Leading the Revival of Individualism & Self Reliance

Sorry Paul Krugman, Cryptocurrency and Blockchain Are the Future

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Economist Paul Krugman has made no attempt to hide his skepticism about cryptocurrency and blockchain technology over the last several years. In 2013, he even penned an article titled “Bitcoin is Evil” in which he lambasted the cryptocurrency as a weapon created by libertarians with the specific intention to disrupt the central banks. And while the latter may be at least partially true, Krugman’s arguments against Bitcoin always sound more like the rantings of jealous schoolboy left out of an inside joke than that of an economist.

And yet, no matter how much Bitcoin, blockchain, and other cryptocurrencies have proven their worth, Krugman still chooses to condemn and dismiss them. In his latest attack, he accuses Bitcoin of setting the monetary system back by 300 years. While Bitcoin has arguably launched the economy into a future where currency is digital and free from government intrusion, Krugman’s fears ultimately boil down to a fear of a decentralized economy.

Past or Future?

When he speaks of setting the monetary system back 300 years, Krugman is referring to a time when money was backed by gold and other precious metals rather than the government’s word. This, of course, made it much harder for central planners to manipulate the money supply as they could only circulate currency that could be backed by something physical.

While this is preferable to those of us who believe that money should have intrinsic value, Krugman disagrees. And he views this affection for gold-backed currency as nothing more than irrational nostalgia. In fact, he believes that real monetary innovation came about when we abandoned gold-backed currency in favor of fiat money— a “milestone” he attributed to the rise of central banks.

He even goes as far as to say that government-issued currency is more legitimate than cryptocurrency simply because the government is more trustworthy than the unknown creator of Bitcoin. In his new article he states:

“Banknotes worked because people knew something about the banks that issued them, and these banks had an incentive to preserve their reputation. Governments have occasionally abused the privilege of creating fiat money, but for the most part governments and central banks exercise restraint, again because they care about their reputations.”

I am not sure what planet Krugman is living on, but the government is constantly meddling with our money supply. In fact, this is precisely why major financial crises arise in the first place. And every time their intervention goes horribly wrong, they use taxpayer dollars to bail out “too big to fail” entities. And it this behavior that has led so many people to distrust government-backed currency and opts for a more decentralized option.

Decentralization is the Future

While gold-backed currency and cryptocurrency are very different, they both make it harder for central planners to manipulate the money supply. When each paper dollar must be backed by gold or another precious metal, you have a fixed supply. The same is true of Bitcoin, which has a set number that can be mined. But Krugman doesn’t like being bound by these rules and believes that fiat currency has value simply “because men with guns say they do.”

He writes:

“But you’re supposed to be sure that a Bitcoin is real without knowing who issued it, so you need the digital equivalent of biting a gold coin to be sure it’s the real deal, and the costs of producing something that satisfies that test have to be high enough to discourage fraud.”

Instead of creating something as complex as the blockchain, where each transaction is anonymous, verified to prevent double spending, and then placed on the public ledger, Krugman thinks we need only trust that those in power are virtuous and know what is best for us.  

And by creating a decentralized system where individuals no longer have to rely on governments to issue mediums of exchange, he believes we are returning to the dark ages of monetary policy. In other words, he fears we are moving into a future where central planners are losing control of the monetary system. And while most Keynesian economists inherently fear a world that they do not imagine they can control, many individualists have cause for celebration.

He states:

“…cryptocurrency enthusiasts are effectively celebrating the use of cutting-edge technology to set the monetary system back 300 years. Why would you want to do that? What problem does it solve? I have yet to see a clear answer to that question.”

While it may not be obvious to Krugman, Bitcoin’s appeal comes from very fact that it is not controlled by governments or the central banks. It could also very well make the role of central banks completely irrelevant in the near future.

The problem it solves is the very thing Krugman praises: it allows individuals to bypass corrupt governments and central banks in favor of decentralization.

The Tortured Language of Social Responsibility is a Purposeful Attack on Freedom’s Values

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As Brittany Hunter has described, language is a perfectly human example of spontaneous order. It is born out of chaos and necessity, and there is no central authority dictating terms. And English is unique among languages – it is comprised of words from dozens of other languages. According to the Oxford English dictionary there are about 500,000 words, more than double many other languages. And because there is no central authority controlling new words and definitions, like there are in other societies, it is the most expressive of all languages.

The Language of Central Authority

At least it was that way once. Over the last 50 years there have been significant changes in the acceptable use of certain terms in English. As Jordan Peterson has warned, “I’ve studied authoritarianism for a very long time – 40 years – and it’s started by people’s attempts to control the ideological and linguistic territory.”  Examples include the ideological monikers themselves – liberal (“liberated” from classical liberalism), and progressive. Both are used to rationalize envy, guilt, and authoritarian control: it’s your duty.

The mother of all personal needs, health care, is no longer the prevention and treatment of injuries and disease. It’s about who pays for it – a duty you owe, and are owed. Freedom used to mean the freedom to make mistakes, as economist Ludwig von Mises has taught. Now it means freedom from mistakes – a duty you are owed. And justice was the legitimate role of government in the defense of natural rights. Today’s media/education complex tells us it means whatever the identity group authoritarians tells us it means – a duty you owe, or are owed.

The point is that centralized control of the linguistic territory has metastasized to the most personal aspects of our lives.

The Language of Value

As Mises explains, economics is life. It’s about meanings and actions, which are driven by values. And values is another personal word – everyone has a unique set that changes with newly attained knowledge. And as is typical of English words, value can be used and understood in different ways.

According to the Oxford English dictionary, value has two uses that are fundamental to economics – the material or monetary worth of something, and the worth of something compared to the price paid or asked for it. And both definitions are central to the idea of voluntary human transactions – each participant receives something they value more than what they give up.

And that is also how value investing works. It balances an individual’s preference for spending now (high time preference), with having more to spend at a later date (low time preference). The decision to forgo consumption (i.e. to invest) is then implemented with a method that evaluates a stock based on its price, earnings, dividends, debt, and growth to calculate a company’s expected future value. If the stock’s share price is sufficiently below this intrinsic value, then it is a good long-term investment.

The most important element to this calculation is the price mechanism. It is built upon millions of inputs from individuals, each with their own unique values, who cannot possibly possess but a tiny fraction of the total knowledge of a company that the market possesses collectively. This is value creation through the wonders of spontaneous order.

Of Duty and Value Creation

In May of this year, the Certified Financial Analyst (CFA) Institute held its annual conference; its theme was Measure Up. In addition to learning new methods for measuring the intrinsic value of a company, conference attendee Michael Edesess claims there was another purpose for the Measure Up theme.

According to his review published in Advisor Perspectives, the CFA Institute conference included a major focus on environmental, social, and governance (ESG) reporting. He claims this is important because ESG reporting will transform value investing from a process of individual choice to a duty to deliver value to society as a whole.

The ESG principle is that financial reporting is not enough; the corporation has a responsibility to control it’s externalities. The financial industry can measure up by conveying capital to improve the future of humankind; in short, by creating value. Creating value requires something more realistically goal oriented than getting the best return on investment. Getting the best possible return on investment is a goal that may be teleologically impossible.

To the authoritarian, externalities can mean any consequence of business activity that violates their fluid definition of justice. In this world, the value a corporation delivers to its natural constituents – customers, employees, and owners – will be measured differently. And the new definition of value is gaining momentum as the “auditing of ESG reports has become a major activity of the Big Four accounting firms. College students majoring in fields with names including the words environment, sustainability, or social responsibility are at least as likely to get snapped up by accounting firms as any other firms.” The new linguistic territory.

The Teleological Ethics of Value and Virtue

Of course this is not really new. Socially responsible investing has been around for about 50 years. More recently it’s been called sustainable, green, ethical, and impact investing – more linguistic territory. It’s voluntary, and for many it serves their values, however tainted by collectivist orthodoxy they may be. Despite all of this, the CFA conference participants understood that the whole ESG reporting sideshow was merely an exercise in greenwashing.

To authoritarians, that’s OK, so long as capital is “invested” by the government for college tuition toward ESG auditing careers, and billions more are paid in ESG compliance costs by the private sector. Good intentions toward ill defined and unachievable goals are what really matter. And that is exactly what teleological ethics requires – the values to be achieved are the explanation for the means of achieving them. In this case, an investor’s personal fulfillment, or a corporation’s value proposition, is morally justified only if it serves this authoritarian vision for humankind. This is a categorical imperative – an end in itself. It is a philosophy that is diametrically opposed to the Age of Reason.

For the priests of the state, the concepts of liberal, health care, freedom, justice, and values are virtues only when defined as a selfless duty that is owed. And what about this word duty? Its definition hasn’t changed, it seems immutable. Let’s reclaim this linguistic territory – keep duty a matter personal choice, free of guilt, based an on individual’s values, and driven by reason.

 

Single Mother Faced Jail Time for Selling Home Cooked Meal without a License

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Overcriminalization has gotten out of control in this country. Most regular Americans have no idea they unwittingly commit three felonies a day on average. As a result, even without explicit criminal intent, individuals are forced to pay extreme fines and some even face jail time. And unfortunately, when it comes to regulations, much of the government-sponsored red tape is aimed at entrepreneurs.

From the persecution of child-run lemonade stands to the crackdown on potlucks, everyday citizens are treated like criminals for behavior that has traditionally played a huge role in our American way of life. But one of the most egregious examples of regulations impacting individual entrepreneurs involves a single mother in Stockton, California who faced a year behind bars for accepting compensation for a home-cooked meal.

Mariza Reulas was unaware that she was breaking any laws when she joined the 209 Food Spot Facebook group a few years ago. The group, which exists for local community members to buy and sell homemade food, has become a target of local law enforcement over the years since most group members do not possess the proper government licenses required to accept compensation for their food.

While many of Reulas’ transactions were trade-based, bartering home cooked meals for other legal items, there were occasions when group members were interested in her famous homemade ceviche but had nothing to trade. Instead, they offered to pay for the meal. Reulas spoke to a local Fox news affiliate saying, “somebody would be like, ‘Oh I don’t have anything to trade you but I would love to buy a plate…”

Reulas’ motives do not appear to be malicious in any way, but her willingness to accept compensation for her meals caught the attention of an undercover investigator from San Joaquin County. According to court documents, a “sting” operation was arranged to catch Reulas in the act of selling her homemade ceviche.

On December 3, 2015, Reulas was contacted by an undercover investigator who expressed interest in her famous ceviche but had nothing to trade. Reulas accepted payment and she, along with a dozen other community members were cited for operating a food facility and engaging in business without a license -both misdemeanor crimes.

Reulas was offered a plea deal of three year’s probation, but she refused. It wasn’t until January 2017 that she was finally able to strike a deal, just days before the case was set to go to trial. This is an extremely stressful burden to place on an otherwise normal mother just looking to provide for her children.

While this seems like behavior better suited for someone suspected of selling drugs, using taxpayer dollars to penalize single mothers for earning a few extra dollars is almost too ridiculous to believe. But the state seemed unapologetic about their behavior towards Reulas.

Clearly, Reulas is not your typical hardened criminal posing a threat to her community, which has led many to question the motives behind the investigators’ decision to focus their attention on a local Facebook group. Surely, there are more pressing matters in San Joaquin County that would be a better use of time and resources. However, the county’s Deputy District Attorney, Kelly McDaniel, has doubled down on the county’s decision saying, “I don’t write the laws, I enforce them. And the legislature has felt that this is a crime.”

McDaniel added that selling food without first obtaining a government license puts the public at risk. She also added that this unregulated competition hurts the restaurant industry and those who have obtained all the proper permits. However, individuals engaging in voluntary exchanges have every right to take those risks if that is their prerogative. Government-issued permits do not ensure safety. If they did, there would be zero incidences of food contamination or food poisoning at restaurants. Consumers are more than capable of making their own decisions when it comes to market exchanges.

When Fox40 asked Reulas what went through her mind when she was faced with the possibility of serving time behind bars, she replied, “my kids.” With the father of her children being absent from their lives, she cannot imagine the fate of her children if she is taken away for a year.

What Really Caused the Great Depression?

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The Great Depression is one of the most commonly misunderstood events in American history. While many history teachers have attributed the infamous economic crisis to laissez-faire capitalism, this is simply not the case. But if free market capitalism is not to blame for the worst financial crisis in American history, then what is the real culprit?

The truth of the matter is, the Great Depression cannot be pinned on one particular thing alone. In fact, there were a series of unfortunate occurrences that ultimately led to, and prolonged, the Great Depression. And if we take a closer look at the interventionist policies that were put into place before and during the depression, we will see that the causes can really be boiled down into different causes.

The Austrian Business Cycle

The Austrian business cycle asserts that there are “booms” and “busts” that occur in the market. This cycle begins when the government interferes with monetary policy, inflating the money supply and artificially lowering interest rates, thus, making credit more accessible. This is what happened prior to the Great Depression. In Murray Rothbard’s book America’s Great Depression, he estimates that between the years of 1921-1929, the Federal Reserve expanded the money supply by 60 percent. It is no wonder this reaped disastrous consequences. “Easy money” caused people to borrow and spend without a care of what would happen when the market corrected itself.

Read more about the business cycle and the Great Depression.

The New Deal

There is this belief that by intervening and implementing the New Deal, FDR saved Americans from the depths of the Great Depression. But in fact, the opposite was true. FDR’s New Deal actually prolonged the Depression and made it far worse than it otherwise would have been. 

Read more about the New Deal and the Great Depression.

The Wagner Act

After several years of economic unrest, in 1935 the U.S. economy seemed as though it might be in recovery. Unfortunately, this trend wouldn’t last long. Just a few months after the Supreme Court’s decision to uphold the Wagner Act in 1937, which empowered labor unions, industrial production fell and with it, employment rates. In fact, the situation grew so dire, employment rates fell back to the 1931 levels when the Great Depression had just begun. But what is particularly interesting is that employment rates fell even as union membership continued to grow. And with the rise of unions, employers and business owners suddenly became the bad guy. Looking for any excuse to squeeze money from the private sector, the Wagner Act also solidified FDR’s war on the business class.

Read more about the Wagner Act.

The Smoot-Hawley Tariff

Over the last several months, thousands of economists have warned of the negative consequences that inevitably arise from imposing tariffs on foreign countries. Many fear what might happen to the economy if Trump continues his love affair with protectionism. And this fear is not unwarranted or unprecedented.

By the time the Smoot-Hawley Tariff Act was passed in 1930, the market had already experienced an economic bust. Economists had warned that instituting new tariffs would result in the economy falling further into a recession. The American Economic Association was so concerned about the impacts that Smoot-Hawley might have, 1,028 of its members even signed and published a statement opposing its passage.  

Read more about the Smoot-Hawley Tariff.

The Real Victim of Social Media Censorship is Individual Responsibility

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Between Trump’s tirades against alleged “fake news” outlets and the recent banning of Alex Jones from Facebook, Apple, and YouTube, our society appears to be obsessed with trying to silence the opposition by controlling the flow of information. And while the recent Jones prohibition has sparked a national debate over who the First Amendment applies to, there is more to this story than just the issue of state-protected free speech.

To be sure, the Bill of Rights is vital to individual liberty and was written explicitly to restrain the government from infringing upon the rights of the people. And while Facebook may sometimes be more accommodating to the government than many of us would like, the fact remains that it is a private company and it has the right to ban whomever it chooses. The same goes for YouTube and Apple.

And while we are each free to disagree with the decision to censor certain users, debating the constitutionality of Facebook and Apple’s decision ignores the real heart of the matter: Facebook, CNN, Apple, YouTube, and Fox News are not responsible for the spread of misinformation, no matter how much believing so may reinforce our own narratives. When all is said and done, the only person responsible for distinguishing fact from fiction is the individual.

When I was a child and used to accompany my mother to the grocery store, I would always stare in wonder at the sensational tabloid magazines that sat near the registers. “Saddam Hussein is Really a Woman,” one headline read. Another claimed to have an exclusive interview with a man with four heads while another had the scoop on the exorcism of a demonic cat. Even as a child, I understood these headlines were false, but I was still confused.

“Why are these magazines allowed to tell lies? Shouldn’t this be illegal?” I asked my mother. “What if someone believes them?”

“Some people do believe them,” she said as she told me about her friend from school who never missed an issue of World Daily News. She continued, “But each person is responsible for making that decision for themselves.”

The freedom to choose and think for ourselves is one of the most sacred attributes of the individual. But over the last several years, many Americans have adopted an attitude that puts political opinions ahead of individual responsibility.

Politics has created a divide in which everyone is accusing those with different opinions of spreading misinformation. And to be sure, in the political world, there is a lot of misinformation. This is not exclusive to just one party; everyone is guilty of it. But the finger-pointing has gotten out of hand. And the recent banning of Alex Jones and the Infowars podcast has demonstrated just how severe the problem has become.

While Facebook and others have denied that the banning of Jones has anything to do with the fear of spreading “misinformation,” that is essentially what their argument boils down to. Facebook, YouTube, and Apple have all stated that Jones was removed from their platforms for violating their respective terms of use. Specifically, the social media giants have each cited hate speech and bullying as the primary causes. And out of fear that people will subscribe to Jones’ beliefs, which some do, these organizations have made the decision to censor information they deem to be false or misleading.

Hateful opinions will exist whether Jones is on social media or not, but at least by allowing him to say his peace, we allow people to make their own decisions about his views. And if those decisions include the foolish choice to judge someone based on their race, immigration status, or sexual orientation, then at least we know who to avoid. By allowing people to freely associate with unsavory people, we can make better use of that same freedom by choosing to disassociate ourselves. Alleged “hate speech” should be treated as a social signal, not an excuse to ban.

The best way to combat bad ideas is with good ideas. And by allowing a plethora of different opinions to be circulated on social media, you give individuals the opportunity to judge the merits of each opinion and ultimately make their own decision. And if our ideas are truly the “right” ideas, then we have nothing to fear.

The rise of the alt-right and the alt-left has brought all sorts of weirdos out of hiding and yes, some of them have views that most of us would deem inappropriate and even immoral. But banning them only shows that we fear what they have to say. There is a market of ideas where different viewpoints compete with others. And if we, as individuals, believe that our view is the “right” or “good” view, then we should let that it compete on its own merits in the marketplace of ideas.

Twitter CEO Jack Dorsey appears to understand this, as he has refused to participate in the Jones ban, saying:

If we succumb and simply react to outside pressure, rather than straightforward principles we enforce (and evolve) impartially regardless of political viewpoints, we become a service that’s constructed by our personal views that can swing in any direction. That’s not us.

And even though this decision has resulted in backlash from the left who have attacked him for not taking a “stand” against Jones, Dorsey has stood his ground. He even responded to the criticism via tweet, telling journalists that if they are concerned with Jones’ views, they should be diligently combating them with their own opinions.

“Accounts like Jones’ can often sensationalize issues and spread unsubstantiated rumors, so it’s critical journalists document, validate, and refute such information directly so people can form their own opinions. This is what serves the public conversation best.” He also released a statement stating that his platform cannot, and I would argue should not, be “the arbiter of truth” in regards to determining which information is true or false.

But no matter who you side with, this problem is hardly exclusive to the left. Trump seized on the term “fake news” (originally deployed by his political enemies) because he disagreed with what CNN and other news outlets had to say about him. But while these private companies are entitled to ban those they disagree with, they should be aware that this act is opening up the door to something much more threatening: government censorship.

The prohibition of Alex Jones has led Democratic Senator Chris Murphy to call for increased censorship in order to “protect our democracy.” In a chilling tweet, he said:

Infowars is the tip of a giant iceberg of hate and lies that uses sites like Facebook and YouTube to tear our nation apart. These companies must do more than take down one website. The survival of our democracy depends on it.

If the flow of all information, true or false, is tearing our nation apart, then it wasn’t very strong to begin with. And for an elected official who, unlike Facebook, has sworn an oath to uphold the Constitution is calling for further censorship, then every single one of us has cause for concern.

We can argue until we are blue in the face over whether or not Facebook and Twitter should censor information, but the government has no business calling for such an act.

So, if Facebook can, but probably shouldn’t ban users and posts it doesn’t like, and the government most certainly should not and is constitutionally prohibited from censoring opinions, what are we to do to stop the spread of misinformation? It may bother some of you to hear that the answer is: absolutely nothing.

All we can do is create and circulate information and trust that our ideas are strong enough to speak for themselves. Only the individual is responsible for their consumption of information. And by constantly trying to ban everything, we are really demonstrating that we do not trust the individual’s ability to make the right decision.

Adam Smith

We Don’t Have To Conform To The Incumbent System Of The World.

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In the year 1517, a German Catholic priest by the name of Martin Luther published a set of propositions that became known to the world as the Ninety-Five Theses.  The publication of these ideas and the thinking behind them are credited by historians as an opening salvo in a civilizational battle of ideas called the Reformation. The Reformation was the people’s overthrow of the repressive and exploitative regime of the Catholic Church, and a major event on the path to the open society we enjoy in the West today.

Luther’s theses were directed against a particular Church institution called Indulgences. These were pieces of paper, sold at very high prices, which granted the purchaser relief from punishment for their sins and therefore entry into the kingdom of heaven, an important and demanding life objective for people at the time. The marketing campaign for these Indulgences was captured in the line, “As soon as the coin in the coffer rings, the soul into heaven springs.”

The Catholic Church, the idea of redemption, and the subjection of the self to the mind control of the priesthood (a self-subjection which was easily extended to the sale of indulgences) constituted what George Gilder refers to in Life After Google as “the incumbent system of the world”: an imposed set of rules of conduct and of thinking with which everyone was expected to comply, and which no-one was permitted to challenge.

Mounting A Challenge At The Most Fundamental Level.

Martin Luther did challenge the incumbent system. He challenged it at its very fundamentals, and to its very core. He felt that the practice of selling indulgences was contrary to the basic precepts of Christianity: that individual merit was to be found in faith in Jesus Christ, and that it was this faith, not purchasing power, that would be rewarded in the afterlife.

Today, there is a venture capital fund – the 1517 Fund – that takes its name and its purpose from Martin Luther’s fundamental challenge to the incumbent system of the world. The system is the credentialism of higher education – the idea that by donating four years of youthful time and tens of thousands of dollars  (which often take the form of debt) to the hallowed institutions of higher learning, you will receive a piece of paper, a credential, that will provide you with entry into the heavenly kingdom of lifetime employment in the divine corridors of the elite technology, banking and consulting companies. Layers and layers of government grants reinforce the stifling conformity of this single system. The debt load of $1.5 trillion or more that the system has heaped upon its penitents not only pays for a bloated academic establishment, it has also “driven whole generations out of the entrepreneurial economy that enriched their forebears and endowed the universities themselves”, Gilder writes.

Higher Ed Impoverishes; Entrepreneurship Enriches.

1517 Fund General Partner, Danielle Strachman, recognized the errors of the incumbent system very early in life. She is an advocate of a different and better form of learning: project-based learning. She started a charter school in San Diego, and believed that students could learn far moire starting their own businesses than sitting in classrooms. She then worked for the Thiel Fellowship “20 under 20” project, which plucked young people “from the cradle of credentialism” (another Gilder turn of phrase), and induced them to skip college, work on their own unique project, and receive assistance from the Thiel Foundation in the form of both dollars and the support of a network of founders, investors and scientists.

The Fund is quite explicit in its linkage to the Reformation. A section on the Fund website entitled “Thesis” spells it out:

On October 31, 1517, Martin Luther nailed his Ninety-Five Theses to a church door in Wittenberg to protest the sale of indulgences. These were pieces of paper the establishment church sold at great cost, telling people it would save their souls. The church made a fortune doing it. Likewise, universities today are selling a piece of paper at great cost and telling people that buying it is the only way they can save their souls. Universities call it a diploma, and they’re making a fortune doing it. Call us heretical if you like, but the 1517 Fund is dedicated to dispelling that paper illusion. Extraordinary careers are possible outside tracked institutions. 

The goal is social transformation through technology allied to radical new thinking and, crucially, individuals who are willing to act to overthrow the incumbent systems of the world.

1517 marks a turning point in history where great social transformations were wrought by technology. Authority on questions of great importance no longer had to come from priests or royalty. It could come from books, and even more dangerously for the establishment, from an individual’s own judgment. Many current technological and social trends point to our future rhyming with this past. We intend to make it so.

A Little Goes A Long Way To Start Fundamental Challenges.

Strachman’s team is not out to flood the world with billion-dollar unicorns. Their funding is typically at the $250,000 level, and they even make individual grants of as little as $1000. The portfolio of projects is wide-ranging, from the future of transportation (new lidar chips that are orders of magnitude better than Google’s at providing the core vision systems for self-driving cars), to the future of hiring  (deephire,  a video platform for firms to quickly and collaboratively review candidates for employment without the productivity-sapping process of in-person interviewing).

The 1517 Fund website says that they are “less interested in things that are popular and more interested in ideas that are novel and have a contrarian edge”. Challenging the incumbent system is at the core of their thesis: “If you do not expect the unexpected, you will not find it; for the known way is an impasse. (Heraclitus)”

Country Time Lemonade Takes a Stand for Child Entrepreneurs

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Summertime is the season of childhood entrepreneurship. Liberated from the confines of compulsory education, children are free to let their creativity blossom for three glorious months before they are forced back into desks. And in that time, something quite remarkable occurs.

When kids are mostly free to do as they please, many discover their love of entrepreneurship. And there is nothing more symbolic of the youthful entrepreneurial spirit than the summertime lemonade stand.

Unfortunately, the front yard lemonade stand has been coming under attack over the last several years. In fact, many mini-entrepreneurs have found themselves confronted by armed police officers for failing to obtain the proper permits needed to operate a business. It would seem that in the era of increased occupational licensing, no one is safe, not even small children.

The lemonade stand problem has become so widespread, it caught the attention of a major lemonade company, who is stepping in to protect the sanctity of childhood entrepreneurship.

Country Time Lemonade just announced that it is assembling a team dedicated to protecting child-run lemonade stands. “Legal-Aide,” as it is so appropriately named, will help children launch their lemonade businesses by providing financial assistance to those met with licensing obstacles. The company is generously offering to pay up to $300 in permit fees or fines acquired as a result of operating an “illegal” lemonade stand. By removing these financial barriers, Country Time Lemonade is helping empower children to become entrepreneurs in spite of government red tape.

On its website, Legal-Aide states:

“Life doesn’t always give you lemons, but when it does, you should be able to make and share lemonade with the neighborhood without legal implications. That’s why we’re here to take a stand for lemonade stands across the nation.”

Lemonade stands play an important role in our culture. And in an era where government licensing seems to be spiralling out of control, it’s refreshing to see a private company protecting the right to freely exchange with one another.

The Sanctity of the Lemonade Stand

The lemonade stand is a rite of passage in America. In many ways, it is a person’s first exposure to the “grown up” world of voluntary exchange.

As constant spectators in their parents’ lives (especially during summer break), children quickly observe that money is the medium of exchange that makes many things possible. Accompanying their parents as they run their errands, kids regularly witness the trading of money for goods or services. Whether it is food at the grocery store or clothing at the mall, children pay attention to these transactions. They understand that in order to take the toy from the toy store out of the box or see a movie at the movie theater, money has to be exchanged first.

And even though children understand that money makes the world go round, they have not yet figured out how to make any of their own. Enter the lemonade stand.

Like all great money-making ideas, the lemonade stand is born out consumer need. Understanding that the heat of the summer makes people more thirsty than usual, many a child has experienced that light bulb moment when they first realize they have something of value to offer to adults in exchange for money. And this realization comes with powerful consequences.

And after the ingredients are gathered, the lemonade is made, and the makeshift stand  is constructed, something truly extraordinary happens: commerce. A neighbor walking his dog past the front yard sees the stand, and in desperate need of a cold drink, opens up his wallet and offers to exchange a dollar for a cup of lemonade. And as soon as that the dollar bill exchanges hands, the child has learned a vital lesson about creating value in the economy. And this lesson is particularly empowering to a kid who feels fairly powerless in most aspects of their life.

By learning how to earn money by responding to consumer demand, they begin to assert their independence and gain the training needed to be financially literate and prosperous adults. But over the last few decades, occupational licensing has gotten out of control.

Solving the Licensing Problem

Instead of celebrating the entrepreneurial mindsets of these young children, local governments have taken to shutting down lemonade stands. Since the children do not hold the proper permits needed to prepare and sell food items, these stands are technically illegal. However, when journalist John Stossel set out to investigate just how hard it is to get the required licensure, he found it took over three months. This means that children wanting to operate a summertime lemonade stand would not even be able to do so before school starts again in the fall.

And to make matters worse, having an innocent business endeavor shut down sends children the wrong message that entrepreneurial risk-taking is accompanied by government force. It also instills in them a belief that one must first seek permission from the government before executing their right to pursue prosperity through hard work. Just imagine the countless innovative ideas that might be stifled as a result of this mindset.

For a long time, it was all too easy for the state to get away with this type of crackdown on market activity. But the internet has made the spread of information all too easy. Each time a child’s lemonade stand is shut down by police, the story is shared all over social media. And as it turns out, most people do not take too kindly to stories of armed police officers shutting down child-run lemonade stands. And as more stories spread, more people began to grow angry on this attack on the entrepreneur.

In Utah, many parents grew so concerned about this crackdown on childhood commerce they joined together to do something about it. As a result of their efforts, Utah is the first state to pass a law that explicitly protects childhood entrepreneurs from the long arm of the regulatory state. Other states are considering their own similar legislation as well. But as Country Time Lemonade is showing us, the private sector is taking a different approach to protecting child-run businesses.

Luckily, this lemonade stand situation seems to be trending in a positive direction. Between states like Utah paving the legislative path for entrepreneurial freedom and Country Time Lemonade’s private sector stance in favor of childhood entrepreneurs, occupational licensing’s days appear to be numbered.

To Alleviate Poverty, Treat the Cause Not the Symptoms

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When we fall ill, our bodies give us symptoms to signal to our brains that trouble is afoot. A fever, for example, lets us know that our body is working in overdrive to fight off some sort of infection. While it may be causing us tremendous discomfort, we know that the fever itself is not the real problem, but rather a symptom of a greater problem that is about to manifest itself.

But if we are in search of lasting relief, we must first discover what is causing the fever in the first place. Sure, we can try to mask the discomfort by using aspirin or ibuprofen, but this relief is conditional and only lasts for so long. Unless the root causes are identified and treated, the symptoms will come back as soon as the medicine wears off.

When put in terms of our health, recognizing that symptoms are merely consequences of a bigger problem but not the actual disease seems obvious. But many fail to see how this principle translates into other realms in life. Poverty, for example, is a vicious cycle with many observable symptoms. Starvation, lack of clean drinking water, and insufficient housing are all symptoms of poverty, but they are not the cause.

And yet, no matter how well-intentioned many charities and organizations may be, a lot of them perpetuate this cycle by focusing only on treating the symptoms of poverty, completely ignoring the root causes.

Everyone is familiar with the saying, “Give a man a fish, and you feed him for a day. Teach a man to fish, and you feed him for a lifetime.” Yet, few of us actually make use of this wisdom.

The Problem with TOMS

One summer, I noticed that everyone on my college campus was wearing TOMS shoes.

It didn’t take long for a Google search to tell me everything I needed to know. On paper, TOMS appeared to be revolutionizing the way we approach charity by capitalizing on consumer incentives. First-World consumers love participating in a cause bigger than themselves, especially when almost nothing is required of them. And TOMS brilliantly found a way to use this to its advantage.

TOMS’s mission promises that for each pair of shoes you purchase, another pair will be sent to the developing world and given to a child in need. And for my fellow college students desperate for a cause to be passionate about, this was a golden opportunity.

But TOMS’s popularity wasn’t limited to college students. Bleeding-heart consumers were buying these shoes in droves. And they weren’t just buying one pair either. New colors and styles of TOMS were being invented to keep up with the increasing demand. American consumers, as it turns out, loved feeling as though they had personally helped alleviate poverty. And before you knew it, TOMS was being held up as a beacon of conscious capitalism.

There was just one problem: handouts cannot fix systemic poverty. And a pair of free shoes can change a person’s life no more than one free fish can. Sooner or later, you run out of fish or your shoes develop holes and need to be replaced. And by creating a dependence on these donations, you actually help perpetuate the very problem you are trying to solve.

Without self-sufficiency, no developing village can ever hope to break the cycle of poverty. And when a village that is fully capable of producing its own shoes instead relies on free American shoes, it reinforces the notion that these countries “need” First-World countries to swoop in and provide them with their basic needs. This is not a particularly empowering message.

And while it may feel good to know we have helped a child receive a free pair of shoes, this act alone does not help keep anyone out of poverty. It serves only to treat a symptom of poverty without acknowledging the cause.

What Can Be Done?

So what can be done to help impoverished villages in Africa? Encourage commerce and create jobs. Senegal, for example, is one of the worst places in the world to start a business. This is why the country earned the 124th slot on the Fraser Institute’s Economic Freedom Ranking. To give some perspective, America, which is extremely free when compared to other countries, is the 11th freest country out of 159 countries included in the ranking, putting Senegal towards the very bottom of the list.

This biggest problem in Senegal comes in the form of overregulation. Because it is so hard to enter the market as an entrepreneur, the country suffers from a lack of businesses. Where there are no businesses, there are no jobs. Where there are no jobs, there is no income. And where there is no income, there is poverty. But it doesn’t have to be. In fact, despite all the regulatory hurdles standing in her way, one woman is single-handedly showing Senegal how integral entrepreneurs are in building economic prosperity.

Magatte Wade was born in Meckhe, Senegal, and was shocked when she first traveled abroad as a child. Baffled by the economic prosperity enjoyed in foreign countries, Wade wanted to know why these economies were so different than Meckhe’s. It didn’t take her long to realize that job creation played a major role in determining the prosperity of a nation. Determined to bring jobs to her home village, Wade has had to navigate through a sea of government red tape in order to start and operate her business within the country.

Wade started Skin Is Skin, a high-end skin care line based in Austin, Texas, but produced in Meckhe, Senegal. And while a skin care line might not seem revolutionary on its face value, to the employees whose lives Wade has changed, Skin Is Skin has been the difference between poverty and prosperity.

Ibrahima N’Dour is Skin Is Skin’s production manager. Prior to working with Wade, N’Dour lived in a tiny one-bedroom home with his wife and five children. At night, they would squeeze three people into their one bed while the rest of the family slept on the floor. Now, he lives in a beautiful home where each of his children has beds and room to play. None of this would be possible without his job at Skin Is Skin.

Adji Maria is another employee of Wade’s who had never held a job before finding Skin Is Skin. Since Meckhe’s economy is entirely based around farming and fishing, roles historically held by men, many women were expected to work in their homes cooking and serving their families. But thanks to her job, Maria has gained skills that have allowed her to provide for her parents and family in a way that was never before thought possible. And Maria is not alone in this. Other employees featured in FEE’s new documentary about Skin Is Skin are positively glowing when they speak of the opportunities Wade has brought to their village. Mame Yakhara, another employee, spoke of the inspiration Wade has given her:

If it was not for Magatte, I would be just staying at home, like before, cooking, serving, while waiting for a husband…we have not seen anyone do what Magatte did, come and open a business in a place like this, to provide work to people like us who are inside our homes, sitting without a job. To get us out of our houses and provide us with this type of job… we do not get many opportunities like this.

Another employee, Mame Mareme Cisse commented, “This work has changed a lot in my life. Now I can provide everything I need for myself without having to ask anyone for it.” Not only is Magatte Wade bringing jobs to this village, she is also empowering the local women in a way they have never before known.

But the jobs created by Wade’s company are not limited strictly to the manufacturing of the actual skin care products. Each product purchased from Skin Is Skin comes in a handsewn leather bag made by a Senegalese company, CAWAAN. The family who runs the company has been making handmade leather goods for five generations. Over the years, as tariffs have increased to rates as high as 45 percent on imported materials, CAWAAN has also struggled to obtain the goods they need to offer quality consumer goods. Understanding these difficulties firsthand, Wade has continued to use CAWAAN, a relationship the company has cherished. In fact, the company has said that Wade’s commitment to their businesses has “encouraged us to work hard and optimize everything.”

Wade understands that in order to break the cycle of poverty, you must strike at the root of the problem: unemployment. And since jobs are scarce in her own village, as well as others in Africa, Wade has dedicated her being to creating jobs through her entrepreneurship, something that is clearly resonating with others. In fact, Wade is now working with the mayor of Meckhe in order to provide more opportunities for education and job training.

The path to economic prosperity will not be found in government regulations or seemingly charitable handouts, like TOMS. For individuals to be able to lift themselves out of poverty, they must have the freedom to be self-sufficient through their own entrepreneurial efforts. And Magatte Wade is a living example that entrepreneurship and job growth are the antidote to poverty.

How Entrepreneurs Follow The T-BAR Method To Create The Future.

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Entrepreneurs confound economists, government bureaucrats, business school strategy mavens, consultants, and talking heads of various sorts. Entrepreneurs create the future. How do they do it? It all seems so unpredictable, and experts hate unpredictability, because it tends to prove them wrong.

Spoiler hint: that’s because creating the future is not about strategy, data analysis, process management or any of the other recipes the experts offer for sale.

It’s about T-BAR.

T-BAR is separate from data gathering and data analysis and projecting trends and identifying gaps in the marketplace. These tools are all about the past (which is the currency that consultants, analysts, business school gurus and innovation process mavens deal in). T-BAR is about the future, which, can’t be analyzed. It has to be imagined.

The T in T-BAR represents the imagination part. Entrepreneurs are theorists of the future. They develop theories of the future that are different than anything that has gone before. Theories are counterfactual. They are not based on data or research. They can’t be, because you can’t research what doesn’t exist. Theories open up previously unseen paths. Theories are not based on what can be perceived and observed. (Read the paper on this Theory-Based View by Felin and Zenger here.)

Airbnb theorized that homeowners would rent their homes, or a room in their homes, to complete strangers, and that travelers would stay in the homes of strangers rather than hotels. Initially, no venture capitalist would fund this theory; it had never been imagined before and generated only skepticism.

Uber theorized that people would ride in other people’s cars in place of taxis. Disney theorized that people would so love their wholesome fantasy worlds and wholesome fantasy characters that they would consume them in animated movies, theme parks, broadway shows and toys.

While entrepreneurial theorizing is creative – an act of imagination – it is also scientific. The attribute of a scientific theory, by definition, is that is falsifiable. You can test its implications and predictions. If it turns out to be true you can keep acting on it. If it turns out to be false, you can change direction and adjust it. That’s exactly what entrepreneurs do – they test their ideas in the marketplace and, when there is a false signal (negative feedback) they readjust and test it again.

Belief-Action-Results.

The testing and re-testing process leads us to the BAR part of the T-BAR method. BAR stands for BELIEF-ACTION-RESULTS. It is a description of the downstream part of the entrepreneurial method, after the imagination part, developed by Peter G. Klein and Nicolai J. Foss.

The entrepreneur must develop a belief that his or her theory can be effectively and profitably brought to market. To do that, the entrepreneur has to assemble resources: financial capital (perhaps their own, perhaps from investors), people, hardware and software, and a supply chain. To convince investors and vendors and supply chain partners, there must be a credible investment proposition and go-to-market plan. Credible means that the entrepreneur’s pitch is believable. To create believability in others, the entrepreneur must have unassailable belief in the theory. This bedrock belief is achieved by testing and re-testing until the proposition is sufficiently solidified to be convincing.

Once the entrepreneur’s own belief is unshakable, he or she can move on to the A in BAR: assembling the right resources for implementation. Resources already exist. The brilliance of  the imagination of the entrepreneur is to identify new and better ways to utilize them, more efficiently and effectively than they have been utilized before. Otherwise, it would not be efficient to shift them from their current use.

With the right resources assembled, the entrepreneur goes to market, makes the offer, runs the advertising, operates the supply chain and generates revenue from customers. Revenue equals results – that’s the R in BAR. If there is no revenue, there is no business. Imagination has encountered the brick wall of the customer’s opportunity cost – the offer hasn’t created sufficient value (compared to what they’re doing now) for them to buy. The entrepreneur readjusts. If revenue flows, but does not cover costs, the imagination has encountered the brick wall of profitability. Without profit, there is no sustainability – the value created is insufficient. The entrepreneur adjusts again to generate a profit. Or quits. It’s all further falsifiability of the theory.

The entrepreneur as theorist is a breakthrough in our thinking about the phenomena of innovation, betterment, and economic growth. How has America – because this is where most innovation originates – been able to create new things, new products, new services and new experiences? How does “new” come into being? We can’t see, hear, measure or analyze “new” in the present, because it does not yet exist. Anything with a price on it is from the past. We can only imagine new – an act of creativity that is unconstrained by observation, tradition, data, analytics and research.

Entrepreneurial theorists are our imagineers. They can think in mad, unhinged, wild and woolly ways, and thereby create the future for which the rest of thank them.

This Swedish Museum Celebrates Market “Failure”

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Ever wonder what happens to consumer products after they fail miserably? For example, where do products like the Microsoft Zune go to die? Now, thanks to a new museum in Sweden, market failures have a place to have a life-after-death and be displayed for all mankind to see. But the mere fact that these wonders of enterprise are now being used to entertain museum patrons proves one of the most integral aspects of the free market–failure, in itself–fuels progress.

“80 to 90 percent of all innovation projects fail,” Museum of Failure curator Samuel West told the Huffington Post, also mentioning that often, consumers are never even exposed to these products before they are pulled from the market. This mystery of innovative failure is what makes this museum so fascinating because at the end of the day, without market duds, we wouldn’t have those truly great products that prove themselves to consumers time and again.

With each failure, there is a new lesson learned. As the great Nicolas Cage says in the film National Treasure:

“Thomas Edison tried and failed nearly 2,000 times to develop the carbonized cotton-thread filament for the incandescent light bulb. And when asked about it, he said ‘I didn’t fail; I found out 2,000 ways how not to make a lightbulb.’”

But as West points out, it becomes much harder to learn from these conventional failures, when we cannot see them and many of us do not even know of their existence at all. For example, one of the museum’s featured products, the short-lived Apple Newton, was a flop with consumers but helped lay the foundation for the iPhone and the iPad.

So the time has come to praise those innovators who had the courage to bring their terrible ideas to market and were wise enough to learn from their mistakes.

Heinz Green Sauce

…because who wouldn’t want the same great tomato-y taste of Heinz Ketchup, but with a rotten green color? Apparently, no one wanted to buy it, or consume it, which is how it ended up in the museum of failures, to begin with. Even attempting to capitalize on the popularity of the Shrek franchise failed to get children on board with using green slime as a kitchen condiment. And for those children whose parents purchased this green goo thinking it would be a real kid-pleaser, all it really did was make adults, like myself, dry heave watching these juveniles choke down rancid-looking ketchup.

Crystal Pepsi

While conventional wisdom might classify this product as a textbook “failure,” I’m going to have to disagree with this being a market failure but rather, a PR nightmare! Truthfully Crystal Pepsi wasn’t that interesting, but as a child growing up in the 90s, drinking a beverage that looked like sparkling water but tasted like regular Pepsi was thrilling. In fact, as I was raised in a family where soda was only permitted under very special circumstances, I was pleased to learn that clear cola qualified as a special occasion. However, America’s fascination with this clear beverage dwindled after a nationwide hoax spread throughout the country as consumers began reporting that they had found syringe needles inside cans of Crystal Pepsi. While the claims were not substantiated, the rumors were enough to ruin this soda’s reputation, earning it a spot in Sweden’s unique museum.

Google Glass

Oh Google Glass, to this day no one is entirely sure what the draw of the actual design was, other than embarrassing your friends in public. Google Glass was a dismal failure that is now immortalized in the Museum of Failure and numerous Buzzfeed listicles highlighting how ridiculous users looked while donning the futuristic goggles.In theory, Google Glass was a true manifestation of the future, almost like something straight out of a Marvel comic book. But with a hefty price tag of $1,500, these glasses were not a practical purchase for the everyday consumer. While the idea was great, the masses may just not have been ready to embrace a world filled with glassholes. As West puts it, “Google released it too early, it was still a prototype full of bugs.”

Twitter Peek

If you’re like most people, you have no memory of the Twitter Peek. Launched in the golden age of the iPhone, this product really didn’t serve a necessary purpose for consumers. Created by a mobile startup, this device was vastly out beat by smartphones which did more than just post to Twitter. Further dampening its success, it only displayed the first 20 characters of each tweet, making users click on each individual post in order to see it in its entirety. Needless to say, this product was quickly destroyed by smartphone technology.

New Coke

The cola wars were an interesting time in history so integral to 80s pop culture that it even earned a line in Billy Joel’s classic, “We Didn’t Start the Fire.” Even though Coca-Cola had maintained the same recipe for its classic soft drink for 99 years, in 1985 the company decided to up the ante and spice things up by introducing “New Coke.” Infamously regarded as one of the worst marketing campaigns in modern history, the new formula was promoted as an attempt to compete with the rising success of Pepsi-Cola, which consumers were beginning to favor for its sweeter taste.

So, of course, Coca-Cola decided to sweeten up their recipe, only it wasn’t met with the same consumer enthusiasm. While the consumer reviews favored the new taste, the company underestimated the American consumer’s nostalgic connection with the original Coca-Cola. After the company was bombarded with negative feedback from consumers, they rebranded their original recipe as “Coca-Cola Classic,” which oddly enough helped them ultimately declare victory against their competitors. New Coke may have been a market dud, but it actually resulted in a huge win for the company.

Moral of the Story: Failure Fuels Progress

While most of the products in this museum appear to be duds, each one taught their respective innovators a valuable lesson about the market process. For Coca-Cola and Heinz, both companies learned that sticking to their original recipes was more beneficial when it came to sales revenue.

Google, on the other hand, learned that it had a great product with Google Glass, but the excitement surrounding this innovation may have caused the company to rush their prototype to market before it was ready.

With each failure comes a lesson that, in the end, has resulted in a win for the consumer.

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