I’ve followed the Ayn Rand, Objectivist and Libertarian world for over half a century. D. Schatz recently led me to a book by Paul Rosenberg. It is a contemporary update of that world. Rosenberg paints a fictional vision in a cyber free-market fantasy.
I’ve had a great deal of experience that relates to the viability of this cyber vision.
- I was the creator of the world’s first universal currency, Mastercard.
- John Draper (Capt’n Crunch) is an old friend of mine. Crunch was the father of phone phreaking and taught Steve Wozniak and his friend Jobs how to build blue-box phreaking equipment. John later became an important code writer.
- Bill English who ran Xerox Park, the foundation lab of the modern home computer, was a friend of mine. I visited his lab at a pivotal point in its development.
- I was the founder of the Briarpatch Network and manager for a decade. The Briarpatch had over 1,000 hippie small businesses in the San Francisco Bay area that formed a loose community of businesses that helped each other. The Network failure rate was under 10% over three years compared to 80% in the conventional market. The San Francisco Bay Area was the prime location of new business startups in the U.S. over that same 20 years.
- The Briarpatch included many tech start-ups in the 1970’s including the HomeBrew Computer Club in Palo Alto. A breeding ground for the future Internet.
- I knew many of the prime movers in the hacking world who attended Stewart Brand’s first hackers conference in 1984.
- I was hired to duplicate the Briarpatch in Sweden and succeeded in starting a large network of small businesses. Over 4,000 new small businesses started over the succeeding five years.
- I tried to create similar business networks in the Pacific Northwest U.S., Western England, Amsterdam, Japan and France with little success.
In many ways my unique experience is directly related to a cyber free-market. I dealt extensively with the brightest of the hacker world, a group who were barely on the spectrum of sociability. I dealt with the hippie world who were composed of outlaws but deeply communal minded. It was common in the hippie world of new business startups to ignore taxes and employment regulations for their first 3 or 4 years in business.
The overarching understanding that comes from my experience was MasterCard. This credit/exchange vehicle was built on the centuries-old institution of banking and on the well-established banking institution of check clearing houses.
The outlaw hippies had a problem of operating off-the-books in the larger established world. There was a sweet hippie woman who worked in an outlaw hippie ice cream retail store; she moved to Idaho and filed for unemployment payments. The California authorities were notified and California quickly forced the ice cream business to pay all taxes and regulatory fees in arrears.
Most people are not aware of how onerous the regulatory world is for a small business. One client in San Jose left a large company to start his own Heating and Air Conditioning business. Within three years he had five employees working in the field. He had to get his wife to work in the office full-time to just handle the paperwork of the regulatory world. Yes regulations are surprisingly onerous for every small business. Everyone wants to escape them. Six workers needed a seventh person just to handle the regulatory workload.
While the hippies were generally honest, they were preyed upon by others. One young black man gave lectures on spirituality and money. To huge crowds. Often 200 people. He took in money on one side of the auditorium, $500 and paid it out on the other, $50 after 3 months. It was a Ponzi. The police and DA caught and tried him after a few years, but they weren’t smart enough to find and return his money. He was rich when he got out of prison.
In another instance a few hippies started a chain letter, ‘Passing on the Love.’ The participants used small cash ($1) amounts sent in the mail, listing their friends as potential recipients; the starting money was going to the name at the top of the list. I was called in for business advice when the first house on the top of the list received the mail in Tiburon. They found that postal employees were keeping about half the envelopes for themselves. There was nothing they could do.
For the hippies, using all that cash was also a problem.
Often people with too much cash would buy a farm in Northern California and grow marijuana. They quickly found that they had to pay underworld armed gangs to protect their crops. Being an outlaw means being a complete outlaw.
That suggests some of the problems of living in dual financial worlds. Commerce depends on many well-established institutions: recourse, large-scale honesty among suppliers and some forms of arbitration.
Each of the geographic areas where I was invited to start a network of small businesses faced different problems.
In the Pacific Northwest, there were plenty of hippies with a sense of being outlaws but there was no tradition of entrepreneurship or starting a small business. Unlike the San Francisco Bay area where many people, from all over the country and the world, had migrated with the skills and initiative to start small businesses.
Western England was unusual; there was a vast network of friends, many with small traditional businesses like bakeries and pubs. Nearly everyone in the network wanted a ‘job.’ Very English. Creating a small business is not a ‘job’ and having employees who want paid vacations and retirement plans doesn’t work for small business start-ups.
Amsterdam and Japan were still another issue. Again there was a strong network of friends, hippies, but the level of ‘honesty’ was very high and their trust in government was too high for them to create anything outside the ‘established world.’ They were good at starting businesses but they were always ‘legitimate’ from the first day. Most of the businesses were passed along in families of traditional forms like bakeries, flower shops and clothing. The tradition in businesses in Japan was for financing to be provided by suppliers.
Sweden and France were still other cases. It was the government that hired me to help the business-oriented hippies start businesses. Sweden was very successful and we got over 4,000 small businesses started. The Swedes were intensely cooperative with each other. There was no sense of the small business people of being an outlaw. There was also no sense of being outside the regulatory world.
In France, the hippies were enthusiastic about commerce but they only wanted to start large businesses. The government helped them with loans so they never considered being outlaws.
Summary, if there is to be a cyber world underground free market, it will have to develop a whole range of institutions, over a long period of time, to replicate the commercial institutions of the conventional world that took a long time to develop.