wrongs must be righted, and equality of result enforced.

Economists Seem To Have Forgotten About Free Markets.

The equality campaign spills over into a less obvious field, one that might otherwise provide a useful check upon the nonempirical claims of the humanities: economics. In a discipline that once showcased the power of markets, an axiom is taking hold: equal incomes lead to general prosperity and point toward utopia. Teachers, book review editors, and especially professors withhold any evidence to the contrary. Universities lead the shift, and the population follows. Today, millennials, those born between 1981 and 2000, outnumber baby boomers by the millions, and polls suggest that they support redistribution specifically, and government action generally, more than their predecessors do. A 2014 Reason/Rupe poll found 48 percent of millennials agreeing that government should “do more” to solve problems, whereas 37 percent said that government was doing “too many things.” A full 58 percent of the youngest of millennials, those 18–24 when surveyed, held a “positive” view of socialism, in dramatic contrast with their parents: only 23 percent of those aged 55 to 64 viewed socialism positively.

At least for now, most progressives acknowledge that markets and economic growth are necessary. But progressives in academia contend that growth has proved itself secondary to equality efforts—something to be exploited, rather than appreciated. Not just nationally, but worldwide, policymakers and the press regard the subordination of growth to equality to be a benign practice, as in the recent line in the Indian periodical Mint: a policy aimed at “reducing inequality need not hurt growth.”

The Gini Coefficient: A Flawed Metric.

The redistributionist impulse has brought to the fore metrics such as the Gini coefficient, named after the ur-redistributor, Corrado Gini, an Italian social scientist who developed an early statistical measure of income distribution a century ago. A society where a single plutocrat earns all the income ranks a pure “1” on the Gini scale; one in which all earnings are perfectly equally distributed, the old Scandinavian ideal, scores a “0” by the Gini test. The Gini Index has been renamed or updated numerous times, but the principle remains the same. Income distribution and redistribution seem so crucial to progressives that French economist Thomas Piketty built an international bestseller around it, the wildly lauded Capital.

Through Gini’s lens, we now rank past eras. Decades in which policy endeavored or managed to even out and equalize earnings—the 1930s under Franklin Roosevelt, the 1960s under Lyndon Johnson—score high. Decades where policymakers focused on growth before equality, such as the 1920s, fare poorly. Decades about which social-justice advocates aren’t sure what to say—the 1970s, say—simply drop from the discussion. In the same hierarchy, federal debt moves down as a concern because austerity to reduce debt could hinder redistribution. Lately, advocates of economically progressive history have made taking any position other than theirs a dangerous practice. Academic culture longs to topple the idols of markets, just as it longs to topple statutes of Robert E. Lee.

But progressives have their metrics wrong and their story backward. The geeky Gini metric fails to capture the American economic dynamic: in our country, innovative bursts lead to great wealth, which then moves to the rest of the population. Equality campaigns don’t lead automatically to prosperity; instead, prosperity leads to a higher standard of living and, eventually, in democracies, to greater equality. The late Simon Kuznets, who posited that societies that grow economically eventually become more equal, was right: growth cannot be assumed. Prioritizing equality over markets and growth hurts markets and growth and, most important, the low earners for whom social-justice advocates claim to fight. Government debt matters as well. Those who ring the equality theme so loudly deprive their own constituents, whose goals are usually much more concrete: educational opportunity, homes, better electronics, and, most of all, jobs. Translated into policy, the equality impulse takes our future hostage.

A History Of Growth In America.

Touring American history with an eye on growth, not equality, has become so unusual that doing so almost feels like driving on the wrong side of the road. Nonetheless, a review trip through the decades is useful because the evidence for growth is right there, in our own American past. Four decades, especially, warrant examination: the 1920s, the 1930s, the 1960s, and the 1970s.

The modern American economic story starts with the 1920s, a decade worth dwelling on at some length because of the stunning evidence that it offers of growth’s power. The winners of the 1920 election were two Republicans, Warren G. Harding of Ohio and his vice presidential candidate, Calvin Coolidge of Massachusetts. Confronting these men and, indeed, Congress, was the same pressure to prioritize redistribution that weighs on us today. In the aftermath of World War I, commodity prices had plummeted; farmers could not pay the bills for equipment and land that they’d purchased in better years. The farmers demanded agricultural subsidies from Washington; veterans sought a federal pension, an early version of Social Security. Harding and Coolidge’s 1920 opponent from the Socialist Party, Eugene Victor Debs, won only 3.5 percent of the popular vote. But the dignified Debs, in prison for noncompliance with the wartime draft, was becoming a national martyr to progressivism. An even greater force was the progressive wing within Harding and Coolidge’s own party, the Republicans, led by Robert La Follette, senior senator from Wisconsin. La Follette advocated massive redistribution, including not only farm aid but also government seizure of national resources. Politically, La Follette was gaining in strength, looking to a 1924 presidential run. Dramatic moves by Woodrow Wilson’s administration during the war, including the suspension of trading on the New York Stock Exchange and the nationalization of the chief means of transportation, the railroad, had strengthened the case for a big-spending government. Perhaps what had worked in war would also work in peacetime.

Meantime, however, business was slow—the early 1920s experienced a significant recession. At the end of World War I, the top income-tax rate stood at 77 percent. Business was accustomed to extraordinary burdens in war. But in autumn 1920, two years after the armistice, the top rate was still high, at 73 percent. The government’s lack of clarity over the tax treatment of capital gains was also roiling markets. An official capital-gains tax rate had yet to be established. It was unclear whether, in the future, gains from the sale of equities would be taxed as income, or taxed at all. If capital gains were taxed as income, Americans would be trapped in an economy where it was almost impossible to make money legally.

In response, Wall Street and private companies mounted a “capital strike,” dumping cash not into the most promising inventions but into humdrum municipal bonds. Bootlegging and any other illicit activity outside the purview of the Treasury’s Bureau of Internal Revenue, the ancestor to our Internal Revenue Service, grew abnormally attractive. The high tax rates, designed to corral the resources of the rich, failed to achieve their purpose. In 1916, 206 families or individuals filed returns reporting income of $1 million or more; the next year, 1917, when Wilson’s higher rates applied, only 141 families reported income of $1 million. By 1921, just 21 families reported to the Treasury that they had earned more than a million. This was ironic, for, as the financial titan Andrew Mellon would comment, the effect of tax progressivity was: “The idle man is relieved. The producer is penalized.” The perverse situation contributed to public disillusionment, the kind captured by F. Scott Fitzgerald in The Great Gatsby, published in 1925—not, as commonly assumed today, after the crash of 1929.

Against this tide, Harding and Coolidge made their choice: markets first. Harding tapped the toughest free marketeer on the public landscape, Mellon himself, to head the Treasury. This was the 1920s equivalent of choosing a Warren Buffett, a hedge-fund star, or Peter Thiel of PayPal, rather than a more standard figure from, say, Goldman Sachs. From his railroad experience, Mellon had seen that high rail-freight charges drove businesses to find other means to transport their goods. To attract maximum business, a railroad could charge, Mellon said, only “what the traffic will bear.” With a low enough freight rate, the railroad could even become popular, making up in volume what it lost when it lowered price. (Mellon spoke of railroads because that was what he knew; today we would use the Walmart example.) The Treasury secretary suggested applying the same theory to taxation: a lower rate, perhaps 25 percent, might foster more business activity, and so generate more revenue for federal coffers.

This figure drove Progressives wild. How could 25 percent for the rich be “good for the country as a whole?” demanded James Couzens, a maverick senator from Michigan. Couzens and others demanded that the amount of all taxpayers’ payments be posted on the walls of town halls or post offices—the “Peeping Tom” provision, as it came to be known. Harding and Mellon got the top rate down to 58 percent. When Harding died suddenly in 1923, Coolidge promised to “bend all my energies” to pushing taxes down further. In a second round, stewarded by Coolidge, a bitter deal was cut: Mellon and conservatives would get a (somewhat) lower tax rate of 46 percent, and the Peeping Tom provision would become law—gossip for a thousand headlines.

But Coolidge was not satisfied. After winning election in his own right in 1924, Coolidge joined Mellon, and Congress, in yet another tax fight, eventually prevailing and cutting the top rate to the target 25 percent. Earlier, Mellon had managed to establish “his” capital-gains tax at a substantial but still reassuringly low 12.5 percent. Just in case there was any doubt about what he and Mellon were doing by putting business first, Coolidge underscored it in a 1925 speech to the American Society of Newspaper Editors: “The chief business of the American people is business,” Coolidge said, adding that “the chief ideal of the American people is idealism.”

Growth in the 1920’s.

Several features of the 1920s events deserve note. The first is the unapologetic tone of the pro-markets campaign. The leaders ignored their own Pikettys, and prevailed: in the 1924 presidential campaign, the Progressive La Follette did take a disruptive 16.6 percent of the vote. But the “icy,” pro-business Coolidge took an absolute majority, beating La Follette and the Democratic candidate combined. Second, the tax-cutters did not back down—though several rounds of legislation were necessary. Third, and most important, the tax cuts worked—the government did draw more revenue than predicted, as business, relieved, revived. The rich earned more than the rest—the Gini coefficient rose—but when it came to tax payments, something interesting happened. The Statistics of Income, the Treasury’s database, showed that the rich now paid a greater share of all taxes. Tax cuts for the rich made the rich pay taxes.

There were other positive outcomes. Today, politicians speak of 4 percent growth, but that’s a frankly aspirational number; 3 percent growth is the goal that most policymakers hope for. In the 1920s, though, the United States did average 4 percent real growth. What’s more, the quality of growth improved: money flowed no longer to war or tax breaks but rather to products with the most economic potential. The great signal of economic hope is the patent: the investment by an individual or a team in the future profitability of an idea. In the 1920s, patent applications for inventions exploded, reaching 89,752 in 1929—a level that they wouldn’t see again until 1965.

Patent data can seem obscure to everyday Americans, but all that innovation resulted in productivity increases, which meant that factory employees could work five days a week, not six. Thus did Americans receive something new to them: Saturday. Luxuries became cheaper to make as new equipment came on line, and therefore more affordable: homes got electricity, most homes got indoor plumbing, and people could afford automobiles. Mellon budgeted so well that he made wartime inflation a memory; consumers found that their dollar went further. Finally, the 1920s economy gave workers something far more important than notional wage equality: a job. Unemployment averaged 5 percent or lower. Putting markets before equality had done much to improve the lives of regular Americans. This may be one reason that no one appeared to notice when Congress, in 1926, repealed the Peeping Tom provision in the tax code. Prosperity tastes better than envy.

Growth In The 1930’s.

The 1930s tell the opposite story. When the market crashed in 1929, Coolidge’s successor, Herbert Hoover, was caught off-guard. So was everyone else, including Corrado Gini, who concluded that the worldwide slump that ensued was due to workaholic Americans—the American worker, the New York Times reported Gini saying, “does not know when to stop,” resulting in the oversupply of goods and the ensuing slowdown. We don’t know what Hoover made of Gini himself, but we do know that Hoover responded differently from the way predecessors had responded to previous crashes: he intervened. The monetary nature of the initial collapse would have been hard for him to address, though Hoover did recognize it. In every other area, Hoover changed policy to focus on social equality: “a chicken in every pot.” Key was Hoover’s emphasis (new for those times) on raising the labor price. Rather than allow prices to find their own level—in particular, wages—as presidents had in the past, Hoover hauled business leaders to Washington and bullied them into sustaining high wages, and he cajoled Congress into passing laws that pushed up compensation as well, the best-known being the Davis-Bacon Act of 1931, which boosted pay for all employment under government contract. The Norris–La Guardia Act likewise institutionalized higher wages by limiting recourse to the courts of employers who could not afford what unions demanded. In addition, Hoover bullied a rueful Mellon into undoing the tax cuts, raising the top rate to 63 percent. Finally, Hoover thoroughly intimidated business and markets, blaming them for hogging too much of the money.

When Franklin Roosevelt ran for president in 1932, the New York governor sent an even clearer signal that in his presidency, equality would come first. “The philosophy of social justice through social action calls definitely, plainly, for the reduction of poverty,” said FDR in a campaign speech in Detroit. “If poverty is to be prevented, we require a broad program of social justice.” Concluded FDR: “Justice is the first law we seek.” Roosevelt cited clergymen in support of the shift, including a statement by the Federal Council of Churches of Christ that got in the requisite dig against wealth: “It is not denied that many persons of wealth are rendering a great service to society. It is only suggested that the wealthy are overpaid in sharp contrast with the underpaid masses of the people.” Roosevelt also quoted a rabbi who made the human-justice priority even more bluntly: “We talk of the stabilization of business. What we need is the stabilization of human justice and happiness.” In modern lingo, we would call the New Deal a social-justice program: the creation of the Securities and Exchange Commission, to put Wall Street in its place; Social Security, to bring equity to senior citizens; and the Wagner Act, a mid-1930s law so advantageous to unions that it drove wages yet higher.

Taken overall, the New Deal’s equality measures prolonged and deepened the Depression. The destructive role of high labor costs was made especially clear recently in the work of Lee Ohanian of UCLA. The obligation to pay higher wages when employers could not afford them forced employers to make their own, bitter, choice: they simply hired fewer workers. Hence the refrain we have heard from our parents, grandparents, and great-grandparents: “The Depression was all right—if you had a job.” Those who didn’t found themselves locked out. For ten years, joblessness stuck stubbornly in the double digits. This mattered far more to families than any theoretical envy index. With the coming of World War II, Roosevelt pushed the top tax rate to 94 percent.

Growth In The 1960’s.

After the war, neither citizens nor politicians forgot the disappointing results of envy populism. Congress pulled the teeth from the Wagner Act tiger with the Taft-Hartley Act and did so with such a majority that Harry Truman, Roosevelt’s successor, could only watch his veto be overridden. For a decade or so—the 1950s—the United States confronted little competition worldwide, and so seemed able to afford Rooseveltian tax rates. But as the 1960s neared, lawmakers came to fear what they called “growth recessions”—and the dominance of the few businesses able to skirt the worst penalties in the tax code. Even Dwight Eisenhower, a general, not an economist, saw the dangers to U.S. enterprise and freedom, and warned against a “military-industrial complex.” It fell to Ike’s successor, John F. Kennedy, to reverse the national course. Kennedy planned dramatic tax cuts that would take top rates down into the 50 percent range again. The president’s assassination in 1963 prevented all but Kennedy’s first step from being completed. After JFK’s death, Lyndon B. Johnson shepherded those initial cuts through Congress and made them law. The new 70 percent rate was still ultrahigh, but the downward trend was enough to inspire markets.

Still, Johnson differed from Kennedy, as Hoover and Roosevelt had from Coolidge. Reversing priorities yet again, LBJ followed logic that started with a premise: “Assume growth.” Taking individual enterprise for granted, Johnson launched a second New Deal, the Great Society, a roster of legislation whose hallmark was redistribution. Through Medicare and Medicaid, Johnson redistributed taxes to cover health care for senior citizens and the poor, and then redistributed further with expansions of welfare. Finally, Johnson established public television and public radio, institutions that would showcase all future social-equality campaigns. Pupils today study Johnson’s enactment of the Civil Rights Act of 1964 and the Voting Rights Act of 1965, but they hear less about the impact of Medicare, Medicaid, and welfare. It makes an intriguing thought experiment: What if Johnson had stuck to Kennedy’s original theme of equality of opportunity (education) and civil rights, rather than stressing equality of result?

For a brief period in the 1960s, it appeared that Johnson had won his equality wager. It seemed that America could pursue equality while enjoying growth and even balanced budgets. In 1969, a year in which the budget was indeed balanced, Congress passed, and Richard Nixon signed, a levy on top earners that redistributed purely for the sake of redistribution—or punishment for the sake of punishment: what became known as the alternative minimum tax. Mellon’s old rule of charging “what the traffic will bear” had been forgotten. John Maynard Keynes’s newer theories were more congenial for politicians, who sought to reward their voters with instant gifts. By the end of the 1960s, Keynesianism had become window dressing for social justice—even though the Great Society, arguably, hurt low earners, including many blacks, the most. The disparity between black and white unemployment widened from the late 1960s onward, with blacks enduring an ever higher measure of joblessness.

Growth In The 1970’s and 1980’s.

The 1970s and early 1980s brought to all Americans, black and white, the bill for Johnson’s assumptions. The Gini coefficient remained low, but unemployment approached 10 percent. And inflation rose as well. The 1970s proved a bumpy ride. To constrain inflation, the Federal Reserve raised interest rates, and in 1980, the prime rate—the rate that banks charge one another—even crossed 20 percent. That meant that the mortgage rate for the typical family buying a home stood for years over 10 percent, which in turn meant that families could afford one or two fewer bedrooms than they otherwise might have. Was the paper equality worth it? A high capital-gains tax rate of effectively 50 percent dampened innovation, as did a law that said that the patent for any invention made under the auspices of a government-funded institution—a university, say—belonged to the government, not the inventor or even the university. Patent rates for inventions flattened out at about 100,000 a year, not much higher than in the late 1920s, when the population had been just over half the size. Growth, it turned out, could not always be assumed.

Only when U.S. leaders turned to three areas that had been essential in the past—income taxes, the capital-gains tax, and patents—did a turnaround become possible. In 1978, Congress, led by Representative William Steiger of Wisconsin, cut the capital-gains rate in half, albeit with resistance from the redistributionist president, Jimmy Carter, who called the cut “a huge tax windfall for millionaires.” In some cases, the capital-gains rate was even lower—“Is a capital gains rate of 17.5 percent unfair?” asked the Washington Post. Yes, thought the paper’s editors. Nonetheless, the country saw the opportunity in lower rates and elected Ronald Reagan. Reagan followed up with a series of tax cuts that brought the top rate on the income tax down to a Coolidge-esque 28 percent. Less known, and also influential, was a law that Senators Birch Bayh and Robert Dole sponsored in 1980 to give scientists and inventors, or their universities, ownership of patents for their inventions. Bayh-Dole, as the patent law is known, caused patent applications to increase and venture capital to explode, powering the Silicon Valley expansion. As economist Larry Lindsey showed, the results of the 1920s repeated themselves. After the Reagan tax cuts, the government saw greater revenues than paper arithmetic had predicted.

As if American evidence of the price of envy weren’t enough, Europe presents a corollary story. In the 1950s, 1960s, and 1970s, social democracies in Europe, established with the encouragement and support of Washington, boasted Gini coefficients that U.S. redistributionists could only dream about. But their spending nearly brought European nations down. In the 1980s, Europe was equal but broke. Only a feisty, pro-growth rebellion in Britain, and quieter revolutions in Scandinavia and Germany, made stronger growth, and more general prosperity, possible again.

Where Are The Growth Economists Today?

What now? The intellectual slide left in economics may eventually cease, a casualty, as other leftish economic theories in the past have been, to the weight of evidence. When inflation moves up, as it will one day, embarrassed economists will come around, as they did in the 1970s. Waiting for a crisis to force the Carters of the future to acknowledge reality is far from ideal, though. Some evidence suggests that as they age, millennials will come to appreciate markets. But we can bring the day of recognition on sooner, and avoid uncountable collateral damage, by demanding better secondary school education, the kind that makes patent and growth indexes as important as those for income distribution. The fastest way to do that is to support competition in standard secondary school education, so that our under-informed youth have an option to attend schools that might afford them a glimpse of the whole economic picture.

A real push is also necessary in the economics trade itself. Members of the guild of Ph.D. economists have little motive to do anything but build on or update Keynesianism, revise Gini, or gild Piketty’s lily. The most important step to put markets where they belong—in first place in the economic discussion—is to establish incentives that would make economists want to report the whole truth about the past. One example is the Manhattan Institute’s Hayek Book Prize, a major award for economics authors whose works reflect the free-market views of the great economist Friedrich von Hayek. The greatest hope lies in the fostering of new institutions that will, in turn, nurture economics thinkers who dare to acknowledge the merits of markets. That means think tanks and universities. Already, George Mason University stands out in this regard. We need more George Masons. A teetering nation cannot right itself until it rights its history.

 

This article originally appeared in City Journal.

Crypto Entrepreneurs Now Have the Power to Change the World

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One of the most intriguing aspects of Ayn Rand’s Atlas Shrugged is that the novel’s protagonists actually have great wealth and thus the power to really change the world. It was precisely this wealth, born of value creation, that allowed Rand’s heroes to leave behind their booming industries and establish Galt’s Gulch. And by doing so, our heroes instigated the formation of a new society, one that valued individualism, entrepreneurship, and decentralization.

While Atlas Shrugged may be a work of fiction, the rise of cryptocurrency has presented a new opportunity for real-life heroes to truly enact change.

Over the last several years, and especially over the last few weeks, I have watched some of my closest friends become abundantly wealthy as a result of crypto investments. And while I could not be happier for their financial success, there is something deeply significant about this newfound wealth.

As Bitcoin grew to become a household name over the years, articles were written cautioning against this burgeoning cryptocurrency. But the concern was not necessarily with Bitcoin itself, or even blockchain; it was about the people who are naturally attracted to such technology.

In 2013, Forbes wrote about “crazy libertarians” flocking to Bitcoin. This sentiment was echoed by the CEO of Reddit in 2014 when he said, “The user base for Bitcoin is basically crazy libertarians.” And of course, economist Paul Krugman has routinely warned that this new technology is “evil” specifically because its primary users were eager to find ways to bypass the Federal Reserve and the United States’ disastrous monetary policies.

And while it may be true that your friend who just made a million dollars from Bitcoin also frequently dons an “End the Fed” t-shirt, this is hardly a cause for concern. On the contrary, it is a cause for celebration.

For decades, many liberty enthusiasts have dedicated themselves to academia, think tanks, or grassroots activism. And while each of these roles is essential to spreading the precepts of liberty, they do not often come with outrageously high salaries.

There is absolutely no shame in choosing to pursue your passions rather than to seek only financial gain. But there is also no shame in choosing to do both.

When Paypal founder Peter Thiel donated $500,000 in seed money to start the Seasteading Institute, he was able to do so without batting an eyelash. Coming in at number 12 on Forbes’s 2017 “Midas List,” Thiel has been the poster boy for libertarian success.

As a prosperous venture capitalist, Thiel has been able to use his vast wealth to fund projects he believes in. Many libertarians advocate political decentralization and seasteading allows individuals to voluntarily choose to live in permanent dwellings in the middle of the ocean, free from government interference.

And while the non-libertarian reader might think this idea crazy, what really matters is that because of his net worth of $2.5 billion, he was able to give a total of $1.7 million to the Seasteading Institute.

But thanks to Bitcoin and other cryptoassets, Thiel is no longer one of the few libertarians with the means to fund decentralization projects.

Erik Finman was fourteen years old when he purchased as much Bitcoin as he could for $1,000. Given to him by his grandmother, he used the money to buy the cryptocurrency when it was only $12 per bitcoin. Now 19, that investment is currently around $5 million. Finman, who has expressed pro-decentralization sentiment on Twitter, has also decided to use his wealth to fund projects that he believes in.

Finman dropped out of high school after the public school system failed him. As described in the Bitcoinist, “Finman had a terrible time going through the school system. He was bored and unmotivated. He says one teacher even told him that he would never amount to anything, so he should just drop out of school and start flipping burgers at McDonald’s.”

But it was this extreme disappointment in the public education system that inspired Finman’s latest project. Committed to creating new privately-funded alternatives to public education, Finman founded Botangle, an online educational platform, in 2013.

Since then, he has expanded his vision and is now planning to build the “world’s best university” in Dubai. Finman, who believes college has become a waste of time, plans to use his wealth to create the type of school he wished could have existed for himself. But because Bitcoin allowed him to obtain this tremendous wealth, he is now able to impact future generations by funding schools he truly believes in.

For liberty activists who have been eager to enact change but frustrated by the stumbling blocks presented through the legislative process, they now have the chance to enact real change.

And this change doesn’t necessarily mean creating something new as Thiel and Finman did.

As mentioned earlier, think tanks are also integral to spreading liberty. And since most libertarians are opposed to government funding in the form of grants or subsidies, most think tanks and other nonprofit organizations of the liberty persuasion choose instead to raise funds from individual donors.

Just last week, FEE received one full bitcoin from an anonymous donor. At the time of the donation, that one Bitcoin was worth around $14,000. Whether or not this donor was one of the many liberty activists who just became wealthy from crypto is unknown. However, these types of donations are becoming more and more common as activists now have the money to back their ideas. And that is really where their power lies.

So many idealists want to change the world. But the unfortunate reality is that many lack the resources to bring about substantial change.

On an application for an internship I applied for years ago in college, I was asked how I would spread liberty if I had access to large sums of money. Talking through my response with other liberty friends, we imagined all the vast ways we could change the world, if only we had the means to do so.

Now, one of those friends has made a small fortune thanks to the crypto economy and has used that money not only to donate to causes he believes in but to also start his own company through which he can spread the message of liberty.

By using his money to put his beliefs into action, he is, to borrow from Randian speak, stopping the motor of the world, as is Thiel, Finman, and countless others. Since the government has a monopoly on force, we may never be able to achieve success through the legislative process. But each time a crypto activist uses their money to further decentralization, liberty wins. Any doubt of this can be cleared up by considering the fear expressed by many regulators and statist economists every time crypto breaks through another barrier.

Bitcoin and other crypto assets are tipping the established balance of power. And where so many other ideologies demonize wealth, libertarians understand how this can be used to promote change.

As the fictional Atlas Shrugged hero Francisco D’Anconia says in his infamous “money” speech, “Your wallet is your statement of hope…”

Entrepreneurs Drive The Economy. We Know How, But We Don’t Measure It Very Well. Part 2.

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Entrepreneurs are the drivers of the market economy. In the construct of Carl Menger, they transform higher order goods (such as raw materials, or raw computer code, or an understanding of consumer needs) into lower order or intermediate stage goods (further down the supply chain, closer the consumer) and final goods (those that are consumed). In doing so they accumulate investment capital (from their own and others’ savings), assemble and pay for human, digital and physical resources, both within and outside their firm, and apply their own time, imagination, judgment, decision making and supervision. There’s a lot of economic activity going on here – a lot of spending, a lot of buying, and a lot of value creation. It seems obvious that the decisions that entrepreneurs make and the way they allocate scarce resources and their success in innovating all the way along the supply chain must constitute the critical variables in whether an economy is successful or not, whether it is growing or stagnant. With many entrepreneurial successes, the economy will be vibrant. With a lot of failures – what the economists call entrepreneurial error – the economy will be weak.

We Are Taught That Consumer Spending Is The Driver.

But we don’t seem to fully recognize the role of entrepreneurs in driving growth. In fact, we can read in the New York Times that “consumer spending makes up more than 70% of the economy, and….drives growth during economic recoveries”. Or, in the Wall Street Journal that “slow growth …was due to sluggish consumer spending and an increase in imports….(and) dwindling government spending”.

Which is true? Do consumers and the government drive the economy by spending? Or do entrepreneurs drive the economy by energizing the supply chain with their productive activity?

The culprit: GDP.

The problem we face in answering this question is one of choosing which statistics to use. The favored statistic of the government is GDP – Gross Domestic Product. This measure focuses on what they call final output, and what Carl Menger called goods of the first order – i.e. that which is consumed. The measurement is dominated by consumer spending and government spending, since that’s how we can define the value of final output, i.e. the value that the buyers place on it. But to focus on this measure of economic activity also reinforces a bias of government and Keynesian economists: that spending more government money in slow periods is a way to drive economic activity. Hence, they derive their justification for stimulus, bailouts and subsidies from the way they measure economic activity.

Alternatives To GDP.

There are plenty of non-governmental economists who have suggested alternative ways to measure economic activity. Murray Rothbard, for example, put forward not one but two measurements to recognize the contribution of entrepreneurs. One was Gross Private Product (GPP) which, in contrast to GDP, excludes any income originating in government and government enterprises, maintaining focus on purely the private and productive part of the economy. A refinement of this is “private product remaining with producers” which deducts tax revenues (or government expenditures if they are higher from tax revenues) from GPP, to tighten the focus even more on private production.

Neither of these measures has caught on, but there is one that has. It’s called Gross Output or GO. It is a measure of total sales volume at all stages of production, through all the orders of goods and services from highest to lowest. So the economic activity of entrepreneurs, from raw material extraction to writing code to manufacturing and designing apps and giving rides and dispensing healthcare, is all recognized whenever a sale is made. This makes sense, since a sale is made when a customer recognizes value and decides to exchange money for that value.

Where GDP measures only final output, GO measures spending throughout the entire production process, at every entrepreneurial stage. This is consistent with economic growth theory – entrepreneurs drive growth. Professor Mark Skousen, one of the originators of GO, calls it a measure of the “make” economy rather than the consumption economy.

If GO were to be widely adopted, it would help to undermine one of the great fallacies of Keynesian economics and the intervention by government in the economy via stimulus measures and bailout measures. As measured by GDP, spending on final output by government and consumers makes up 85% or so of the economy, and so government can justify interventions in slow economic times via stimulus measures and bailouts and “shovel ready projects”. GDP is a justifier of big government.

GO Recognizes The Role Of The Entrepreneur.

In the GO measure, entrepreneurial spending by businesses represents over half the economy. It is businesses that drive growth, with investment in people, equipment, technology and productive capacity.

In fact, as Professor Skousen says, “Consumer spending is largely the effect, not the cause, of prosperity”. GO reverses the New York Times equation and flips our understanding. Entrepreneurial businesses should be turned loose, with less government regulation and less government intervention and spending.

As the Bureau Of Economic Analysis put it, “Gross Output (GO) is the natural measure of the production sector, while net output (GDP) is appropriate as a measure of welfare”.

What gets measured gets attention. GDP measures consumer and government spending and focuses our attention on those as drivers of economic activity. GO measures entrepreneurial production throughout the supply chain, and is a better focus for our attention.

Economic Concepts That Everyone Needs to Understand

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As the new year gets underway, why not make a goal to read more about the essential economic principles. While there are many aspects of free market capitalism that are integral to understanding the field, these are a few concepts that will be most helpful to know as you continue to study free market economics. 

Subjective Value: Only individuals can determine the value of good or service.

Sunk cost fallacy: The misconception that one must continue an endeavor because of the time and resources already invested.

Spontaneous order: The belief that when individuals are left to their own devices without a central authority the will create organic order out of chaos without any coordinated effort. 

Knowledge problem: It is impossible for one person or group to have enough knowledge to plan entire economies. This can never be possible since the information necessary for this to occur is decentralized among individuals.

Broken window fallacy: Is the misconception that destruction stimulates the economy.

Entrepreneurs drive the economy. We know how, but we don’t measure it very well.

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Today, we have a poor understanding of the fundamental role of entrepreneurs in advancing economic growth. This misunderstanding holds us back; we could create more prosperity for everyone if we corrected it.

There are two important causes we can point to as sources of error. First, we all have an imprecise definition of entrepreneurial activity. Second, the way we measure economic growth does not properly recognize the role of entrepreneurs.

The definition of entrepreneurial activity.

In fact, one group of economists, the so-called Austrian School, has always understood the role of entrepreneurs in the economy better than anyone else. In Human Action, published in 1949, Ludwig Von Mises laid down the principle of economic growth:

The direction of all economic affairs is in the market society a task of the entrepreneurs. Theirs is the control of production. They are at the helm and steer the ship.

What exactly do entrepreneurs do to steer the economic ship? The founder of the Austrian School, Carl Menger, had defined this very precisely in his 1871 book, Principles Of Economics. (We’ve known this stuff for a long time.)

Menger defined the structure of production, and the role of entrepreneurs within that structure. He used some language that we don’t still use today, but it’s actually very helpful to us in forming a picture of how the economy works. Let’s tackle it.

Menger divided the goods and services that are produced in the economy into goods and services of what he called the first order – those that are the final output of a production process and are consumed – and goods of higher order – those that are capital goods and producer services that constitute the supply chain links prior to final consumption. The process of transforming goods of higher order into goods of lower or first order is planned and executed by entrepreneurs. This is the definition of entrepreneurial activity. Not only does the entrepreneur participate in this process, he or she makes the underlying economic calculations and the actual decisions to assign goods of higher order to particular productive processes. Today, we are more likely to use language like the allocation of scarce resources and the trade-offs between alternative uses of capital.

The Role Of The Entrepreneur.

Menger was very specific about exactly what entrepreneurs do in the entrepreneurial process:

  1. Gather or create information. From the perspective of today’s information economy, this might seem trivial. But, in fact, Menger was ahead of his time in understanding that successful entrepreneurs create new information, or more comprehensive information or new insights from existing information (what today we’d call analytics). It is the quality and uniqueness of information that is the first ingredient of entrepreneurial initiative. Today we talk of addressable markets and unmet needs and available opportunities; these are aspects of information, and modern entrepreneurs all follow Menger’s first principle.
  2. Economic calculation. Time is required to transform the higher order goods and services into lower goods and services; capital is going to be tied up (Menger called this securing “the services of capital”), and the entrepreneur may forego a salary and use up savings and investment. He or she makes an economic calculation of the value of the revenues to be realized from selling the future goods and services and compares it to the cost of the entrepreneurial activity to get to the point where net revenues begin. This ROI model or revenue model or business model calculation is rife with uncertainty, since nothing in the future can be predicted with precision. This is the essence of the risk the entrepreneur takes in pursuit of future return.
  3. An act of will. Here’s another use of 19th century language that sounds a bit old fashioned to our modern ears. Menger referred to the act of will “by which goods of higher order are assigned to any particular production process”. Today, we might refer to this act of will as entrepreneurial judgment. It’s what we admire entrepreneurs for, and it’s what makes them heroes. They make the quantitative economic calculation in their spreadsheets and business models. But then they must take the leap of faith that says they believe in the model and are prepared to risk the capital, sacrifice their own income in the short term, and pin their reputation on the model being successful. They take the responsibility for making these decisions.
  4. Supervision of the execution. Menger recognized that the entrepreneur could be the venture capitalist, or the technical founder, or the CEO, or play some other role in execution. But to qualify as an entrepreneur, there must be an element of supervision, taking the responsibility for implementing the plan effectively and efficiency. In today’s terms, we might see the entrepreneur hiring and managing, and sometimes changing, vendors; securing and supervising the allocation of investment capital; making mid-term adjustments (sometimes called pivoting); and responding to market feedback. All of this and more would fall under Menger’s definition of supervision.

In summary, Menger said, the value of all the higher order goods and services in the economy, necessary for the production of lower order or first order goods and services, is equal to the prospective value of those future goods and services. That’s the economic calculation. When we compute that value, we must include the value of the services of the entrepreneurs themselves (what we’d call today their value-added) and the time value of the period for which they take command of capital in order to deploy it to their entrepreneurial purpose (roughly, the discount rate or interest rate or cost of capital).

Can We Measure The Contribution Of The Entrepreneur?

Why don’t we fully recognize this economic contribution of the entrepreneur today? It’s because we don’t measure it properly. That’s the difference between Gross Domestic Product (GDP) and Gross Output (GO) – the subject of a future post at Center For Individualism.

 

Entrepreneurial Order Is The Pathway To Prosperity, Freedom And Justice.

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Entrepreneurial order is the social system of self-organization that F.A. Hayek described, and we summarize in Center For Individual’s 10-point manifesto for individualism.

  • Everyone follows his or her own individual conscience.
  • All property is private property, so I know what’s mine and respect what’s yours.
  • Everyone is free to try their best, to see what they can achieve.
  • Each individual contribution is tested and corrected by others.
  • No-one is qualified to pass final judgment on others’ capacities or what they can do.
  • The remunerations of the efforts of the individual correspond to the value of the result of his or her effort to others.

A free market satisfies these conditions. In the market, the individual takes the risk to find out if the results of his or her efforts create value for others. Everyone does their best, and the preferences of consumers tell producers what to produce more of and less of.

Entrepreneurial order is decentralized and networked to distribute power, influence and opportunity among people who find each other. The new order does not depend on hierarchy, centralized institutions, or giant global corporations mass marketing, mass distributing, and mass adverting. It is dynamic and self-organizing.

Today, as a result of new technologies such as mobile devices for universal access, platforms and apps, both entrepreneur and customer have a universal network on which to find each other and respond to each other directly. There is more scope for peer-to-peer exchange: more speed, lower, transaction costs, and higher quality of continuous, direct communication.

The Three Technologies Of Entrepreneurial Order

The first type of new technology is those the augmentation of the capabilities of the individual via greater access to knowledge, learning and intelligence. This augmentation technology – sometimes called artificial intelligence – can be applied vertically within professions and occupations to make individuals smarter in their specialty, and horizontally across the agile attributes of individuals in multiple skills, collaboration and teaming. Entrepreneur and customer will both be augmented, enabling individualized and personal responsiveness.

The second type is disintermediation – people serving people better, faster and at lower cost by cutting out middlemen, back rooms and intermediate process steps and replacing these with peer-to-peer exchange. Blockchain is the leading emergent technology here. It promises a big advance for service systems, eliminating the bias and discrimination of mediators such as banks and financial institutions.

The third type is represented by global market exchange platforms, where multiple parties on multiple sides of a platform can exchange, create and collaborate.

New Organizational Forms, New Entrepreneurial Styles.

These new technologies will change how we organize business and society. A new form of augmented self-reliance will emerge, as will new forms of social and economic structures, such as boundary-less commercial organizations and functionally independent political structures, such as prosperity zones.

A new definition of entrepreneurship will also emerge. The new entrepreneurship lies in interconnecting people, knowledge, technology, ideas and actions so that new innovations emerge. It is the interconnecting that constitutes entrepreneurship.

Research conducted by Dr Cristina Mele and Dr. Tiziana Russo Spena (both of University of Naples Federico II, Department of Economics, Management and Institutions, Napoli, Italy)[1] points to interconnectedness as the opening of a door to an emergent and entirely new and revolutionary concept of economic, social and cultural innovation.

Entrepreneurs Co-create and Co-construct.

Entrepreneurship becomes the continuous co-construction and co-creation that results from the interconnections among a network of market actors, actions, contexts and resources. Innovation is the emergent outcome: “a shared knowing and doing” of society. Innovation is about interactions between networks of actors, a set of collaborative practices taking place on nested, interconnected networks. The next great phase of innovation is interconnecting humans and non-humans in new ways to build new innovation opportunities. There is no predicting the new experiences that will emerge.

Importantly, entrepreneurship and innovation are no longer merely business issues. Entrepreneurs will change everything: socially, culturally, material and contextually. The shared knowing and doing of an interconnected society can improve lives, evolve new institutions, and change culture.

Institutional innovation.

The new innovation extends to institutions. For example, money is an institution that is currently constrained by central planning. Now, entrepreneurial application of technology is now evolving a new institution of money based on decentralized money creation, and cryptographically protected single-ownership private property rights.

The institution of political democracy is based on individuals delegating their political rights to representatives via occasional voting, after which the voter loses control and influence. New digital concepts of “liquid democracy”[2] change the institution. Every citizen can vote on every issue at all times via smartphones and digital devices, and can delegate their voting rights to any other informed citizen on any issue if they choose to do so, without giving up power to a “representative”.

The country of Estonia is innovating the institution of citizenship of a country via e-residency[3] on the blockchain, open to any one who applies from anywhere in the world, independent of the geography in which they reside, or the country of which they are currently a citizen.

These are just a few early examples of the kind of institutional innovation that digital interconnectivity in the service of creative entrepreneurs will bring.

A new era for freedom.

Super-connected entrepreneurs will create an unhampered system of market exchange, freed of all kinds of frictions, interventions, centralized institutions and mediation. It is the entrepreneur who will lead the way to greater freedom, and more efficient, global market exchange.

Jesus Huerta De Soto has stated that “the most just society will be the society that most forcefully promotes the entrepreneurial creativity of all the human beings who compose it[4]”. With new technologies, we bring this ideal closer.

[1] Cristina Mele & Tiziana Russo-Spena, Innovating In Practice: Perspectives and Experiences, Springer, 2017

[2] For example, Democracy Earth Foundation, The Social Smart Contract, v 0.1, 2016, https://www.democracy.earth/#paper

[3] https://e-resident.gov.ee

[4] Jesus Huerta de Soto, The Ethics Of Capitalism, Journal Of Markets And Morality, Vol 2, No. 2, Fall 1999, pp150-163

The Fight Continues: Keynes and Hayek on Prices

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F.A. Hayek and John Maynard Keynes are two of the most controversial economists in history. They are also the two that are most often mentioned in undergrad economics courses. But even though these two have managed to break through to the mainstream, many still do not fully understand the differences between the two economists’ beliefs. 

Previously, I  discussed how Hayek and Keynes differed in regards to their views on spending and planned economies. Hayek, whose views were closely aligned with the Chicago school of economics, believed that markets operate organically and, as such, should not be constrained to the confines of government orchestration. This led him to conclude that government intervention, including but not limited to the setting of prices, inhibits the free market from reaching its full potential.

Keynes, on the other hand, believed the exact opposite. For Keynes, the more government intervention the better. He believed that laissez-faire economics was dangerous for consumers and was destined to fail. This faith in government institutions would also transfer over to his views on price theory.

Keynes on Pricing

Like most things regarding the economy, Keynes was a huge advocate of government intervention. As George Selgin put it, Keynes’s believed that “government authorities should manage money so as to achieve a stable level of consumers’ prices.”

Expanding on this, Selgin says:

“But, although some of Keynes’s writings, and the General Theory especially, may have laid the groundwork for inflationary policies, Keynes himself regarded them as supporting a monetary policy that would stabilize consumers’ prices. The desirability of a stable consumers’ price index is a persistent theme of Keynes’s monetary writings, from the Economic Consequences of the Peace (1919) to How to Pay for the War (1940). In this respect at least Keynes saw eye-to-eye with several of his more important contemporaries, including Irving Fisher and such members of the “old” Chicago School as Loyd Mints and Henry Simons.”

Keynes believed that prices were closely tied to monetary policy. Selin says, “But, although some of Keynes’s writings, and the General Theory especially, may have laid the groundwork for inflationary policies, Keynes himself regarded them as supporting a monetary policy that would stabilize consumers’ prices.

Let the Market Do Its Thing

For anyone familiar with Hayek, it will not be surprising to learn that he believed that prices are an organic product of the market. Since Hayek believed that the market was capable of operating without constant government supervision, he thought it was unwise to give the government the power to determine prices.

Instead, he believed that prices were a response to market demand. If an item was proving itself to be of value to willing consumers, that demand would provide a basis for entrepreneurs to structure pricing. 

To explain this in more technical economic terms, Selgin explains that Hayek, “believed that the general level of output prices should be allowed to vary in response to changes in factor productivity, falling in response to both anticipated and unanticipated improvements in productivity, and rising in response to any productivity setback.”

Until demand dies down, and consumers are demonstrating their unwillingness to pay a certain price for an item or service, there was no reason to reduce prices. If, on the other hand, demand continues to climb, entrepreneurs and business owners may decide to raise the price of a good or service since it is proportional to the demand. Keynes would have never trusted the market enough to believe that prices could be set and stabilized through demand.

 

Why Halo Top Ice Cream is a Market Phenomenon

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No one expects healthy desserts to taste good. It is one of life’s harsh realities that we have had to learn to live with: you can either eat healthy food, or eat delicious food; you can’t have it both ways. But that was before Halo Top entered the market and was met with unconventional success.  

Visit any grocery store that sells the healthy protein-packed ice cream in the late afternoon or evening hours and you will see empty shelves where the beautiful gold-lined pints once stood. So high in demand are these low calorie, low fat, low sugar ice cream flavors, large supermarket chains can barely keep up with the consumer demand.

But unlike many successful brand name products, Halo Top comes from humble origins. In fact, its creators had to overcome some major obstacles and wait six years before they achieved market success. And what is perhaps most intriguing about Halo Top is its refusal to do things in the traditional way. But it is this innovative mindset and the ability to learn from mistakes that has helped Halo Top reach the top.

Changing the Way We Eat Ice Cream

For many of us, ice cream is a treat reserved for “cheat” days, but certainly not something to be eaten on a daily basis. But Halo Top’s healthy approach to ice cream is changing the way consumers eat the deliciously cold treat. That is because each pint of the heavenly snack only contains 220-240 calories. Compare this to a brand like Ben and Jerry’s which has about 1,040 calories per pint and you can see why consumers get so excited about it.

Since Halo Top also taste great, something no other diet ice cream has pulled off, consumers are actually eating a pint of this ice cream every day. But since the calories are so low, they needn’t feel guilty for eating an entire container in one sitting. In fact, its packaging encourages you to “stop when you hit the bottom.”

This also means consumers are coming back for seconds and thirds with more frequency than any other ice cream brand before it, which would explain why grocery stores are having a hard time keeping inventory in stock. And this is precisely what its creator Justin Woolverton had in mind when he created his recipe.

A fan of low carb diets and intermittent fasting, Woolverton wanted a cold treat that he could eat while still abiding by his diet. And like all great market products, Halo Top was born out of a demand for a product that didn’t yet exist.

Originally using greek yogurt and fruit as his main ingredients, Woolverton began experimenting with recipes. He quickly discovered that his “healthy” ice cream tasted like garbage. But he refused to give up.

As with most successful products, it took several rounds of trial and error before the product resembled anything close to ice cream. But like any good entrepreneur, he was consumed with perfecting the recipe, until he was so excited about it, he could hardly sleep.

Gasping for Air

But what is perhaps most notable about Halo Top is its secret ingredient: air. And oddly enough, in the process of building the Halo Top brand, lack of air almost killed, not only his product, but Woolverton himself.

After moving to a commercial kitchen, Woolverton realized that simple multiplying his recipe by 50 wasn’t going to work. The consistency was all wrong. So in order to keep calories low, Woolverton simply added more air through a process called “overrun.” But this process isn’t necessarily unique to Halo Top. Every name brand ice creams use this process to lesser degrees. Though most are not worried about keeping calories low, so they are able to add other ingredients to play around with the consistency, which requires less air than is needed for Halo Top.

Getting this process just right took a great deal of time. But the mark of a good entrepreneur is the inability to settle for mediocrity. Woolverton continued to perfect his recipe for an entire year before he was satisfied. And even after the ingredients were finalized, he still found his ice cream was still rock solid, not replicating an authentic ice cream experience. However, he found that if left out for only a few minutes, the consistency was almost identical to regular ice cream.

But a perfect recipe didn’t equate instant market success. After all, he still had to convince the stores to buy what he was selling. Healthy ice cream doesn’t have a great track record and most are discontinued shortly after they are released. In fact, INC’s profile of Halo Top list several other attempts at healthy ice cream that were each dismal failures.

As a one-man operation, Woolverton was doing everything: creating the recipes, convincing stores to stock Halo Top, and even driving the shipments himself. And it was this that almost killed him.

In order to preserve Halo Top’s consistency while it was en route to its destination, large amounts of dry ice were needed. His car was packed with 40 pints of Halo Top stored in dry ice. And, as is typical for Southern California, severe traffic meant spending a lot of time trapped in his vehicle. Unfortunately, it did not occur to him that the dry ice is a solid form of carbon dioxide that sublimates as it warms up. After almost passing out behind the wheel, he flagged down a nearby ambulance and a major crisis was averted. But his determination was not shaken.

But his solo operation would not be solo for long. Douglas Bouton, a friend of Woolverton, was done working in the legal profession and was ready for a change. Bouton became the primary “seller” going to health food stores and asking them to sell their product. After several visits, they signed a few local stores as well as various Whole Foods Markets. Halo Top was well on its way to becoming a household name.  

Unconventional Methods

But as successful as their ice cream brand would later become, in 2013 things weren’t looking so hot for the duo. Having already borrowed $500,000 from friends and family, Bouton and Woolverton realized they were running out of chances to make this work.

For smaller companies, like Halo Top, selling their product in a major grocery store chains means having to pay to do so. In many cases, this can cost up to $150 per flavor. And while this might not seem like a huge cost on its own, it ended up costing the two entrepreneurs hundreds of thousands of dollars just to get their ice cream on the shelf, without any guarantee that anyone would actually buy it.

Having maxed out several credit cards and exhausted all other methods, they decided to try crowdsourcing. Crowdsourcing has cleared many hurdles that stand in the way of innovators and entrepreneurs gaining access to capital. Through crowdsourcing, loyal fans of Halo Top could pitch in money to help the struggling company. This resulted in around $1 million for the company, which had promised this would be their last attempt before giving up.

Since money was tight, they couldn’t rely on traditional ad campaigns to promote their product. Instead of commercials airing at prime times, the two utilized social media. Calling on fitness buffs with large Instagram followings, Halo Top was able to get its name out there. Since they couldn’t afford to pay for ads, they traded promotion for ice cream coupons. Eventually, this caught the attention of GQ whose 2016 write-up of the company elevated it to the next level in the nick of time.

Three months later, the two former lawyers had doubled their revenue and were making a profit.

They say imitation is the best form of flattery, and if this is true then Woolverton and Bouton should feel very flattered indeed. Over the last year, name brand ice cream companies, blown away by Halo Top’s success, have launched their own “healthy” ice cream lines. But like all great entrepreneurs, Woolverton and Bouton knew they had to innovate to stay ahead of the competition.  

Late last year, Halo Top started branching out and offering non-dairy alternatives of their classic flavors. All this was in addition to adding new flavors to their line as well. But the most fascinating aspect of Halo Top’s branding is its cult following.

The low carb diets have stuck around as many have discovered they do not have to sacrifice taste for a smaller waistline. And when you think of healthy ice cream, you think of Halo Top. Starting a campaign on Instagram featuring fit people showing their bare midriffs while eating Halo Top was a huge success, and has helped consumers associate Halo Top as the only healthy ice cream. This has allowed the company to keep on edge on their competitors, even though they are facing huge names like Bryers and Ben and Jerry’s

And as far as keeping overhead costs low is concerned, if you’re searching for the Halo Top headquarters you won’t be able to find it because it simply doesn’t exist. Each of Halo Top’s 75 employees works remotely. Utilizing the work platform Slack, they are able to keep in touch. When needed, they rent out space from WeWork for physical staff meeting. This is just another aspect of the company that has allowed them to stay afloat in a sector formerly ruled by big brand players.

It may have taken six years for Woolverton and Bouton to become household names, but I am sure they would both agree that it was well worth the wait. And for those of us who can now eat ice cream without the guilt, Halo Top has been a life changer. In fact, I ate an entire pint while writing this article.  

Each Of Us Can Drive Towards Lifetime Sustained Peak Performance – Like Tom Brady

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In his book The TB12 Method, Tom Brady lays out a system to achieve a lifetime of sustained peak performance. He might seem to us like a special case. After all, he is an elite athlete with over 20 years of high achievement from his years as a college quarterback at Michigan to his tenure with the New England Patriots in the NFL. His results have been superior and sustained over time. For example, he is the NFL quarterback with the most Super Bowl victories and the most Super Bowl appearances.

In his book, Brady describes an approach to lifetime peak performance that is built on attitude rather than rare skills, and “can benefit anybody who is committed, open-minded and disciplined”. The benefits include living “a vital, active and energetic life off the field as well”. He describes the TB12 method as “common sense principles”.

As individuals, and particularly in our entrepreneurial mode, each of us can take on the challenge of lifetime peak performance. Circumstances change, new challenges present themselves, and we all age, but we are all able to strive for peak performance over an extended period of time. Brady’s ideas and attitude are available to all.

Commitment.

Commitment to peak performance is the first step. As we say in our 10-Point Manifesto For Individualism, everyone is free to try their best, to see what they can achieve.

Discipline.

Once you make the commitment, devise a plan and stick to it. That doesn’t mean the plan never changes; in fact the opposite, because new learning brings new understanding and insights. But you stick to the habits and behaviors you need to maintain to implement your plan every day. For Brady, that might be the exercise room and the skill exercises he needs to repeat and repeat for peak performance, but also the nutrition habits, hydration habits, proper rest and many more elements of everyday discipline.

Self-Directed Learning, Training and Preparation.

Much of the TB12 Method book focuses on what Brady has learned about optimal muscle conditioning, the best ways for him to train (which might be different for him than for other individuals, and different than for other positions on the team), and the best choices to make in a wide range of fields that contribute to performance. He has eagerly sought new knowledge that’s relevant to his current goals, and applies that knowledge in training and preparing for games. There may be little time to think when faced with unanticipated developments in a game situation, so learning and training and preparation are needed to lock-in the muscle memory and habits of mind that govern performance under stress.

Collaboration.

Brady works with a subject matter expert, Alex Guerrero. Guerrero has his own set of knowledge, based on research and experimentation with elite athletes to develop the best ways of keeping them fit for their specific athletic activities and helping them to recover from injury or, better still, prevent injury. None of us can hope for peak performance unless we collaborate with others. Each node in a partnership or network brings unique knowledge and capabilities. Our job as a peak performer is to recruit and nurture the best network, to give as much as we get, and to earn the privilege of working collaboratively with others who represent excellence in their own specialty.

Team Role.

Brady plays at peak performance in a very special role that is deemed to be key to team performance. Nevertheless, there is no peak individual performance without peak team performance. Brady knows his team role, and while he often chooses a different training regimen from, say, a defensive lineman, he is always highly focused on how the team does what they do together. He has had many teammates in a long career, but only one professional team. Knowing your role, and helping teammates understand their roles, and integrating all roles in pursuit of a single shared goal, is a big part of the high-achievement individual’s skill set. It’s important to know and apply what’s unique about yourself, and equally important to know how to blend into a team.

Sweat The Details.

Brady spends an extended amount of time in his book explaining the contribution of detailed decisions, habits and practices to sustained peak performance. He covers nutrition (what to eat, in what proportions and ratios, and what not to eat), hydration (how it’s an amplifier of daily vitality), and supplementation (smart use of selected supplements to completely meet your individual nutritional needs). He takes a comprehensive view of personal performance and makes sure no detail is left unattended. You can do the same for your life, your work, your family commitments and every other aspect of your performance.

Re-centering, Rest And Recovery.

One of the 12 sections of the TB12 method focuses on mindset, centering, brain exercises and rest and recovery (especially sleep). Brady even provides advice on room temperature for sleeping, and the role of a clean bedroom and a good mattress. “I like the idea of my body working for me during the night. I’m getting the edge (on my opponents) even when I am sleeping.”

Peak Performance For Longer Than You Believed Possible.

Tom Brady is creating a brand built around the promise of sustained peak performance, and about each of us becoming the best version of ourself. The answer is in our hands, he tells us.

What if we had a President whose brand was built around the promise of being the best person he could, and helping all Americans to be the most productive they could be, and helping the country to achieve peak performance, focusing on the most important contributory factors and eschewing the political distractions that get in the way and make us despise our government? What if any politician were to build such a brand and make such a commitment? It would be nice if one of them read Tom Brady’s book and reflected on the difference between personal peak performance and political performance.

 

 

 

 

Tax Cuts, Tariffs, And Trump’s Presidential Legacy

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Every time President Trump does something worthy of praise, he counteracts his seemingly good deeds by doing something terrible. The last few weeks have been no exception to this phenomenon. While the recent tax cuts have been met by criticism from many on the left, who have decried this act as a benefit only to the rich, there is absolutely no denying the net positive these cuts have had for the American people.

Several companies have recently decided to give their employees bonuses as a result of lower taxes. Disney is reported to have handed out $175 million in bonuses to its employees in the wake of the cuts. And they are not the only ones.

At the end of January, FedEx had announced that the tax cuts had made such a dramatic impact on the company, it was raising wages and giving out employee bonuses. On its website the shipping giant stated:

“FedEx believes the Tax Cuts and Jobs Act will likely increase [gross domestic product] and investment in the United States,”

In addition to these two companies, Starbucks also announced it would be giving out raises to its employees thanks to the cuts. Home Depot also stated that they would be giving $1,000 bonuses to every employee who had been with the company for 20 years or longer.

And almost every American has noticed an increase in the wages they take home each paycheck since the cuts went into effect. And yet, in spite of all the evidence pointing suggesting that these cuts are good for almost everyone, many Democrats are refusing to acknowledge the impact they are having.

Nancy Pelosi, who coincidentally happens to be one of the 15th richest members of Congress scoffed at the GOP tax plan, dubbing the subsequent bonuses and wage increasing as mere, “crumbs.”

But before I begin to sound too much like an unabashed Trump supporter, it is important to understand that with this Administration, the good comes with a fair amount of bad.

Trump’s Tariffs

In an attempt to push back against what the Administration views as “unfair” trading policies with countries like South Korea and China, Trump introduced new tariffs on foreign manufacturers. While this fits in perfectly with the “America first” rhetoric so prevalent with the Trump Administration, these new tariffs are anything but.

Policies that put a damper on our ability to freely trade with other countries do not put America first. In fact, they stifle innovation and inhibit job creation. The same week Trump announced these new tariffs several American companies expressed their concerns with how this will negatively impact their businesses.

SunPower, a United States-based solar power company had planned on spending $20 million dollars on expanding its company and creating hundreds of new jobs for American workers. However, in light of the 30 percent tariff hike, the company has announced it will now have to halt these plans.

What Trump failed to recognize, or perhaps just doesn’t understand, is that many US-based companies rely on foreign imports. In fact, the majority of the company’s parts come from Mexico and the Philippines. And this is not a bad thing, it is merely the division of labor in action. If it is cheaper to purchase certain solar technologies from foreign manufacturers than it is to have them made in the United States than this opportunity for trade should be embraced, not taxed.

Of course, the Administration believes these types of protectionist policies will secure American jobs, but this is not so. In the case of SunPower, which imports around 80 percent of its parts abroad, the new tariffs will result in increased costs. This, in turn, will result in fewer jobs created in the long-run. This hurts American workers, not helps them.

Trump’s Legacy 

While the new tariffs do not go into effect until February 7th, they are already impacting American businesses. Tom Werner, the chief executive of SunPower said, “We have to stop the $20 million investment because the tariffs start before we know if we’re excluded. It’s not hypothetical. These were positions that we were recruiting for that we are going to stop.”

Meanwhile, Trump continues to be praised for his regulatory cuts, and justifiably so. In fact, Trump has already surpassed Ronald Reagan’s legacy of slashing regulations and he has only been in office for a year.

But consistency is important, and without it, praise cannot be justly given. If Trump wants to leave behind a legacy that promotes free market principles, he needs to adopt a consistent message across the board. And while he should definitely continue with the tax cuts, our economy can do without the rampant protectionism.

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