Pro Commerce

Barons of the Civil War

It is my thesis that the nouveau ultra riche in America are a source of ongoing  innovation. They reinvest in the technology that made them rich.

Since I didn’t know the origins of many men who made their fortunes during the Civil War, I was happy to read a recent book by Jeffry Wert on the subject.

Special thanks to Ed Squibb who purified chloroform and ether that was heavily used in the War and the purifying techniques that built his long lived company.

Same with Gail Borden who gave us condensed milk in a durable metal can and a company that lasted into our lifetime.  The War soldiers thank him too. They also thank Philip Armour for similar work in pork and other meat.

John Deere vastly increased agricultural output with his special plow and all the innovations he added to it. This was concurrent with Cyrus McCormick.

The vast growth of shipping both by water and rail gave us Andrew Carnegie, Cornelius Vanderbilt, Collis Huntington and his partners Leland Stanford and Mark Hopkins (and Charles Crocker).

This is also the source of the great Weyerhaeuser lumber fortune.  I gave a talk to the 110 descendents of this wealth back in the 1970’s.

In each case, the innovations that these men created for the Northern Army as their powerful client generated the bases for many fortunes and a number of corporations that survived a century.  

There were more and many were successful innovators whose names did not survive as corporate names.  Wert covers them well.

In honor of the late Rabbi Alan Lew

If you want to read in detail about Alan’s life, there are many references on the Internet.   He wrote five books on his practice. I knew Alan for several decades and loved him.  He practiced Zen at the San Francisco Zen Center, where I knew him. He later became a rabbi and served at a San Francisco conservative congregation where I spent time with him.

I only wanted to pass on one thing I learned from him that may or may not be in his books.

Alan had a way of reading the most significant hebrew prayer, the Shema, that is a fascinating connection to Zen.

To understand what this reading of hebrew is about, one needs to know that Arno Penzias and Robert Wilson, working with a radio telescope at Bell Labs in New Jersey in 1964, detected a microwave radiation at a wavelength slightly less than 3 degrees above absolute zero. This microwave radiation pervades the universe.  This radiation is believed to be the current sound of the big bang creation of our cosmos.

Penzias is related directly to Judaism. His grandfather was a rabbi and his daughter is a rabbi in Safed.

This is the Shema: read the Hebrew  from right to left

 

Sh'ma Yisra'eil Adonai Eloheinu Adonai echad.

The hebrew ‘Shema’ translates as breath, the origin of the word. Also hear, discern, obey, understand.

The hebrew Eloheinu translates as ‘our god’, ‘what we call god’.

The hebrew echad is ‘one’ but also ‘everything’, ‘the now’.

The two quote marks are the name of God that is never said, but is substituted for with the word Adonai.

Rabbi Alan suggests that the Shema should be understood:  that the Adonai we are to listen to is the sound of the universe, the background microwave radiation. The ‘now’ of the universe. The universe is to be heard when we listen to our breath.

So it can be read as: ‘Listen Israel, god is the sound that pervades the universe, it is the great now.’

That works for Zen and Judaism.  If it is of interest to you.

The happiest era

I was eight years old at the end of World War II.  I have lived in the happiest era in human history. My life has been bountiful.  I’ve travelled the world for seven decades in the modern world of global airlines and lived many years abroad. The whole planetary adventure was at a cost of one or two earlier transAtlantic steamship trips.

I’ve owned homes, raised successful and happy children who have raised spectacular children of their own.  We have all had medical confrontations that would have maimed or killed us in the era before I was born. Our health has thrived.

I’ve lived fully in the era and enjoyed telecommunications, computers, private airplanes, a wide range of technologies, the abundance of food and the most exquisite culinary joys ever known to mankind.

I have created many new businesses, including creating Mastercard the basis for the first global currency. Which I used to travel from the old villages of Indian untouchables to open markets with European goods in the most remote inner towns of Cameroon.

I lived in San Francisco, the capital of the hippie world, as a healthy male, during the twenty year sexual freedom experiment.

I uniquely enjoyed the prosperous world around me.  I got to wallow in the abundance. I earned my own living from age 17.   My only financial inheritance was under $40,000 when I was 37 years old. I supported my parents in their old age.  For most of my life I was self employed and did what I wanted everyday and every hour. I had many hundreds of beloved friends (and still have many) and an abundance of fascinating lovers.

Nothing I did has been secret.  I’ve written more than a dozen books based on my experiences and over five thousand blogs.

This has been possible for only one reason: I have lived in America during the most successful commercial period in world history.  The Cold War kept the Marxist anti-American Left out of power in America during those decades.

I believe anyone, with an adventurous nature, born during my lifetime could have enjoyed what I have. My last book was an homage to the sources of America’s commercial triumph. The Most Important Book in Human History.  It explains for all who are willing to listen; the sources of American innovation and greatness. Our meritocracy.

Blessed is he who appreciates what we have, understands it’s exceptional nature, its fragility and fights to protect it for our children.

All that wealth and envy

Interesting that most of the great new wealth of the past three decades is concentrated in the San Francisco and peninsula area.

Since nearly all of these nuevo riche made their money in tech they are doing something not surprising.

The new techie wealth is investing in new technology.  Investing in start-ups and start-up funds. Billions of this new money is going into technical  innovation.  Much of it the area where they live.

That means the new wealth is feeding back into new products, new technology, new pharmacology and the innovative future of America.

This is not a unique situation.  New money in the 1890’s, Rockefeller, Carnegie, Gould, Vanderbilt and Mellon went into new industries that gave us electricity, phones, radio, autos, airplanes and the innovative explosion at the beginning of the 20th Century.

The great Texas oil money, Mecom, Murchison and Hunt went into more oil and the technology that is still the pride of the world.

This new 21st Century tech money is going right back into technology and a bountiful future.

Don’t let the envious Marxists and other Lefties put a damper on everyone’s future health and bountiful lives.

The caravan and decent commerce

This is the beginning of November and a horde of more than 10,000 people are travelling from Central America to the U.S.

Some people have suggested that these people should turn around, overthrow their own governments and create their own decent economic society like ours.

This is where my analysis in The Most Important Book in Human History comes into play.  Few people understand why this horde can not go back and re-create the U.S. The U.S. was an anomaly.

A modern commercial society requires widespread meritocracy.  All Latin American countries have extensive hereditary elites that blocks meritocracy.  I have seen this in Guatemala where the elite all live in one neighborhood.  Nobody knows how to get rid of an hereditary elite. Communists in
Russia, China, Cuba and Cambodia have tried by murdering them.  That seems to have failed.

America was an accident of a large continent and  World War II that promoted meritocracy. England had the far reaches of an empire, where the meritocratic sons were sent to be administrators.  Israel has a unique military that is hi-tech and needs meritocracy.

We have no answers.  Chile may be an example of open commercial markets bringing jobs and modernity to an otherwise traditional ‘patron’ society. Chileans get modernity but no innovation.

No one has an answer, that I know of.

How we got here

The question I am answering is: ‘How did we get to a stage where one-third of Americans believe in more government, more even distribution of income and wealth; and every large city in the U.S. run by unions?’

I am able to trace the change back to the mid-1960’s when mainstream religions (Catholic, Lutheran, Presbyterian, Methodist and Episcopal) became Leftwing advocates.  Their role as champions of America and as rungs on the social-climbing ladder had disappeared. They tried to appeal to the urban immigrant neo-communists and failed because the new base was anti-theist like post war Europe.  The core pro-Americans joined the Baptist, Evangelical and Fundamentalist churches where community was the dominant chord.

Three major changes can be dated to this period. The demise of the the hereditary elite.  The purification of the Democrat Party. The decline in the relative importance of industry in America.

The underlying ground of 21st Century America began during the 1850's. It was the vast immigration of neo-communists from Europe and Eastern Europe (that includes socialists, anarchists, syndicalists, wobblies and the myriad other similar political pathologies). Together they were todays neo-communists.

These immigrants brought the European neo-communist model from Italy, Greece, the Jewish Pale of Settlement in Western Russia and from Prussia.  These people were urban settlers in the U.S. and, over the next century, gained control of the world of academic teaching, as well as the movies, theatre, arts and the intellectual milieu. In the 20th century they came to control nearly all of education and the mass media.

Understanding that the ground of the United States in urban, coastal immigrant areas was neo-communist allows us to understand the question of why this group rose to importance after the 1960’s. They didn't emerge.  They were already in place when other forces disappeared.

The hereditary elite of America was in control of the United States until the late 1950’s.  By 1970 the hereditary elites were weak and unimportant. Replaced by the long underlying ground of neo-communists.

What happened?  America had an hereditary elite from its founding.  Americans escaped its oppressive power by moving West for most of our history.  The elite controlled industry and provided jobs and income to its members via this industrial control.

The end came with World War II where officer status was given to college graduates, a population that was no longer hereditary elite, and to meritocracy in the form of field promotions and the highly technical needs of the military.

By the mid 1950’s the WWII veterans, with meritocratic skills, became the managers of industry and displaced the hereditary elite, destroying the elites ability to give jobs to their own and finance their class.

That absence of hereditary power and dominance also left local political control to the only remaining organized entity in urban areas, the unions. Unions have controlled all urban areas since then with police unions, fire unions and education unions as their power base.

Simultaneously the dominant Democrat Party expelled its racist wing, the Dixiecrats, leaving itself open to slow emerging control of membership by the unassimilated European neo-communists.  By the end of the Cold War, 1992, the anti-communists were also removed from the Democrat Party or died like Scoop Jackson, leaving it entirely to the European immigrant neo-communists.

Concurrent with these postwar changes the dominance of industrial firms in commerce was replaced with non-industrial, technical and service firms. The top firms in 1955 were GM, Exxon, U.S. Steel, GE, and Dupont.

By 1970 the top included IBM. ITT and AT&T.

By the 1990’s top corporations were in Silicon Valley and Hollywood. They became wealthy locales with neo-communists in the movie, theatre, Arts, TV and academia. Over the last half century the media became the major spokespeople for neo-communist America as well as for the guilty nouveau riche of Hollywood and Silicon Valley.

The modern political world is:

• the century long creation of our unassimilated European immigrants who brought neo-communism to coastal urban areas all over the country. They never assimilated. They found work in the non-industrial sectors.
• WWII had consequences that significantly replaced the hereditary elite with meritocratic commercial forces in the post war era.
• A replacement of industrial America after the 1980's with the neo-communist dominated non-industrial, technical, service world of commerce.  
• And changes in the Democrat Party that first purified itself of the Dixiecrats and then the anti-communist wing, leaving itself open to seizure by the neo-communist zealots.

Where we are 2018 August

It is clear to me that I am no longer a Republican.  I have been a Republican since I was president of the San Francisco Young Republicans in 1964. I have worked in one presidential campaign, one gubernatorial campaign and one assembly campaign; all for Republicans.  I was a campaign management trainer for the Party.

Trump has been a disrupter for both parties.  He has shown me that the mainstream media has been a Democrat Party organ since 1964. The Democrats have recently split into the party that wants more incompetent government, and the Venezuelan majority.

Trump has taught us that politics requires the rebuttal by the incumbent, with as much force as necessary to get equal or more time.

Trump has turned around my views on tariff agreements.  I only assumed they were too pro-union and pro-ecofreaks.  They have been consistently bad for the U.S. and used as a development tool.  I strongly supported the WTO as a way around bad tariff deals. But the WTO was ruined with the admission of China, a scuflaw, Saudi Arabia and many countries that have no significant productive sector.

He has aggressively cut back the regulatory state.  Republicans never really did anything on this vital issue.  He pointed out its central importance in a speech in Poland..

He kept his many campaign promises including moving the Israeli embassy to Jerusalem.

He bravely showed us that most elected Republicans don’t accept major changes; he has eradicated decades of bad policy in every area of the bureaucracy.

Trump openly defied the eco-world but never got into an argument with them. Brilliant.

Only a real estate developer could have lived with unremitting years of media hatred and learned to survive it. He showed it is possible.  The mass print media and most network TV are enemies of America.

President Trump has shown that  major departments of the Federal Government are so corrupt they must be totally overhauled: FBI, CIA, IRS, Federal Courts and Justice.

He is cancelling Aid to Africa, which Republicans used to (try) and buy the black caucus; it is a total waste of money. Here and there.

I now understand that the Republican Party is not a conservative pro-commerce party.  It is a party of weak incompetent politicians.

Blind ideology about minimum wage

This blog was hard to write.  The subject makes me mad. When I talk to the swarm of San Francisco Lefties around me, I find that they refuse to look at an abundance of national data (1)(2)(3) collected regularly for 50 years that explains clearly the effect of a rising minimum wage.  

For a retailer, doing business in America, the rent is 3 to 5% of gross sales. Direct labor costs are 20 to 25% of gross sales.  I know of some restaurants that pay 7% of gross sales in rent but they have part of that tied to net profit so the landlord has an incentive to help the business survive.

My Lefty friends explain all the empty retail stores around us (in San Francisco with a $15 minimum wage) as caused by ‘greedy landlords’ because that fits Lefty ideology.  Landlords raising rent can have a direct effect of less than 1/5th of the cost of labor in a business. These Lefties can’t see the effects of ideologically blind governments in raising labor costs and putting retailer’s out of business.

The whole point of this obvious and measurable data is that when a landlord raises the rent and drives a company out of business the landlord has the option of lowering the rent in the future to correct for a mistake of raising the rent too high.  Rent is a small percent of a business cost but it can close a business quickly. A rent rise has less than 1/5th the impact on a business that a rise in labor costs have.

When a government raises the cost of labor by raising the minimum wage, the business is done, closed. To start again it must leave the area controlled by the government.  There is nothing a landlord can do to bring back the business closed by a high minimum wage. The business must leave the jurisdiction in order to restart.

Three additional data points that are vital.  

• San Francisco and many other jurisdictions raised the minimum wage from $11.00 to $15.00, a 36% increase.   If direct labor is 20% of sales it goes up to 27% of sales after the increased minimum wage. If direct labor is 25% of sales labor costs go up to 34%.

Few retail businesses can survive direct labor costs this high.

• Direct labor costs do not include social security withholding, vacation and sick pay, medical insurance, pregnancy leave and training costs.  These other costs are one third more, 33%. So base labor costs for a retail business goes from a range of 20% of sales to 26% When adding the minimum wage, and rise to a range of 25% to 33% of sales when overhead is included. Every business person knows this. Add in the 36% rise in minimum wage and the range of labor cost goes from a low range of 26% of sales to a high of 33% of sales;  the new total of minimum wage rise and overhead brings the range to 35% of sales and 45%.

Don’t expect many retail stores to survive those high labor costs of doing business.

• Labor and salary costs in a business are always tied together.  The lowest paid worker may get 2/3rds of the next higher paid worker and that next higher paid worker with many years on the job may get 2 times the pay.  A supervisor may get 2.5 times the lowest paid worker and a manager my get 3 times the pay of the lowest paid worker.

When the minimum wage goes up, the rest of the wages in the business go up too.

These are the realities of 3.5 million retail stores in the U.S.  This is real data. A rise of the minimum wage means the end of many retail stores that have low end workers.

Glide and Cecil Williams

Glide is in the news these days and I have a unique vantage point.

Glide is Glide Memorial United Methodist Church of San Francisco with its most famous minister, Cecil Williams and his wife Jan Mirikitani.  Cecil and Jan are in a head butting fight with the Bishop of the United Methodist California-Nevada Annual Conference, Minerva Carcaño.

The history: Three Methodist ministers were invited by Bishop Tippett in 1962 to create a dynamic new church form in a vital urban center.  The first, Lew Durham found the other two, Ted McIlvenna and Don Kuhn. The time was fortuitous. Within three years San Francisco became the center of the hippie revolution as well as the Gay liberation movement. The three original ministers had active community organizing projects underway and no interest in being traditional pastors. They found and installed a young black activist, Cecil Williams.

Glide, in 1962, was an endowed church with a six story office building (in photo office building is attached to church), a hotel one block away and a portfolio worth several million dollars.  It had been created in 1931 by Lizzie Glide, the widow of Joseph Glide. Joseph had been a cattle rancher who owned land in Kern County California where large oil deposits were found.

Glide’s trust document was created on behalf of the Methodist Episcopal Church South.  A vestige of the Methodist split before the Civil War over slavery; the Methodist Episcopal Church South became the United Methodist Church in 1939.

Much of the Glide portfolio consisted of money from the sale of various properties in California that were owned by the United Methodist Church. This money was melded into the Glide portfolio.

I became Glide Treasurer and Business Manager in September 1970, invited by Don Kuhn and the Board.

One of the tenets of the Methodist Church is that pastors are appointed and rotated to individual churches by the local Bishops and Superintendents.  One goal of the rotation is to keep the ministers from becoming too controlling of the congregation or too controlled by the congregation and to avoid corruption and adverse attachments.

When it was time to move Cecil Williams he wouldn’t move to another church. He was black and closely tied to local politics.  He couldn’t be moved by the Methodist Church. He soon married his secretary and gained complete control over Glide and its Board by 1980.  He was forced to retire at age 70 in 2000. He never did retire and no ministers were comfortable under his control in the next 18 years.

At this point he claims Glide Church is his. The Glide Memorial Trust documents make it clear that the church and all it assets belong to the United Methodist Church.  

There may be a legal battle.  Cecil Williams will lose. There is no reason in trust law that the original trust document should be changed.

Darwin observed in commerce

The Darwinian model of random variation with selective application of survival, works fairly well in commerce.

If we look at a shopping street with large buildings that have offices in them, we will see a steady change over time as the foot traffic changes, as the demographics change and as tastes replace one type of business with another.   Technological change also plays a role.

The source of change is primarily innovation in the society and it is most often focused around new businesses.  A pastry shop becomes a flower shop as the Italian immigrants are replaced with a gay population and the flower shop is replaced with a children's clothing shop as married couples move into the safe neighborhood. Then a boutique shoe store. Then a Radio Shack opens on the street as electronics become part of the social fabric, lately giving way to a watch retailer and then a smart phone shop.

We can watch the evolution of automobiles under Darwinian conditions.  In 1920 there were dozens of car factories in the U.S. including steam cars, electric cars and reciprocating gasoline cars.  There were fat tires, skinny tires and balloon tires with tubes. By 1935 many companies had consolidated and many types of cars were gone.  A few major technologies became dominant as more people used cars and simplicity of repair and simplicity in driving became ascendant.

Headlights and starting motors were being standardized and ignition timing was being automated.  

Watching autos evolve has been a process of seeing technologies that failed being dropped and tastes of consumers slowly dominating.  As women and families became buyers, and roads became highways, safety and reliability became selection factors. By 1960 automatic transmissions with a ‘park’ feature and gasoline engines became dominant.  Starting motors were universal.

Imports improved the entire auto industry in the 1970’s as Japanese quality and durability became norms while English, French and Italian cars, with obscure engineering elements, lost importance in the world market; and Communist cars disappeared altogether.

The next major evolution came with the hybrid engine in the late 1990’s and became almost universal.  It combined the high torque of electricity at starting speeds with high speed reciprocating engines. Much like the evolution of railroad diesel-electric engines in the previous century.

There are two aspects of Darwinian evolution that have bothered me in the biological world.  I asked Stephen J. Gould about both and he changed the subject because he didn’t know the answer.

‘What is the minimum size of a sub-species that can survive long enough to become a separate species?’  The problem is that too small a group will permit fatal genes to become dominant.

Concomitantly, ‘What level of new gene inflow can help a small sub-species survive?’

In the world of commerce I was introduced to a 1972 Xerox Parc idea of a small portable computer model that was supposed to become the future ‘laptop’.  For that to happen, nearly 30 years later, required a dozen elements including the Internet, Google and wi-fi.

In Darwinian terms: ‘for the subspecies to become a new species required a new very rich environment where many separate survival modes developed and were consolidated’.  Probably the way a wolf became a dog.

In terms of inflow to a weak sub-species; I’ve watched as a few international businesses expanded to new cultures, new nations with new kinds of people in management.  Like IBM and Sony where the expansion over a heterogeneous set of environments, nations, created a new vitality and far greater survival capability. Because of the inflow of new genes, a new diverse membership in management, survival was extended.

Commercial evolution has many similarities to Darwinian biological evolution.

I think we can learn about the biological model from observing the commercial model.