October 18, 2018

The Rentier Economy: A Primer (Part 2)

My plan for this week’s post was to present further data about the extent of the rentier economy and then provide a digest of articles for further reading.

Turns out that wasn’t so easy. The data is there, but it’s mostly buried in categories like corporate capitalization, profits, and market concentration. Extracting it into blog-post-sized nuggets wasn’t going to be that easy.

Further, the data was generally only footnoted in a maelstrom of worldwide commentary. Economists and journalists treated it as a given, barely worthy of note, and were much more interested in revealing, analyzing, and debating what it means. The resulting discourse spans the globe — north to south, east to west, and all around the middle — and there is widespread agreement on the basics:

  • Economic thinking has traditionally focused on income from profits generated from the sale of goods and services produced by human labor. In this model, as profits rise, so do wages.
  • Beginning in the 1980s, globalization began moving production to cheap labor offshore.
  • Since the turn of the millennium, artificial intelligence and robotics have eliminated jobs in the developed world at a pace slowed only by the comparative costs of technology vs. human labor.
  • As a result, lower per unit costs of production have generated soaring profits while wages have stagnated in the developed world. I.e., the link between higher profits and higher wages no longer holds.

Let’s pause for a moment, because that point is huge. Erik Brynjolfsson, director of the MIT Center for Digital Business, and Andrew McAfee, principal research scientist at MIT, wrote about it in their widely cited book The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies (2014). The following is from a chapter-by-chapter digest written by an all-star cast of economists:

Perhaps the most damning piece of evidence, according to Brynjolfsson, is a chart that only an economist could love. In economics, productivity—the amount of economic value created for a given unit of input, such as an hour of labor—is a crucial indicator of growth and wealth creation. It is a measure of progress.

On the chart Brynjolfsson likes to show, separate lines represent productivity and total employment in the United States. For years after World War II, the two lines closely tracked each other, with increases in jobs corresponding to increases in productivity. The pattern is clear: as businesses generated more value from their workers, the country as a whole became richer, which fueled more economic activity and created even more jobs. Then, beginning in 2000, the lines diverge; productivity continues to rise robustly, but employment suddenly wilts. By 2011, a significant gap appears between the two lines, showing economic growth with no parallel increase in job creation. Brynjolfsson and McAfee call it the “great decoupling.” And Brynjolfsson says he is confident that technology is behind both the healthy growth in productivity and the weak growth in jobs.

Okay, point made. Let’s move on to the rest of the rentier story:

  • These trends have been going on the past four decades, but increased in velocity since the 2007–2009 Recession. The result has been a shift to a new kind of job market characterized by part-time, on-demand, contractual freelance positions that pay less and don’t offer fringe benefits. Those who still hold conventional jobs with salaries and benefits are a dying breed, and probably don’t even realize it.
  • As non-wage earner production has soared, so have profits, resulting in a surplus of corporate cash. Low labor costs and technology have created a boom in corporate investment in patents and other rentable IT assets.
  • Rent-seeking behavior has been increasingly supported by government policy — such as the “regressive regulation” and other “legalized monopoly” dynamics we’ve been looking at in the past few weeks.
  • The combination of long-term wage stagnation and spiraling rentier profits has driven economic inequality to levels rivaled only by pre-revolutionary France, the Gilded Age of the Robber Barons, and the Roaring 20s.
  • Further, because the rentier economy depends on government policy, it is particularly susceptible to plutocracies, oligarchies, “crony-capitalism,” and other forms of corruption, leading to public mistrust in big business, government, and the social/economic elite.
  • These developments have put globalization on the defensive, resulting in reactionary politics such as populism, nationalism, authoritarianism, and trade protectionism.

As you see, my attempt to put some numbers to the terms “rent” and “rentier” led me straight into some neighborhoods I’ve been trying to stay out of in this series. Finding myself there reminded me of my first encounter with the rentier economy nine years ago, when of course I had no idea that’s what I’d run into. I was at a conference of entrepreneurs, writers, consultants, life coaches, and other optimistic types. We started by introducing ourselves from the microphone at the front of the room. Success story followed success story, then one guy blew up the room by telling how back in the earliest days of the internet, he and Starbucks’ Howard Schultz spent $250K buying up domain names for the biggest corporations and brand names. Last year, he said, he made $76 Million from selling or renting them back.

He was a rentier, and I was in the wrong room. When it was my turn at the mic, I opened my mouth and nothing came out. Welcome to the real world, my idealistic friend.

As it turns out, following the rentier pathway eventually leads us all the way through the opinionated commentary and current headlines to a much bigger worldwide issue. We’ll go there next time.

 

Kevin Rhodes studies and writes about economics in an effort to understand the world his kids are growing up in, which is also the world he’s growing old in. You might enjoy his latest LinkedIn Pulse article “The Fame Monster: Rockstars And Rockstar Entrepreneurs.”

The Pledge

19th Century Steel Baron Andrew Carnegie was (a) more than okay with the right to make as much money as you want; but he (b) was not okay with spending it any old way you like. He had some very specific notions about the latter:[1]

By the late 1880s, Carnegie’s place as one of the wealthiest men in the United States was cemented… With the time afforded him as the controlling shareholder, Carnegie put forth theories on capitalism. the human condition, and the American Republic. In 1889, Carnegie wrote an article simply titled “Wealth” — it would soon become known as “Gospel of Wealth.” . . . In it he offered an unapologetic defense of the system that enabled great wealth such as his.

[Carnegie believed that] the price for… material progress — “cheap comforts and luxuries” — was great wealth inequality. . . . Any thinking person, Carnegie surmised, would conclude “that upon the sacredness of property civilization itself depends — the right of the laborer to his hundred dollars in the savings bank, and equally the legal right of the millionaire to his millions.” But his defense of capitalism was a setup for a most startling conclusion.

In the article Carnegie argued that the greatest of men, capitalists, should be unencumbered to accumulate wealth. But once great wealth was achieved, these men should, during their lifetimes, give it away. As the possession of wealth was proof to society of great achievement, aptitude, industriousness, and ability, it made little sense that it should be bequeathed to descendants. Inherited wealth would undermine the argument that those with wealth earned it, deserved it.

Next, he held that if men waited until death to give the money away, less competent men unused to large sums would squander it thoughtlessly, however well-intentioned. While Carnegie viewed wealth as a symbol of intellectual mastery, the actual possession of it should be considered only a trust fund, with “the man of great wealth becoming mere trustee for his poorer brethren, bringing to their service his superior wisdom, experience, and ability to administer, doing for them better than they would or could for themselves. The man who dies thus rich, dies disgraced.”

Carnegie was hailed by newspapers, socialists, workingmen, and, more discreetly, even his fellow capitalists . . . for such enlightened views.

Carnegie’s legacy of endowments endures to this day. (I have clear memories of our small town Carnegie library.) Carnegie’s fellow Robber Barons created similarly enduring legacies, such as those reflected in the following names: Johns Hopkins, Leland Stanford, Ezra Cornell, Cornelius Vanderbilt, and James Duke.

Carnegie’s philosophy also endures today. albeit expressed in terms more in tune with the ethos of our times. Consider, for example, the Giving Pledge, formed “in an effort to help address society’s most pressing problems by inviting the world’s wealthiest individuals and families to commit more than half of their wealth to philanthropy or charitable causes either during their lifetime or in their will.”

As of May 2018, 183 individuals or couples from 22 countries had taken the pledge, representing total net worth closing in on a trillion dollars. Some of the Pledgers are household names; most aren’t. I randomly clicked several of their photos on the Giving Pledge home page, which takes you to their statements about why they took the pledge. Noticeably absent is Carnegie’s belief that capitalists are “that the greatest of men,” that “the possession of wealth [is] proof to society of great achievement, aptitude, industriousness, and ability,” or that wealth is a “symbol of intellectual mastery.” Nor is there an expressed fear that “less competent men unused to large sums would squander it thoughtlessly, however well-intentioned.” Instead, there’s a certain humility to many of the statements: they often mention lessons learned from forebears or other role models, and often express gratitude for having been “blessed” or gotten lucky, such as this one:

Allow me to start by saying that I am not sure I am a worthy member of this group of extraordinary individuals. I consider that I have been lucky in life.

Other themes in the statements are (a) a recognition that attaining great wealth is not solely a matter of rugged individualism, but that cultural and historical context deserve a lot of credit, and (b) a belief that giving back is a way to honor this reality. I.e., wealth made possible by historical and cultural circumstance ought to benefit all members of that culture, including the most needy. As it turns out, this isn’t just a kind-hearted philosophy of life, it’s a statement of the economic terms upon which much wealth has in fact been created and in the past and continues to be created today.

State-sponsored policies that favor timely and innovative ideas and technologies represent a significant type of societal support for wealth creation . We’ll look at that next time.


[1] Americana: A 400-Year History of American Capitalism, Bhu Srinivasan, (2017).

 

The Great Gatsby Lawyer

How okay are we, really, with the right of everyone (a) to make as much money as they want, and (b) to spend it any way they like? If we would limit (a) or (b) or both, then how and why?

Consider for a moment what your (a) and (b) responses have been to the upward mobility stories we’ve looked at so far: Richard Reeves, Matthew Stewart, Steven Brill. Travie McCoy. David Boies, Eric and I. Now consider this story from an article in Above the Law:

[P]ersonal injury attorney Thomas J. Henry threw a lavish bash to celebrate his son, Thomas Henry Jr.’s, 18th birthday. And the price tag for the Gatsby-mixed-with-burlesque-themed fête? A cool $4 million.

To rack up such a hefty bill, the event had lots of performers which included showgirls, aerial performers, art installations, and contortionists (oh my!). Plus, there were musical performances and celebrity guests.

And don’t think the over-the-top party was the only gift the birthday boy received:

The star of the party, who sat on a throne-like chair when he wasn’t dancing, was given a fully loaded blue Ferrari, an IWC Portugieser Tourbillion watch and a custom-made painting from Alec Monopoly.

Henry’s work as a trial attorney is obviously pretty lucrative. The big payouts he’s been able to secure for his clients have made him a member of the Multi-Million Dollar Advocates Forum.[1]

Henry is known for throwing giant parties. Just last year, he spent $6 million for his daughter’s quinceañera. I guess we know which one is really daddy’s favorite.

The writer telegraphs her attitude about the story with the article’s tone and with the understated lead line, “this seems extreme.” Apparently she would cast a vote for limitations on (b). When I’ve shared the story with friends, the response is usually stronger than “this seems extreme.”

I wonder why. Maybe it’s because this looks like a case of conspicuous consumption, which never goes down well. Economist/sociologist Thorstein Veblen coined the term in his 1889 book, The Theory of the Leisure Class, to describe how the newly prosperous middle class were buying things to communicate their move up the social ladder. The neighbors were rarely impressed — that is, until they made their own purchases, and then the game turned into keeping up with Joneses.

The conspicuous consumption shoe might fit here: Mr. Henry’s website tells a bit of his upward mobility story — German immigrant, raised on a farm in Kansas, etc. Or maybe there’s something going on here that transcends his personal story. In that regard, the term “affluenza” comes to mind.

The term “affluenza” was popularized in the late 1990s by Jessie O’Neill, the granddaughter of a past president of General Motors, when she wrote the book “The Golden Ghetto: The Psychology of Affluence.” It’s since been used to describe a condition in which children — generally from richer families — have a sense of entitlement, are irresponsible, make excuses for poor behavior, and sometimes dabble in drugs and alcohol.

From an article by Fox News. See also these descriptions from CNN and New York Magazine.

Definitions of the term come loaded with their own biases, judgments, and assumptions. This is from Merriam-Webster:

Affluenza: the unhealthy and unwelcome psychological and social effects of affluence regarded especially as a widespread societal problem: such as

feelings of guilt, lack of motivation, and social isolation experienced by wealthy people

extreme materialism and consumerism associated with the pursuit of wealth and success and resulting in a life of chronic dissatisfaction, debt, overwork, stress, and impaired relationships

And this is from the popular PBS series that came out shortly after The Golden Ghetto:

Af-flu-en-za n. 1. The bloated, sluggish and unfulfilled feeling that results from efforts to keep up with the Joneses. 2. An epidemic of stress, overwork, waste and indebtedness caused by dogged pursuit of the American Dream. 3. An unsustainable addiction to economic growth.

Affluenza made quite a splash in the estate planning world where I practiced, spawning a slew of books, CLE presentations, and new approaches to legal counseling and document design. Affluenza went mainstream in 2014 with the highly-publicized trial of Ethan Couch, the “Affluenza Teen,” when a judge reduced his sentence on four counts of intoxicated manslaughter and two counts of intoxicated assault after an expert witness testified that his wealthy upbringing had left him so psychologically impaired that he didn’t know right from wrong.

For a great number of my clients, that their kids might catch affluenza was their worst nightmare.[2] Their fear suggests this consensus to Thomas Henry’s partying habits:

(a) it’s okay to make all the money you want,

(b) but it’s not okay if you use your money to make your kids a danger to themselves and to others.

I wonder — would it temper our rush to categorize and judge Mr. Henry if we knew his philanthropic history and philosophy? This is from his website:

Mr. Henry’s overall philosophy is that helping others when you have the good fortune of being successful is not an elective decision but a mandatory decision. People who achieve success have a duty to help others.

That statement closely mirrors the beliefs of Robber Baron Andrew Carnegie. We’ll look at that next time, along with the perceptions of other 0.01 percenters about the social responsibilities of wealth.


[1] The Forum’s website says that “fewer than 1% of U.S. lawyers are members,” which appropriately signals Thomas Henry’s position in the economic strata.

[2] I used to tell my clients that if I had a dime for every time a client said, “I don’t want my money to ruin my kids,” I would have been a rich man. That was hyperbole, of course: a dime each time wouldn’t have made me rich. On the other hand, a million dollars each time might have made me a billionaire. A billion is a BIG number.

 

Rebel Without A Cause

Continuing with David Graeber’s analysis of Eric’s job experience from last time:

What drove Eric crazy was the fact that there was simply no way he could construe his job as serving any sort of purpose.

To get a sense of what was really happening here, let us imagine a second history major — we can refer to him as anti-Eric — a young man of a professional background but placed in exactly the same situation. How might anti-Eric have behaved differently?

Well, likely as not, he would have played along with the charade. Instead of using phony business trips to practice forms of self-annihilation, anti-Eric would have used them to accumulate social capital, connections that would eventually allow him to move on to better things. He would have treated the job as a stepping-stone, and this very project of professional advancement would have given him a sense of purpose.

But such attitudes and dispositions don’t come naturally. Children from professional backgrounds are taught to think like that from an early age. Eric, who had not been trained to act and think this way, couldn’t bring himself to do it.

Like Eric, I couldn’t bring myself to do it either — although it was not so much that I couldn’t, it was more a case of not knowing how. I was bright enough, had a knack for the all-important “likeability factor” with clients and colleagues, and worked with lots of clients and other professionals who were members of the Red Velvet Rope Club. But like Eric, I remained on the outside looking in, and I spent a lot of time feeling envious of others who fit in so easily.

Those dynamics dogged the early years of my law career. In time, a general sense of inadequacy became depression, which I compensated for by nursing a rebel-without-a-cause attitude.

My experience didn’t have to be that way. Consider, for example, the story of super-lawyer David Boies. Like Eric and me, Boies was also born to working class parents and grew up in a farming community, but that’s where the resemblance ends. Chrystia Freeland introduces him this way in her book Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else(2012):

As the world economy grows, and as the super-elite, in particular, get richer, the superstars who work for the super-rich can charge super fees.

Consider the 2009 legal showdown between Hank Greenberg and AIG, the insurance giant he had built. It was a high-stakes battle, as AIG accused Greenberg, through his privately-held company, Starr International, of misappropriating $4.3 billion worth of assets. For his defense, Greenberg hired David Boies. With his trademark slightly ratty Lands’ End suits (ordered a dozen at a time by his office online), his Midwestern background, his proud affection for Middle American pastimes like craps, and his severe dyslexia (he didn’t learn how to read until he was in the third grade), Boies comes across as neither a superstar or a member of the super-elite. He is both.

Boies and his eponymous firm earned a reputed $100 million for the nine-month job of defending Greenberg. That was one of the richest fees earned in a single litigation. Yet, for Greenberg, it was a terrific deal. When you have $4.3 billion at risk, $100 million — only 2.3 percent of the total — just isn’t that much money. Further sweetening the transaction was the judge’s eventual ruling that AIG, then nearly 80 percent owned by the U.S. government, was liable for up to $150 million of Greenberg’s legal fees, but he didn’t know that when he retained Boies.

What did Boies have that Eric and I didn’t? Well, um, would you like the short list or the long? Boies is no doubt one of those exceptionally gifted and ambitious people who works hard enough to get lucky. I suspect his plutocrat switch was first activated when his family moved to California while he was in high school, and from there was exponentially supercharged by a series of textbook upwardly mobile experiences: a liberal arts education at Northwestern, a law degree from Yale, an LL.M. from NYU, joining the Cravath firm and eventually becoming a partner before leaving to found his own firm.

That’s impressive enough, but there’s more to his story: somehow along the way he was transformed into the kind of person who belongs — in his case, not just to the 9.9% club, but to the 0.1 %. Yes, his human capital was substantial, but it was his personal transformation that enabled him to capitalize (I use that term advisedly) on the opportunities granted only by social capital.

And now, if the 9.9 percenters we heard from a couple weeks back are correct, the pathway he followed is even more statistically rare (if that’s even possible) than when he travelled it — in part because of an economic principle that’s at least as old as the Bible.

We’ll talk about that next time.

Eric and Kevin’s Most Excellent Career Adventures

       

David Graeber’s book Bullshit Jobs is loaded with real-life job stories that meet his definition of “a form of employment that is so completely pointless, unnecessary, or pernicious that even the employee cannot justify its existence even though the employee feels obliged to pretend that this is not the case.” One of those stories rang a bell: turns out that “Eric” and I had the same job. The details are different, but our experiences involved the same issues of social capital and upward mobility.

Eric grew up in a working class neighborhood, left to attend a major British university, graduated with a history major, landed in a Big 4 accounting firm training program, and took a corporate position that looked like an express elevator to the executive suite. But then the job turned out to be… well, nothing. No one would tell him what to do. He showed up day after day in his new business clothes and tried to look busy while trying in vain to solve the mystery of why he had nothing to do. He tried to quit a couple times, only to be rewarded with raises, and the money was hard to pass up. Frustration gave way to boredom, boredom to depression, and depression to deception. Soon he and his mates at the pub back home hatched a plan to use his generous expense account to travel, gamble, and drink.

In time, Eric learned that his position was the result of a political standoff: one of the higher-ups had the clout to fund a pet project that the responsible mid-level managers disagreed with, so they colluded to make sure it would never happen. Since Eric had been hired to coordinate internal communication on the project, keeping him in the dark was essential. Eventually he managed to quit, kick his gambling and drinking habits, and take a shot at the artistic career he had envisioned in college.

My story isn’t quite so… um, colorful… but the themes are similar. I also came from a strong “work with your hands” ethic and was in the first generation of my family to go to college, where I joined the children of lawyers, neurosurgeons, professors, diplomats, and other upper echelon white collar professionals from all 50 states and several foreign countries, At the first meeting of my freshmen advisory group, my new classmates talked about books, authors, and academic disciplines I’d never heard of. When I tackled my first class assignment, I had to look up 15 words in the first two pages. And on it went. Altogether, my college career was mostly an exercise in cluelessness. But I was smart and ambitious, and did better than I deserved.

Fast forward nine years, and that’s me again, this time signing on with a boutique corporate law firm as a newly minted MBA/JD. I got there by building a lot of personal human capital, but my steel thermos and metal lunch bucket upbringing was still so ingrained that a few weeks after getting hired I asked a senior associate why nobody ever took morning and afternoon coffee breaks. He looked puzzled, and finally said, “Well… we don’t really take breaks.” Or vacations, evenings, weekends, or holidays, as it turned out.

A couple years later I hired on with a Big 4 accounting firm as a corporate finance consultant. My first assignment was my Eric-equivalent job: I was assigned to a team of accountants tasked with creating a new chart of accounts for a multinational corporation and its subsidiaries. Never mind that the job had nothing to do with corporate finance. Plus there were two other little problems: I didn’t know what a chart of accounts was, and at our first client meeting a key corporate manager announced that he thought the project was ridiculous and intended to oppose it. Undaunted, the other members of the consulting team got to work. Everybody seemed to know what to do, but nobody would tell me, and in the meantime our opponent in management gained a following.

As a result, I spent months away from home every week, trying to look busy. I piled up the frequent flyer miles and enjoyed the 5-star accommodations and meals, but fell into a deep depression. When I told the managing partner about it, he observed that, “Maybe this job isn’t a good fit for you.” He suggested I leave in two months, which happened to be when our consulting contract was due for a renewal. Looking back, I suspect my actual role on the team was “warm body.”

Graeber says that, at first blush, Eric’s story sounds like yet one more bright, idealistic liberal arts grad getting a real-world comeuppance:

Eric was a young man form a working-class background… fresh out of college and full of expectations, suddenly confronted with a jolting introduction to the “real world.”

One could perhaps conclude that Eric’s problem was not just that he hadn’t been sufficiently prepared for the pointlessness of the modern workplace. He had passed through the old educational system . . . This led to false expectations and an initial shock of disillusionment that he could not overcome.

Sounds like my story, too, but then Graeber takes his analysis in a different direction: “To a large degree,” he say, “this is really a story about social class.” Which brings us back to the issues of upward mobility and social capital we’ve been looking at. We’ll talk more about those next time.

In the meantime, I can’t resist a Dogbert episode:

 

Upward Mobility — Pop Music Style

I had a different post planned for this week, but then I heard a song over the gym soundtrack last week that perfectly illustrates the dynamics of social capital and upward mobility and the perils of the rags-to-riches journey. It also captures an attitude that often accompanies that feeling of having your nosed pressed up against the glass: wanting to move up but feeling blocked. That’s a lot of economics to pack into one pop song, so I just had to feature it.

I talked about all of that in the very first post in this series just a bit over a year ago, when I wondered out loud whether money can make us happy:

I mean, all these famous (and mostly rich) people are entitled to their opinion, but we’d like to find out for ourselves if money could make us happy — we’re pretty sure we could handle it.

Rapper Travie McCoy was pretty sure he could handle it, too. He wrote a song saying so — the one I heard at the gym — then lived his own upward mobility rise, fall, and eventual comeback. His experience couldn’t be more different than that of the 9.9 percenters we heard from last week. Apparently the social capital of the pop music red velvet rope club isn’t the same as the club covered by Forbes.

McCoy teamed up with Bruno Mars to do the song back in 2010. Obama was president, we were just coming off the Great Recession, it was five years after Hurricane Katrina and four years before Bruno Mars did his first Super Bowl halftime. Last time I checked, the song’s official video was closing in on 330 Million views. Obviously it hit a sweet spot. The song made an appearance on Glee— the unofficial version I found had nearly a million views — more hitting a sweet spot.

Judging from what happened next, McCoy might have been wrong about whether he could handle it. A “whatever happened to Travie McCoy?” search suggests his big hit didn’t give him the life or make him the person he visualized in the song. Among other things, there was a steep decline into opioid then heroin addiction, but since then he has clawed his way back into the music scene.

We’ll let the song deliver its economic lessons on its own terms. If you want to take a short break for a catchy tune, you can watch either the official video or the unofficial Glee version below. (The latter is an excellent cover, with the lyrics spruced up for prime time TV, as reflected in the lyrics below.)

I wanna be a billionaire so frickin’ bad
Buy all of the things I never had
I wanna be on the cover of Forbes Magazine
Smiling next to Oprah and the Queen

Oh every time I close my eyes
I see my name in shining lights
Yeah, a different city every night oh right
I swear the world better prepare
For when I’m a billionaire

Yeah I would have a show like Oprah
I would be the host of everyday Christmas
Give Travie a wish list
I’d probably pull an Angelina and Brad Pitt
And adopt a bunch of babies that ain’t never had **it
Give away a few Mercedes like here lady have this
And last but not least grant somebody their last wish
It’s been a couple months that I’ve been single so
You can call me Travie Claus minus the Ho Ho
Get it, hehe, I’d probably visit where Katrina hit
And damn sure do a lot more than FEMA did
Yeah can’t forget about me stupid
Everywhere I go Imma have my own theme music

Oh every time I close my eyes
I see my name in shining lights
A different city every night oh right
I swear the world better prepare
For when I’m a billionaire
Oh ooh oh ooh for when I’m a billionaire
Oh ooh oh ooh for when I’m a billionaire

I’ll be playing basketball with the President
Dunking on his delegates
Then I’ll compliment him on his political etiquette
Toss a couple milli in the air just for the heck of it
But keep the five, twenties tens and bens completely separate
And yeah I’ll be in a whole new tax bracket
We in recession but let me take a crack at it
I’ll probably take whatever’s left and just split it up
So everybody that I love can have a couple bucks
And not a single tummy around me would know what hungry was
Eating good sleeping soundly
I know we all have a similar dream
Go in your pocket pull out your wallet
And put it in the air and sing

I wanna be a billionaire so frickin’ bad
Buy all of the things I never had
I wanna be on the cover of Forbes Magazine
Smiling next to Oprah and the Queen
Oh every time I close my eyes I see my name in shining lights
A different city every night all right
I swear the world better prepare for when I’m a billionaire
Oh ooh oh ooh for when I’m a billionaire
Oh ooh oh ooh for when I’m a billionaire

I wanna be a billionaire so frickin’ bad!

More upward mobility stories coming up — one of them is my own.

The End of Horatio Alger

“I know perfectly well that men in a race run at unequal rates of speed.
I don’t want the prize given to the man who is not fast enough to
win it on his merits, but I want them to start fair.”

~Teddy Roosevelt

In economic terms, a fair start is about equal opportunity. There’s no more enduring version of that particular ideal than the rags-to-riches story codified into the American Dream by Horatio Alger, Jr. during the Gilded Age of Andrew Mellon, John D. Rockefeller, Cornelius Vanderbilt, Andrew Carnegie, and the rest of the 19th Century Robber Barons. If they can do it, so can the rest of us, given enough vision, determination, hard work, and moral virtue — that was Alger’s message. And according to Roughrider Teddy and politicians like him, government’s job is to guarantee equal opportunity for all, then get out of the way and let the race to riches begin.

These days, however, it seems as though the notion of a fair start is a thing of the past — so says Richard V. Reeves in his book Dream Hoarders, which we looked at briefly last time. Reeves begins by confessing that his disenchantment over the demise of the Horatio Alger ideal will no doubt seem disingenuous because he didn’t grow up American and is now a member of the Red Velvet Rope Club himself:

As a Brookings senior fellow and a resident of an affluent neighborhood in Montgomery County, Maryland, just outside of DC, I am, after all, writing about my own class.

I am British by birth, but I have lived in the United States since 2012 and became a citizen in late 2016. (Also, I was born on the Fourth of July.) There are lots of reasons I have made America my home. But one of them is the American ideal of opportunity. I always hated the walls created by social class distinctions in the United Kingdom. The American ideal of a classless society is, to me, a deeply attractive one. It has been disheartening to learn that the class structure of my new homeland is, if anything, more rigid than the one I left behind and especially so at the top.

My new country was founded on anti-hereditary principles. But while the inheritance of titles or positions remains forbidden, the persistence of class status across generations in the United States is very strong. Too strong, in fact, for a society that prides itself on social mobility.

Reeves also wrote a Brookings Institute monograph called Saving Horatio Alger: Equality, Opportunity, and the American Dream, in which he said the following:

Vivid stories of those who overcome the obstacles of poverty to achieve success are all the more impressive because they are so much the exceptions to the rule. Contrary to the Horatio Alger myth, social mobility rates in the United States are lower than in most of Europe. There are forces at work in America now — forces related not just to income and wealth but also to family structure and education — that put the country at risk of creating an ossified, self-perpetuating class structure, with disastrous implications for opportunity and, by extension, for the very idea of America.

The moral claim that each individual has the right to succeed is implicit in our “creed,” the Declaration of Independence, when it proclaims “All men are created equal.”

There is a simple formula here — equality plus independence adds up to the promise of upward mobility — which creates an appealing image: the nation’s social, political, and economic landscape as a vast, level playing field upon which all individuals can exercise their freedom to succeed.

Many countries support the idea of meritocracy, but only in America is equality of opportunity a virtual national religion, reconciling individual liberty — the freedom to get ahead and “make something of yourself” — with societal equality. It is a philosophy of egalitarian individualism. The measure of American equality is not the income gap between the poor and the rich, but the chance to trade places.

The problem is not that the United States is failing to live up to European egalitarian principles, which use income as a measure of equality. It is that America is failing to live up to American egalitarian principles, measured by the promise of equal opportunity for all, the idea that every child born into poverty can rise to the top.

There’s a lot of data to back up what Reeves is saying. See, e.g., this study from Stanford, which included these findings:

Parents often expect that their kids will have a good shot at making more money than they ever did.

But young people entering the workforce today are far less likely to earn more than their parents when compared to children born two generations before them, according to a new study by Stanford researchers.

A new study co-authored by Stanford economist Raj Chetty describes an economic portrait of the fading American Dream; growing inequality appears to be the main cause for the steady decline

Reeves and Stanford’s researchers aren’t the only ones who feel that way. We’ll hear from a couple others next time.

 

Kevin Rhodes writes about individual growth and cultural change, drawing on insights from science, technology, disruptive innovation, entrepreneurship, neuroscience, psychology, and personal experience, including his own unique journey to wellness — dealing with primary progressive MS through an aggressive regime of exercise, diet, and mental conditioning. Check out his latest LinkedIn Pulse article: “Rolling the Rock: Lessons From Sisyphus on Work, Working Out, and Life.”

The End of the Firm

 

“The official line is that we all have rights and live in a democracy. Other unfortunates who aren’t free like we are have to live in police states. These victims obey orders or else, no matter how arbitrary. The authorities keep them under regular surveillance. State bureaucrats control even the smallest details of everyday life. The officials who push them around are answerable only to higher-ups. Informers report regularly to the authorities. All this is supposed to be a very bad thing — and so it is, although it is nothing but a description of the modern workplace.”

Bob Black, The Abolition of Work and Other Essays (1985)

Peter Drucker’s famous dictum “If you can’t measure it, you can’t manage it” established math and management as the indisputable co-sovereigns of the modern workplace. As it turns out, Drucker apparently never actually said that[1], but the concept has dominated the workplace since the advent of factories and railroads, telegraphs and electricity. Consider, for example, what it’s like to work at Amazon.

But, while math and management prospered together under the Industrial Revolution’s mechanistic worldview, today’s digitally-driven marketplace demands a freshly-nuanced management style, or in some cases, no management at all. Either idea challenges an even more foundational historical assumption: that commerce is best conducted by a firm that must be managed. Eliminate the firm and you eliminate the need to manage it. Get rid of both, and you have an unimaginably different “description of the modern workplace” than Bob Black wrote about 33 years ago.

Last time, we looked at an article by science writer and artificial intelligence engineer George Zarkadakis called “The Economy Is More A Messy, Fractal Living Thing Than A Machine.” In it, he says this about the firm:

Ever since the invention of the assembly line, corporations have been like medieval cities: building walls around themselves and then trading with other “cities” and consumers. Companies exist because of the need to protect production from volatile market fluctuations, and because it’s generally more efficient to consolidate the costs of getting goods and services to market by putting them together under one roof. So said the British economist Ronald Coase in his paper “The Nature of the Firm” (1937).

“Why do firms exist?” asks Ryan Avent in his book The Wealth of Humans: Work, Power, and Status in the Twenty-First Century (2016). He provides the same answer as Zarkadakis:

According to a 1937 paper by Nobel Prize-winning economist Ronald Coase, it’s to bring all the necessary people, processes, and information under one roof, instead of contracting it all out. In exchange for the convenience of one-stop shopping, one-size-fits-all, employees trade their independence and the possibility of greater personal market returns for the firm’ management structure and financial capital, which — as long as they conform to the company culture – the way we do things around here — promises to keep them on task and to deliver a paycheck in return.

Today, however, the new “gig economy” is fast making that unimaginable the new normal — and that’s only the beginning, says Zarkadakis:

Now, in an era of Ubers-for-everything, companies are changing into platforms that enable, rather than enact, core business processes. The cost of reaching customers has dropped dramatically thanks to the ubiquity of digital networks, and production is being pushed outside the company wall, on to freelancers and self-employed contractors. Market and price fluctuations have been defanged as machine learning and predictive analytics help companies manage such ructions, and on-demand services for labour, office space and infrastructure allow them to be more responsive to changing conditions. Coase’s theory is nearing its expiry date.

The so-called “gig economy” is only the beginning of a profound economic, social and political transformation. For the moment, these new ways of working are still controlled by old-style businesses models – platforms that essentially sell “trust” via reviews and verification, or by plugging into existing financial and legal systems. Airbnb, eBay and Uber succeed in making money out of other people’s work and assets because they provide guarantees for good seller-buyer behaviour, while connecting to the “old world” of banks, courts and government. But this hybrid model of doing digital business is about to change.

Avent concurs, and describes two key dynamics of the new anti-firm business model, operating culture and rent — how a business gets things done, and whether it owns the kinds of assets it can let others use, for a price:

Current workplace trends are bidding fair to tear down the firm model of operating. If you take employees out from under the firm umbrella — make them mostly freelancers, outsource jobs to countries on the make — then what’s left of value is mostly the company’s way of getting things done and the assets for which it can charge rent, in the economic sense of billing a premium for scarce assets. How assets become scarce becomes an essential policy-making function. These become essential “intangible” or “social” capital, replacing “human” capital.]

We’ll be talking more about social capital, rent, and other changing dynamics of the workplace.


[1] According to the Drucker Institute, he never did. And see this Forbes article for a rousing condemnation of the idea.

 

Kevin Rhodes writes about individual growth and cultural change, drawing on insights from science, technology, disruptive innovation, entrepreneurship, neuroscience, psychology, and personal experience, including his own unique journey to wellness — dealing with primary progressive MS through an aggressive regime of exercise, diet, and mental conditioning. Check out his latest LinkedIn Pulse article: “Rolling the Rock: Lessons From Sisyphus on Work, Working Out, and Life.”

Who Controls the World?

One fine afternoon autumn day in Cincinnati I watched transfixed as a gigantic flock of migratory birds swarmed over the woods across the street. I didn’t know it then, but I was watching a “complex, self-organizing system” in action. Schools of fish, ant colonies, human brains — and even the financial industry — all exhibit this behavior. And so does “the economy.”

James B. Glattfelder holds a Ph.D. in complex systems from the Swiss Federal Institute of Technology. He began as a physicist, became a researcher at a Swiss hedge fund, and now does quantitative research at Olsen Ltd. in Zurich, a foreign exchange investment manager. He begins his TED Talk with two quotes about the Great Recession of 2007-2008:

When the crisis came, the serious limitations of existing economic and financial models immediately became apparent.

There is also a strong belief, which I share, that bad or over simplistic and overconfident economics helped create the crisis.

Then he tells us where they came from:

You’ve probably all heard of similar criticism coming from people who are skeptical of capitalism. But this is different. This is coming from the heart of finance. The first quote is from Jean-Claude Trichet when he was governor of the European Central Bank. The second quote is from the head of the UK Financial Services Authority. Are these people implying that we don’t understand the economic systems that drive our modern societies?

That’s a rhetorical question, of course:  yes they are, and no we don’t. As a result, nobody saw the Great Recession coming, with its layoffs carnage and near-collapse of the global economy, or its “too big to fail” bailouts and generous bonuses paid to its key players.

Glattfelder tackles what that was about, from a complex systems perspective. First, he dismisses two approaches we’ve already seen discredited.

Ideologies: “I really hope that this complexity perspective allows for some common ground to be found. It would be really great if it has the power to help end the gridlock created by conflicting ideas, which appears to be paralyzing our globalized world.  Ideas relating to finance, economics, politics, society, are very often tainted by people’s personal ideologies.  Reality is so complex, we need to move away from dogma.”

Mathematics: “You can think of physics as follows. You take a chunk of reality you want to understand and you translate it into mathematics. You encode it into equations. Then, predictions can be made and tested. But despite the success, physics has its limits. Complex systems are very hard to map into mathematical equations, so the usual physics approach doesn’t really work here.”

Then he lays out a couple key features of complex, self-organizing systems:

It turns out that what looks like complex behavior from the outside is actually the result of a few simple rules of interaction. This means you can forget about the equations and just start to understand the system by looking at the interactions.

And it gets even better, because most complex systems have this amazing property called emergence. This means that the system as a whole suddenly starts to show a behavior which cannot be understood or predicted by looking at the components. The whole is literally more than the sum of its parts.

Applying this to the financial industry, he describes how his firm studied the Great Recession by analyzing a database of controlling shareholder interests in 43,000 transnational corporations (TNCs). That analysis netted over 600,000 “nodes” of ownership, and over a million connections among them. Then came the revelation:

It turns out that the 737 top shareholders have the potential to collectively control 80 percent of the TNCs’ value. Now remember, we started out with 600,000 nodes, so these 737 top players make up a bit more than 0.1 percent. They’re mostly financial institutions in the US and the UK. And it gets even more extreme. There are 146 top players in the core, and they together have the potential to collectively control 40 percent of the TNCs’ value.

737 or 146 shareholders — “mostly financial institutions in the U.S. and the U.K.” — had the power to control 80% or 40% of the value of 43,000 multinational corporations. And those few hundreds — for their own accounts and through the entities they controlled — bought securitized sub-prime mortgages until the market imploded and nearly brought down the global economy valued in the tens of trillions dollars — giving a whole new meaning to the concept of financial leverage. In what might be the economic understatement of the 21st Century, Glattfelder concludes:

This high level of concentrated ownership means these elite owners possess an enormous amount of leverage over financial risk worldwide. The high degree of control you saw is very extreme by any standard. The high degree of interconnectivity of the top players in the core could pose a significant systemic risk to the global economy.

It took a lot of brute number-crunching computer power and some slick machine intelligence to generate all of that, but in the end there’s an innate simplicity to it all. He concludes:

[The TNC network of ownership is] an emergent property which depends on the rules of interaction in the system. We could easily reproduce [it] with a few simple rules.

The same is true of the mesmerizing flock of birds I watched that day; here’s a YouTube explanation of the three simple rules that explain it[1].


[1] What I saw was a “murmuration” of birds — see this YouTube video for an example. It is explained by a form of complex system analysis  known as “swarm behavior.”

 

Kevin Rhodes writes about individual growth and cultural change, drawing on insights from science, technology, disruptive innovation, entrepreneurship, neuroscience, psychology, and personal experience, including his own unique journey to wellness — dealing with primary progressive MS through an aggressive regime of exercise, diet, and mental conditioning. Check out his latest LinkedIn Pulse article: “Rolling the Rock: Lessons From Sisyphus on Work, Working Out, and Life.”

Reframing “The Economy”

We’ve seen that conventional thinking about “the economy” struggles to accommodate technologies such as machine learning, robotics, and artificial intelligence — which means it’s ripe for a big dose of reframing. Reframing is a problem-solving strategy that flips our usual ways of thinking so that blind spots are revealed, conundrums resolved, polarities synthesized, and barriers transformed into logistics.

The Santa Fe Institute is on the reframing case: Rolling Stone called it “a sort of Justice League of renegade geeks, where teams of scientists from disparate fields study the Big Questions.” W. Brian Arthur is one of those geeks. He’s also onboard with PARC — a Xerox company in “the business of breakthroughs” — and has written two seminal books on complexity economics: Complexity and the Economy (2014) and The Nature of Technology: What it Is and How it Evolves (2009). Here’s his pitch for reframing “the economy”:

The standard way to define the economy — whether in dictionaries or economics textbooks — is as a “system of production and distribution and consumption” of goods and services. And we picture this system, “the economy,” as something that exists in itself, as a backdrop to the events and adjustments that occur within it. Seen this way, the economy becomes something like a gigantic container . . . , a huge machine with many modules or parts.

I want to look at the economy in a different way. The shift in thinking I am putting forward here is . . . like seeing the mind not as a container for its concepts and habitual thought processes but as something that emerges from these. Or seeing an ecology not as containing a collection of biological species, but as forming from its collection of species. So it is with the economy.

The economy is a set of activities and behaviors and flows of goods and services mediated by — draped over — its technologies: the of arrangements and activities by which a society satisfies its needs. They include hospitals and surgical procedures. And markets and pricing systems. And trading arrangements, distribution systems, organizations, and businesses. And financial systems, banks, regulatory systems, and legal systems. All these are arrangements by which we fulfill our needs, all are means to fulfill human purposes.

George Zarkadakis is another Big Questions geek. He’s an artificial intelligence Ph.D. and engineer, and the author of In Our Own Image: Savior or Destroyer? The History and Future of Artificial Intelligence (2016). He describes his complexity economics reframe in a recent article “The Economy Is More A Messy, Fractal Living Thing Than A Machine”:

Mainstream economics is built on the premise that the economy is a machine-like system operating at equilibrium. According to this idea, individual actors – such as companies, government departments and consumers – behave in a rational way. The system might experience shocks, but the result of all these minute decisions is that the economy eventually works its way back to a stable state.

Unfortunately, this naive approach prevents us from coming to terms with the profound consequences of machine learning, robotics and artificial intelligence.

Both political camps accept a version of the elegant premise of economic equilibrium, which inclines them to a deterministic, linear way of thinking. But why not look at the economy in terms of the messy complexity of natural systems, such as the fractal growth of living organisms or the frantic jive of atoms?

These frameworks are bigger than the sum of their parts, in that you can’t predict the behaviour of the whole by studying the step-by-step movement of each individual bit. The underlying rules might be simple, but what emerges is inherently dynamic, chaotic and somehow self-organising.

Complexity economics takes its cue from these systems, and creates computational models of artificial worlds in which the actors display a more symbiotic and changeable relationship to their environments. Seen in this light, the economy becomes a pattern of continuous motion, emerging from numerous interactions. The shape of the pattern influences the behaviour of the agents within it, which in turn influences the shape of the pattern, and so on.

There’s a stark contrast between the classical notion of equilibrium and the complex-systems perspective. The former assumes rational agents with near-perfect knowledge, while the latter recognises that agents are limited in various ways, and that their behaviour is contingent on the outcomes of their previous actions. Most significantly, complexity economics recognises that the system itself constantly changes and evolves – including when new technologies upend the rules of the game.

That’s all pretty heady stuff, but what we’d really like to know is what complexity economics can tell us that conventional economics can’t.

We’ll look at that next time.

 

Kevin Rhodes writes about individual growth and cultural change, drawing on insights from science, technology, disruptive innovation, entrepreneurship, neuroscience, psychology, and personal experience, including his own unique journey to wellness — dealing with primary progressive MS through an aggressive regime of exercise, diet, and mental conditioning. Check out his latest LinkedIn Pulse article: “Rolling the Rock: Lessons From Sisyphus on Work, Working Out, and Life.”

What is “The Economy” Anyway?

Throughout this series, we’ve heard from numerous commentators who believe that conventional economic thinking isn’t keeping pace with the technological revolution, and that polarized ideological posturing is preventing the kind of open-minded discourse we need to reframe our thinking.

In this short TED talk, the author[1] of Americana: A Four Hundred Year History of American Capitalism suggests that we unplug the ideological debate and instead adopt a less combative and more digital-friendly metaphor for how we talk about the economy:

Capitalism . . . is this either celebrated term or condemned term. It’s either revered or it’s reviled. And I’m here to argue that this is because capitalism, in the modern iteration, is largely misunderstood.

In my view, capitalism should not be thought of as an ideology, but instead should be thought of as an operating system.

When you think about it as an operating system, it devolves the language of ideology away from what traditional defenders of capitalism think.

The operating system metaphor shifts policy agendas away from ideology and instead invites us to consider the economy as something that needs to be continually updated:

As you have advances in hardware, you have advances in software. And the operating system needs to keep up. It needs to be patched, it needs to be updated, new releases have to happen. And all of these things have to happen symbiotically. The operating system needs to keep getting more and more advanced to keep up with innovation.

But what if the operating system has gotten too complex for the human mind to comprehend? This recent article from the Silicon Flatirons Center at the University of Colorado[2] observes that “Human ingenuity has created a world that the mind cannot master,” then asks, “Have we finally reached our limits?” The question telegraphs its answer: In many respects, yes we have. Consider, for example, the air Traffic Alert and Collision Avoidance System (TCAS) that’s responsible for keeping us safe when we fly:

TCAS alerts pilots to potential hazards, and tells them how to respond by using a series of complicated rules. In fact, this set of rules — developed over decades — is so complex, perhaps only a handful of individuals alive even understand it anymore.

While the problem of avoiding collisions is itself a complex question, the system we’ve built to handle this problem has essentially become too complicated for us to understand, and even experts sometimes react with surprise to its behaviour. This escalating complexity points to a larger phenomenon in modern life. When the systems designed to save our lives are hard to grasp, we have reached a technological threshold that bears examining.

It’s one thing to recognise that technology continues to grow more complex, making the task of the experts who build and maintain our systems more complicated still, but it’s quite another to recognise that many of these systems are actually no longer completely understandable.

The article cites numerous other impossibly complex systems, including the law:

Even our legal systems have grown irreconcilably messy. The US Code, itself a kind of technology, is more than 22 million words long and contains more than 80,000 links within it, between one section and another. This vast legal network is profoundly complicated, the functionality of which no person could understand in its entirety.

In an earlier book[3], Steven Pinker, author of the recent optimistic bestseller Enlightenment Now (check back a couple posts in this series) suggests that the human brain just isn’t equipped for the complexity required of modern life:

Maybe philosophical problems are hard not because they are divine or irreducible or workaday science, but because the mind of Homo Sapiens lacks the cognitive equipment to solve them. We are organisms, not angels, and our minds are organs, not pipelines to the truth. Our minds evolved by natural selection to solve problems that were life-and-death matters to our ancestors, not to commune with correctness or to answer any question we are capable of asking.

In other words, we have our limits.

Imagine that.

So then… where do we turn for appropriately complex economic thinking? According to “complexity economics,” we turn to the source: the economy itself, understood not by reference to historical theory or newly updated metaphor, but on its own data-rich and machine-intelligent terms.

We’ll go there next time.


[1] According to his TED bio, Bhu Srinivasan “researches the intersection of capitalism and technological progress.”

[2] Samuel Arbesman is the author. The Center’s mission is to “propel the future of technology policy and innovation.”

[3] How The Brain Works, which Pinker wrote in 1997 when he was a professor of psychology and director of The Center for Cognitive Neuroscience at MIT.

 

Kevin Rhodes would create workplace utopia if he could. But since he doesn’t trust himself to do that, he writes this blog instead. Thanks for reading!

Utopia Already

“If you had to choose a moment in history to be born, and you did not know ahead of time who you would be—you didn’t know whether you were going to be born into a wealthy family or a poor family, what country you’d be born in, whether you were going to be a man or a woman—if you had to choose blindly what moment you’d want to be born you’d choose now.”

Pres. Barack Obama, 2016

It’s been a good month for optimists in my reading pile. Utopia is already here, they say, and we’ve got the facts to prove it.

Harvard Professor Steven Pinker is his own weather system. Bill Gates called Pinker’s latest book Enlightenment Now “My new favorite book of all time.”

Pinker begins cautiously: “The second half of the second decade of the third millennium would not seem to be an auspicious time to publish a book on the historical sweep of progress and its causes,” he says, and follows with a recitation of the bad news sound bytes and polarized blame-shifting we’ve (sadly) gotten used to. But then he throws down the optimist gauntlet: “In the pages that follow, I will show that this bleak assessment of the state of the world is wrong. And not just a little wrong — wrong, wrong, flat-earth wrong, couldn’t-be-more-wrong wrong.”

He makes his case in a string of data-laced chapters on progress, life expectancy, health, food and famine, wealth, inequality, the environment, war and peace, safety and security, terrorism, democracy, equal rights, knowledge and education, quality of life, happiness, and “existential” threats such as nuclear war. In each of them, he calls up the pessimistic party line and counters with his version of the rest of the story.

And then, just to make sure we’re getting the point, 322 pages of data and analysis into it, he plays a little mind game with us. First he offers an eight paragraph summary of the prior chapters, then starts the next three paragraphs with the words “And yet,” followed by a catalogue of everything that’s still broken and in need of fixing. Despite 322 prior pages and optimism’s 8-3 winning margin, the negativity feels oddly welcome. I found myself thinking, “Well finally, you’re admitting there’s a lot of mess we need to clean up.” But then Prof. Pinker reveals what just happened:

The facts in the last three paragraphs, of course, are the same as the ones in the first eight. I’ve simply read the numbers from the bad rather the good end of the scales or subtracted the hopeful percentages from 100. My point in presenting the state of the world in these two ways is not to show that I can focus on the space in the glass as well as on the beverage. It’s to reiterate that progress is not utopia, and that there is room — indeed, an imperative — for us to strive to continue that progress.

Pinker acknowledges his debt to the work of Swedish physician, professor of global health, and TED all-star Hans Rosling and his recent bestselling book Factfulness. Prof. Rosling died last year, and the book begins with a poignant declaration: “This book is my last battle in my lifelong mission to fight devastating ignorance.” His daughter and son-in-law co-wrote the book and are carrying on his work — how’s that for commitment, passion, and family legacy?

The book leads us through ten of the most common mind games we play in our attempts to remain ignorant. It couldn’t be more timely or relevant to our age of “willful blindness,” “cognitive bias,” “echo chambers” and “epistemic bubbles.”

Finally, this week professional skeptic Michael Sheerer weighed in on the positive side of the scale with his review of a new book by journalist Gregg Easterbrook — It’s Better Than It Looks. Shermer blasts out of the gate with “Though declinists in both parties may bemoan our miserable lives, Americans are healthier, wealthier, safer and living longer than ever.” He also begins his case with the Obama quote above, and adds another one:

As Obama explained to a German audience earlier that year: “We’re fortunate to be living in the most peaceful, most prosperous, most progressive era in human history,” adding “that it’s been decades since the last war between major powers. More people live in democracies. We’re wealthier and healthier and better educated, with a global economy that has lifted up more than a billion people from extreme poverty.”

A similar paeon to progress begins last year’s blockbuster Homo Deus (another of Bill Gates’ favorite books of all time). The optimist case has been showing up elsewhere in my research, too. Who knows, maybe utopia isn’t such a bad idea after all. In fact, maybe it’s already here.

Now there’s a thought.

All this ferocious optimism has been bracing, to say the least — it’s been the best challenge yet to what was becoming a comfortably dour outlook on economic reality.

And just as I was beginning to despair of anyone anywhere at any time ever using data to make sense of things, I also ran into an alternative to utopian thinking that both Pinker and Shermer acknowledge. It’s called “protopia,” and we’ll look at it next time.

 

Kevin Rhodes would create workplace utopia if he could. But since he doesn’t trust himself to do that, he writes this blog instead. Thanks for reading!