Dana Blankenhorn

Human Capital and the 1980 Game

In 2020, we will be 12 years removed from the first political triumph of technology, the generational election of Barack Obama. All his progress is now being undone, much as a generation ago oil’s gains were threatened by Jimmy Carter and his cardigan sweater.

As we prepare to play the 1980 Game the question becomes, who is Ronald Reagan now? (It’s usually phrased, “Who Can Beat Trump?”) The answer lies in what drives our economy today, and in what drove it then.

I remain confident in the ultimate triumph of Democracy because, today, human capital is the gating factor to economic growth.

Aladdin’s Bank

Jeff Bezos doesn’t really have over $100 billion, not in the way you may have $1,000 in a bank. Amazon.com isn’t worth $900 billion, in the way your house is worth $250,000.

Both valuations are based on a lie, the idea that Bezos could sell out his stock, or that ready buyers would take out all shareholders at the current valuation. The value of a stock-based fortune, or a company’s market cap, is based on the price paid at the last trade.

So it is that we return to Aladdin’s Cave, which I wrote about in 2013.

Had Aladdin come out of that mythical cave, with all its gold and jewels, and tried to sell them, the value of gold and jewels in that town would have plummeted. He would have brought only a fraction of the value.

On the other hand, what if Aladdin were a Hamiltonian?

Capitalistic Feudalism

The central problem of our time is the march toward feudalism.

It began among capitalists.

Democracy is essential because it lets people change their minds and, upon changing them, reform the institutions that control their lives. That’s what the Declaration of Independence is about. It argues that despotic systems must be overthrown when they threaten our “life, liberty” or pursuit of happiness.

Many people, including me, have argued that the current attack on democracy began with The Jim Crow Project.

But long before one of our major political parties abandoned democracy, business did. It happened as these things usually do, with the very best of intentions.

As I noted last week, the system that came into effect in 1789 had only property owners voting.  The true genius of succeeding generations has been to expand the right to vote, thus the pool of those who can effect change, to more and more people. This work continues, and it’s important.

But there’s another kind of democracy, corporate democracy. It may be even more important than electoral democracy because even functional democracies operate by the Golden Rule – he who has the gold makes the rules.

Before we can hope to have electoral democracy, then, we must have corporate democracy.

We Are All Founders

There are two distinguishing features to the existential crises in American history.

The first is it makes us return to first principles, causing us to re-examine, criticize, and eventually deify the past.

In the run-up to World War II, a crisis that really began four score and seven years ago, in 1932, there was a vogue for Abraham Lincoln. Henry Fonda and Raymond Massey did popular biopics, and his memorial became a sort of Ground Zero for what was best in our political natures.

In our time, Lin Manuel Miranda did this to Alexander Hamilton while Ron Chernow, who did the biography of Hamilton on which the movie was based, proceeded to resurrect U.S. Grant. The purpose of both these pieces of art was political. Miranda wanted to highlight the importance of immigrants in getting the job done. Chernow wanted to push back against a Confederate-inspired view of history that still, 150 years later, has those who supported human rights being disparaged while those they fought are exalted.

We love to call America the world’s oldest democracy. We revere the founders as giants.  We even call them the Founders.

But the original Constitution was profoundly anti-democratic. Women couldn’t vote. Neither could blacks, nor native Americans. The franchise was reserved for white males, and not even all of them. You had to be a property owner.

The Google Primary

One reason I’ve always been confident that Trump was doomed was because history has generational cycles, and the rising generation hates him.

Another reason is that American politics are based on economic cycles, and the economic future hates him.

America runs by the Golden Rule. He who has the gold makes the rules. The business of America is business, and the business with the highest value-add calls the tune.

Back in 1979 this was the oil industry. Jimmy Carter defied oil with a cardigan sweater and a call for conservation. They buried him.

Exurbs are the New Rust Belt

Here is where economics, politics, and technology converge.

Trumpism is driven by exurban voters. There just aren’t enough people in the rural areas to drive a competitive candidacy. It’s obviously the exurbs.

Exurbs are suburbs of suburbs. Their locations shift as people move further away from urban employment centers. When my folks moved to Orange County in the 1970s, Huntington Beach was an exurb. Today Riverside County, where my sister lives, is an exurb.

Exurban economies are based on gasoline and real estate. Drive until you qualify. The money is far away so you need a big car, and a lot of gas. Doing anything requires a drive. Serving the needs of a car-centric society is what the exurbs are all about, supporting people with shopping and services.

When I was young, exurbs were in fashion. Control of resources added more to economic growth than anything else, but for that to become value, the resources had to be used. That’s what exurbs do best.  Technology meant future growth, but only in the last decade has technology become central to the economy.

This is the important point.

2018: Halfway Through the Gauntlet

Kids are taught in history that Gettysburg was the turning point of the Civil War, and that Operation Torch, the invasion of North Africa, was the turning point in World War II.

From July 4, 1863, the South never invaded the north again. From January 1943, the Nazis and Japanese never again had the initiative.

That’s not the way things were to the people living through these crises. While these events were celebrated, people knew better.

I believe it will be seen that November 6, 2018 represented a similar turning point in the crisis represented by Donald Trump, and the invasion of the West by Russia that is, even now, escalating in Europe and the Ukraine. But a turning point isn’t final victory. It doesn’t even mean victory is in sight.

Nostalgia

Nostalgia is derived from two Greek words. Nostos means home, algos means pain.

I have never been one for nostalgia. I prefer to look ahead. I’m not into pain.

So, 40 years ago I looked forward to people moving into central cities, and 30 years ago I was so high on the Internet. It’s why 20 years ago I was thinking about what’s now called the Internet of Things, and why 10 years ago I was big on clouds.

Throughout my life, better and better has gotten faster and faster. American lifestyles seem little changed from what they were when I was growing up on Long Island. But a half-century ago, in The Shoes of the Fisherman, mass starvation was a reality in China. It was a reality in India, too, and across Africa.

Tsunamis vs. Waves

As soon as it became apparent that Democrats would win the U.S. House, analysts began asking whether this was a “wave” election.

It wasn’t. It was a tsunami.

It’s easy not to understand this because most political scientists aren’t taught the difference between a wave and a tsunami.

The waves that daily hit the shore of the Bonzai Pipeline, on Hawaii’s northwest coast are often 12 feet high. But a wave, no matter how high, will break upon the beach and do no damage, except perhaps to the surfer who doesn’t catch it right.

A tsunami, on the other hand, is caused by forces deep inside the Earth.  A tsunami may be shorter than an ordinary wave, but it will do tremendous damage, because of the enormous power behind it.

The Climax State

One advantage that biologists have over economists and political analysts is a clear understanding of a “climax state.”

A climax state, whether it’s a swamp filled in by peat, a redwood forest, or a planet filled with huge dinosaurs, is the most vulnerable thing in nature. It only looks stable. But a fire, or any sudden conflagration, can destroy it utterly. Mankind has, in the last thousand years, created such a climax state.

This was all described to me in the summer of 1991, when we took our family vacation around our home state of Georgia and found ourselves riding in a canoe through the Okefenokee swamp. Our guide described how the life-and-death competition among plants and animals leaves organic matter behind, which fills in the water and creates little islands, which are eventually connected as more water disappears. But these islands are highly flammable. A fire in the swamp clears them out, leaving a new swamp for creatures to compete in.

It's lack of competition that makes ecologies vulnerable.