Month: September 2014

Milton Friedman: “Only a crisis — actual or perceived — produces real change.”

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Milton Friedman

There is enormous inertia—a tyranny of the status quo—in private and especially governmental arrangements. Only a crisis — actual or perceived — produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes politically inevitable.

Milton Friedman, Capitalism and Freedom, Preface to the 1982 edition.

This could easily have been the quote at the front of America 3.0.

A crisis, or series of crises, are likely to be coming in the years ahead as the economy and government based on industrial era (America 2.0) models fails more and more completely and obviously. The inertia, the tyranny of the status quo, embedded in our existing institutions is going to resist meaningful reform. It will not be an inert resistance, either, it will be attacks on agents of change. To use Clausewitz’s phrase, the defense of the status quo will be “a shield of blows.” Some people will be hurt by the blows.

But it won’t work. It cannot work.

Our task in the book was and is precisely to offer alternatives to existing policies, and explain why our proposed alternatives suit America’s inherited underlying culture, and the technology which will shape our future. Many of the things we suggest in the book have been dismissed as “impossible” even by friendly critics. But as Milton Friedman correctly noted, the politically impossible can become the politically inevitable, if it is an idea whose time has come.

The Restaurant and Bar Business

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I am far from an expert on the Restaurant and Bar Business segments but as a long time resident of Chicago in various areas packed with these establishments from Wrigleyville to Bucktown to River North I am at least a frequent regular qualified to throw my 2 cents in. I hadn’t thought too much about the economics of this until I talked to a friend who recently opened two great pizza places where he is the owner about what you get when you buy a used restaurant.

You get nothing… you have to re-model and start over the food concept. And when you sell, the next guy does the same.

What makes a good restaurant as a business? There are a lot of variables and I am only speculating, but certainly timing and location are key elements. For instance you have the Twisted Spoke, a bar on Grand Avenue in what used to be a pretty sketchy part of town that is rapidly gentrifying, and they have the iconic “skeleton on a motorcycle” on permanent rotation in front. This bar has survived for a long time with a mix of hipster / biker cool, an astoundingly good drink / beer mix, and surprisingly good food and interesting / witty / iconic employees. I’d bet that back in the day this place was actually full of bikers but nowadays the crowd looked like the usual hipsters in plaid shirts. And don’t forget the enormous benefit of a rooftop – it astounds me how many bars / restaurants ignore the fact that Chicago people LOVE to sit outside during the few nice days that we receive every year and they drink like fish and eat until they can’t even move.

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History Friday – The Last of Her Ilk

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I was going to write about another mildly notorious woman – an imperishably ladylike and competent professional gambler who was a figure of note in her day on the Texas frontier – for History Friday, but I noted the departure of Deborah, known to her family as Debo, the last of the notorious Mitfords, from this mortal plane. Yeah, it was in the Daily Mail website, but they had a number of lovely archive pictures of her, taken throughout her life – which through no particular fault of her own – was spiced with notoriety. Deborah, the Dowager Duchess of Devonshire – which sounds like a made-up title for one of those horrible regency romances – was privileged and burdened, I think – in about the same degree.

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Peter Thiel and George Gilder debate on “The Prospects for Technology and Economic Growth”

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This is an excellent dialogue between George Gilder and Peter Thiel, from 2012, regarding two different versions of what the future will look like.

It is a little over an hour, and I highly recommend you listen to it.

Gilder is a thorough-going optimist. He sees a world where everything is good and getting better, and critiques of technological change are generally wrong-headed. That is a brutal over-simplification, of course. Gilder is a seasoned speaker, debater and writer. He makes a decent case, better than I am suggesting here.

Theil makes a more subtle case. He says that technology, other than the technology has stalled for decades. He says that the fields of engineering that deal with “stuff” have been — and this is a strong word — “outlawed.” As a result, the only areas where technological change is happening are in finance and computing. Nuclear engineering, for example, would have been a suicidal career choice if you made it a generation ago.

So, Theil is one hand a pessimist. He sees a decay in the rate of technological development, a decay in standards of living and real wages, a decline in optimism and expectations for a better future.

However, he does not conclude, “so, we are doomed.”

What he says instead is that we cannot pretend that technological progress grows on trees. He says that we need to address the obstacles to technological change which are thwarting the potential for a better future.

All of that seems correct.

The vision Jim Bennett and I depict in America 3.0 is one in which the excessive regulatory obstacles to technological progress, capital formation, and new business formation have been greatly reduced. Under that scenario, much of the halted progress in the world of “stuff” should resume. This is particularly the case because, as Gilder correctly notes, the extraordinary advances in computing power will enhance the potential of all of these areas. The potential for rapid development, leading to rapid economic growth and rising living standards, is within our reach. It is being held back by political and regulatory obstacles, not technical or scientific ones.

That has to change. But, it might not. Nothing is inevitable.

It is up to us to make it happen.

I have not yet read Thiel’s new book Zero to One: Notes on Startups, or How to Build the Future. It is en route from Amazon as I type this, however. Here is the web page for the book.