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Tuesday, August 09, 2016

Oligarchy, predators & parasites: what the New Feudalists would be doing now, if they had sense.

Evonomics is burgeoning rapidly into the go-to place where sane-insightful sages discuss what's gone wrong with modern capitalism. Not from any leftist or hostile perspective, but with an eye to rescuing the goose that has laid our golden eggs -- truly creative-competitive enterprise. These top folks refute the notion that our struggles are "left vs right." Market economics can be saved, and generate the vast (and efficient) wealth enabling us to redouble generosity, if it is again made to be flat-open-fair.

Take this interview with Michael Hudson, author of Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy. Wherein the agenda is not to oppose competitive capitalism... rather the parasitical manipulators who Adam Smith himself denounced as markets' worst enemies... and have been for 6000 years.

Predators and Parasites: In Evonomics, Prof. David Sloan Wilson interviews Lynn Stout - Distinguished Professor of Corporate and Business Law at the Cornell – on the hoary mythology spread decades ago by Milton Friedman, that the only purpose of a modern corporation is to maximize short term value to stockholders. A cancerous dogma that is at last being dissected, disproved on every level and demolished. 

For example, Wilson cites a major study which monitored the survival of 136 firms starting from the time they initiated their public offering on the U.S. Stock Market. Five years later, the survivors—by a wide margin—were firms that did best by their employees.

Other critics show that Friedman’s cult encourages companies into short-term thinking and stock buy-backs instead of investing in new products – eating their seed corn – which is exactly the opposite of what we were promised by “supply side” zealots. Then there are “externalities” where corporations will ignore the needs of our children (e.g a less-toxic planet) unless regulated into taking such factors into account, in pricing.

== Sure, oligarchs want oligarchy. But can it be smart? ==

Here’s a perfect IQ test for the 0.001% aristocrats. Are you uber-oligarchs capable of noticing when greed may tip way beyond mere economic stupidity and immorality into life threatening self-destruction? When - as happened many times in the past - insatiable top-down class war could wind up taking you on a tumbrel ride toward guillotines? 

This fascinating open letter from a rich man to his fellow zillionaires makes a point that was stated eloquently by Joseph Kennedy, to explain why that ruthlessly self-serving mogul supported FDR during the Great Depression: “I’d rather lose half my fortune to help raise a healthy and contented middle class than lose it all to revolution.” 

In other words. Self-interest should look to farther horizons.

Hence, looking ahead, Nick Hanauer - a Seattle-based entrepreneur and early Amazon investor - published an Ultra-rich man’s letter: To My Fellow Filthy Rich Americans. The Pitchforks Are Coming.”

“Seeing where things are headed is the essence of entrepreneurship. And what do I see in our future now? I see pitchforks. At the same time that people like you and me are thriving beyond the dreams of any plutocrats in history, the rest of the country—the 99.99 percent—is lagging far behind…. Unless our policies change dramatically, the middle class will disappear, and we will be back to late 18th-century France. Before the revolution.”

Nor is Hanauer alone. Among U.S. billionaires and sub-billionaires, those who got rich through technological innovation, through delivery of new and popular goods and services, have increasingly expressed the same worry.  They became wealthy working side by side with creative, middle class engineers, scientists, artists, etc. Moreover, they increasingly find present trends — set in motion largely by “supply side” so-called 'economics' — to be deeply destructive and dangerous voodoo.  

Which is ironic to a stunning degree; they are the only billionaires who did use Bush tax cuts to invest in productive innovations and goods. Yet they are nearly all now democrats, calling for an end to those tax cuts.


It is the other branch of uber-wealth — those who got it via Wall Street parasitism, resource extraction-exploitation, capturing regulators or inheritance — who seem mostly unable to read the writing on the wall.  While congratulating themselves that they are geniuses, they happily ignore lessons of history.

I might add that any ‘angry peasants’ in the future will be far better armed than the 1789 Jacobins. Forget torches and pitchforks. Many will have fancy tools of cyber or genetic or chemical engineering. ISIS is a joke compared to what an enraged American technical caste could do, if (no, when) they ever wake up and rediscover that every human generation except the Baby Boomers knew class war.

Boomers grew up in an illusion of classlessness because the Rooseveltean reforms enacted by the Greatest Generation were so spectacularly successful! And another such moderate/pragmatic reset is still possible, reviving healthy-competitive market enterprise while re-invigoration the great middle. That is, if the oligarchy listen to folks like Hanauer.

== Farmers awaken ==


Nor is Hanauer alone. We know that most of the tech billionaires have joined Warren Buffet in rejecting the winner-takes-all mantra of Fox-style economics. But how about midwest agri-business leaders?

Greg Page is executive chairman and former CEO of Cargill, Inc., the largest private company in the U.S. Page participated in the high-level “Risk Committee” of top business leaders that forecast the US economy could suffer damages running into the hundreds of billions of dollars by the end of the century due to climate change.

Page describes the northward movement of the American agricultural belt. As average temperatures have risen over the past decades, the growing season in the northern plains has expanded, while heat waves further south baked America’s traditional agriculture producing states like Iowa, Oklahoma, Nebraska and Texas.

These explorations continue on the Evonomics site. In this article economist Sally J. Goerner elucidates why the “Trump-Sanders Phenomenon Signals an Oligarchy on the Brink of a Civilization-Threatening Collapse.” Goerner maintains that: oligarchies always collapse because they are designed to extract wealth from the lower levels of society, concentrate it at the top, and block adaptation by concentrating oligarchic power as well.” 

History shows that this tendency can be periodically correctedIf done in a moderate but determined way, the public will mobilize behind honest leaders and effective reforms. 

Or as Will and Ariel Durant wrote in The Story of Civilization: "…the unstable equilibrium generates a critical situation, which history has diversely met by legislation redistributing wealth or by revolution distributing poverty.”   

Of course we know why the oligarchy has tried so hard to turn lower middle class anger toward all the meritocratic professions. Especially toward the technology castes. Get working class whites to despise modernity and scientists, doctors, teachers, journalists, economists, civil servants… hey it worked in 1930s Germany and in the Confederate south. And look how well those turned out.

This is why the tech billionaires… most of them… are democrats nowadays. As would be Adam Smith, if he were alive today. They want an FDR to get them out of this bind, and not a Robespierre. And it is why we must pry the hands of the other kind of oligarch — those who fail this IQ test — off of society’s tiller. If theses guys are so rich, why ain’t they smart?

== What they'd be doing now, if they truly were smart ==


Some of you may recall a scene in Existence, set at a Swiss Alps meeting of the Trillionaires' oligarchy? I portrayed what I think aristos would be doing now, if they were both smart and wanted to restore feudalism, without repeating the same damned mistakes that feudalism made across 6000 years. 

Do I oppose feudalism? With all my soul. But so did Machiavelli, fighting for the Florentine Republic. Then, when it was clear there was no hope at all and all was finished, he got employment trying to talk the artistos into at least being smart about it. 


(Hint, I am willing, under carefully defined circumstances, to consult discretely on this matter, with some exceptional suggestions... accompanied by a wagging of fingers. And if finger-wags deter you guys from seeking the best ideas - and I have the best - then you'll deserve what inevitably happens to you.)
Alas, there's a quandary here. The smartest billionaires today want nothing to do with feudalist trends. But feudalist trends are powerful in themselves and favor the dumb rapacious kind. The type who will never hold meetings of the kind I portrayed in Existence


Indeed, it is doubtful that many of them read. Yet they hire flatterers to tell them how smart they are.


Thus proving the very opposite.

== Right vs Left Solutions ==

How shall we measure politics? According to hoary, insipidly lobotomizing metaphors like “left-vs-right,” which none of you could properly define, even if your lives depended on it? 

Or according to what we really need, today, which is pragmatic flexibility – a willingness to drop stale dogmas and do what’s right for our children and the world? Okay, then dig this… the Obama Administration – backed up my many modern environmentalists –is exploring ways to help the U.S. nuclear industry survive and keep reactors running, to weather hard times brought by cheap natural gas.

Mind you, that cheap gas is a huge improvement over relying on filthy coal. And the long term solution is looming fast, with solar, wind, tidal and storage power becoming economical faster than even optimists expected. Still, nuclear is now viewed much more favorably by techno-liberals, starting some years ago with Stewart Brand and others, but increasingly by mainline environmental groups.

Oh, they are still wary!  And problems with spent fuel are worrisome. And we can argue which newer “better” fuel cycles deserve investment. But keeping currently clean, already running nuclear plants going would seem blatantly in our interest.

Moreover, this shift by liberals is diametrically opposite to their political opponents on the right, who cannot even begin to ponder changing their minds in the face of evidence. About anything. Ever. It is genetically impossible. 

And that – rather than any “left” or “right” nostrum – is the real difference in U.S. politics today.

81 comments:

  1. Oligarchs are like ticks, when there are too many or they get to big the host will bite them off...

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  2. David, you should remember that at Versailles the original feudalists were sure their army would keep the peasantry at bay. Today's oligarchs believe the same thing, because they're confident they will eliminate challenges by using their technological military superiority. Who knows if they're right or wrong? I see the beginning of "the Klept" and a looming "jackpot," to refer to the recent work of another writer I enjoy and follow.

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  3. Jeff B.4:30 PM

    I don't think it can be overstated how dangerous the "maximize shareholder value" idea was and is. It has "trickled down" to small corporations, and it appears also to supposedly nonprofit medical institutions.

    I had the privilege of being one of two employee-elected members of a board of directors of a newly privatized $250m ESOP. I didn't fit in, obviously, with the standard board culture, but I pushed my luck one meeting and addressed the table about employee morale and turnover being a serious issue threatening the company's long term stability, and insisted that they needed to address the issue, and start w. a survey. Cue incredulous stares...

    The overwhelming motivation for the officers and much of the board was increasing profits, esp. for the officers, who had to own stock (to prove they had an interest in performance). They just couldn't fathom that the shareholders- who were in fact the employees- might not merely be replaceable drones, but also had an interest in being treated well.

    And I saw a lot more of the same when (probably because of that incident) they decided I needed to be educated about the role of boards, so sent me to Wharton's Director's Institute. I was amused at the condescension in the room, but they really did think and communicate differently- almost as a different subculture, with their own shared assumptions and beliefs.

    Despite the talk, the "shareholder value" is so deeply embedded now that it will take years or decades to break through all the unconscious belief.

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  4. I'm going to carry over my Gilded Age challenge from the previous post since nobody seemed to properly understand it.

    Working conditions stank. Check. Poverty was grinding. Check. Being poor really sucked back then. Check. The gap between rich and poor was truly huge. Check.

    But: economic growth was really, really, high. See the Wikipedia entry:
    https://en.wikipedia.org/wiki/Gilded_Age#Economic_growth

    From the Wiki
    "This emerging industrial economy quickly expanded to meet the new market demands. From 1869 to 1879, the U.S. economy grew at a rate of 6.8% for NNP (GDP minus capital depreciation) and 4.5% for NNP per capita. The economy repeated this period of growth in the 1880s, in which the wealth of the nation grew at an annual rate of 3.8%, while the GDP was also doubled.[48] Economist Milton Friedman states that for the 1880s, "The highest decadal rate [of growth of real reproducible, tangible wealth per head from 1805 to 1950] for periods of about ten years was apparently reached in the eighties with approximately 3.8 percent."[49]"

    Let's play with the calculator. Staring from 1900 to the present.
    1% growth/year -> 317%
    2%/year -> 994%
    2.5%/year ->1754%
    3%/year -> 3084%
    3.8%/year -> 7566%

    A factor of 75 improvement in income is significant, even if you start low. Cut it in half to go with a reduced workweek if you wish. Still pretty good.

    The assumption of my challenge was a fixed wealth distribution, that it would stay where it was just prior to the Progressive Era reforms. That is, apply the same money multiplier to both pauper and robber baron.





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  5. Jeff B.4:41 PM

    The unresolved question, though, is whether continuing on our current path will result in violent revolt, at least in developed nations. Even with the uber-rich controlling such a huge share of our economies, conditions for the vast majority of citizens is light-years beyond the late 19th and early 20th centuries. An overstated meme perhaps, but most in the middle class live in comfort unimaginable even in the relatively recent past.

    Political upheaval, sure. And if the middle class continues to struggle and maintain their status quo, then maybe, eventually, yes. But our comfort levels would have to dwindle, and employment worsen far beyond what we see today for it to reach a breaking point.

    I can see, though, something akin to the original progressive movement that helped challenge the "Gilded Age" happening again, with even greater force. Serious political reform, with perhaps the fear of pitchforks behind, in the U.S. might again free the political system from much of the corrupting effects of money in politics and institute honest, effective tax reform esp. on the elites.

    At least one can hope... My children, and their children to come, deserve far better.

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  6. Regarding your post above: completely agree on the Friedman debate. Mixing some noblisse oblige and long term brand building can be profitable in the long run.

    Have you read the debate between John Mackey, Milton Friedman and T.J. Rogers?

    http://www.wholefoodsmarket.com/blog/john-mackeys-blog/rethinking-social-responsibility-of%C2%A0business

    You might also take a peek at Michael Strong's book Be the Solution.

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  7. Carl

    If I'm reading you correctly you seem to think that
    Economic growth is higher when there are less regulations lower taxes and more inequality

    All of the actual data shows the opposite!!!

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  8. Jeff B.4:57 PM

    @Carl M.

    You appear to have a major assumption that undermines your premise,
    and neglect several negative factors.

    First, the assumption- that growth was and would be applied equally across the board. This simply was not true- the working poor were not seeing 1-3.8% annual wage increases. Labor was cheap, incredibly so, for much of the period in question because of waves of immigration, so there would have been absolutely no incentive to pay workers more (the insightful Henry Ford nonwithstanding.)

    Without this assumption, the premise fails, largely because of the likelihood of growing unrest, even revolt (the U.S. came close enough to this as it was in the late 1800s) or fascism. Without the social safety net, and later civil rights campaigns, democracy would have been doomed.

    And the obvious factors not considered- two world wars, the Depression, and later the Cold War. The global economy underwent wrenching changes because of each of these events, so it is not so simple to just assume steady growth.

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  9. LME… the US military is not owned by the oligarchy. There are very few overlaps of interest. As I’ve said, the proto-feudalists have not thought any of this through.

    Thanks CarlM, that stuff was much better. Interesting. I quote Michael Strong in The Transparent Society and had dinner twice with John Mackey.

    Jeff B… if the middle classes live comfy lives, that may not suffice if they see top lords getting goodies like augmentation. Or immortality.

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  10. LarryHart6:27 PM

    Carl M in the previous thread:

    Larry, are you saying the United States didn't exist prior to 1965?


    Uh, no.

    Or as "Hamilton" would have it,

    He looked at me like I was stupid.
    I'm not stupid.



    OK, I'm feeling uppity. Here's a couple more exercises in humility for ye to misinterpret.


    "Hamilton" again:

    Why do you assume you're the smartest in the room?


    The cocky Dave Simish "6 billion people are wrong and I'm right" act isn't winning any converts.


    I'm weighing different types of bad. I'll be voting for Johnson this election.

    And I should clarify something: I'm not including Trump among the relatively pacifistic members of the Alt Right. Trump is mixing Neocon belligerence with some Alt Right positions. We're talking quality Evil here: the ugliness of the Alt Right without the redeeming features.

    Ok, that sentence reminds me of the description of Rick Perry as "George W Bush without the intellect".


    I honestly don't remember how we got onto the Alt-Right in the first place, but I've been repudiating Trump and the set of followers who remind me of Hitler rallies. My beef with the Alt-Right (who I'm only familiar with through your own descriptions) is their ugliness, which I think of as anti-American. But if you want something to agree on, sure, they're not as bad as Trump.


    Have you ever like, met a communist? Your statement is outright bizarre. Have you ever struck up a conversation with someone in a Che T-shirt? Someone whose parents sent them off to a communist collective farm for the summer? A member of one of the many socialist parties in this country? An immigrant who was a member of a European Communist party before coming here? Someone with a hammer and sickle insignia on their shirt? Someone who is on an FBI watch list from supporting socialist causes?


    I know that comment wasn't addressed to me, but no, I haven't met people like that. Ever. Not even in college, although there were a few posers there.


    I have.


    Ok, that explains a lot. The whole Smallville/Gotham City dichotomy at work again.

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  11. LarryHart6:48 PM

    PaulSB in the previous thread:

    Oversimplifications don't cut it. Few liberals are really communists, or even socialists (Sanders notwithstanding)


    Sanders is a Democratic Socialist, which--giving me a chance to quote Orwell again--"is a different thing. In fact, it's the opposite thing."

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  12. LarryHart7:02 PM

    PaulSB:

    Tarring Democrats by associating them with Communists is a very old ploy. But not everyone is fool enough to fall for the old guilt by association tactic.


    In all fairness, I think that was Carl's point. He was tarring Democrats with Communists to demonstrate that he thought we were unfairly tarring Trump with the Nazis and KKK who support him.

    I can see Carl's point, but to me, Nazis and KKK are a special case that don't fit the same mold. I daresay that most Americans who sympathize with Communists either downplay or disbelieve the atrocities committed by the likes of Stalin and Mao. Or else they claim that those guys aren't True Communists. Point being, they may consider themselves communists in the sense of "I think wealth should be distributed more equally" but not in the sense of "I think Gulags and torture and secret police and an iron curtain are good ideas."

    The Nazis and KKK who support Trump do seem to think that torture and secret police and violence against "others" are good ideas, and they get the message from Trump himself that he supports them in this.

    His latest assertion that there might be no way to stop Hillary from appointing USSC justices "except, you know, the second amendment" should have the Secret Service paying him a visit, and not in the way a presidential candidate would like.

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  13. Socialism is dangerous?

    Heh. You know what else is? Capitalism.

    For that matter, oligarchy is dangerous.

    In fact, the only way to avoid danger is to die.

    Let's put it this way. It could be considered a natural evolution of capitalism for the very rich capitalist to buy off government officials and have laws crafted given that capitalist a monopoly (or duopoly or the like).

    Even if a capitalist business does not buy out government, if it becomes large enough then it can, through economy of scale and economy of scope create a product structure that remains innovative, low-cost, profitable, and a monopoly because no one else can compete.

    The company would likely be large enough that should a disruptive technology come around and resists being bought out, the company could research that technology, come up with its own, and then crush the competition with a lower cost version.

    And worse, should something happen and suddenly that business folds? It may very well take a while before proper competition can start up... and the disruption requires government to step in.

    And you know why? Because. There. Are. No. Perfect. Solutions.

    That said, limited socialism is far less dangerous and damaging than uncontrolled capitalism.

    Rob H.

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  14. “But recognize that his solution is less horrible than what we have going on today.”

    Stunning drivel. Each and every headline today propels us toward solving problems and doing better. It is a measure of our character and we are passing the tests.

    Mind you, I would not mind if a coalition of a sub-population of African Americans were to decide to move to Mississippi or S Carolina and swamp the state and take over! But they had better not use the power to oppress or segregate.

    Do NOT flirt with the AltRight jerks. They come up with rationalizations and incantations and mantras. But it is all based on denouncing the progressive Great Experiment which has delivered - in every conceivable category from justice to wealth to fun to science - better than ALL other societies… combined. Com-bined. By an order of magnitude. No… TWO orders of magnitude.

    Burden of proof falls on the whiners and flakes who declare - as if declaring makes it so - that the nation built by Franklin, Washington, Lincoln, both Roosevelts, the brave Union soldiers and the Greatest Generation was a mistake. Or that the new WORLD built under the protection and guidance of Pax Americana - featuring a tsunami of new wealth and freedom and peace and opportunity - has been a mistake.

    That things would have been SO much better without FDR or Marshall or King or LBJ etc. Bullshit. Prove it, Alt-Right. We have accomplished more than all other societies - especially the feudal-nasty ones they so admire - combined, at dragging listless, nasty humanity out of the caves and sadistic hellscapes, toward the light. Real light. Better than Star Trek. We are getting there at blazing speed, though it’s always a battle.

    Ingrates. Nasty little ankle-biting, accomplishment-free, jealous-preening, science and logic-hating, and barely hiding-it racist ingrates.

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  15. Seriously. Find me the scientists and do-ers who partake in such drivel. Peter Thiel, maybe. A bit. A few other examples. 99% of the do-ers appreciate this complex, never completely logical and always imperfect but always improving Great Experiment. There is an inverse relationship between getting stuff done in the world and dreamy-resentful radical rationalization that an ingrate knows how everything would have been SO much better if....

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  16. Paul SB10:26 PM

    Larry,

    "In all fairness, I think that was Carl's point. He was tarring Democrats with Communists to demonstrate that he thought we were unfairly tarring Trump with the Nazis and KKK who support him."

    - In all fairness, it is entirely possible that my immune system is hyperactive and I am jumping to conclusions. The things that influence you at a young age tend to haunt your neural pathways to the end. His posts read like the same ANP (and Chrisronazi) solipsism I was surrounded by in my larval years. Perhaps I am oversensitive, or perhaps just stressed. But I agree that there isn't really an equivalence between the extreme left and the extreme right, at least, not in this century. Even the most strident of leftists today do not justify the kind of mass killings committed by Stalin or Mao most of a century ago, but the most strident right-wingers are itching to commit a blood bath. And I definitely don't buy "benevolent racism" in any form. Just look at Elliot Erwitt's famous water fountains picture.

    http://fadedandblurred.com/elliott-erwitt/

    Sounds like solipsism to these ears.

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  17. I remember the sign said "colored" and what kid wouldn't prefer some blue or orange water to plain old colorless water? So I ran over and began to drink. My mother snatched me away saying "No!"
    Because someone might see.

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  18. Paul SB5:37 AM

    Funny little Facebook exchange, relevant to some of the discussion in the last thread:

    Some posted a picture of a man in a stormtrooper costume, but instead of the helmet he (could be a she - can't tell) had the head of the Cookie Monster. Cookie Trooper was holding a sign that said, "T Shirt Lied. Dark Side No Have Cookies."
    Mt Response:
    Paul SB It's the Dark Lords who get all the cookies (like the Koch Brothers). We support their agendas because we are dumb enough to think they will share. What part of "Dark Lords" aren't we getting?

    Someone Else #1 That's just crummy.

    Paul SB And we batter do something about it...

    Someone Else #2 I think it is the crumble down theory - when the dark lords eat cookies the henchmen are supposed to stay really close so that they can try to catch any crumbs...

    Paul SB That theory never works! Even Darth Ronald couldn't get it to work.

    Now it's off to work...

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  20. Anonymous7:10 AM

    A rousing sermon on the myth of progress, though one somewhat weakend by the claim that history can be simplified to 6,000 years of feudalism. Or is that claim inseperable from the myth of progress: the past must be dark, therefore feudalism as a convienient thought-stopped for the assumed darkness? Toynbee and Spengler, somehow, never end up with so simple a formulation of history, nor more recent authors such as Samuel P. Huntington, who provides useful predictive value in his analysis of civilizations—Turkey will be a hot spot for various given reasons, but now aren't they supposed to be rolling around in liberal democracy according to the Francis Fukuyama crowd? Perhaps your model provides no predictive value? No? Ah well, keep doubling down on that 6,000 years of feudalism thing, I guess.

    As for passing tests, why is traffic violence, up? Why is the suicide rate, up? Why is entrepreneurship, down? Why is your eternal growth stalling out? Why do the Iroqui—who, once again, lacked an executive branch, so how were they suffering under feudalism before being saved from savagery by your Western man?—consider Western man to be on a death path?

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  21. A.F. Rey8:16 AM

    As for passing tests, why is traffic violence, up? Why is the suicide rate, up? Why is entrepreneurship, down? Why is your eternal growth stalling out?

    Why do you assume progress will be smooth, without any bumps, setbacks or problems? Why do you think minor, short-term problems like these disprove long-term trends?

    More importantly, why do you assume anyone else assumes that? ;)

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  22. raito8:53 AM

    Paul SB,

    (from last thread, re: Communism)
    It was mostly a thought experiment. Part of the idea is that some of the bad stuff comes forward from the earlier generations. Even fanaticism. You'd have to have some sort of idealized zen priest purity to raise a generation that could operate as actual Communists. And even then it might not work.

    On oligarchy (I'd be surprised if this wasn't mentioned in 2014 when it was published:
    https://scholar.princeton.edu/sites/default/files/mgilens/files/gilens_and_page_2014_-testing_theories_of_american_politics.doc.pdf
    and an interview:
    http://talkingpointsmemo.com/dc/princeton-scholar-demise-of-democracy-america-tpm-interview

    The redux is that the authors were attempting to find out through the use of surveys and statistics whether the US government was controlled by the majority or a minority. The results are pretty much what you'd expect.

    A.F. Rey,

    It's all too common for people on one side of an issue to label any problem as short-term, just as it is common for the ones on the other to label them as long-term.

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  23. raito9:05 AM

    Whoops, I forgot to comment on shareholder value.

    In the instances with which I am directly aware, the absolute worst thing for a company's workers (and indeed, for a company's health) is the transition between the first owner and the second owner. Sure, its not always a problem, but it is very often. Going public often has some of the same problems.

    In those businesses, the founders started the businesses because they wanted that business. Their successors want money.

    Way back in the before-time, there were a couple very successful local restaurant chains (one successful enough that national competitors refused to enter the local market because they'd lose). The second owners drove them into irrelevancy.

    The nursery I used to buy cold-hardy plants from just made this transition. Now I don't buy from them, because they cut their product line back to where they have nothing I want.

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  24. Bah. Anonymous isn’t even aware of how absurdly he/she squirms. Lawyer all you want buddy. Now tell me a society that had both agriculture and metals where you’d gladly, right now, go live in the past as a person in the 40th percentile.

    I respect the Iroquois, so did Ben Franklin. And I wrote about their smart cousins the Cherokee, in SUNDIVER and wrote a screenplay about them! But they were anomalous among tribes, and also plenty plenty violent.

    Most of recorded history was rationalizers proclaiming it GOOOOD that they would own your son & daughters. And you damn well know it, sir. Your quibbling reveals you to be a deeply dishonest mind. TRy testing it with a map and a dart — to pick random locales with metal and agriculture and dice to pick random dates. Feh.

    As for today… most stuff is STill getting better fast, despite the fact that the US has lacked a legislative branch for all but 2 of the last 22 years, through treasonous sabotage.

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  25. Thing about inferior logic. They think anecdotes refute rough generalities. No. Anecdotes can disprove claimed UNIVERSALITIES. Like I demand that US rightists show ONE example of better governance outcomes than democrats. (So far, no counter examples. Not one.)

    But I only claimed that 99% of past metla+agriculture societies were feudal nightmares. An anecdote does not refute that. The anecdote stands out as a beacon across history.

    Disprove this blatantly obvious fact the hard way, sorry.

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  26. For as long as I can remember, I've been aware of raito's observation on the dramatic effects of the transition of first owner (or founder) to second owner.

    At the company where I began my career, I worked for nearly 8 years when the founder's health failed to such an extent that he seemed to have little say in the company's affairs. I bailed out at that point and went to work for another company that was owned by someone who was essentially the founder. Even though I took a big salary cut at the time, it was the best career move that I ever made.

    About 28 years later, that founder sold, but I decided to risk staying on with the second owner. That was my worst possible career move, and it cost me a lot.

    I was obviously a lot smarter 28 years earlier, although I was still aware of the founder/second-owner problem. The second time that I faced the founder/second-owner problem, I just wasn't agile enough to make the move that I should have.

    The founder/second-owner problem isn't universal, but it is true in an overwhelming number of cases. Company founders usually try to create something of lasting value. Second (and subsequent) owners have other considerations.

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  27. I certainly tar Trump with the same brush as Nazis not because of what his fanatic and deeply creepy supporters do or say, but because of what he does and says. You all know what he's said.

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  28. Berial10:39 AM

    Jerry are you and ratio talking about 'second owners' as someone that buys out the first or does a child taking over the family business count as well?

    I ask because what pattern I've seen is founder builds a successful company makes his kids work for him and work hard. Imparts the knowledge of the business and a work ethic in the kids, and the kids usually do decently during their 'turn' running the business. THEN the second gen thinks the first make them work way to hard, so they coddle their kids. Those kids then go on to be total screw ups living off of (grand)daddies money and the family business and fortune goes for naught.

    Those are but anecdotes but I've seen that happen more than a few times. Second owners that buy out the first fall more into the pattern yall are talking about to me.

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  29. Yes, Berial, first-generation children do almost as well as the founder. It seems to be getting much more seldom, however, that the first generation children are willing to fully take over the company.

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  30. Midboss5710:56 AM

    While David has been comparing our current Oligarchs to parasites, I think the analogy has one flaw: Parasites have to self limit, lest they kill the host and die with it. That might have been correct for most of history, but I think a new model has been born out of globalization: Oligarchs as locusts.

    Think about it: they move it, devour everything in sight and then move on to the next place. I think the locusts know that their practices are causing their field to die, but they don't care. They reason that once this field dies, they can just move on to the next. (For that analogy, imagine field being nations) If the western caste of locusts causes their hosts countries to crumble down, they don't care, they can just move to other countries and restart the cycle from there. The money is already in foreign banks and there's always a county willing to accept them in exchange for a small part of that money they'll initially bring in. Eventually, that host country will also end up plundered and the cycle will repeat.
    Never mind all the other animals in that field that can't travel as far and easily as them.

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  31. A.F. Rey10:56 AM

    It's all too common for people on one side of an issue to label any problem as short-term, just as it is common for the ones on the other to label them as long-term.

    This is true, which is why one should look at the long-term trends. Is traffic violence trending up over the long-term? Does entrepreneurship go up and down over time? Has growth ever stalled in the past, and then recovered later on?

    Although I haven't researched it, these indicators would seem to be ones that would vary up and down over time, most likely without any discernible trend over the long-term.

    While things do change, and new trends begin almost every day, one shouldn't just assume that any change is a harbinger of a new trend. Especially for an experiment that has been going on for the last 200+ years.

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  32. Deuxglass12:02 PM

    Nick Hanauer’s letter was very interesting and we are seeing more and more of the wealthy class starting to get worried about the future prospects of their existence. It’s about time. Two years ago it was rare to find any discussion whatsoever in mainstream media about the dangers of too much inequality. It was known of course but most felt that it will work out somehow in the end and that no real changes in policy are needed. Let the market decide. The market is always right, isn’t it? I have been following John Mauldin for over 15 years and I do like and respect him however it is only recently that he has started to question the economic orthodoxy that all “serious” economists adhere to. He said many times that he doesn’t know where the new jobs will come from but he knows that they will come. That is just a blind faith statement. He finally recognized last week that something is really wrong with the way we look at economics and that something must be done quickly. It’s a welcome change. They have finally understood that the problem is so big that it can’t be contained and will not just “go away”. The problem is in all developed countries and in many developing ones as well. For the ulta-wealthy, if things turn really bad, there is no safe haven anywhere. What had been an abstract cocktail party conversation topic has suddenly mutated into a serious possibility. Of course this revelation was not born in a vacuum but is the direct result of the new voting patterns.

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  33. Laurent Weppe1:53 PM

    * "I ask because what pattern I've seen is founder builds a successful company makes his kids work for him and work hard. Imparts the knowledge of the business and a work ethic in the kids, and the kids usually do decently during their 'turn' running the business. THEN the second gen thinks the first make them work way to hard, so they coddle their kids. Those kids then go on to be total screw ups living off of (grand)daddies money and the family business and fortune goes for naught."

    There's a french saying: the first generation builds the family's wealth, the second generation gets to enjoy it, and the third loses it all.

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  34. Berial2:09 PM

    There's a french saying:
    Sigh. And again I'm not original at all! :)

    PS: Thanks for the confirmation Jerry.

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  35. Chinese saying.
    1st generation ; coolie. Saves to buy a little land
    2nd generation ; farmer. Works hard buys more land.
    3rd generation: rich farmer. Borrows to buy more land.
    4th generation: coolie

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  36. Paul SB3:29 PM

    I have seen it go faster than that. I have a great uncle & aunt who invested in a cookie factory in Delft. When I was larval they would send a nice, big box every Christmas - best stroop waffels ever! They were very successful and branched out into chocolates, and by the time they retired the business was pulling in around 3 million guilders a year. Following the tradition of primogeniture, they turned the factory over to their eldest son, who drove it to bankruptcy within a year (no more stroop waffels! :[ )

    Just an anecdote, I know...

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  37. LarryHart4:04 PM

    Carl M:

    Or consider Fred Reed -- an Alt Right writer worth reading whether you agree with him or not. His Black Lives Matter solution is to separate the races and let blacks decide the amount of policing they want in their neighborhoods.


    You're reminding me of the Yogi Berra attribution: "In theory, there's no difference between theory and practice, but in practice, there is."

    We tried "separate but equal", and it turns out to inevitably lead to "not equal". There is some appeal to the idea of having blacks, Muslims, American Indians, etc have self-determination in their own areas, but we just know that they'd be relegated to the worse neighborhoods and poorest land, and that if the land they were allocated turned out to have greater value at a later date, they'd be "relocated" again. The experiment has been run over and over again.

    The problem I have with your assertion, even in theory, is the implicit assumption that the white Christians are the nominative owners of whatever portions of America they desire to claim, and that it is incumbent upon those "other" second-class citizens to go elsewhere in order to self-segregate. Maybe I have fallen for a bulls%%% line from Thomas Jefferson, and everyone else is in on the joke, but I really do hold to be self-evident that the rights and privileges and dignity of American citizenship belongs to all Americans. It's not "up to" black people to "make" black lives matter. They do matter. Liberals get told all the time to "Love it or leave it" or to "Go back to Russia!"

    If they think anything about America can be improved. If the alt-Right wants their own white country, it's their turn to go wherever that is. Their beloved Putin's Russia, maybe.

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  38. @Carl M: Regarding your Guilded Age challenge…

    Working conditions stank? Not compared to what they used to be. Compared to now? Yes. Compared to our pastoral image of the past? Yes. Compared to actual past conditions? No. They were an improvement and people voted with their feet.

    Poverty was grinding? Not compared to what it used to be like. In today’s dollars, the average person on earth earned about $3/day through most of history. The average American in the Guilded Age was doing better at perhaps $6-$10/day.

    Being poor really sucked back then? Meh. It wasn’t as bad as it used to be. One could actually buy clothing by then without sinking a year’s worth of wages to do it. Compared to our pastoral view of the past? Yes, but that is one of the biggest delusions sold to the bourgeoisie. Life really sucked for the average person before about 1700 and then got better slowly in NW Europe and then spread to Britain’s colonies in North America.

    The gap between rich and poor was truly huge? Check, but this has always been true. The size of the gap varies over time, but it isn’t a simple, exponential relationship.

    Your calculator work is reasonable, but there are decent estimates for the real income of the average American today you could use instead. We are way above $3/day now. If you denominate wages in terms of things we need (food, energy, shelter, and all that), you get to exclude luxury items and see what the real impact is. Ignoring the growth of quality on the good we buy, the growth factor in the US is around 40x. Include quality improvements and things get fuzzy, but a decent estimate is about 100-300x. Obviously we don’t need to buy 40x more food, energy, and shelter to get buy, so some of our income is made disposable and we buy formerly luxury items like air conditioning, automobiles, and educations. The multiplier to consider when it comes to impoverished people is the one that counts only the necessities, but the vast majority of Americans are rich enough now they aren’t restricted that way. Even in the wider world, the number of people still trapped at such a low level is shrinking rapidly. In both absolute and relative numbers, the people at $3/day are vanishing into cities and larger markets where they earn more.

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  39. This thread reminds me of a conversation I had with my 90 yr. old mom the other day. She bounced between staying home and working. Substitute teaching and a few years teaching full time. But the talk we had was of her budget. She had an old foot-pedal sewing machine and made her own dresses and my sister's too. She darned socks.

    Shelled peas my dad grew in our suburban back yard. We ate a lot of corn on the cob he grew. Green beans, strawberries, tomatoes. She made crab apple jelly from a crab apple tree. No leftovers were ever thrown away. They became stew.

    The sewing machine was made to be eternal. Cast iron. Bearings made for easy access and service.

    She bought stuff from Sears catalogs.

    Once on a beach vacation she shelled a gallon of coquinas which are tiny clam-like mollusks, and made chowder from them, as an experiment and so she could have the experience. It was good. https://en.wikipedia.org/wiki/Donax_variabilis

    My parents sent 3 kids through college paying cash, although the eldest, a dentist, took out some loans for dental school. The youngest got 4 years credits in 3 years but didn't get a bachelor's, instead working in technical jobs in labsand the oil exploration field, such as on offshore rigs.

    Times have changed.

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  40. @Jeff B: First, the assumption- that growth was and would be applied equally across the board. This simply was not true- the working poor were not seeing 1-3.8% annual wage increases. Labor was cheap, incredibly so, for much of the period in question because of waves of immigration, so there would have been absolutely no incentive to pay workers more (the insightful Henry Ford nonwithstanding.)

    It all depends on what you count and in how it is denominated. They WERE seeing price drops in things that mattered to them, so their income (denominated in a currency) could be flat, but it went further.

    Labor WAS cheap until standardized processes started to take over in the mills and factories. The price of labor depends on a number of things, but accumulated human capital (education) is a key factor. Once industry standardized certain types of jobs, employees could carry with them what they learned at one place to another. Only then could they set the employers in competition with each other for their labor.

    Without the social safety net, and later civil rights campaigns, democracy would have been doomed.

    Possibly. There is some decent evidence that progressive politics arrived on the scene AFTER employers had already begun to shift away from child labor and other things we consider ugly today, but progressives are seldom satisfied with anything less than instantaneous improvements. Our long duration, trade-tested improvements might take a generation or two, so in a political sense it might not matter if we have cause and effect backward. We still might storm the castle with pitchforks and torches and ignore evidence of slow improvements.

    The global economy underwent wrenching changes because of each of these events, so it is not so simple to just assume steady growth.

    The evidence suggests this has been averaged out. The wars were terrible, but the growth spurts afterward had the effect of making a moderately steady growth model fairly accurate. It’s not really the wars that did the dirty deeds, though. Bad things happened to growth before when trade became highly restricted and trade-tested progress was largely shutdown. The growth rate has more to do with innovation than it does with trade, so what matters most is how we treat each other socially when someone wants to engage in creative destruction.

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  41. @jumper: My latest, newest source of enjoyment from old movies is to watch them with the sound turned down to look at the sets and costumes. If one avoids the musical fantasy settings and looks instead at dramas set on farms or in cities, there is something neat one can spot that a kid today might not realize. Besides the old-fashioned appliances and electrical wiring, the sets are barren compared to modern story settings. Maybe the old studios were just cheap and went for minimal sets to focus the viewer on the story, but when I see that in many movies I begin to wonder. It’s not just the foot-pedal sewing machine (my mother had one) and the manual typewriter (I learned on my mother’s one). It’s the stuff that is missing from view. Pictures. Cupboard contents. Carpeting. Furniture. Tiny armoires and their limited contents. The number of tools supposed to be available to mechanics, carpenters, and plumbers. The list goes on.

    One can even watch the opening animation piece used for The Simpsons over the years to see something similar. Count the cars, TVs, and other consumer items. Heh.

    Times have changed indeed.

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  42. LarryHart6:27 PM

    Midboss57:

    Oligarchs as locusts.

    Think about it: they move it, devour everything in sight and then move on to the next place. I think the locusts know that their practices are causing their field to die, but they don't care. They reason that once this field dies, they can just move on to the next.


    Yes, that metaphor has a lot going for it.


    Never mind all the other animals in that field that can't travel as far and easily as them.


    Even worse, the locusts present themselves, and probably imagine themselves, as adding needed efficiency to the consumption of those fields. "Those other animals don't deserve the fruits of the fields. They don't use them as efficiently as they could."

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  43. LarryHart6:33 PM

    Alfred Differ:

    Carl M: Regarding your Guilded Age challenge...


    If it was just one time, I'd gloss over it, but you keep typing the same way...

    "Gilded" age, as in gold-plated.

    A "guilded age" would likely be something entirely different. Or do I get to use my Orwell line yet again?: "...but that's a different thing. In fact, it's the opposite thing."

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  44. This comment has been removed by the author.

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  45. Heh. Okay. I am getting rusty in the art of spelling.
    I had better be careful or I'll start confusing 'gilting' with 'guilting' next. 8)

    Imagine the fun to be had with 'gelding'.


    Sigh. 8)

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  46. Some of you might not think much of Boudreaux and his politics, but he has chimed in on what Adam Smith knew long ago that our politicians apparently don't.

    http://cafehayek.com/2016/08/41215.html

    Specialization improves productivity at the risk of fragility, but it also improves the odds that betterments will be found. Specialists have the time and motivations to focus on them.

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  47. LarryHart6:57 PM

    ...and after using the line so often, I decided I better make sure I was remembering it correctly.

    Sure enough, from "1984":


    "You are mistaken. This is not solipsism. Collective solipsism, if you like. But that's a different thing; in fact, the opposite thing."

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  48. I've been toying with the 'oligarchs as locusts' ever since reading "Here on Earth". Flannery uses analogies to economic modelling and spatial sorting to describe the impact of migrant Neolithic tribes on the mammoth tundra. Mammoths had the role of bankers allowing the velocity of money (grass) to be higher than the regional climate (even colder than today) would suggest. Butcher those with supply side spears, and the grass is literally locked into the permafrost, inaccessible to other creatures. Sound familiar?
    By the time the speedier Neolithic tribes had reached the Polar corridor into America, they were getting very good at carnage, and the rest could eat their shorts.

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  49. Jumper great family story!

    ALfred - right on. All the hand wringers about horrible Dickensian factories never mention that the workers went home to a bathtub, washed with cheap soap, put on comfy, attainable clothes, bought an iron bedstead that lifted an inexpensive mattress off the vermined floor… And there was paper and pencils and books and more books and more soap that all came cheap from those factories. And I shudder at the hells that my ancestors endured, so their kids could suffer slightly milder hells.

    Ye, the reformers and the novels that exposed Dickensian working conditions were utterly necessary! Written by a generation that had higher literacy and published cheap for a vast generation of new readers.


    One of the best shows ever. 1900 House
    https://www.youtube.com/playlist?list=PL1547779732B6D1D8

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  50. Hi Guys
    Re First generation rich/third generation poor

    IMHO that is a myth spread by the rich!
    In practice several analysis have shown that the family names that were rich hundreds of years ago are the family names that are rich today
    This was in Sweden! Italy and the UK

    There is a fair amount of churn among the well off - but as soon as your fortune is large enough it becomes almost immune to that effect

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  51. The not so funny thing about Dickensian factory stories is people read them as Dickensian history. It wasn't that way. The timing and economic evidence are wrong. They make decent self-preventing prophecy attempts, but they make for terrible history.

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  52. Soap. I have to wonder if that wasn't the most important betterment that convinced our ancestors to put up with the trauma associated with creative destruction. 8)


    Heh. I doubt the evidence will support me, but it's a thought.


    I suspect the real truth is they didn't have a clue about the kind of future they were making possible. I think of the number of people today who still think the markets are zero-sum and suspect we still don't.

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  53. Berial7:18 AM

    @Duncan,
    I'm definitely talking about families whose fortunes are still tied to the family business and not the fortune itself.

    You are correct that once a fortune gets big enough, it's own gravitational pull makes it a black hole of money. It's one of the reasons we NEED an estate tax. So all those sons and daughters of the ultra rich can find out for themselves just how creative and good at business they REALLY are, instead of being wastrels soaking up money they didn't earn and have no notion of how to put to real work.

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  54. And the alternative argument is that wealth drains from rich families within a couple of generations and thus ultimately an estate tax is a bad idea because that money will reenter the system.

    It ignores, of course, rent-seeking behaviors and the fact some rich wastrels will just live off of the rent-seeking resources... and buy politicians to make laws that favor them. It also ignores the fact that even in a libertarian society, laws can and do exist, and thus libertarianism needs to be fought for even more stridently than democracy because the rich rent-seekers in a libertarian society are well-placed to put in laws and convince people it is for the best... and then ensure they remain at the top of the food chain.

    Rob H.

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  55. I see the spambots are trying to become sneakier.

    Sadly they still don't comprehend concepts such as sarcasm or building up an argument.

    Rob H.

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  56. I had two points incidental to my tale. One is that the home used to be a productive place for a large fraction of the population. I don't see that's the case anymore.
    The second point is that sewing machine was made to last forever. When orders for sewing machines went down, a few slipped away and became sewing machine repair experts. A few made fewer machines, and a few began making other things without much downtime, one suspects. That too has changed. Who sharpens scissors anymore? Who repairs toasters? Shoes? Socks?

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  57. Jeff B.12:30 PM

    @Alfred Differ:
    "There is some decent evidence that progressive politics arrived on the scene AFTER employers had already begun to shift away from child labor and other things we consider ugly today, but progressives are seldom satisfied with anything less than instantaneous improvements. Our long duration, trade-tested improvements might take a generation or two, so in a political sense it might not matter if we have cause and effect backward. We still might storm the castle with pitchforks and torches and ignore evidence of slow improvements."

    I've yet to see any convincing evidence to support the "incremental improvement" argument, which I've heard before. Sure, the economic wheels made the country and world more prosperous, but those on the bottom saw little of it. If the rest of the economy improves 3% per year, and the lowest rung only 0.5% or less, that's still dirt poor, and getting poorer.

    Even if we grant the premise, though, not to be rude, but: so what? Does the fact that the economic situation of the poor is slowly changing justify doing nothing at all now to alleviate the current misery? Both in the modern world, and the fin de siecle? Like pollution controls, or endangered species protection, some improvements morally must be made as quickly as possible.

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  58. Jeff B.12:34 PM

    @Jumper:
    "Who sharpens scissors anymore? Who repairs toasters? Shoes? Socks?"

    Guilty as charged on counts 1 and 3. We have a scissors sharpener; seemed like a good idea, but never worked right. I do regularly sharpen our kitchen knives and garden tools, though- dull knives and tools are dangerous.

    And I've taken hiking boots to be re-soled twice to the one remaining cobbler next town over.

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  59. Calling the Estate tax a “death tax” on the deceased is crazy. It is a tax on a form of INCOME being received by the heirs. Why should such unearned gifts be tax free but hard-earned salaries be taxed?

    When wastrels are protected from their stupidity by family trusts then you get almost no stupidity-recycling.

    Jumper the 20th century was the age of Professionalization of all things that folks used to do for their families in the home, except partly parenting. But trends have reversed. Homes are now often filled with hobbies, avocations and other semi-pro types of expertise.

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  60. I've repaired a toaster, sharpened scissors, and sharpened drill bits. There is an argument from prudence for doing so, but it covers more than the money in my wallet. Environmental issues can be made into prudence arguments too.

    If such considerations are taken seriously, though, there is a time limit for how long one spends fixing toasters and what not. Strictly in terms of prudence, my effort has an opportunity cost. I should pay someone else to fix the toaster or buy a new one if my LOE is too high. Broadening past prudence, though, enables me to consider other things besides money. For example, I fixed my toaster partially to save money. The other part is I knew they are simple devices and I was curious what could have possibly gone wrong. The answer was they have to be cleaned occasionally, so my new knowledge might have prevented a future house fire. 8)

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  61. @Jeff B: The evidence for incremental improvement is found in the economic history texts after about 1950 or so. Before that time, the historians weren’t exactly professional in how they did their work, so there is a case to be made that they mixed their politics into their research. It still happened after WWII, but a few of them decided they should treat old texts in a more objective manner. Once they did, they found they had trouble explaining the industrial revolution even though it was an obvious bit of history. One could see the evidence of improvements, but their explanations were weak at best.

    An example improvement involving the production of textiles occurs in the earliest decades of the industrial revolution. In some ways it starts before as the steam engine wasn’t the initiator. Programmable looms and water power were enough. The effect of the early improvements increased the supply of cloth and was motivated by the high price of cloth. The result, though, was a drop in price for cloth that did not match perfectly the increased supply. Demand came up part way. Over the course of a few decades of these improvements, especially after steam power got involved, the price of cloth fell dramatically. From a peasant perspective, they could buy more without first earning a larger income. Their purchasing power increased either with more income OR lower prices and for cloth it was the latter. Over time, peasants were able to purchase more clothing of higher quality. The same was true of aristocrats, but it wasn’t such a big deal to them.

    When you are looking at economic growth figures, don’t restrict your attention to an increased wage. Lower prices improve our purchasing power on a stagnant wage, thus they count. In the earliest days of the Great Enrichment, it was mostly price reductions through supply growth that mattered to the poorest. All the aristocrats really saw were merchants suddenly becoming wealthy. What would a nobleman care if the price of food dropped by a factor of 20? They weren’t in the markets exposed to the prices. The peasants and bourgeoisie were. The lowest ranks were the ones that were benefiting the most from improvements to the necessities of life.

    In pure numbers, one can’t get 3% growth if the peasants are growing at 0.5%. There are too many peasants weighing down the average back then. Remember that the peasant class vastly outnumbered everyone else in 1700 except among the Dutch and English where the bourgeoisie were a bit more numerous. Oddly enough, the enrichment started with the Dutch and spread to the English.

    I’m all for faster improvements, but I get annoyed when progressives fail to notice that the ONLY method that has been proven to work to the advantage of the poor is the long, slow slog of incremental economic improvement. Fortunately, there is no reason to believe the haul requires 5 to 10 generations anymore. The South Koreans picked themselves up after the end of the Korean War in about one generation. They did it not from our charity or their central planning. They did it by adopting the Bourgeois Deal hammered out in the West over many more generations. There were hiccups along the way, but THEY did the heavy lifting.

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  62. The best argument I know for keeping the Estate tax low or non-existent is that the tax itself motivates the rich to game the rules to ensure their wealth passes to their children. Obviously they could do the same with no tax, but that particular incentive won't be there.

    Is it worth it? Hmm... I think it should be seriously considered. Cheating incentives should be limited as best we can manage.

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  63. In the real world improvements come in both small increments and large leaps. Occasionally a large leap makes pointless a whole series of small improvements in the recent past, making a certain type of personality grieve over wasted efforts. In manufacturing planning, of course such events generate a lot of finger pointing.
    I think when I support incremental improvement I am in no way denying the chance of leaps, and in no way do I NOT wish to see great leaps of improvement. I do recognize the additive value of a series of 1 and 2% improvements. If everyone in a group effort found a 1% improvement, in almost any case the outcome would be good.

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  64. So ask yourself if there was no coal in Wales or England, what would the industrial revolution have looked like? Would it have moved into the industrial "eco-space" of America and maybe China or Poland? Would it have "moved" at all, or would it have to be re-created, autogenesis, maybe not in America, but the other places?

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  65. A.F. Rey3:02 PM

    I loved it how Trump said the other day in Michigan: "Finally, no family will have to pay the death tax. American workers have paid taxes their whole lives, and they should not be taxed again at death--it's just plain wrong."

    Only about 5000 families were subject to the estate tax in 2014--on estates worth more than $5 million. Today, the first $5.45 million is exempted.

    I think Trump has a very narrow definition of who "American workers" are. ;)

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  66. Coal is just one more of the material suggestions for what made the industrial revolution happen. The numbers don’t really work, though. The enrichment started before coal mining really took off. If Wales and England had been coal deficient, they would have purchased it elsewhere or found substitutes. Most likely they would have paid more and bought it elsewhere.

    I strongly doubt industrialization would have started anywhere else except Britain whether coal was there or not. What matters most to the revolution was an environment where people offering trade-tested betterments were honored for doing so and mostly free to make a go of it. In most other places in the world, they would have been stymied by the aristocracy AND the peasantry. Small improvements might burst open into large ones and threaten existing power structures. Princes and Priests didn’t like that risk, so it wasn’t hard to convince them to shut down those options. Peasants have a habit of being quite conservative too, since they traditionally lived close to the edge of starvation and disease. Creative destruction to us sounds like destruction to them. Even worse, though, what we think of as innovation attempts might to them sound like attempts to dodge Real Work. [There is a story floating about relating what Thomas Lincoln thought of his son Abraham’s desire to learn to read, write, and study. Abe was needed for work on the farm and for neighbors to generate money for the family. Where was the time for an education, hmm?]

    As best I understand it, the change among the peasantry occurred due to a change in the way they approached their faith. Some accepted that it was not their place to whine about their place in the Great Chain of Being. Bear your cross with dignity. Some few were taught tolerance, though, and that working their Gifts to improve lives in this world was an act of faith. Enrichment caught hold among the tolerant bourgeoisie who were NOT burdened overly much by an aristocracy and that converted some of the peasants who could move up in a society not fully trapped by class/caste chains.

    I’m not a believer, so I don’t know the religious history. What I’ve read speaks of the radicals of the Reformation who came after Luther and chose to flatten the hierarchy of their church governance. Anyone willing to take a risk like that when they believed their souls were on the line might not think it such a large step to become an English Leveller. If they bring with them into the market a belief from faith that they are responsible for bettering their souls in this life, they might not think it such a large step to become a creative destroyer. I’m not a believer, but I can see how a spilling-over of sacred pursuits could make the heart sing and snuff out generations of tradition. I suspect that is what happened and it happened only where the conditions were right.

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  67. LarryHart4:45 PM

    Jumper:

    Who sharpens scissors anymore? Who repairs toasters? Shoes? Socks?


    In my town of Arlington Heights, Illinois, there exist both a watch repair shop and a shoe repair shop that I frequent as much as I can so that they don't go out of business. Both are an absolute pleasure to do business with and chat with the proprietors.

    Of course, as you can probably guess, those proprietors are old men who have been doing their thing forever, and who make my late father look young. I don't hold out hope that either shop will outlive me.

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  68. LarryHart4:48 PM

    Jeff B:

    I've yet to see any convincing evidence to support the "incremental improvement" argument, which I've heard before. Sure, the economic wheels made the country and world more prosperous, but those on the bottom saw little of it. If the rest of the economy improves 3% per year, and the lowest rung only 0.5% or less, that's still dirt poor, and getting poorer.


    I'm partial to Thomas Paine's view that society owes compensation to those who are made poorer by a system that disenfranchises them for the greater good. Not as charity, but as fair exchange for a taking.

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  69. For the sake of the topic of this thread, what the feudalists should be doing if they had a lick of sense is surrendering to mere enrichment. Let go of the reins of power and become MUCH richer and MUCH more admired. The peasants of the world have given up too and are joining the bourgeoisie. Since our clade is fickle and divided, there isn’t much point in trying to rule us when we are our own largest source of annoyance. It is best to stay out of the way of mobs on the field and see what happens from the safer sidelines.

    Seriously. Trillions are just the start. Once we get full buy-in to the Bourgeois Deal from the billions of people formerly excluded, we will remake this world. We already have partial buy-in, so prepare for the flooding tide.

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  70. Alfred. The Renaissance - centered in Italy, was not enough: it got co-opted. The Enlightenment - centered in France - was not enough: it became theoretical and pedantic. The Reformation was not enough: centered in Germany and Switzerland and Holland, it honored hard working bourgeoisie, but not the questioning of guilds and authority.

    The Scots added an idealization of the mechanical workman and the English Puritans who chopped a king justified it in ways that declared limits to power and demands for fairness. Yet even those only unleashed the first phase of the Industrial revolution. You needed a full rebellion, In America, to deeply root a hatred of state imposed monopolies.

    The Enlightenment has been a series of successive — flukes? Or emergent -expected properties? I don’t know!

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  71. Paul SB5:37 PM

    Raito,

    Sorry it took me awhile to get back to you. The new school year is starting and I will be going more into lurker mode.

    "It was mostly a thought experiment. Part of the idea is that some of the bad stuff comes forward from the earlier generations."
    - I had figured as much. The memes of past generations are transmitted, however imperfectly, to each new generation. To have something like Communism work you would have to eliminate old memes that glorify aggression, competition, inequality and arrogance - pretty tall orders. My point about the artificially produced humans was that even if you could wipe the superstructural board clean, you still have a set of genomes that are full of contradictions, like high oxytocin sensitivity that on the one hand makes people warm and caring but on the other hand can make them insanely jealous. Without some serious tweaking of the genome, which would require self-knowledge we are like decades from, and doubtless not just a few, hominids are just not built for it. But then, I don't think we are built for unrestrained capitalism, either, or else alpha male pheromones would reduce the testosterone levels of beta males to near-zero and there would never be peasant revolts, Occupy Wall Street, or even Departments of Justice.

    I tried to read those articles you linked to, but ran out of time before getting too far into them. You are right about things coming out largely as expected. I thought one of the more memorable lines was where they mentioned that the wealthy tend to be more socially liberal because they really don't care who the peasants choose to marry. It is the lower classes who get really uptight/conservative about social issues. The upper crust are mostly interested in the money.

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  72. Alfred,
    "The best argument I know for keeping the Estate tax low or non-existent is that the tax itself motivates the rich to game the rules to ensure their wealth passes to their children. Obviously they could do the same with no tax, but that particular incentive won't be there."

    If that's the best argument, I'd hate to hear the worst.

    "The best argument I know for not having laws against rape is that the law itself encourages the rapist to cover their tracks. Obviously they could do the same without the law, but that particular incentive won't be there."

    Not seeing the logic there. Not seeing any logic there.

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  73. AF Ray,
    "Only about 5000 families were subject to the estate tax in 2014--on estates worth more than $5 million. Today, the first $5.45 million is exempted."

    Interesting. $5 million is a fairly low amount, on the scale of "rich", allowing for real-estate, companies. I mean, it's not income, it's overall net value. Yet only half of one percent of estates qualify.

    It brings up a thought. There's so few people that many of the more complex laws are trying to fence, that they could be individually named.

    When you look at all the complexity of the tax system(s), I sometimes wonder if it would be more effective to have a separate tax system that names who it applies to, and specifies their reporting and taxation obligations, customised to their individual circumstances; with individualised restrictions on what financial structures they can and can't use, etc. Then a second, vastly simpler tax system that applies to the remaining millions of us who can't play games with loop-holes, company structures, trusts(*), off-shoring, etc.

    (In essence, turning the rich and especially ultra-rich into "second class citizens". Or at least recognising that if we're going to have lords, we might as well give them title.)

    *(I'm not saying "people with trusts are super-rich tax avoiders", I work for a small trust. But like complex company structures, there are those who are using it for the purpose it was intended, and those at the very top who can manipulate it to avoid tax. By naming them individually, you say "This law can't apply to the following 137 people, instead here are their individual laws...")

    I know, in reality such a system would be quickly co-opted and gamed as much as the current one. But at least the rest of us wouldn't have to deal with the complexity of laws written in an attempt to prevent three particular corporations in the entire country from manipulating a particular loop-hole, without just biting the bullet and naming the three.

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  74. Paul SB6:05 PM

    Dr. Brin,

    Do you remember what I wrote ages ago about seeing history like a lawyer vs. seeing history like a statistician? The lawyer looks at history for precedent, to justify future action as conformity to some past event. The statistician sees history as trajectory. If there were a good way to quantify freedom, perhaps you could make a graph of relative freedom through human history. Periods like the Italian Renaissance, the Reformation and the Enlightenment would show a rising trend, though not without a few downward dips. I imagine similar graphs of both standard of living and income equality would show the same trends. Violence would be negatively correlated, while the relative proportion of law enforcement to population would be positively correlated. Any other synergies you can think of?

    The important thing is that the trend is toward improvement across the board. The doomsayers are all walking down the up escalator (this includes our Iroquois Boy, who probably knows he is making apple/orange comparisons, makes no acknowledgement of what the Iroquois are most famous for, and made no response to terminology someone who really knew what he was talking about should have recognized - or at least Googled - but that's a different soapbox).

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  75. It's not that the estate tax forces rich folks to squirm to avoid it. It is that the ET causes so many of them for form charitable foundations that choose to act on some part of the needs horizon that government thereupon may be able to step back from.

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  76. Freedom, money and power are fungible in my view.

    On special dispensation to treat family inheritance differently from capital gains, there is precedent in special property law such as community property laws in some states. Which brings to mind I read that under Sharia law men do not get property their wife brings to marriage, the women retain it, and that Islamic immigrant women are horrified when they settle in those states.

    I say index long term capital gains to inflation and tax inheritance thusly.

    As far as our Iroquois booster I have certain sympathies but I do believe a world population of half a billion would still theoretically support penicillin, dentistry and Wikipedia.

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  77. raito7:59 AM

    Yes, I know onward has been called...

    A.F.Rey,

    There's times where my wife and I will be arguing, and one of us will stop and say, "Hey, we should be arguing with facts!" (the advantage of having married another engineer)

    Dr. Brin,

    Yes, ancedotes disprove universalities. And the plural of anecdote is not data. But data is the sum of all anecdotes.

    LarryHart,

    I was listening to some commentary on the Milwaukee School District the other day. Milwaukee has some of the widest choice available as far as where children go to school. Traditional local school, open enrollment, charter schools, private schools, homeschooling, the whole lot. Only 20% of children there attend their neighborhood school. And you know what? Nearly every school's population is overwhelmingly of a single race. So choice doesn't seem to be an answer. One good bit about the analysis is that sending poor students to school with rich students doesn't affeect the rich students much, but does positively affect the poor ones.

    Alfred Differ,

    Watch an old episode of the Honeymooners. Even accounting for the idea that you couldn't show a bathroom in the 50's, the Kramdens line in 2 rooms. The only place to sit is at a round table with 4 chairs.

    Contrast this with Muir's idea of 'this boy's room', a movie trope mostly from the 80's where there's always a pan across the boy manin character's room. Look at all the stuff!

    And it's true in my life, too. My children have an awful lot of stuff compared to what I ahd growing up, even though economically the situation is about the same. Even my childhood friends whose parent's were considerably richer didn't have that much more stuff.

    Robert,

    Re: estate tax. Don't forget en entire caste whose purpose is to symbiotically ensure that fortunes stay intact.

    Paul SB,

    Well, the rich appear to be socially liberal. But they still abhor the nouveax riche because they don't act the same or share all the same values. Rather like the rift in politicial sensibilities between the ricjh in traditional industries and new technology.

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  78. David i hope you don't throw Peter Theil under the bus for his latest weird move. I have to confess his "zero to one" really made me start to see a lot of the points you bring up over and over and now im committed to reading Adam smith because of that book.
    hes some one who shows up in awful ways on gawker for instance which lead me to re-look at what hes said as they made highly inflammatory comments about him. Instead i found someone who's ideas really resonated with me, hes pro govt for projects like Apollo, nor is he's a ayn rand fan at the end of the day.
    my opinion of his siding with trump is he sees opportunity in chaos

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  79. Anonymous5:13 PM

    "Behind every great fortune, there is a crime."

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