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Innovation And Freedom Are The Cure To The Fed’s 2% Solution Addiction.

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On September 26th, Federal Reserve Bank (Fed) Chairman Jay Powell announced that the Fed Funds target rate is being raised above 2% for the first time since the Great Recession of 2008. The Fed uses this rate to steer monetary policy toward their favorite inflation, employment, and economic growth targets. The consumer price index and the unemployment rate are published by the US Bureau of Labor Statistics, and Gross Domestic Product (GDP) is published by the US Bureau of Economic Analysis. You get the connection.

Besides the 2% Fed funds interest rate, there is the 2% GDP growth number that is interesting. On October 29, 2012, the chief economist at Wells Fargo Securities, John Silvia, told the Risk Management Association that “Banks need to adapt to an economy in which 2% annual GDP growth is the new standard.” Then on June 11, 2014, Treasury Secretary Jacob Lew told the Economic Club of New York “Many wonder whether something that has always been true in our past will be true in our future,” referring to the Congressional Budget Office’s 2% annual GDP growth forecast.

And here it is four years later, and the most recent GDP growth calculation came in above 4% annually. What has changed? How could these public and private bank economists be so wrong? And what are they going to do about it?

4% Is the New Optimal Rate of Inflation

According to the Wall Street Journal, the 2% inflation target, another interesting coincidence, has been “a Holy Grail for the world’s major central banks. That is no longer the case given deep changes that have since reshaped the global economy.” Are they saying that corporate income tax reform and the political rejection of heavy handed regulation in the US and Britain have reshaped the global economy? Is 4% GDP growth merely an example of the Keynesian “animal spirits” that must be corralled by cooler heads at the Fed and the European Central Bank (ECB)? And what does a change in the inflation target accomplish?

Olivier Blanchard of the Peterson Institute for International Economics in Washington is calling for a 4% inflation target because in the event of a recession, it would be easier to cut interest rates. With a 2% target, it’s more difficult to cut interest rates, especially below zero. And sub-zero interest rates would be silly, right? Second, it would reduce the need for wage cuts in the event of a recession, but not for government employees. But what causes these anticipated downturns? If it’s not the government policies themselves, it must be these pesky animal spirits that caused 4% GDP growth in the first place.

Regarding debt, a higher inflation target makes it easier for borrowers to pay it off with cheaper money than what they borrowed, especially the government and their debt. The heck with the lenders and savers. And lastly, it would reduce the government’s debt to GDP ratio. The thinking here is that higher inflation means higher GDP growth, and this is true, except when its not, like in the 1970s. More realistically, its just another way to hide massive government debt accumulation.

0% is the New Optimal Rate of Inflation

According to Federal Reserve economist Anthony Diercks, “a mildly negative inflation rate would also have benefits, such as eliminating the cost of holding cash.” This idea may be a little harder to grasp, but it goes like this – when there is inflation, the cost of holding cash is its decreased purchasing power. One way to relieve all of us poor dumb slobs of our purchasing power risk (because of our large cash hoards) is deflation, meaning falling prices.

An added benefit of deflation would be negative interest rates. Meaning that if f you keep your cash hoard in a bank for safekeeping, it will earn a negative rate of interest, and you’ll have the privilege of paying the government bank interest on your deposits. But it doesn’t end there, the next likely step in helping with your cost of holding cash problem is to outlaw cash. This way your financial assets are always on deposit at a government bank, and only bank secured electronic purchases and sales will be legal. Otherwise, the central bankers would lose the interest income they’re charging depositors and the income taxes on the greedy capitalists. After all, its for the common good.

According to former Fed Chairman Ben Bernanke, “negative rates would be temporary and deployed only during severely adverse economic conditions.” Caused by what? And Vitor Constancio, Vice President of the ECB (where inflation and short-term rates have been zero or negative for about 3 years) says he has “no theoretical objections to a mild upward revision of the inflation target, however moving to a new target could undermine central banks’ hard won credibility.” Yes, credibility.

The Age of Complexity Worship

In all seriousness, fixing the price of money, setting inflation targets, government monopoly currencies, and measuring the wealth of an economy with Gross Domestic Product serves only one purpose – to expand the power of the Fed. This is because central bank governors are central planners, meaning self-proclaimed experts who disavow the productivity of free people and free markets. They believe themselves to be indispensable. Their rationale is that life has become too complicated for us poor dumb slobs.

To the Trump administration, raising the Fed Funds rate stifles economic growth. All administrations think that way. To the banks, higher rates mean higher net interest margins. They always think that way. Pundits defending the Fed’s move claim it leads to more normalized bond markets after ten years of artificially low rates. And normalized markets would be a great thing if that meant markets were free to float without interference from government econometric models.

For example, a huge flaw in these models is that they can’t anticipate innovation and the connectivity it inspires. The most recent inflation numbers came in a little lower than expected at 2.3%. This is because innovation is fueling even greater productivity, and helps keep prices stable, even in a hot economy. In other words – more and better and cheaper. It always works that way, and that bodes very, very well.

 

What Does it Mean to Be An Entrepreneur? The Answer Might Surprise You

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The word entrepreneur is thrown around a lot in casual conversation. But do most of us really understand what it means? According to Merriam-Webster, the word entrepreneur is defined as, “one who organizes, manages, and assumes the risks of a business or enterprise.” And while that definition might sound a little stale, this is essentially how most of us think of the word.

We associate the term with the likes of Andrew Carnegie and Walt Disney, great innovators who managed to take their grand ideas from their minds to reality. And while the business world seems to have a monopoly on the term itself, there is a lot more to being an entrepreneur than starting a business.

But as Adam Thierer, Senior Research Fellow at the Mercatus Center says, “The term can be used in many different ways to describe a variety of individuals who engage in economic, political, or even social activities. Entrepreneurs affect almost every aspect of modern society.” In fact, in a recent post on the topic, Thierer brilliantly describes a few different ways entrepreneurs manifest themselves within society— and some may be more beneficial to the rest of us than others.

Austrian Economists and Entrepreneurs

From the Austrian perspective, there is probably no economist more commonly associated with entrepreneurship than Joseph Schumpeter. For Schumpeter, the entrepreneur was about creativity and destruction. In fact, his theory of creative destruction focuses on these very elements. He believed that the entrepreneur played one of the most vital roles in our economy. And by “exploiting” inventions as he put it, he believed the entrepreneur could “reform or revolutionize the pattern of production.” And from this exploitation, society, and the individuals it is comprised of, benefit.

This more common definition of entrepreneurship was shared by another Austrian economist, Israel Kirzner. Kirzner believed that an entrepreneur was someone who demonstrated “alertness,” meaning they could recognize the implications a new product or idea could have on the market. Thierer defines Kirznerian entrepreneurs  as “individuals who are able to identify the ways in which a market could be moved closer to its equilibrium, such as recognizing a gap in knowledge between different economic actors.”

While this is the most traditional sense of the word, both Kirzner and Schumpeter elevated the entrepreneur’s role in society to new levels. From the economic perspective, all innovation begins with the entrepreneur. And through this innovation, they make possible societal change as well as the disruptive innovation that usually results in creative destruction.

But not all forms of entrepreneurialism have the same positive impacts on individuals. In fact, some are more harmful than others.

Rent-Seeking Entrepreneurs

While the type of entrepreneur mentioned above is one who generally helps to create value in the market and in society as a whole, creating value is not necessarily a defining characteristic of entrepreneurship. Thierer brings up the example of a political lobbyist, someone who is, in many ways, still an entrepreneur but is not creating real value for anyone other than himself. For many lobbyists, they identify ways to benefit from political institutions, which almost sounds like what Kirzner calls “alertness,” but at the end of the day are offering no true innovation, and thus, are creating no real value.

And if you are wondering what these benefits might be, Thierer lists them as, “monopoly status, favorable regulations, subsidies, bailouts, loan guarantees, targeted tax breaks, protection from foreign competition, and noncompetitive contracts.”

Since these types of benefits do very little to positively influence individual consumers, many economists refer to this type of “rent-seeking” entrepreneurship as destructive entrepreneurialism or unproductive entrepreneurialism. And it is not hard to see why. As Thierer’s colleagues, Peter Boettke and Chris Coyne have commented, “destructive entrepreneurship reduces the total surplus in an attempt by the entrepreneur to increase his own wealth.”

Put differently, these rent-seeking, unproductive entrepreneurs are seeking value for themselves at the expense of the rest of us. They want political favors given to them regardless of whether or not society and individuals benefit in any way. So while they are still entrepreneurial in nature, they do not hold the same role as Schumpeter and Kirzner’s entrepreneurs.

Social Entrepreneurs

In his piece, Thierer mentions how he, along with his fellow colleagues, have defined social entrepreneurs as “innovative, social value-creating activity that can occur within or across the nonprofit, business, or government sectors.” Where this type of entrepreneur differs from the other is profit.

Rather than seeking monetary incentives, the social entrepreneur is motivated by a mission larger than himself. MIT economist Eric von Hippel likes to call this “free innovation,” and defines this as:

(1) was developed by consumers at private cost during their unpaid discretionary time (that is, no one paid them to do it) and (2) is not protected by its developers, and so is potentially acquirable by anyone without payment—for free.”

Our modern tech world is ripe with examples of this. For example, anyone who has ever used any sort of open-sourced application has engaged in this kind of entrepreneurialism. Thierer uses the example of open-sourced designs being routinely used on 3D printers. The creators are not receiving any monetary gain from their inventions, but they are contributing to a greater cause by creating value for society. This might seem almost counterintuitive since so much of how we view entrepreneurship is dependent on earning a profit. But for these entrepreneurs, the impact they are having on society is more important to monetary gain.

Since the tech world is by and large becoming more open-sourced, it is likely that this form of entrepreneurship will dominate the market in the coming years.

Be Entrepreneurial in All Things

While Thierer brilliantly focuses on these aspects to define different variations of entrepreneurs, this does not mean this is a conclusive list. In reality, each of us has the opportunity to be entrepreneurial in just about everything we do. Whether it is looking for ways to create value in the office or at home, entrepreneurship exists in many different capacities.  

Here Is A Proposed Free Market Solution To Opioid Addiction That Owes Nothing to Government Programs.

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Private markets have a way of developing and testing innovative new solutions to people’s problems, without resort to government or other forms of dependency. In fact, self-efficacy is a pathway to eliminate personal dependence. Whatever the problem people need solving, private enterprise is the best way to discover a solution, through collaboration, experimentation and feedback loops. This article is taken from The Wall Street Journal. We edited out some names.

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Emily Brawn is a recovering opioid user who is trying a new strategy. In early September, 90 days sober, the 29-year-old stepped into a gym in an industrial corner of Boston, where muscled people were warming up for CrossFit, surrounded by top-line equipment and a rock-climbing wall.

But this gym is different: It is free and its patrons are beating back drug addictions. The staff’s black T-shirts are emblazoned with celebratory statements about sobriety.

“Most of us are in recovery ourselves,” Kina Troy, a front-counter employee, told Ms. Brawn.

The nearly 11,000-square-foot gym is part of “The Phoenix,” a Denver-based string of fitness centers and programs for recovering drug abusers. It is spreading nationally with the help of management coaching and a multimillion-dollar investment from an arm of a private donor network.

Venture Capital Meets Philanthropy Meets Research Meets Innovation.

A venture-philanthropy group called Stand Together is investing more than $40 million this year in nonprofits, including between $2 million and $3 million in the Phoenix. It expects to continue or increase that level of funding to the Phoenix in future years, said Stand Together Executive Director Evan Feinberg.

Advocates, officials and philanthropists are scouring for any tactic to stop deaths from the still metastasizing opioid crisis. That includes seeking new ways to thwart potentially deadly relapses. Preliminary U.S. Centers for Disease Control and Prevention data show drug-overdose deaths topped 70,000 last year, up more than 10% from the previous year, driven by opioid fatalities.

Increasingly, evidence supports exercise as a tool to stay sober, said Peter Thanos, an addiction researcher at the University of Buffalo. Steady exercise can regulate brain circuitry linked to feelings of well-being, he said. Addictive drugs “hijack” that reward system but dull it over time, he said, prompting addicts to chase greater highs to feel normal.

“In theory, you should be able to have an effect on drug-seeking” through persistent exercise, Mr. Thanos said.

The Phoenix, now in 11 states and set to move into Florida in October, could expand to every state, Stand Together officials said.

In Dallas, donor Arun Agarwal bought a building that will open as a 7,500-square-foot Phoenix gym early next year. He watched two employees at his textile company wrestle with painkiller addictions. He said he paid for their treatment, but they repeatedly relapsed, despite desperately wanting to stay sober. “It was an eye opener,” he said.

Even before the ACA, Medicaid was the largest source of funding in the U.S. for mental-health care, including substance-abuse treatment, according to the Robert Wood Johnson Foundation. But addiction is a multifaceted problem and it is a mistake to think needs won’t be met “if government isn’t expanding.”

“While a private market philosophy and strategy on some of the issues may not be things that I am perfectly aligned to, nevertheless we’re saving lives,” said Jacquelyn Hillios, Phoenix’s deputy executive director. Her own political leanings, as a social worker, she said, “don’t get much more liberal.”

Self-efficacy: The Belief That You Can Do What You Set Out To Do.

Scott Strode, who founded the Phoenix 11 years ago, credits physical exertion with fueling his long-running abstinence from alcohol and cocaine. A self-described “big bald guy” with bulging muscles, he said the concept is simple: a sober social network where anyone who is clean for 48 hours can realize their potential through physical fitness.

Phoenix activities, from rock climbing to mountain biking, are specifically chosen to increase self-efficacy, the belief that you can accomplish what you set out to do.

People are “so fearful of a relapse that they are locked up at home trying to figure out who they are sober,” said Mr. Strode, who is 45. “I really found out who I was by crossing the finish lines and climbing mountains.”

Phoenix’s Boston gym, which also started with help from local donors, is around the corner from a stretch of road known as “Methadone Mile.” People sleep along a chain-link fence and use drugs near treatment and social-service centers. Discarded needle caps dot the pavement.

Massachusetts opioid-related deaths are trending lower but remain alarming, with more than 2,000 last year, according to estimates.

Phoenix staffers walk the rough area inviting people to try the gym, which is offering classes such as yoga. They plan an official grand opening on Sept. 29.

Dina Gonsalves, who is 51 and manages a Boston pizza shop, credits CrossFit at Phoenix and methadone for helping her recently hit a year of sobriety from heroin.

“Within two months, my body transformed,” she said, flexing an impressive biceps. “I was hooked—kind of like another addiction, but a positive one.”

This article was originally published at wsjonline Sept 17, 2018

Write to Jennifer Levitz at jennifer.levitz@wsj.com

PHOTO: PHOTO BY KATHERINE TAYLOR FOR THE WALL STREET JOURNAL

 

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.

The Innovations Entrepreneurs Discover Depend On The Questions They Ask.

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It is in the interests of some humans to disparage the intelligence and capabilities of others. The most salient instance of this phenomenon is government: politicians and bureaucrats think the rest of us can’t get out of our own way and can’t get along without their help.

Another version of this disdain is to be found in intellectuals and scientists. They think the rest of us are dumb. They capture their arrogant disdain in fancy terminology like “bounded rationality”, by which they mean our ability to think clearly is highly constrained. But sometimes they slip, and let their unguarded language express their true superciliousness. Nobel laureate Daniel Kahneman, for example, tells us we are “blind to the obvious”, and suggested we “replace humans with algorithms wherever possible”. He thinks robots exhibit far more wisdom than humans.

Every Individual Mind Processes The World In Its Own Way.

Teppo Felin is an academic researcher who does not share this point of view, and wants to give the poor, dumb rest of us a break. He takes a more positive view of our capabilities for cognition, and finds the brilliant, value creating way we apply it in entrepreneurship.

Felin points out that the “humans are dumb” crowd base their analysis on what they believe is a limited ability of the human mind to process data. There is a lot of information in the world, and humans don’t always see it or detect it. For example, a lot of people undoubtedly observed apples falling from trees, but until Newton came along, no-one had processed these observations into the theory of gravitation. The data was there, but the pre-Newton humans didn’t “see” it. Hence, blind to the obvious. Felin calls this way of thinking about perception a “world-to-mind “ bias. There’s a lot of data the world presents to our minds and we are remiss in not seeing it all and processing it all.

However, he believes that this “world-to-mind” process is exactly the reverse of the one that actually applies, and the one that makes humans so creative. The real process is “mind-to-world”. Individuals make choices about what they are looking for in the information they receive from the world, and these choices determine what they see and what they discover. The choices are entirely subjective, and are therefore individualistic. Each one of us is discovering new things on the basis of the questions we ask, and each one of us has a unique capacity for discovery. The world doesn’t tell us what is relevant. Instead, it responds to questions. The more distinctive and individualized the questions, the more the potential for each one of us to find unique answers and novel strategies and contribute them to the social learning that drives progress.

Entrepreneurs Are Individuals Who Imagine The Future.

Felin joins the dots from the individual’s capacity to ask creative and generative questions, to the ability of entrepreneurs to imagine the future. Ironically, he thereby answers a question that our intellectual superiors ask and fail to answer: if human beings are so dumb and so constrained in their thinking and so blind, how do they generate the incredible improvement in prosperity and quality of life that we have witnessed over the last few generations? Deirdre McCloskey has estimated the scale of the improvement at 3000% over 200 years.

Felin finds the answer to these questions in entrepreneurship. Entrepreneurs are people who can imagine a better future, for themselves and the people they serve. How do they imagine the future? They ask original and creative questions. How can there be a hand-held computing device that’s intuitive to use without buttons and dials? (Steve Jobs.) What if life online were just like a college dorm? (Mark Zuckerberg?) What if the importance of a web page could be measured by the number of links to other popular web pages? (Sergey Brin and Larry Page.) What would it take to enable people to deliver packages overnight from and to anywhere in the country? (Fred Smith.) What are the implications of the continuous increases in the number of transistors that can be squeezed onto a computer chip? (Gordon Moore.) What if we could harness the power of steam to some sort of engine? (Thomas Newcomen.) What if that engine could power some kind of transportation? (Robert Stephenson.) What if I were to develop a service to help people with the tending of their yards? (Landscaping services all over the world.)

From this ability to ask original, creative questions about an unknown future, Felin’s proposition is that entrepreneurs become theorists. Their second step, after the question, is to develop a theory of how this imaginary future can be made to come about. Felin coins a term for this process through which novel beliefs about future possibilities and strategies emerge: “entrepreneurial theorizing”. Entrepreneurs are individuals with novel theories about the future.

These theories can’t come from knowledge, observation or experience. There may be some fragments of which the entrepreneur is aware or has observed in the marketplace, but, by definition, a theory is a guess that’s not based on existing data.

Entrepreneurial Theorizing Is Something We Can All Do.

Theorizing is not something limited to intellectuals and geniuses and Ph.D. scientists. In fact, Felin tells us, it’s quite childlike. It’s how children learn language, for example. They hear fragments and bits and pieces that they can’t fully recognize, and they must develop a theory of language (although, of course, they wouldn’t call it that) and then test the implications of that theory to see if it works, constantly adjusting on the basis of feedback. Entrepreneurs follow a similar process.

Psychologists tell us that this theorizing, or imagining the future, takes place separately from both the senses and perception. That’s why entrepreneurial theorizing does not require past or current observations and perceptions. It’s not the mere processing of existing data. It’s not analytical (that’s what machines do). It’s uniquely creative. It’s an act of “supposing, conceiving and considering various new possibilities (and impossibilities for that matter)”. (Emphasis original.) Imagination allows for completely new thoughts and completely new imagined scenarios, and permits envisioning an entirely new future. It’s brilliant. And we are all capable of this brilliance.

Brilliant imagination is brought to market by recombining resources in new ways. Entrepreneurs develop theories of how this can be done and set about the task of realizing their imagined scenario. Entrepreneurial theorizing never rests and never stops, from the original question (What if?) to the new innovation, which, itself, comes with more questions. How do you like it? How can I make it better?

We can all be entrepreneurs. It depends on the questions we ask and the theories we develop as a result.

Degenerate And Delusional Elites Are Being Toppled By The Exotic And The Outliers.

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We need new leaders – a better elite, a better ruling class.

So says Patrick Deneen, a Harvard social scientist, in a discussion of his book, Why Liberalism Failed. While we would disagree with him (we don’t need any leaders, nor an elite, nor a ruling class) it is nonetheless instructive that the elite is calling for its own abolition. This can only be a good thing.

Coincidental with Deneen’s call for an assisted suicide of the ruling class, we noted two significant recent examples of the new wave of the elite questioning itself, one in politics and one in technology.

An “Exotic” Nationalist Questions Radical Centralization.

Ryszard Legutko is a university professor who represents Poland’s conservative governing party at the European Parliament. That’s about as elite as it gets in Europe.

But Professor Legutko questions the status quo, and uses some challenging language in doing so. For example, he states  that “the European Union reflects the order and the spirit of liberal democracy in its most degenerate version.” As a result, “the EU doesn’t merely have individual dissidents in its midst, but dissident states”. (Just like the USA has California.)

Poland is one such dissident state. It is currently involved in a dispute with the EU central body because Poland wants to reform its legal system (80% of the Polish people support the reforms, according to Prof Legutko) to get rid of Supreme Court judges who “faithfully and shamelessly served the communist regime”. Legutko sees the reform as surgery to remove this dead tissue from the rotten corpus of the judiciary. The EU disagrees because, Legutko says, it is liberalism incarnate. “A liberal is someone who will tell you, I will organize your life for you. The Poles refuse to have their liberty organized for them, and are therefore branded by the elite as stupid, dangerous or both”.

Legutko’s term for Poland is that it is an”exotic” country in Europe. The term is one of opprobrium, hurled at the country that is trying to throw off its communist past to enter the community of Western nations. The Western elites will not welcome the return of a prodigal if it refuses to conform precisely to the norms of the liberal establishment.

Legutko doesn’t think it’s because of what Poland does “wrong” that the country is so criticized and so ostracized. It is “because of who we refuse to be”. The feeling that there are different worlds and different cultures, unlike the one the elites live in, “is disappearing because of the homogenization of Western culture”. The elites are very intolerant, which is why Poland is searching for new leadership.

A Technology Prophet Predicts An End For The Delusional Ideas Of Silicon Valley.

We’ve been persuaded to think of Silicon Valley as a pinnacle of innovative technologies and the home of the leaders of the tech revolution. George Gilder thinks they’re delusional and will soon be replaced.

“The Google paradigm of massive data centers and artificial intelligence determinism will be transcended in the next era”, which Gilder believes is starting right now. The advances in machine learning that Google trumpets and preens about really are just advances in the speed of processing. It’s not super-intelligence, it’s just the same intelligence accelerated to terahertz speeds.

According to Gilder, we will leave behind the big tech view that there’s an inexorable Darwinian model that allows the big winners to take all. But the GAFA conglomerates will dissolve, and the clouds of concentrated computing and commerce will disperse. “We’re moving beyond digital and silicon to carbon nanotubes with hybrid chips and sensors and 5G antennas everywhere. Even money is being disaggregated and reinvented. The clouds are dispersing into the skies – sky computing rendered on your laptop and smartphone, spread across blockchains, transparent and transformative.”

There are new leaders for this new architecture. In an interview in Forbes, Gilder mentions several, starting with Vitalik Buterin who created Ethereum, “an amazing new computer platform based on a new blockchain that he…programmed with a new computer language and financed with a new currency….based on a new unit of computational value”. Gilder assesses Buterin as one of the great figures in today’s world economy, leading a global movement, raising money for an array of new inventions, new distributed systems and new architectures.

Austin Russell, founder of Luminar, appraised all the current systems for self-driving cars and realized that none of them could produce a functional vehicle that would survive amidst the myriad conditions a car actually encounters on the world’s roads. He started from scratch to build a 50-fold better system based on new frequencies and new chip technology.

Thomas Sohmers started Rex Computing as a 16-year old, and is completely changing chip architecture. All these leaders and all these advances are coming from outside the normal channels. These entrepreneurs are outliers. They are defying “the Silicon Valley centralization of leviathan companies that chiefly buy up their own rivals and buy up their own stocks with zero-interest money pumped out by central banks”.

The New Leadership Will Come From The Bottom, The Edge, The Outliers, And Wherever The Elites Don’t Expect.

These examples – the political and cultural dissidence of Poland, and the tech dissidence of Ethereum, Luminar and Rex Computing – share the common attribute of anti-elitism. They are attacks on conventional wisdom. The new world never looks like the old one, but the established elites can never realize that fact.

Patrick Deneen wants a new elite. Much more likely is the emergence of a system of no elites, and no ruling class. The change will come from the bottom, not the top. It will come via radical decentralization and radical individual innovation, not from top-down reform. It’s already in motion.

Why Halo Top Ice Cream is a Market Phenomenon

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

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

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

Changing the Way We Eat Ice Cream

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

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

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

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

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

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

Gasping for Air

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

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

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

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

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

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

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

Unconventional Methods

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

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

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

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

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

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

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

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

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

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

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