Outstanding Piece On What Today’s Economic Gloomsayers Are Missing

August 11, 2014 / / No Comments

Outstanding new op-ed by the best living economic historian, Joel Mokyr at Northwestern: What Today’s Economic Gloomsayers Are Missing.

There is nothing like a recession to throw economists into a despondent mood. Much as happened in the late 1930s. The economic growth experienced through the 20th century, they tell us, was fleeting. Our children will be no richer than we are.

 

What is wrong with this story? The one-word answer is technology. The digital codification of information = reinvention of invention. [Terms] like ‘IT’ don’t begin to express the scope of the change [array of] tools that the digital age places at science’s disposal.

 

The consequences are everywhere, from molecular genetics to nanoscience to research in Medieval poetry. As science solves problems that were not even imagined, inventors, engineers and entrepreneurs are waiting in the wings to design new gizmos and processes based on the new discoveries that will continue to improve our lives.

 

The economy may be facing some headwinds, but the technological tailwind is more like a tornado. Fasten your seat belts. So: If everything is so good, why is everything so bad? Why the gloominess of so many of my colleagues?

 

[GDP and productivity] work for a steel-and-wheat economy, not [ours], as they mismeasure the contributions of innovation to the economy. Many new things are expensive to design, but copy at low/zero cost: They contribute little to GDP even if the consumer welfare impact is large.

I highly recommend Mokyr’s books: The Lever of Riches: Technological Creativity and Economic Progress, The Gifts of Athena: Historical Origins of the Knowledge Economy, and The Enlightened Economy: An Economic History of Britain 1700-1850. I also highly recommend Mokyr’s recent podcast with from Nov 2013, an hour of genius.

Source Tweets: 1,2,3,4,5,6,7,8,9,10,11,12,13,14

The 40 Year Collapse Of Trust In Print News

August 11, 2014 / / No Comments

Something I believe that nobody I know believes: Woodward and Bernstein Watergate coverage precipitated the 40yr collapse of trust in print news. That long slow slide of trust can be seen, among other places, in Gallup polls over the years. After Nixon resigned 40 years ago this weekend, Washington Post Watergate coverage became exemplar for the entire next generation of reporters. The political press became obsessed with unearthing scandal, which metastasized throughout print journalism, gunning for Pulitzer bait.

There are clearly scandals that need to be unearthed, like Watergate, but endless scandal frenzy is exhausting and demoralizing. Particularly when applied indiscriminately across the news landscape, and particularly when extrinsic press motivations are so clear. Irony is we now know Woodward and Bernstein less reported Watergate than had the story fed to them by Mark Felt, a partisan in an internal FBI battle.

I think the 40 year echo effects of Watergate have more to do with the existential crisis of newspapers than anyone would ever admit. As news consumers, the endless barrage of scandal, tragedy, and conflict has real psychological effects. They make the world seem worse than it is.

Followup reading that provokes thought: Avoid News, The Information Diet, You Can’t Not Believe Everything You Read. Also the book “Breaking The News” by is thought provoking and recommended. Last but not least, Steven Pinker on the broad perspective of our era.

Source Tweets: 1,2,3,4,5,6,7,8,9,10

Lessons Learned From Large Institutions in Financial Crisis

August 8, 2014 / / No Comments

Lessons learned by managers and shareholders of large regulated financial institutions for the next financial crisis: There is no risk of individual executive criminal prosecution whatsoever. Bailouts are guaranteed, particularly for bondholders, for all but the weakest members of the herd.

The one thing that will get punished is acceding to the government’s request/demand for stronger companies to buy weaker companies. Ultimate fines will be levied against your shareholder base eight years in the future, not your shareholder base when the sins are committed. “Too big to fail” institutions will be allowed to become bigger than ever, increasing their safety buffer for next time.

And for bonus points, regulatory barriers against new competition will be raised, not lowered, further entrenching incumbents.

AND: “Too big to jail” is real, according to the Attorney General of the United States.

AND: Regulators on whose watch the last crisis happened, will be allowed to become even bigger and more powerful.

AND: All three government branches — executive, legislative, and judicial — are out to lunch on oversight.

Followup reading, from US Federal Judge Jed Rakoff: http://www.nybooks.com/articles/archives/2014/jan/09/financial-crisis-why-no-executive-prosecutions/

Followup viewing: Both nonfiction “Too Big To Fail” film and fiction “Margin Call” film are excellent at capturing the 2008 crisis.

Source: Tweets – 1,2,3,4,5,6,7,8,9,10,11,12

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Lyft Line Launch

August 8, 2014 / / No Comments

We @a16z are very excited about the launch of Lyft Line, and I want to explain why!

Lyft and Lyft Line are an archetypal example of how Silicon Valley is going straight at the hard problems, in this case transportation. A growing number of people know about the amazing consumer utility and convenience created by “a ride on demand whenever you want”. And in parallel, services like Lyft make it possible for people who may otherwise not be able to make car payments to keep their cars.

In many cities, this results in a triple win: Consumer convenience, driver economic benefits, and improved business/tourism environment. But beyond that, as Lyft and its peers grow, ride sharing becomes increasingly convenient and affordable as *alternative* to owning a car. This leads to environmental benefits: Fewer cars needed -> less natural resource utilization; Network efficiency -> fewer miles driven.

Online supply/demand matching eliminates the need for cars-for-hire to drive around & look for riders. Network optimization in bits not atoms. Lyft Line is especially environmentally friendly: Facilitates multiple people riding together on the same route, still with high convenience! Everyone in world wants equivalent to upper-middle-class American lifestyle. Services like Lyft make it possible without destroying planet.

Few new techs deliver so much to so many: riders, drivers, car owners, cities, environment. And to think it just looks like an app :-). Closing note: Lyft Line is the classic “peace dividend of smartphone wars” — not possible pre universal smartphones.

Source: Tweets – 1,2,3,4,5,6,7,8,9,10,11,12

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Pruning Brands and SKUs to Encourage Company Growth

August 7, 2014 / / No Comments

Really interesting business experiment starting at Procter & Gamble: P&G “will sell or exit 90-100 mostly minor brands in bold attempt to refocus the business behind its 70-80 remaining best-selling brands. Less will be much more,” P&G CEO told analysts. “The objective is growth… We’re going to be much more agile and adaptable.”

I think a majority of big company CEOs think they should do this in their own companies. But few ever pull the trigger. It’s too scary. A common thing you hear at big companies is “SKU proliferation” — the sheer number of items for sale. It bloats the organization and makes action harder.

Steve Jobs legendarily used the strategy of cutting brands and SKUs for Apple’s turnaround. But few CEOs have followed suit in last 15 years. Like Steve, AG Lafley at P&G is one of the most respected CEOs in the world. If this works for P&G as well as it did at Apple, I think the odds go way up that many big company CEOs will pull the trigger on the same strategy. It could be transformative for business.

The stakes are high: Whether, and how, big companies will be able to grow their businesses and their number of workers in the future. Further, whether/how big companies will invest in new product creation in the future. Paring the old can be staging for creating the new.

Of course, Larry Page is busily ignoring Steve Jobs’ advice to do the same thing at Google! And Jeff Bezos is furiously expanding Amazon. There are no absolutes, but I think it’s very healthy for every big company to consider: How to best set up to grow and create new things?

Source: Tweets – 1,2,3,4,5,6,7,8,9,10,11,12

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The International Socialist Review In 1964

August 4, 2014 / / No Comments

The answer to the last last tweetstorm is: 1964, in the International Socialist Review. Every single argument made by today’s “technology will eat all the jobs” brigade is in there, from 50 years ago. The claim that “this time is different”, that we finally reached the tipping point where the Luddite Fallacy would come true. Including the demand for massive additional government intervention in the economy to correct the resulting inherent structural flaw.

Of course, since 1964, an enormous number of new jobs have been created and the quality of life in the US is way up at all income levels. Identifying the fallacies and flaws in logic in the 1964 manifesto given the 50 years that followed is an interesting exercise and I propose, identical to identifying the fallacies and flaws in logic in the equivalent arguments today. Perhaps the most interesting change in the era: Advocates then were proud to call themselves Socialists. This is less so today, history is speaking to us.

Source Tweets: 1,2,3,4,5,6,7,8

Manifesto On “Technology Eats All The Jobs” Guess Who Wrote It and When

August 4, 2014 / / No Comments

Here is a manifesto on “technology eats all the jobs” which I did not write. Guess who wrote it and when.

Computers and the Internet result in a system of almost unlimited productive capacity which requires progressively less human labor. The technology revolution invalidates the general mechanism so far employed to under gird people’s rights as consumers. Potentially unlimited output can be achieved by systems of machines which will require little cooperation from human beings.

 

As machines take over production from people, the men and women who are displaced become dependent on minimal government welfare. The existence of this paradox is denied or ignored by conventional economic analysis. Capitalist system designed to produce increasing quantity of goods; distribution of purchasing power would occur almost automatically.

 

Continuance of the income-through-jobs link now acts as the main brake on the almost unlimited capacity of a tech-based productive system. Adequate distribution of goods plus services, not how to increase production but how to distribute the abundance created by technology. Underlying cause of unemployment: the capability of machines is rising more rapidly than the capacity of many human beings to keep pace.

 

As a first step to a new consensus it is essential to recognize that the traditional link between jobs and incomes is being broken. We urge that the government undertake an unqualified commitment to provide every individual with a basic income as a matter of right. Distribution of abundance in technological society must have criteria strikingly different from economic system based on scarcity.

Bonus points: Identify the publication, and its ideological affiliation in which this manifesto first appeared.

Source Tweets: 1,2,3,4,5,6,7,8,9,10,11,12,13

Founding Fathers Arguably Designed US System Specifically To Be Dominated By Moneyed Interests

July 14, 2014 / / 5 Comments

A common thing one hears in the US is the “Political system is broken; Founding Fathers never intended politics to be dominated by moneyed interests.” But in 1776, voting was “restricted to property owners—most of whom are white male Protestants over the age of 21″. In 1789, George Washington was elected President. “Only 6% of the population can vote.” Not until 1856 was voting expanded, even to all white men (eliminating property ownership requirement).

In 1868, voting was extended to former slaves (at least in theory), but still explicitly defined as male. Women could first vote starting in 1890 in Wyoming! In 1920, the 19th Amendment passed, giving women the right to vote throughout the US. Throughout the late 1800s and early 1900s,there were lots of battles for and against the rights of other groups e.g. Native Americans and immigrants to vote. Of course, the massive battles in the 1960’s to extend practical right to vote to African-Americans; some battles continue to this day.

Not until 1971 (year I was born) did the voting age get lowered to 18, despite 18-21 year olds being conscripted and sent to war throughout. Founding Fathers arguably designed US system specifically to be dominated by moneyed interests, aka white male Protestant landowners. We have far broader-based voting and political participation today than ever before, due to hard work by many activists over 200 years and we’re still by no means perfect. There is lots of progress yet to be made. But we’re leaps and bounds ahead of 50-100-150-200 years ago and no, I’m not watching the World Cup finals :-).

[tweet https://twitter.com/pmarca/status/488432907808026624 align=”center”] [tweet https://twitter.com/mcguirejpatrick/status/488428845750431744 align=”center”] [tweet https://twitter.com/StevenEJohnston/status/488429115368689665 align=”center”] [tweet https://twitter.com/danhudson007/status/488429219567763456 align=”center”] [tweet https://twitter.com/prchovanec/status/488429559256076288 align=”center”] [tweet https://twitter.com/josephjeong/status/488431360323764224 align=”center”]

Source Tweets: 1,2,3,4,5,6,7,8,9,10,11,12

Ten + One Ways to Grievously Damage Your High-Growth Tech Startup and Silicon Valley in the Process

July 9, 2014 / / No Comments

Ten + one ways to grievously damage your high-growth tech startup, and Silicon Valley in the process:

  1. Only hire, and only train/motivate/incent your managers to hire — don’t optimize efficiency, don’t do performance management, don’t fire.
  2. Founders, sell too much of your own personal stock too quickly, alienating your employees and questioning your long-term commitment.
  3. Let private stock sales by employees get out of hand: create hit-and-run culture and take on burdens of being public before going public.
  4. Dilute the s*** out of cap table: be sloppy and undisciplined w/stock grants to early employees, plant morale land mine for later employees.
  5. Maximize absolute valuation of each growth round: make later rounds harder and harder to achieve, until you trigger a disastrous down round.
  6. Let non-SV investors suck you into terrible structural terms on growth rounds: guarantee massive trauma if anything goes slightly wrong.
  7. Go public too soon, before you’re a fortress, before you can withstand all the assaults: ending in stock price death spiral and train wreck.
  8. Pour huge money into overly glorious new headquarters, signaling to employees “we’ve made it, we’re amazing”, then repeat two years later.
  9. Confuse conference circuit and party scene with actual work. Encourage alcohol and drugs, party culture in company, value ballers over nerds.
  10. Refuse to take HR seriously: allow terrible internal manager and employee behavior to catalyze into catastrophic ethical and legal crisis.
  11. And the one that will actually kill you: Assume more cash is always available at higher and higher valuations, forever.

Source: Tweets – 0,1,2,3,4,5,6,7,8,9,10,11

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An Answer to Critics Who Say that Silicon Valley Isn’t Building/Funding the Right Things

July 9, 2014 / / No Comments

One persistent canard from would-be SV critics is “Silicon Valley isn’t building/funding the right things, aka solutions to big problems.” There are six logical problems with the false choice of “make trivial apps for 20-something SF hipsters” vs “do things that matter”.

First, “make trivial apps” vs “do things that matter” are not actually in conflict; there’s plenty of room and plenty of money to do both.

Second, it’s often hard to tell which is which up front. Almost all big world-changers were dismissed by critics as trivial at first.

Third, observer bias: Only read consumer tech blogs, only go to consumer tech conferences, think SV only works on consumer tech. Founders of non-consumer-tech startups routinely find same pundits mounting criticism have little interest in hearing about other domains. This is exacerbated by the SF-centric consumer tech party scene–other domains in SV don’t have the same party culture, just nerds at work. New arrivals to SV get sucked into SF party scene, and never make it to the South Bay industrial parks where everything else is happening.

Fourth, battling cynical critiques: Founders who articulate the big vision for changing the world get called arrogant and vainglorious. Both criticisms are leveled with no cognitive dissonance: Founders are either not pursuing big ideas, or are out of control egomaniacs if they are.

Fifth, subtext often that communication tech/apps in particular somehow aren’t important or don’t matter, vs energy, education, etc. I think this is 100% incorrect: Communication tech/apps including the Internet are the foundation for everything else we’ll do for 100 years. Why? Communication is the foundation of collaborative work, which is how all the important problems get solved. People working together.

Sixth: Anyone who thinks SV can be doing more/better/different, come join us and participate in building new things, products, companies! Jump in, the water’s warm! SV draws talent from all over the world and all walks of life; nothing preventing any critic from contributing. As my old boss Jim Barksdale used to say, “We have plenty of uniforms your size.” Many opportunities to contribute and make a difference! And, of course, tech startup ecosystem now expanding worldwide. Opportunities to contribute from anywhere abound, linked via Internet.

Source: Tweets – 1,2,3,4,5,6,7,8,9,10,11,12,13,14,15,16,17

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