Pro Commerce

Coffee with Alex

Alex is visiting, on an annual trek from Canada. Our conversations are hours long.  My real close friends are defined by their interest in the world, everything, not just the issues that impinge on their lives.  None of my close friends were on the Railroad to Retirement (salaried jobs they were doing to earn a pension.)  They were all learning every day, rethinking all that they knew and recasting their experiences in novel ways.

Alex said there were two unique and important things he has learned from me over the years. Simple Living and the Culture of Commerce.

My view of simple living is not the traditional religious one. My view is that having few objects in one's life means freedom, fundamental freedom.  It means not having to earn a reliable or substantial living.  I haven’t had a real job with health insurance, pensions or office hours since my 20’s.  Owning objects means that their existence clutters up the mind. I regularly had house sales to rid myself of possessions; and I tried to lead a life with 200 possessions. I had three children which was possible despite my possession austerity.  I gave out annual Simple Living Awards to the people around me who understood and lived the freedom of simple living. I wrote a book Simple Living Investments subtitled  For a Truly Secure and Adventurous Old Age.

Concomitant with my views on simple living, I see commerce as the source of daily vitality, excitement in life, meaningful life values, community and significant social contributions.

I have worked with over a thousand businesses of all sizes in eight countries. Commerce is often considered competitive, which it is in a positive, healthy way (lowering prices and improving quality) but the daily operation of commerce is 99% cooperation with suppliers, landlords, customers, employees and the whole community.

The hippies saw commerce as a vehicle for making society better.  We have much to be grateful to the hippies for.  If you love mountain biking, windsurfing, ski boarding or skateboarding, you have hippie entrepreneurs to thank. If you use the modern desktop computer and any of its common programs, thank the hippies. Most of the organic food business and agriculture was pioneered by hippies and their organic retail ideas.  The same goes for the clothing world from running shoes, jeans to work and outdoor gear.  All these were businesses I worked with in their inception and early growth.

Commerce is the backbone of modern society, it is where radically different kinds of people work together to produce new and important improvements in our lives.  It is the door to opportunity for every kind of person and personality. Commerce is the invisible hand of health and opportunity for all.

Commerce is not bad when it is big.  Three women clients of mine developed an innovative  personal body care business in the Bay Area. Their entire business, in every detail, was copied by a British woman who took their business model worldwide. It is the Body Shop. It is still fun and original.

To reiterate: for a life of freedom, choose simple living. For a life of vitality and meaning chose a deep commitment to commerce.

The gig economy

A word from the future.  

I have lived in the ‘gig economy’ for the past forty years.  I often had a supplementary salary.  Nearly all my real income came from clients, speeches and royalties.  For me, it has been a gig economy.  It has given me vast freedom to do what I want with my time and my passions.

Of course that is what the troglodytes in the Democrat Party don’t want people to have.   I listen to Robert Reich and Hillary Clinton rail against the gig economy.  People who are so scared of life and still think we are in the 18th Century with precarious daily sustenance.... that only a salary can protect us from the monsters of daily life.

The reality of the gig economy is the extraordinary freedom ordinary people can have if they choose.  We can work when we want, doing what we want, and working for and with people we want to work with.  What a refreshing change from office politics and working with all the boring schmucks who people the world of salary life.  

We giggers improve our skills, develop new talents and understand self management.  Things not possible in the world of salaries and offices.  We don’t have bosses running our lives and determining our destiny.  We work for ourselves and our lives are in our hands.  

We vacation when we want.  We act like the richest of the rich with a deep sense of security that is never found in retirees on a fixed income.

If you can’t handle freedom, and most people can’t, don’t be in the gig economy.  But for god’s sake don’t try to close off that option for the rest of us.  Please don't use the political tyranny that is the basis for the Leftist view of the world to lock us into the archaic world of salaries and retirement pensions.

Merry old England

I’m constantly asking myself how much abuse can commerce in America take before it stops working or is so degraded as to be minimal?

I am first looking at Britain after WWII.  Led brilliantly by Winston Churchill during the war, the nation immediately elected a pure socialist government led by Clement Attlee and Aneurin Bevan in 1945.

England immediately bought all the large industry with government bonds, socialized medicine and created a communist five year plan.  Every functioning private industry was nationalized from steel and autos to transportation and telecom. Most of coal was nationalized.  

England remained a highly stratified hereditary class society, so most of the hereditary elite remained in their top management positions.  The creaky old industrial world just got more creaky and unable to innovate.

This communist model lasted until Churchill was returned to power in 1951. Because the election was close and the government coalition only lasted until 1955, Churchill was unable to undo much of  the socialization that had been completed.  Britain remained a socialist backwater until Margaret Thatcher in the 1980’s made an effort to reverse the damage of socialism.

England was a major auto, coal, steel, clothing and pharmaceutical powerhouse before WWII.  After the war it was insignificant and has remained so since then.  It lost its empire as a source of exports but gained the wealth of the commonwealth as the natives moved to London and made it a wealthy and vibrant center.  Only London.

In summary, England is evidence that a vital commercial society can be reduced to economic ruble for nearly a century after sufficient socialization of industry.  England is not a pure case because WWII did a great deal of damage to the capital of the country. Much of that was offset by the U.S. Marshall Plan aid.  The second problem with a pure case example is that the hereditary elite remained in control of the society and that makes commerce ineffective under any circumstances.

In any case, a valid conclusion can be drawn: a sufficiently powerful central government can destroy commerce, especially if meritocracy has never had a chance.  England today is coasting along. As is most of the rest of the world, on the driving  power of the United States which continues to generate innovation and vigorous global commerce.

P.S. A powerful sign of modern commercial failure is found in England: half the resident Jews have left since 1990.

Internet skills and Tokyo

I’m really not comfortable with people telling me how the Internet is changing lives when there is no measurable observation.

I have some good measurements. For over 25 years I have had guests visiting me in Tokyo and staying in my home. Tokyo has no straight lines or corners to the streets (except in one dense business area). The rest of the city is as chaotic as a Moroccan suk or Mumbai.

Except that it has an infinitely complex subway system and impossible bus system that makes London look like a 3 year old’s puzzle. It is all high-tech with glitz and trains that run 2 minutes apart on tight published schedules.

For 25 years I have had to give the 80+ guests a folder of maps, travel brochures and guidebooks for everything. So they can get around Tokyo and find things they want to do.

It usually took 3 or 4 days before my friends were confident enough to find their way home. Some never got that confidence in a week.

Starting two years ago, that was over. Now all the guests arrive with their smart phones and can figure Tokyo out right away. My three granddaughters arrived late on a Sunday night, and Monday night they walked home on two different routes that were complex. With their phones and websites they planned every day by themselves with no help. The same with the next guest who did it all by himself. Every day.

Now that is what the Internet can really do. Make a truly complex and inaccessible problem in the real world… totally accessible. Quickly.

Business is the next big thing

Some techie has started a blog with the title ‘business is the next big thing’. Meaning to me, that this is a good time to correct the record. This dude wants business to be more socially responsible and sustainable. I can’t respond to the sustainable part. The word has no meaning unless one prefers life without steel, airplanes, cargo ships, bananas and restaurants. Paleo, real paleo is sustainable.

It is hard or impossible to understand the nature of business unless one has worked with dozens of small businesses and extracted the core operating rules. I’ve overdone it with over two thousand businesses of all sizes. And an open mind.

The core principles are in the upper panel of this blog. Meritocracy, diversity and openness.

A modern business will fail if it hires a brother, a sister-in-law or uncle to do serious work. Meritocracy only thrives in modern commerce (and the modern American and Israeli military). Since it is the only way people become fully developed as humans, it is clearly the only socially responsible and decent form of human organization.

Diversity is what is never appreciated about modern business. Not diversity of skin color or genitals which is not diversity but absurdity. Diversity of viewpoint and experience are what make businesses vital and successful. Modern commerce brings unique humans together and promotes vigorous interaction and development. A Muslim Pakistani can work with an atheist Texan. Again, a unique quality of modern commerce not found in any other institution.

Lastly, openness. An analog for honesty. Commerce is often seen only in terms of competition between businesses and based on trade secrets. Non-sense. Everyday business is based on trust and openness. Orders are shipped, advisors advise seriously, people work together amicably, internal theft is negligible, businesses help each other everyday, receivables are received and trade organizations work for their common interests.

Commerce is 95% cooperation and camaraderie and 5% competition of the kind that is found in sports. Where else do people behave that way? Nowhere.

Business is not the next big thing. It is the only big thing and has been for 200 years.

Pounds per mile per dollar

I owe a debt to Michael Adams who responded to an earlier blog about the central role America has played in the explosion of modern global commerce.  Mr. Adams sent me to a book by Jane Jacobs called Systems of Survival.  I have always loved Jacobs' writings, she is still an influential mind.

In her Survival book, Jacobs does an excellent job of distinguishing the ethics of commerce from that of government.  Everything she writes is clear and explicit.  However it applies to the period before 1800, maybe because she worked in Canada which is not part of the modern industrial explosion (Canada is nearly all extractive).  When we get to the modern commercial world we need to add the other element of my blog headline: meritocracy.  The replacement of tribes and families and hereditary hierarchy are central to our modern prosperity and technology.

In my mind my addition of meritocracy to Jacob’s list of commercial elements was still not sufficient to explain our global prosperity.  I finally had to add another element to my list to distinguish the world of 1800 from the world of 1900.  Speed and cost in moving heavy loads. 

This video of downtown San Francisco in 1905 is what stimulated my thinking.  Nearly everything is at the speed of a fast walking person.  When I was a child, cable cars only stopped at a few locations, otherwise men jumped on and off the moving car at about 9 miles per hour. That was the speed of everything downtown.  Today it is still about the same speed except for the underground rail line.

When did the world outside of downtown change?  It came with the steam driven railroads dating from 1850.  Speed picked-up with autos, ships and trucks in about 1910. Then again with airplanes in the 1950s at the same time freeways came into regular use.  The final uptick in speed and weight came with 18 wheel trucks, cargo containers and the complete FedEx and UPS systems in the 1980s.  

I see this increase in speed as a function of weight and cost.   A man can carry 60 pounds for 4 miles in an hour at $12 current dollars. That is 1.25 pounds per mile per $1 per hour.

A horse pulling a wagon is 1,000 pounds for 6 miles in an hour at the price of one man at $12 and one horse at $1.40 per hour.  That is 167 pounds per mile at $13.40 per hour, or 12.5 pounds per mile per $1 per hour.  The horse and wagon are about 10 times more efficient.

Rail freight costs about 80 pounds per mile at $1 per hour. A rail car goes about 30 miles in an hour. The rail is faster and costs one 6th the amount of a cart and horse.

It is this considerable decrease in transport cost from 12.5 pounds per mile per $1 per hour for a cart and horse to 80 pounds per mile at $1 per hour.

In 150 years we have reduced the costs of cargo by a factor of 6.4.  It now costs less than 16% of what it did then.  That steady reduction in the cost of goods dramatically increased the size of markets, reducing the costs of production too.  Transport costs declined and increased market size and that in turn reduced the costs of production.  Our modern commercial bounty owes much to this specific transport technology.

Air freight express is 3 pounds per mile at $1 per hour.   Air freight goes about 350 miles in an hour.  While air freight is only a little more efficient per mile per $1 than a man walking with a back pack, we wouldn't be eating strawberries from Chile if we waited 15 months for men to carry them to us.

I must now add transport efficiency to the panoply of factors giving us the modern world.

Also a note.  Our dense urban areas have not benefited much from the transport efficiency factor.  I can run across San Francisco in about twice the time it takes to go by car.  

How important is the American lesson?

I spend a lot of time thinking about modern commerce, both currently and in terms of its history.

Since I start out with a different perspective I am generating a different origin.  As can be seen from the title of this blog page I find no comfort in the words 'capitalism' or 'free market'.  To me the former is Marxist haberdashery and the second is ideology.

Modern commerce has three components: trade, industry and clientry.  Each with a different history. Industry began roughly two hundred years ago.  Trade and clientry are as old as cities. Though both have evolved to suit the modern industrial world.

Modern industrial commerce requires four sub-systems to work effectively: meritocracy, diversity, openness and a preference for markets.

It is on these observations that I look back at history and see a different story than most others.  

While I have focused, in the past, on the institutions that came out of 17th Century Holland and migrated to England for the 18th Century, I have moved on.  All the institutions created in Holland were vital.  Holland gave us Amsterdam, with a Protestant optimism,  with a high level of meritocracy, a great sense of egalitarianism,  an extraordinarily high level of diversity with Jews from Spain and traders from everywhere in Europe,especially the liberal Hanseatic lands, a high level of honesty in trade dealings and many original open markets for goods of all kinds including financial goods.

I also recognize the importance of the Masonic order and the innovations in food and husbandry in England.

Nevertheless, it is the three outrageous lessons of America that I look to as the source of modern industrial vitality.  First in the 19th Century then again in the 20th Century.  America and only America brought us this vast treasure of modernity.

• First meritocracy needed a fertile ground.  America and the English colonies  provided that. America and the colonies are where the dissidents and children who didn’t gain from primogenitor moved. They were heavily meritocratic.
• During the 19th and 20th Century they have come from every land on the globe to America.  The meritocratic escaped the feudal, static and tribal societies that constitute most of the earth.
• By 1960, America had dissolved the hereditary elite.  They and their ‘blue books’ were replaced at the tops of corporate America by the meritocratic men who rose to the top in the WWII military.

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• Second, meritocratic families enjoyed the vast open frontiers of America.  They could leave the hereditary elites behind in Boston and New York and move to Seattle, San Francisco, Salt Lake City….everywhere in the West.  There they found the greatest freedom on the planet.  No government, just opportunity.  They slowly created government, democratic government, from the ground up.  Unlike the kingdoms of the world, the grass roots of American democracy favored meritocracy and commerce.
• This happened again in the 1970’s with the confluence of expanded immigration, reduced tariff barriers and the outlaw world of hippies who loved commerce and openness.

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• Lastly, from the earliest days of the 13 States to the great Western expansion, government in America has been weak and grass roots in nature.  This was true in the hippy home of San Francisco too.  This has always been true in America and it allows for incipient new businesses to emerge.

• We can see from the treatment of Uber and Airbnb around the world that government is hostile to modern commerce.  Weak government is an important ingredient in the prosperity of commerce.

God bless America.  She is the fountainhead of modern commerce and global wealth.  Not one iota of the American ‘grace’ was planned.  It was mostly good fortune.

Matt Ridley again

Matt Ridley has published a second great book.  The Evolution of Everything: How New Ideas Emerge.

I’ve recommended Ridley twice before and summarized his material on commerce in his first book here and in a speech he gave here.

Ridley is a brilliant pro commerce author, maybe the only other one.  He gives credit to Deirdre McCloskey for her comparable genius on this pro commerce issue.

Evolution is a long book.  The greatness about the book is that Ridley shows us that both the free market mechanism and Darwinism are the same evolutionary mechanism.

Neither require a god, a direction, a meaning or a designer.  Both are the same mechanism: survival applied to variation.  

Ridley does a wonderful job of reminding us that evolution is what happens not just with biology but also with nearly everything in the human world.  He goes into detail with free market evolution that creates languages, weapons, cities and businesses that we can all see.  He shows that it also includes morals (look at how arranged marriage has evolved into cohabitation and gay marriage), as well as money, education and most importantly: technology.

The book has done one important thing: made me think about the broad scope of human subject matter that evolves.

Unfortunately, Ridley is not a good writer.  He mixes all his personal prejudices, most of which I agree with, into this broad subject.  That is distracting and weakens his argument.

It is now time to think much more broadly about evolution and especially the limits of evolution.  

Governments, bureaucracies and states don’t seem to evolve, because they survive despite their inept and incompetent and inappropriate functions.  They always fail but they survive despite that fact.  What can we say about that?

Politics and commerce

Both politics and the ‘trade’ part of commerce are very old.  These institutions have survived for one reason: they fit perfectly in a zero sum society.

Politics is the allocation of zero sum resources, mostly political power.  It exists wherever humans convene.  Tribes use their complex and intimate networks to constantly re-allocate resources.  (He lost a leg hunting for all of us, we will provide his widow with food.) It can escalate to warfare as it has throughout most of history; particularly when zero sum becomes negative sum. (In drought years the Zuni raided their Pueblo neighbors.)  

The trade component of commerce is almost as old.  It is an effort to allocate zero sum resources to improve resource allocation to get more mutual satisfaction, voluntarily.  (The Zuni traded corn for clay pottery with neighbors.  The Zuni were good at irrigation, others had good mines for clay.)

Thanks to commerce, which uses many unnatural and non tribal elements, such as meritocracy, diversity, technology and open markets, most of us now live in a positive sum world.

Politics and modern commerce constantly come into conflict because one is dealing with the older zero sum world and commerce IS the modern positive sum world.

 

Communist medicine

It is clear to me that the revolutions in medicine and surgery in the past century are entirely the by-product of commerce.  Demonstrating this is a different matter.

Therefore I ask the question: in a century of communism, has any communist country ever developed a significant medical or surgical innovation?  

The Russian communist revolution was nearly 100 years ago.  Over a billion people have lived in communist countries in that 100 years.  Yet no significant medical or surgical innovation has been developed.  

The first life saving innovation was the X-ray.  X-ray equipment was developed in Britain, Germany and the United States.  X-ray machines created General Electric.

From that point, until the end of WWII those three countries were the source of all medical, dental and surgical innovation.  After WWII the locus of such innovation moved almost entirely to the U.S.

The communist countries were always parasites, using innovation that originated in the commercial countries.  Cuba and North Vietnam are still 50 years behind the rest of the medical world.

With the advent of socialized medicine in post WWII Europe, innovation stagnated and nearly all medical and surgical innovation moved to the United States.  The most radical innovation began with the Salk polio vaccine.  Radical emergency medicine was developed on the American battlefield in the Vietnam War. Tamoxifen, the first successful pill treatment for breast cancer came from Britain. One of the great surgical innovations is the catheter lab; developed slowly mostly in the U.S. in the post WWII era.

Commerce and positive mortality and morbidity correlate perfectly.  Commerce is the source of modern health.

 

Today's America is an anti-commerce disgrace

Commerce is fundamentally about meritocracy and diversity. Meritocracy is about individuals. No one can do a particular job better because they are a member of a 'protected victim class'. That goes for teaching black history or being a professional football player. Merit goes only to individuals not to tribes, families or class.

That is even more true of diversity. Diversity is about individual uniqueness not about being a member of a 'protected victim class'. A good group of fashion designers will be made up of people with a wide range of talents including differing esthetic tastes, not different sexual appetites.

The same is true of an engineering team where diversity means different training and a variety of experience. Bell Labs was the greatest research institution on the planet because of the wide range of geniuses that came from every society on the planet. Certainly not based on melanin level or sexual preferences or gender.

Today in America, the Left has adopted a very totalitarian anti-commerce value of arranging society to reflect 'protected victim classes' differences in all institutions ranging from CEO's, boards of directors, employment to home ownership and educational outcomes.

Everything except sports such as football and basketball where the stupidity of this idea is obvious.

This idea of 'protected victim class' is a fairly new one. The idea of equal outcomes for all 'protected victim classes' is even newer.

We have always had hated outside groups: Chinamen, Irish, Jews. The idea of 'victim groups' was first promoted by the American Communist Party in the 1930's trying to divide Americans and gain membership. It gained currency on the Left in the early 1960's as civil rights became a source of political power for 'civil rights victims'. The Left learned that treating all blacks as a class of victims gave the Left power.

That led to the increased fracturing of society with the rise of the women's movement as a 'protected victim class' in the late 1960's. Academia took the lead in expanding the 'false authenticity idea' with black studies departments in the 1970's. The idea has continued to expand ever since then.

The evil of this idea is most visible in the election of an unskilled, untrained, incompetent man as president, and his re-election based on his skin color. The evil was most visible when he asked the black members of Congress to boycott one of the greatest leaders of a democracy to address Congress, and most black Congress-members did boycott PM Netanyahu. Solely based on their own skin color.

It is a sad day in America when a woman who has high melanin becomes 'black' and a 'woman' only when she changes her political party affiliation to Democrat. I'm thinking of Condoleezza Rice a Republican who is not considered either 'black' or a 'woman'.

On the other hand, only Republicans are real people. Democrats are members of 'protected victim classes' with no real personal attributes.

We went wrong when the Left adopted the American Communist Party definition of human group differences: victim classes.

Does commerce need democracy?

There are two parts of this blog. One is on commerce and democracy the other deals with current democracy politics.

What is the relationship of commerce and democracy? I have no final answer. It is historically too early to tell. We have seen an explosion of democracy in my lifetime. From four dozen democracies before WWII, to four score today. A democracy has regular elections and the government involves more than one party. Power is moved to new people based on popular vote.

Some clearly new democracies are Taiwan, So. Korea, most of East Europe, Chile and Mexico. A few that aren't include Russia, China, India and Singapore.

The thriving commercial centers of the world are all democracies, deep democracies, non-extractive economies, like the U.S., Holland, Israel, Germany and Japan.

The problem examples are China, India, Singapore and Turkey. India is problematic because it has a few cities that are thriving commercially with third world socialist infra-structure. China is problematic because it is a thriving commercial society with no democracy. Singapore, where the brilliant Lee Quan Yew, founder, just died, is a thriving commercial center with a socialist infra-structure and very little democracy. Turkey is doing well economically but has gone from a democracy to an Islamic tyranny.

A few healthy commercial societies are socialist, like Canada, Sweden and Denmark. These are very white societies without an indolent black population.

In my lifetime it is possible to say that successful commerce thrives in democracies, but can also do well in other unique situations. A stronger statement isn't possible at this time.

Now politics. The American president Obama, has done something unique in world history. He is the first leader of a great democracy to publicly criticize another democracy. Obama has virulently criticized Israel for 5 years and after the most recent election in Israel has viciously criticized Israel and its re-elected leader.

This act is significant for one reason other than its historic first. An American president clearly shows he dislikes 'democracy'. A democracy is the creation of its people. To criticize a democracy for the results of its election is to say in the clearest possible language that the people of that democracy are not competent to create and run a government.

Further proof that this American president dislikes 'democracy' is his reaction to the 2014 mid-term election where the president's Democrat party was routed at every level of government in the most decisive overthrow election in a century. He promptly signed executive actions to override the new legislators and announced a refusal to work with the newly elected officials.

We have a stunning anomaly: the elected leader of democracy who publicly dislikes 'democracy'.

Modernity

My son recently suggested that most people confuse modernity with commerce. I am trying to create an original connection between commerce and authenticity. 'Modernity' is confusing the issue.

I think the confusion is real. But commerce is substantive and has distinct attributes. Modernity is a vague conception with no stable attributes. At best we can say that modernity is opposition to tradition or rejection of tradition with an overlay of anti-traditional religion.

The reason for the confusion between modernity and commerce is the historic emergence of both at roughly the same time. This emergence was caused by commerce that brought us mass produced elegant dinner ware and stationary steam engines for power supplies. Both are none traditional. Both replace traditional ways of life.

Commerce sprouted a new world of health, abundance, vigor, pragmatism, novelty, technology and the opening for personal authenticity because it is a meritocratic world.

Modernity is merely a commentary on the new commercial world in the form of the arts, architecture and secular consumption values.

To summarize: two hundred years ago commerce brought to the world a new day, a new way of living. It was called 'modern'. Since then the term 'modernity' has been applied as a commentary on commerce. But 'modernity' is neither meritocratic, since it flows from the mouths of anyone, nor is it tied to technology since it is often approved of by Luddites.

Modernity is a rejection of tradition.

Commerce is just commerce moving in its pragmatic way; lowering costs and expanding markets.

Heidegger

Don't worry. I'm not going to write a Germanic philosophic piece to ruin your day.

I had a period where I loved Hannah Arendt's work and that period has passed. That is the only time I paid attention to Heidegger. I always knew there was a deep connection of his work to Nazism. There would have to be. Politics is a subset of worldview.

Recently I read a commentary on Heidegger in Foreign Affairs by Christian Madsbjerg that helped me to realize that Heidegger is an important philosopher of the anti-commerce world. My intellectual nemesis.

Heidegger is a champion of the Germanic 'blood and soil'. You are 100% the by-product of your cultural and historic traditions and proper living is an acceptance of that. This is a perfect statement of anti-commerce and anti-Jew.

Jewish tradition also believes in the power of rational thought and the power of social institutions to accommodate individual character. As a consequence, Jews fit well in a commercial society.

Heidegger is a champion of the tribal world with its intense and deeply intertwined personal relations.

Commerce is a pragmatic world where individual relations are autonomic, ad hoc and open. We commercial people sell to everyone, buy from anyone; we work with the most competent people regardless of their family and we use technology where it works best. Pro commerce and anti-Heidegger.

We find authenticity in following our lives to where they lead us in a multi-complex world of commerce.

Innovations

I'm still focused on the Jan-Feb issue of Foreign Affairs that discussed 'entrepreneurs'. It just missed so much about reality

When using examples of global innovations in technology, that changed lives, their examples seem to focus on Apple products, Google, and Facebook. That is just blindness

I focus on three innovations that don't support the normative values of academia and the notions of popular culture. ( I started to use the term 'mundane' which is a terrible perversion of the word. See tomorrow's blog. )

My three are: Craigslist, Task Rabbit and Google (again for different reasons)

Craigslist is the biggest innovation of our time. It created a gigantic garage sale. Allowing people to buy and sell a spectacular variety of goods, never before possible. I would guess that its reduction in personal expenses and increase in personal product satisfaction has reached 10% of GDP by now. It wiped out newspapers by replacing their 'classifieds'. Print on paper now has half its earlier circulation as the press founders on their death beds.

Most of all, worst of all, Craigslist is and was a hippie operation. Driven by love and joy, determined to do the best job possible. That never makes it into academic or popular writings

Next is Task Rabbit. Just getting started but truly radical. I go to Task Rabbit for small jobs around the house, or for parties or business projects that are short term. People bid on my jobs and list their skills

That is from my perspective. From the workers perspective, they are self employed, no invoices to collect on, infinite variety of work and a chance to work in countless environments and find out what you love doing.

It, like Craigslist is changing the way people run their lives

Lastly, Google. Google started with no advertising. That wiped out all competitors, because the public really prefers life without ads. It became a corporation worth $billions by selling 'listings'. To understand the 'no advertising/business runs on listings' idea you must go to my 1984 book Marketing Without Advertising. Google's innovation was wiping out the world of advertising, about $150 billion worldwide. Like Craigslist it helped ruin the world of print on paper and gave us a direct way to find what we are looking for: Listing

See the world through my eyes; and you see how commerce changes the way people lead their lives. That is where innovation occurs

Lastly I forgot to mention that Apple would be 2% of anything to this day, except that they became open source when they introduced iTunes and let a million people design and sell programs to the public. It fits everything I've said so far about innovation. But doesn't fit the academic/popular models so widely discussed.

Real entrepreneurs aren't

I was just reading the January-February edition of Foreign Affairs magazine which was focused on entrepreneurs and the national climate that encourages them.

In general the articles were reliable and somewhat accurate within the domain of popular ideas.

But my experience suggests it was off the mark because the entire subject is off the mark.

Who am I to talk? I am the founder of the Briarpatch Network, the hippie network of small businesses. I worked as a consultant with more than 1,000 start-up hippie businesses in the San Francisco Bay Area over a decade. That probably makes me the leading authority on this subject now and for a century into the future.

I don't recognize the term 'entrepreneur'. Its bull. Everyone who starts a business is in the same category: a person who starts a business. From this group there is a subset of people whose businesses survive. These are 'small business people'. Among these there is another subset, those who want their business to grow and it does. Those are the people mistakenly called 'entrepreneurs'.

One element that is often omitted in describing people who found innovative businesses. They invariably start in poor neighborhoods (in poor suburbs, these are started in garages). Because neighbors don't call the cops and 'strange goings on' are strange. The tofu business started in just such a neighborhood, so did several electronic companies and many manufacturing plants from wind generators to pot pipes.

The two elements that are always overlooked on the subject of start-up businesses: up-beat and outlaw.

Everyone who starts a business is up-beat and they are usually in an up-beat environment. You have to be up-beat to face the daunting task of facing the odds against succeeding. I never see that stated clearly and blatantly. I suspect that when the national mood is down-beat, not many businesses get started. The hippies started more new businesses than any group on earth, or anytime in history. They were astoundingly up-beat and intended to create a new world. A new world with new food, clothes, technology, new governance, religions and everything else.

The hippies were also outlaws. Not just because of drug usage but in their outlook on the surrounding society. Nearly every start-up business I dealt with began without a license, without paying taxes or any of the legal fees including withholding taxes or workers compensation. After they got going and knew they would survive they became legal.

It is the outlaw quality that is usually overlooked. People who risk their lives in starting a business are not conformists who could get a salaried job. They are defiant. A quality that makes for an innovator.

That's my experience.

Several of my start-ups became global corporations. Their stories are varied. Body Shop is just one example. Three women started a cosmetics business called Body Shop based on their hippie ideas of safe and healthy ingredients. They had good design skills. A British woman copied every detail of their business and grew it to a global scale. She then went back and paid the three founders a reasonable lump sum settlement.

Another global business example is the modern bicycle... I'll save that story for another time.

Next time you hear the word 'entrepreneur' question the term and note that the user has ignored the requisite up-beat qualities needed to start a successful business and the outlaw origins of most innovative businesses.

Real productivity and the smartphone

My good friend Alex asked me to comment on the role of the Internet in producing greater efficiency. He points out that  products we used to order took two weeks to be delivered, even across national boundaries; they now arrive in two or three days.

We don't have any adequate measures of productivity. The productivity measure you see in the newspapers is a residual of dividing revenue of industries by the number of workers in those industries. As these numbers diverge we have greater productivity reported to us.

You can see the problem with this. It is crude. It is gross and it is often years after the introduction of the productive elements in that industry. This measure makes it impossible to identify specific sources of increased productivity.

My experience of working inside individual businesses is that there were two extraordinary increases in productivity that occurred in the early 1980s. One was in telecom due to the fax machine and the telephone answering machine which allowed commerce to proceed on a global 24-hour schedule. The second was the introduction of delivery services that were truly rapid, such as FedEx, UPS and DHL.

I watched as people worked longer hours, worked much faster and much harder simply to keep up with the flow of material and paper that was moving faster around them.

It is from this experience that I conclude that anything that shortens delivery time between information from individual to individual and material passed from individual to individual or business to business is inevitably going to increase productivity.

The first people I saw buy portable phones, called car phones at the time, were the most productive people at high ranks in corporations and self-employed people who frequently worked in their cars.

From all of this. I conclude that increased speed in communications and materials results in increased productive output.

I know there are restrictions and limitations to this statement.  People have a limited number of hours to work as opposed to sleep and people have a finite amount of energy. But I have certainly seen productivity gains in communication and supplies translated into exhaustion of available work hours and energy. I have also seen some nonproductive uses made of these new tools.

I think improvements in communication and supply are of great productive significance.

Our better world

I am particularly grateful to Steven Pinker, a professor at Harvard, who is continually publishing material showing that homicide, murder and death from military action has been in a steady decline for centuries.

Our individual worlds have not only gotten safer from other humans. At the same time our world has gotten safer from our long-term enemies: the microbes.

This article that appeared in Slate makes the point that there are several long-term improvements in addition to Pinker's specialty of intra-human attacks.  Good.

I would like to point out that in the past 200 years we have also conquered most microbes, many hereditary physical deformities and we have wiped out hunger and famine in 98% of the world.

While Pinker won't say it and neither will the rest of the Lefty world, all of these improvements in our lives are attributable to the rise of industrial commerce.

If we take a pro-commerce stance we will witness even more rapid improvements in the human condition, domestically and worldwide.

Source of modernity

There has been recent discussion in France about the origins of modernity. There seems to be a great effort on the part of the French to give this honor to the Greeks. The main locus of their idea centers on the Greek polis, the Greek City, and how it was run, with diversity and focus on individuals.

Pshaw. (That seems to be a word that has fallen out of use. Too weak.)

The Greeks had the diversity found in cities. Found in nearly all cities worldwide where there is international commerce. They were still tribal and hierarchical based on family and heredity. I see no evidence of meritocracy except in athletics. Again, a near planetary universal.

No folks. Modernity comes from one thing and one thing alone: industrial commerce. Industrial commerce brings meritocracy to the diversity already found in cities. In the case of the United States, in its middle stages (1960's), meritocracy combined with industrial commerce destroyed the hereditary class.

Full blown modernity has still not arrived. We have Leftist parties all over the world and Islam, fighting it. We have unions staunchly opposing it. Modernity is the world of miracles. Abundant food, extraordinary pleasures, unique individual genius triumphant, the end to nearly all illness and disability and a daily vitally that is still unimaginable.

The Greeks made a modest contribution but the primary contributor has been the United States and more recently Japan and Israel.

Minorities, classes and commerce

My son pointed out that the current Lefty hysterical academic creation of every possible minority-oppressed-group is inappropriate in the world of commerce.

Commerce is based on meritocracy and diversity. Commerce thrives in the most diverse social environments. It does much better in the United States, Canada and Israel than it does anywhere else. That diversity is not definable but it is made up of the wide range of human variability.

Fundamentally commerce thrives on meritocracy. The person who does the job should always be the most capable of doing the job regardless of whether they have one eye in the middle of their head or wears a pink turban.

Into this reality is thrown the preposterous Lefty notion of feminism, racism, sexism, homophobia, imperialism and god knows how many other efforts to categorize people into meaningless cohorts.

The obvious failure of this academic malice is that many extraordinary people who we now appreciate entirely for their merit were not limited because of their modern-day academic classifications. George Eliot is a master regardless of gender. The same is true for Martin Luther King Jr. and Genghis Khan.

There is an apparent contradiction in my life, I confess. I was the leading person in the United States to seek and obtain dramatic increases in minority and female employment in the financial industries, by using a lawsuit.

I did it because there was a strong ingrained bias against minorities and women within the executive class in business. This had to be broken using legal methods; at the time. I have no doubt that commerce would have brought about the same outcome in other industries as it did in finance. Given sufficient time. But commerce and the diversity and meritocracy elements were not well understood at the time and they still aren't.

My personal action is an argument for the use of legal power in times when it is clearly beneficial to wipe away the cobwebs of previous legally ingrained bias.

It in no way relates to the academic absurdity of creating minority intellectual hovels based on ephemeral qualities. That remains anti-commerce and inherently bigoted.

Positive philanthropy

A brilliant friend of mine read my earlier blog saying there is no such thing as philanthropy that works. She has been involved in philanthropy much of her life and asked me what could be done to have a positive philanthropy.

I suggest a mental construction. You are in the United States in 1800 with a large sum of money that you want to use to generate well-being for people in the future real-world. What could you do?

Only commerce can generate health, prosperity, freedom and personal well-being. How can you generate commerce in 1800 USA?

At that time the driving forces of commerce were international trade carried out by corporations formed in England and Holland. You could have supported a stock and bond market; a functioning American bank and a campaign to reduce American tariffs. But none of those would really have worked in the absence of an existing commercial environment.  You would have been Alexander Hamilton; unappreicated to this day.

Today we have a commercial environment.  What can be done to stimulate it?

A few years back I was impressed with a program called Junior achievement; it encourages schoolkids to start small businesses. That's an example of a desirable existing project.

We completely lack books, studies and monuments honoring the great commercial heroes of the last two centuries and the great innovators. That can be remedied with positive philanthropy.

We have many programs that encourage innovators today: makers faires, hackers conferences and a range of pro-commerce voluntary groups. These can be supported and organizers can be dispatched to create more.

The world of culture is completely lacking in stories about the creation of corporations and the positives of life within corporations and at the management level. Movies of this sort can be encouraged as well as film festivals on this subject.

There is yet to be a conference or ongoing focus on the history of commerce. That could be funded.

The field is wide open for charitable contributions that could promote a love of commerce. I encourage creating prizes simply for people who can come up with new ideas that are pro-commerce.

Peter Thiel is wrong

A little over a week ago an article appeared in the Wall Street Journal Saturday Review section by Peter Thiel about business being based on success with monopoly conditions and failure with competition.

I'm sure everybody has already put in their two cents worth about the absurdity of that statement, which is blatantly wrong based on the most miniscule of data and observation.

I just wanted to put in my particular observations because I have a slightly different take than the traditional economist or business commentator.  I’m still very different from Peter Thiel. I don't know if Thiel is ignorant.  He's definitely uneducated but I admire his anti-academic attitudes.

Disclaimer: When I was starting a new micro-payment business, twelve years ago, I ran into trouble with PayPal and found it to be a disgusting, inhuman, merciless organization. The only way I could deal with the organization, to get any attention to get any response was to sue the bastards. Then I could at least talk to their lawyers.

Thiel is looking at PayPal and Google as his examples of a monopoly being successful.

PayPal is no monopoly. Banks have just been very slow to accommodate online financial transactions. Most banks have far more assets and liabilities than PayPal. The top ten banks have net revenues in the tens of billions of dollars compared to PayPal’s half a billion dollars. They also didn't pay attention to PayPal because PayPal doesn't make loans, which is the banking raison d'être. PayPal is not a monopoly.  It was a weird offspring of the money transfer business. It was of no interest to the real banking business and still isn’t.

Google is a different story. I described the future Google (before it existed) in several 1980's books I wrote.  I described that type of business as a ‘service monopoly’. Google didn't exist until they had a chance to copy most of my ideas. When Google began there were many search engines but Google became so good, so reliable and so comprehensive that no one else had a chance. That is what I call a service monopoly.'

A service monopoly is a business that has so much of the marketshare and does such a good job that the customers have no reason to go anywhere else.

Newspapers lost their classified ads because Craigslist was more comprehensive, more accurate, more reliable, cheaper and more precise in meeting the consumer's needs. Craigslist still has no comparable competitors. It is a service monopoly and will be one as long as it provides what the customers want.

Google could be wiped out any time if a better search engine came along and provided better services that consumers want.

Back to Peter Thiel and his nonsense. He ignores the most common and economically understandable phenomenon for corporations to grow and be successful. Economies of scale.

Economies of scale occur in production, distribution, marketing and management. That explains why we have so many global corporations that are so large and so extensive. They have no monopoly. They have merely grown by effectively using some economy of scale or multiple economies of scale.

There are only a few automobile companies in the world and none of them are monopolies. But they are gigantic and they are responsive to their markets. In the current world there is a hell of a lot of money and consequently no barriers to entry in anything.

Ask Elon Musk, he entered the auto market. He had no trouble getting startup capital.

Economies of scale are what matter most of the time.

Service monopolies occur at other times.

Can't you see that Mr. Thiel?

A long wait to be validated

This is a success story based on my business advice. My advice is unusual and so this story is worth telling.

Sometime in late 1974 about five or six months after I started the Briarpatch Network of small hippie business, I was having lunch with my kids at our favorite Taqueria  on Mission Street in San Francisco. Since it had opened a year earlier it had become our favorite for many reasons including the tongue burrito for me and the wonderful fresh fruit drinks for my kids.

This particular day the owner came over to talk to me. Miguel Jara had heard about the Briarpatch. He wanted some advice.

Two stores were opening on his block within 100 feet of him and offering a similar menu.

From the day he opened Miguel's store had a line outside. It still does.

I left my kids and my burrito and went to look at the new stores. I came back and explained to Miguel that the two new restaurants would improve his business, if that was possible. They would take the overflow of his lines… but then the people they took would be very dissatisfied.  It would make Miguel’s lines look less crowded initially. But the people who went to these other restaurants would always come back to Miguel with a new genuine loyalty.

I did not comment on how Miguel made his food, which was much fresher and more imaginative than any other Mexican restaurant I had ever been to.  Most importantly, I did not want to sound racist by telling him his real secret: that his restaurant was more than twice as clean as any other Mexican restaurant anywhere. He maintains the cleanliness in his restaurant at a maximum level. That just doesn't happen anywhere else in the Mexican restaurant industry. Simultaneously he always had the flavor and feeling of a Mexican neighborhood restaurant. That combination could not be duplicated in most other neighborhoods.

Then he asked me what I thought he should do in the future. My answer was that he had to choose between leading a calm successful, prosperous life with a good income and great respect from the community…. or opening other sister restaurants, possibly becoming a chain and making more money but living with ungodly amounts of anxiety and stress.  He would also have to protect himself from the constant pressure of people who wanted his money.

This was the point in the life of his business at which he had to make the choice.

You can see from the article, 40 years later Miguel Jara has maintained his one restaurant which continues to have a line out the front door, to make plenty of money for him.  Now he has something I could not have anticipated.  Miguel has the emotional satisfaction and the well deserved recognition as the best taqueria in America.

Miguel Jara followed my advice. Not everyone does. I'm happy to say the evidence supports my business thinking.

Can commerce be stopped?

This is neither a rhetorical question nor an expert comment. Nobody knows the future.

The reason I bring up the question is because I've recently become  conscious of the impact of the World War I on Europe. Up until 1914 Europe was a rapidly growing center of commerce as well as culture, technology, the arts and a fully integrated society for Jews in the northern latitudes.

Thirty years later, 1945,  Europe embarked on a different course, socalism. 100 years later, Europe is stuck on that course.  Europe is steadily moving towards second and third class status.

Europe is no longer an important factor in technology, commerce or the arts. It nationalized all of its important commercial industries and remains in a slow growth pattern decade after decade. Thanks to its Muslim labor imports, a negative reproduction rate and dependence on Russian oil, Europe has a grim future. Maybe no future.

If one century and two wars can do this much damage to a 300 million person population it gives one pause to think about how much damage socialism and war can do to the United States and its commercial world.

The mitigating factors are that:

* Over the past century the number of big corporations has gone from a dozen to many hundreds.

* The number of businesses has grown at a similar geometric rate.

* While government has grown in the United States in proportion to the total GDP it is not popular with the majority of the population and in the absence of government meritocracy it is held in low regard among thoughtful people.

My main source of optimism, if there is any, is the magnitude of commerce that has penetrated the society and become normative thinking. Most people prefer the life they have today, with technological and health innovations. Most people prefer their life with relative freedom to choose occupations and with a wide range of lifestyles that are delivered by commerce.

Most people prefer a society that is meritocratic rather than one with an hereditary elite or unionized.

I simply wanted to recount the issue because we have a rather grim environment in the United States. We have a president, a White House and leaders of the Democratic Party committed to doing violence to our world of commerce. They push damaging minimum wages, horrendous government employee wages and benefits, unreasonable expansion of rules and regulations, unreasonable government control of health care for the population and a vast symphony of sycophants in academia and the media.

Chestnut and Union

The two streets in San Francisco that I want to describe are both pedestrian shopping streets in the same Marina neighborhood. They are both straight East-West streets and they both go roughly 6 blocks; they have the same parking and residential circumstances.

In the 1960s, Union St. got an overall design by an architect friend of mine, Beverly Willis. For the next 30 years Union St. was on the map for all visiting tourists and was a very successful walking destination for shoppers. In the 90s and since then it has been dead. The picture below was taken at the same time as the picture on the right. Sunday early afternoon on a warm Summers day. Union Street was empty, Chestnut Street was crowded.

What is the difference?

Union street has banned virtually all chain stores excluding two or three such as Starbucks.

Chestnut Street welcomes chain stores and more than half of the storefronts are either chain stores or well-known brands.

Union street has virtually no good restaurants and only a few bars. It has little nighttime traffic and most of its daytime stores are for jewelry or nails. The fashions are boring.

Chestnut Street is noted for its many good popular priced restaurants, it's jumping bars and the fashion outlets. The stores are perfectly in sync with the age group that crowds the street.

Why are chain stores so important to the vitality of a street with walking shoppers?

I can identify two reasons.

* The first is that people are familiar with chain stores and their presence offers physical security.

In San Francisco there are two routes from downtown to Fisherman's Wharf. The short route is through North Beach the long route is along the waterfront. Very few tourists take the short route because there are virtually no chain stores that they recognize. Excluding Walgreens they do not see any familiar signs that let them know that they are in comfortable territory. Chain store names whether it is the Gap, McDonald's, Starbucks, Whole Foods or UPS give people a sense that they know the neighborhood; the sense that they know what is in the store. Chain stores provide a comforting environment. (This doesn’t apply to German tourists who will go anywhere.)

* The second is that chain stores have vital information about consumer tastes and interests because they have geographic diversity. They do a better job serving their customers.

Chains can spot street fashions in West LA, in Boulder and in Tel Aviv. This sensitivity is not available to local stores. The chain stores can also detect changes in consumer patterns in both marketing appeals and supplier innovations. These are rarely accessible to local stores.

Most importantly the managers in chain stores have an incentive to work harder and do a better job because there are promotions and slots in management above. That is not true for local stores.

The last photo I have included is a government project. The state, local and federal governments wiped out an historic black neighborhood with urban development. Decades later they replaced it with a city designed Black Heritage Jazz Cultural Center.

Look carefully at the photo on the right and you will not see pedestrians. It didn't work.

Government bureaucrats don’t have the vaguest idea of how business works. They have put tens of millions of dollars into supporting the few businesses that have been bribed into opening stores. Being public-housing-project-adjacent means failure even if it hadn't been a bureaucrat design.

What is anti-commerce?

If I am pro-commerce then what is everyone else?

They are mixtures of anti-commerce. I will elucidate so you can see.

Let's take the biggest category: environmentalists. Most of our environment has been cleaned up over the past forty years.  More than a third of the United States is already preserved parkland.

At this point further environmental policies, especially those based on the belief in the CO2 Armageddon, are designed to harm commerce. The perfect example is suppression of fracking. Natural gas is the cleanest energy readily available and an important source for economic growth. Complaints about water supplies and waste are minor and remedial. Anti-fracking is pure anti-commerce.

The second biggest category is pro-union.  Pro union includes political measures such as keeping non-unionized stores out of a local area.

Unions abhor meritocracy. Meritocracy is the lifeblood of commerce. Some people are good at commerce some people are good at specific productive functions. Rating everybody on seniority means low productivity and life for everyone in the boring Luddite world.

For anti-commerce, let's throw in people who think big business is a priori bad. Businesses grow because they sell more to customers and to more customers. Sometimes they grow in order to combat government regulations that become expensive for small and medium-size firms. To grow in the first place they need customers. You don't like big companies you're not in favor of people buying what they want, you are anti-commerce.

The same is true for many issues like free trade. Free trade agreements are synonymous with pro commerce. You want restrictions on prices you are anti-commerce. You want to increase government regulations and government intrusion in people's lives you are anti-commerce.

I think you get the idea. Any particular detail may be more complex but the gist of it is always that encouraging people to make use of their unique human talents and helping other people do the same, is pro commerce.  Everything else is anti-commerce.

Evil in a pro commerce world

In yesterday's blog I used the term ‘evil’.

This blog is an attempt to explain what I mean by evil.

I know the literature on evil and I know the religious concepts that underlie most popular views of evil. I do not derive my view directly from these sources.

I have abstracted from the Ten Commandments and the general milieu of our social mores a single underlying ethical point. To me, evil is the torturing of an innocent person or being that is unable to defend itself. My most extreme image is Saddam Hussein feeding living political enemies into tree chopping machines, feet first.

This is a corollary to my basic premise that the first human right is self-defense.

Therefore all acts against an innocent person or being that they cannot defend against, is a form of evil.

In the specific environment of pro-commerce, evil takes on a broader meaning. Commerce thrives on meritocracy, diversity, openness and love of technology.

When one is anti-commerce, one is opposed to these four qualities.

* To be opposed to rewarding merit is to oppose the development of each individual's unique human characteristic; that is bad but it is not evil.

* To be opposed to an individual because of who they are in a society that lacks diversity (think of a disabled person); is bad but it is not evil.

* Openness is a fundamental quality of honor and opposition to commerce is to deprive people of their core honesty; that is bad but it is not evil.

* Lastly, to oppose technology, (there are many arguments about the harmful side effects of technology); may be bad but it is not evil.

To oppose all four of these attributes of commerce is evil.

Commerce is what brings us modern health, abundant food and meaningful work. Commerce raised us out of poverty. To oppose these powers of modernity is to oppress individuals.

 Commerce raised us from the life of misery we all lived for nearly 20,000 years, misery that still exists in much of the world. Parts of the world still live without modern commerce… they have not benefited in health or food supply or fulfilling work.

Opposition to commerce is, in my mind, evil because it condemns all of the poor people in the world, to live lives from of pain and suffering from which they are unable to defend themselves. Opposition to commerce condemned those who lived in India during the 1950s and were starving, as well as most of the world in 1800 who had nothing but bodily suffering and regular famine in their lives. To put people in that environment or to keep them in that non-commercial environment is evil (think N. Korea and Cuba).

To support politics that leads to a future that stifles personally fulfilling work and suppresses the medical advances that commerce generates, is equally evil. That is the goal of modern Leftism.

Pro Commerce is only partly conservative

Many people who know me believe I am either conservative or Republican or Tea Party or some combination.

I am not any one of those. Pro-commerce is a position that stands alone and it is only a partial component of any one of the above categories.

The reason pro-commerce is an uncomfortable position for both conservatives and the Republican Party is that commerce is the fundamental source of modernity and change in our society. It is the reason we have a constant flux of new technology and the world of volatile modernity.

Commerce is the tentpole on which technology grows and thrives. Most importantly commerce is the tentpole that brings technological change, including medical and new health products, to the final consumer.

No matter how we look at the world around us in terms of our health, our daily lives and every detail of our daily lives, the changes that occur annually and decade by decade are the byproduct of commerce continually innovating, destroying the old and helping us welcome the new.

Commerce is the basis for modernity and innovation. The conservative plea to preserve old houses, traditional family and social norms as well as most traditional social values is actually at war with the innovative edge of commerce.

In a recent era we have seen the Internet change every commercial business. It would be very hard to argue that the old ways of brick-and-mortar and local businesses can somehow operate without the Internet and the massive upheaval it has wrought. The old ways, no matter how we look at it, have been disrupted by commerce.

As a lover of commerce I cannot be considered a conservative nor can I align myself with the conservative elements of the Republican Party. I certainly can't associate myself with the extraordinary anti-commerce of the Democrat-Union anti-trade pro-government-expansion Party.  As for the Tea Party, to the extent that it grew out of hostility to the vicious manipulation of the Senate and the House by the Democratic Party to create a vast government run health bureaucracy, I am a fan. To the extent that it remains grass-roots, I am a fan. Beyond that I see no greater affiliation on my part.

Pro-commerce is a perspective that stands on its own. It is a champion of social diversity, meritocracy, technology and openness. When some political party encompasses even a small segment of these values I will be affiliated with that political movement.

The rational world and the future

I have discussed in an earlier blog the battle between modernity and tribalism.

In my own society, the U.S., where modernity is ascendent,  I must still ask the question of modernity’s future.

‘What is the future of rationality?’ is a fundamental question.  Rationality is in fact, at the core of modernity and modernity’s doppelgänger: commerce.

To be able to survive in the world of commerce with its inherent meritocratic environment, with its inherent diversity of people, with its enduring need for technology and openness, we need a rational basis for human interaction.

It is definitely legitimate to question the future of rationality. The magnitude of Jew hate around the world is a measure of the level of anti-rationality. Jew and Israeli are synonyms for rationality.  Jew hate is epidemic in Europe, Islam and the Latin world. That comprises nearly half of the global population. It is also endemic in American and Anglophone academia.

While academia pretends to support the values of rationality that is not a defensible pretense. Academia universally promotes Jew hate and environmental Armageddon. Two positions invulnerable to rational examination.

At its core, academia is anti-modernity.  It is hostile to the corporate world, to the modern military, to commerce in general, and most of all it is hostile to open debate. Anyone who has  seen the commencement speaker brouhaha in the past year, knows that academia rejected speakers for their opinions. That should leave no doubt about the hostility of American academia to rationality.

My view on the future of rationality is based on the very slow creep of commerce into a significant position in the world. More countries now have open commerce in their society than at any point in history. That open commerce is not necessarily protected by the rule of law or popular opinion in every instance. Nevertheless commerce does have some footing in much of the world.

I live in a city very hostile to commerce, San Francisco. I constantly see that this position cannot survive in the long run as people refuse to confront ‘the 20th century problem’.

The 20th century problem was hostility to commerce, a dominant governmental position in the USSR, China, India and a dozen other places. This anti-commerce position failed because these societies were faced with the inability to feed their populations. Additionally, the appeal that the cultural messages of commerce conveyed globally, life opportunities for individuals, also hastened the failure of anti-commerce statism.

I know I am a lone voice in this matter but I see people learning the hard way from the lessons of the 20th century. In the United States we have urban bankruptcies and Detroit. The collapse of thriving local economies will teach some of us that statism is a dead end. Those who need to learn, will learn slowly but the lessons are being learned by younger people.

I am not overly optimistic. I don't see progress as being rapid or as a straight line.

Does commerce need democracy?

In our era there is an ongoing debate about the relationship between democracy and commerce. We have three locations that raise the question. Singapore is a socialist country with thriving commerce. Hong Kong was a free market, now a pseudo-democracy with thriving commerce and then there is China, a country with thriving commerce and not a shred of democracy.

I am a champion of commerce. What is my opinion about the role of democracy?

From my position it appears that Mancur Olson has answered this question with his metaphor of a saucer. Olson argues that industrial commerce, thrives on the flat part of a saucer. The low part of the saucer is anarchy in which industrial commerce has no ability to build a market and maintain enduring management. The high outside tip of the saucer is the tyrannical environment where the tyrant will confiscate a business that succeeds and give it to his brother (or his campaign donors).

I think it is necessary to re-examine Olson's saucer. What we have in the low inside part of the saucer that is identical to the high outside part of the saucer is the absence of a reliable legal system. The rule of law is the sine qua non of industrial commerce. One needs to have private property protected by the rule of law in order to avoid the problems of both anarchy and tyranny.

China does not have an established 'rule of law' that applies to everyone in the society. It might prove to be a failure over time.  We can therefore require a longer period of time than the current 30 years of Chinese success to examine the question of commerce and democracy. At this point I would say that democracy is not necessary but the reliable rule of law is.

The only question is whether we can have the rule of law in a society that is not democratic. We do not have sufficient answers to this question at this point in history.

I do not want to suggest that the rule of law is the end all of commerce. Commerce thrives at the trade level in anarchy. People still buy and sell food, cigarettes and sex in an anarchistic environment. They also sell and buy weapons and ammunition. (Trade is different from industrial commerce.)

The rule of law also has its upper limits. In the United States where we claim great priority for the rule of law, we still have property confiscated for self-interested plutocratic reasons under the eminent domain rule. We constantly have businesses punished by regulatory authorities and taxed out of existence. But, we have some fairly extensive rule of law that applies to the vast market of businesses.

Tipping solution

In four earlier blogs (this is the 4th blog) I discussed the problem of raising the minimum wage by 40% in San Francisco. This is going to happen over a 3 to 4 year period. I discussed the enormous damage this will do to the city. We will become a sad declining city; we will be using Detroit style self immolation.

In the restaurant businesses, that I know, a 40% increase in the wages for the service staff will require at least a 20% increase in the retail price of meals and beverages. I expect most high-end restaurants with employees, who aren't family members, to close as the restaurant business moves to Oakland, a nearby city with very good restaurants.

Recently, I did see a possible solution for San Francisco restaurants.

The wait staff is paid primarily in tips. The average tip being somewhere around 18% of the bill before sales-tax. The wait staff earns two thirds of its revenue from tips.

If there were a way to get customers to pay 20 or 25% more for their food and not leave any tip, the net to the customer would be approximately the same as it is before the rise in the minimum wage. The wait staff could be given a small percentage of the increase.   (But they would still have jobs… their wages might suffer a net decline.)

Customers, in the dozens of cases that I have observed, will always leave a tip regardless of what instructions they are given. This is not a problem with Europeans who are happy to avoid a tip. They seem to understand that tipping is a residual practice left over from the days of servants and slaves. Tips were meant to encourage servants and slaves to do a more enthusiastic job.

Ordinary Americans will leave a tip no matter how much effort is made to discourage them.

The geniuses at Uber, the online taxi service, have figured out a way to keep Americans from giving their drivers tips. The entire bill is charged to the credit card and with the invoice on the  smartphone comes a questionnaire to rate the driver and car from 1 to 5. That rating function seems to replace the need to tip the driver.

I can see in a restaurant where the tip line, on the bill, would be eliminated but a rating system for the customer to rate the service would be on every bill.

This might be the way to raise prices more than 20% without increasing the cost to the customer.

Commerce is always a source of ingenuity.

Commerce and big business

Somehow or other in the Lefty fundamentalist mind small neighborhood businesses are good and big national and international businesses are bad. I cannot defend or understand this absurdity but I can point out the logical failure.

In nature there are a multitude of small species for the very few large species. There are billions of blades of grass, there are millions of bushes and their only tens of thousands of tall trees. The same with business.

Businesses grow for two reasons: first, because consumers like their product and second, because growth offers economies of scale. Economies of scale can occur in marketing, innovation, production, and distribution. Economies of scale reduce costs, the driving force of industrial commerce.

Because the world is made in such a way that when building 1000, each widget can be cheaper than each widget when building five, we will always have big companies.

The biggest problem that seems to be the source of Lefty antagonism, other than the fact that they are antagonistic to anything big as long as it is not a whale or an elephant, is that big business seems to destroy small business.

This is completely untrue and the result of biased observation.

First, when a new innovative enterprise enters a new field it rapidly expands the number of small businesses in that field that are able to thrive. In this earlier blog I show that the arrival of Starbucks in San Francisco in the 1990s dramatically increased the number and quality of independent coffee shop's.

Second, I have worked with dozens of small businesses that were faced with new entrants in their market; bookstores faced with national chains, retailers faced with Walmart and organic foods (and even bagel shops) faced with new chains. And every retailer faced with the Internet.

In each and every case I was able to recommend changes in the business operation that made the local store more valuable and more desirable to its customers. In a few instances I saw success where the local store made the adaptations I recommended.  In almost every other case I found that the local store owners did not have the energy to make the necessary changes.  Old-age, boredom, and exhaustion are the reason they closed their store. It had nothing to do with the big businesses. Nothing.

Most people don’t know what a physical struggle it is to keep a small local business running.  They can’t see the exhaustion that is the real reason the local businesses close.