Leading the Revival of Individualism & Self Reliance

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

/in /by

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

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

Andy Kessler exposes the fraud.

____________________________________________________________________

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

Enter The Bureau Of Labor Statistics.

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

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

Let’s Do Our Own Hedonic Adjustment.

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

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

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

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

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

The Currency Debasement Index.

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

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

Don’t Believe The Government’s Numbers.

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

 

Think Twice before Demonizing “Sweatshops” in the Developing World

/in /by

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

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

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

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

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

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

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

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

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

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

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

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

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

According to the Daily Beast’s interview with Mobarak:

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

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

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

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

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

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

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

This State Just Passed A Law Protecting Free-Range Kids

/in /by

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

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

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

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

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

Utah Protects Free-Range Parenting

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

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

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

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

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

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

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

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

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

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

/in /by

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

Metaphors Influence Our Beliefs And Our Behaviors.

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

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

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

Entrepreneurs And Corporations Are Servants Of Consumers.

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

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

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

Competition Is The Wrong Metaphor For The Networked Economy.

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

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

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

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

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

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

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

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

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

 

How the Regulatory State Hurts Small Business Owners

/in /by

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

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

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

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

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

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

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

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

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

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

How Can I Contribute? You Can Start By Mopping.

/in /by

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

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

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

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

__________________________________________________________________________

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

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

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

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

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

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

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

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

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

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

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

/in /by

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

Blockchain Offers Us The Potential For Institutional Innovation.

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

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

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

The Scourge Of Wall Street.

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

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

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

The Unleashing Of 5 Billion New Entrepreneurs.

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

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

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

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

Transformational Technology.

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

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

 

Image courtesy of Wired magazine.

Cryptocurrency Is Completely Decentralizing the Film Industry, and It’s Wonderful

/in /by

Over the last few years, cryptocurrencies have been a hot topic. And while Bitcoin tends to dominate most conversations on the subject, there is so much more to this technology than cryptocurrency alone.

Blockchain technology, which is the medium through which Bitcoin and others cryptocurrencies are sent and received is changing the world. From decentralizing art ownership to rebuilding foreign economies, blockchain’s potential is endless. One of the more surprising industries Bitcoin is shaking up is the film industry.

Raising Capital

Until recently, unless you had the right contacts or an overflowing wallet, financing something as expensive as a film or television series was nearly impossible. While the entire “indie” film genre typically meant lower-budget films, even those budgets were more than the average person can afford.

But the crypto space has allowed for new opportunities to raise capital, which means more artists and entrepreneurs are able to fund projects they are passionate about. And, more importantly, they are able to fund projects with strong themes of individualism, economic liberty, and decentralization, something not seen often in Hollywood. 

As Forbes explains:

“What does this mean for those trying to raise capital? It means the landscape has completely changed. In 2017 VCs raised a total of $200 million dollars in capital for blockchain and crypto technology. ICOs (initial coin offerings), which are a new vehicle for raising investment capital using tokens and cryptocurrency, raised $3.8 billion total. This freeing of the capital markets created a $3.6 billion increase in the amount of money raised. The effects of this spread across all industries. One sector in which it could really be a game changer is entertainment.”

Being able to fund Hollywood films may not seem like a high priority for many. But the implications are far-reaching. Whether we like it or not, pop culture plays a huge role in our lives. The content we consume by watching films or television shows impacts our worldview in a way that other forms of content may not. When we watch a film or series we are transformed into another world where we are almost entirely engrossed in the character’s hero’s journey. We experience each triumph and failure right alongside the characters on the screen. Sometimes the scenes portrayed are so powerful, we are encouraged to enact some sort of change in our own lives. That is the power of art.

While one may learn more concrete knowledge from an economic textbook, few people seek out economic texts for pleasure. But almost everyone consumes media of some sort. And unfortunately for those who favor more of a decentralized, individualistic view of the world, Hollywood films seem to have an agenda that is often incompatible with individual liberty. 

The Power of the Purse

Having the “power of the purse” yields a lot of control over the subject matter portrayed in films and television series. For example, Hollywood’s anti-individualistic tendencies mean that many films coming out are biased and molded to further an agenda. While everyone has an agenda of their own, it is always good to be able to combat ideas with alternative ideas. But when only one side has the power to fund these projects, only one side gets heard. But now that cryptocurrencies are presenting new ways to raise money, this is changing. 

The forthcoming series, Hardfork is unlike any other series around today. Set in a dystopian future, the series incorporates blockchain and cryptocurrencies into its storyline. The series tells the story of a radical group of rebels who utilize blockchain technology in order to hack the powers that be in order to bring the entire system down. But its content alone isn’t what makes it so spectacular. Hardfork is also the first series whose funding is being raised solely in cryptocurrency.  

Utilizing the Steemit.com, a crypto-backed platform for artists of all varieties to share their work, the producers began raising the funds for HardFork. After raising 30k, the producers used a portion of those funds to create a teaser to share in order to build hype for the project. After the first teaser debuted in Portugal last year, the project gained a significant following. From that point on the momentum began to build.

As the series’ director told Forbes:

“We met people in Lisbon who had been following the HardFork series for months and were just as excited about it as we were. This new fundraising vehicle allowed us to create an audience around the project as we were raising capital. That’s ultimately what distributors want to see, that you have an in-built audience. So it was really a win-win for us.”

All this buzz resulted in the cryptocurrency team from DASH contributing almost a million dollars to the HardFork project. So, not only is this project able to utilize crowdsourcing among the crypto community, but they are also able to further their message of decentralization and individualism. A rare concept to be portrayed on a mainstream show.

Eric Vance Walton, the co-creator  of the project said, “There’s no reason this funding model couldn’t be adapted to work for any creative project, whether it be music, a major motion picture or even theater.”But the funding is, of course, only one component. The show is actually using its platform to teach viewers the seemingly complex details of blockchain technology. As Walton continued:

“It seems the main barrier to adoption is understanding. The HardFork series is providing an example for others to follow and raising awareness about the fascinating technological advances in this space, while aiming to bring down those barriers in a fun and engaging way.”

We are still in the very early years of blockchain technology and already it is having an enormous impact on the way information is spread and how projects are able to be funded. One can only imagine what the future holds.

How To Apply The Economic Way To De-Stress Your Life, Physically And Financially.

/in /by

“Live long and prosper” is a traditional Jewish blessing made famous by Mr. Spock of Star Trek fame. And this simple greeting can be broken down into two parts, vitality and productivity. Of course there are many factors that contribute to both, some of which cannot be controlled, such as heredity and violence, and many that can be. This is because the human organism is capable of transforming itself, both its internal physical and its external creative capabilities.

Finding The Healthy Energy Zone

There are a number of physical adaptations that people can train for. They range from increased strength, stamina, and flexibility to elite athletic performance. Many people simply prefer to feel good and look better, and that’s big, because it’s about small accomplishments and focus. A marvelous compass to guide people on this journey is a heart rate monitor. It provides instant feedback regarding physical effort, calories burned; and with some knowledge of metabolism, the energy source being utilized. For most people, reducing body fat and increasing endurance will lead to many other health benefits.

According to the book Slow Burn by exercise physiologist Stu Mittleman, the healthiest energy producing states are found in three heart rate zones. They are the “mostly aerobic pace,” the “speedy aerobic pace,” and the “most efficient pace.” All three utilize fat as the primary fuel source. The only difference is the percentage of sugar calories being included. For everyone, a fat burning focus improves metabolism, body composition, immune systems, and a sense of vitality. Using the heart rate monitor to maintain a mostly comfortable energy zone will help you live the one life you have to its fullest.

Discovering The Economic Way

The same thinking applies to achieving lifestyle goals that require money. In this case, it’s about having a vision about future cash flow needs, setting priorities, and crafting a plan that will achieve them with a high level of confidence. The variables include age and life expectancy, saving habits, financial resources, and spending goals. In other words, balance the things we can control against the uncertainty of the future. And the plan must be flexible; circumstances and priorities will change, and investment returns will be volatile. It means applying economics and thinking like a business owner.

The economic way also avoids bad decisions. In the world of personal fitness, a no pain no gain mindset, and high intensity interval training, are probably bad decisions for most people. In the world of personal finance, bad decisions may involve maximum risk tolerance, market forecasts, faulty return projections, beating the market, and staying the course. The economic way for both would answer the following questions. Does this anticipate needs? Is it easy to use and understand? Is it reliable? Does it lead to the good life? In other words, a strenuous workout or beating the market may sound good, but they don’t satisfy long-term personal goals.

Easing In To The Financial Comfort Zone

In economics, a reliable philosophy respects the evidence of spontaneous order, which can’t be predicted or managed. In finance, it respects efficient markets because investment returns can’t be predicted or controlled. A reliable investment strategy is grounded in the uncertainty of the future and the variability of actual returns. In fact, the actual sequence of returns has a greater impact on lifestyle planning than any strategy. That’s because life happens: people invest during their working years and spend during retirement years. If it wasn’t for that, the asset allocation decision would be the primary factor for success or failure, notwithstanding undisciplined spending.

So how do investors give themselves a high probability of living their lives to the fullest without unnecessary sacrifice or risk? Like an entrepreneur, they acknowledge that reality exists. They have a strategy for the possibility of changing market forces, and their effect on achieving important goals. For investors, it means taking into account all possible sequence of return scenarios, balancing them with current and future spending needs, and making trade-offs based on their unique values.

The Stress Test

This is not about predicting the future. Its about anticipating possibilities, achieving balance between competing priorities, and capacity for risk. And it means being flexible. The heart rate monitor is a tool to that helps the user find the optimal energy zone for long-term health and vitality. Likewise, the Monte Carlo simulator is a tool that will help the user find the optimal confidence level for realizing priorities. By performing 1000 random simulations, with all possible investment outcomes, the engine will calculate the likelihood of meeting or exceeding all lifestyle spending goals. This Stress Test can be performed at any time. And many what-if scenarios can be created, with new priorities, changing circumstances, and different trade-offs. This makes the process very dynamic and easy to understand.

Because flexibility is key, spending priorities and risk capacity are assigned ideal and acceptable levels, and there is always a fall back plan. Of course none of this is foolproof. Physical health is affected by a multitude of forces. And so is prosperity, especially by physical health. All the more reason to take a long view, embrace reality, be flexible, and live with confidence. As the ultimate man of reason Mr. Spock advises, live long and prosper.

Photo by rawpixel on Unsplash

Five Occupational Licensing Laws That Hurt Entrepreneurs

/in /by

Occupational licensing laws prevent individuals from working. This has had a particularly harsh effect on entrepreneurs looking to go into business for themselves. Not only must they pay for all the typical costs associated with starting a business, they must also ask the government for the permission. And this permission comes with a price tag.

Not only do these licenses come with strict requirements and fees, they do nothing to prepare workers for their careers. In fact, occupational licensing does nothing aside from benefitting established industries and adding to government coffers. But unfortunately, these permits regulate much of the workforce.

And while much has been written on this topic, here is a list of five ridiculous occupational licensing laws.

License to Massage a Horse

This may sound almost too ridiculous to be true, but in some states conducting a horse massage, also known as equine myofascial release, requires certification. But since there exists no certification specific to this trade, some states mandate veterinary school completion before one can become a practitioner.

There is just one problem with this, veterinary colleges do not teach equine myofascial release, so these licensing requirements are completely arbitrary. More on this silly licensing law here.

 

Makeup Artist

Can you imagine mandating that all painters must obtain a license before they are able to sell their art? This is exactly how ridiculous it sounds when governments require makeup artists to obtain cosmetology licenses. And yet, this field is heavily protected in all 51 states across the country.

But these types of laws place unnecessary hurdles in front of ambitious entrepreneurs who just want to make money from their artistic skills. Read more about the individuals being harmed by these types of laws here.

 

License to YouTube

In case you needed any proof that the government will go to any lengths to incorporate more regulatory policies, look no further than YouTube. Last year, Cobb County Georgia shut down a video gamer who had found a way to monetize his YouTube views. While most would applaud the way this young man had utilized YouTube to fund his life, the county did not see it that way. Claiming that he lacked the license necessary to run this operation out of his home, he was stripped of his ability to earn a living.

The worst part of this whole ordeal: no such license even exists. Read more here.

 

Dietician

The government has been a horrible bearer of nutritional information. The food pyramid has proven itself to be riddled with misinformation that has only furthered our country’s obesity and health issues. And yet, the state would still like to be in charge of who is allowed to give nutritional advice to consumers.

Even though the topic of nutrition is broad, with different diets better suited for some people over others, the government likes its one-size-fits-all approach. The license required to be a dietician is incredibly burdensome and prevents many from getting ahead in their careers. Read about how this law prevented one entrepreneur from getting ahead here.

 

Nail Technician

Just like cosmetology is heavily regulated, so is the rest of the beauty industry. Everything from shampooing hair commercially to applying makeup is so heavily regulated, that it makes it hard for those with natural talent to get ahead. The nail technician industry is another example of this.

If someone has a talent for applying nail polish or doing manicures, they should be allowed to do so as long as the consumer is willing to exchange money for this service. But even though this is not a dangerous task, the state has placed heavy restrictions on this industry, restrictions that have hurt many individuals. To read how this particular licensing law is impacting those from high-risk areas, click here.

Write for CFI