Entrpreneurship Means I Give Up

I come from down in the valley/
where mister when you’re young/
they teach you to grow up to do/
like your daddy done
-Bruce Springsteen, The River


In his state of the union speech, President Obama predictably praised America’s “spirit of discovery and innvoation” and talked about making it easier for entrepreneurs to start new businesses in a single day. This is bad news, and let me explain why.

There are basically two significant visions of the climate crisis (I’m deliberately excluding those who believe there is no climate crisis, and also those like Guy McPherson who believe the looming crisis is so extreme that nothing will serve to enable a single human to survive another century) and those are first, the only plausible response is cease the extraction and consumption of fossil fuels, and to absorb the social disruption and change in standard of living that this would entail, and second, that some new technology will come along that enables renewable sources to provide the energy that drives our modern quality of life. There is actually surprisingly little in the median strip between these two solutions: at a conference last year Hans Bruyninckx mentioned, offhandedly, that the European Environment Agency is basing its policy and planning recommendations on exactly the 4o world that the World Bank says “must be avoided.”

Both of these “plans” have their problems- for the first, stopping the trade in fossil fuels would essentially destroy USD10 trillion in private wealth, specifically the assets of some of the most politically powerful private entities in the world. Furthermore, the disruption in lifestyle suffered primarily by the wealthiest and most militarily powerful countries as a result would be profoundly destabilizing. Unsurprisingly, major Western powers have traditionally opted for the second response, calling for “innovation” as a solution.

Only problem is, innovation is a “scalable” enterprise. You can dream about a worm or a spear-carrying soldier and invent space suits or sewing machines, or you can pour trillions of dollars into research programs and come up dry- there’s no automatic connection between inputs and outputs. Engineers call these as-yet-unrealized solutions to difficult problems “unobtainium” but lay observers have taken to another phrase: “hopium”

Its safe to say that at present, the idea that climate change can be averted or even accomodated without a major shift in the american way of life depends on hopium, but that’s a science and engineering question, and this isn’t an engineering essay.

Entrepreneurship is Hopium for the Economy

I had a nasty realization the other day- at my first “real” taxable job, working retail at a bookstore, I was making USD0.65 more than minimum wage. Since then I’ve gotten a college degree, come within striking distance of finishing grad school, and acquired a number of practical and social skills I simply didn’t have as a teenager. And I’m making… USD0.65 more than minimum wage. Sure, the minimum’s gone up, but in inflation-adjusted dollars I’m earning less than 2% more in middle age than I was as a teen. That’s not even unusual. Wages vs. inflation is a hotly debated topic, but unless you buy the Heritage Foundation’s argument that DVD players make you wealthy, incomes have stagnated while the cost of living has gone up.

I’ve never understood the argument that technological toys compensate for a declining standard of living in real terms. Like hey, my dad is dying in his fifties of kidney disease from heavy metals in the municipal tapwater, but at least he got to play Candy Crush- what?

I won’t revisit the collapse of the manufacturing economy in North America except to point out that the Springsteen lyric I used as an epigraph was, for a while, true. Now it isn’t- how many readers could actually go into the same business as our parents and expect a similar career? How many non-scalable careers are even out there? People read Taleb’s question of scalability as advice on how to get rich- choose a career where you have a chance to be mindblowingly successful, as opposed to one where your income is capped by the numbers of hours in the week- but I read it backwards as a statement on your chances of finding work that might pay anything at all. There aren’t steel mills and shipping companies ready to absorb thousands of eager workers with strong backs, who show up on time, put in a day’s labor, and expect to own a house by the time they’re thirty. Even the modern replacement careers- nursing schools, medical schools, which, contrary to the American legend, are calibrated to turn out very few brilliant practitioners in favor of a large, reliable number of perfectly adequate practitioners and a vanishingly small number of screwups- are becoming more lottery-like. Specifically, the ratio of medical school “slots” to the number of residencies waiting for those students once they graduate is going way up… but I digress. The point is, doing like your daddy done just isn’t an option anymore.

Lotteries Overt and Otherwise

So, what’s a smart person to do to avoid pauperism? Well that’s obvious, isn’t it? Create your own job! Start a new business in a day! Making… well… this is the part where it gets tricky. If it were apparent what businesses need started already, they’d be started already. The first “job” today’s kids have to answer is, what the hell am I going to do that anyone is willing to pay me for? And each kid, increasingly, is expected to answer this alone as an individual. When poor or less-educated people do this, its called “hustling” but when it trickles upwards to the children of the 1%, its our national economic plan. Play the small-business lottery, cross your fingers, and hope.

I should also acknowledge that so far, this hasn’t caused any major collapse. There’s a lot of elasticity built into the system: one of the odd aspects of the global economic slowdown is that there are virtual oceans of liquid capital looking for a safe harbor for investment. Only a very few “startups” have to generate 10000% ROI to justify funding an enormous number of bright young sparks, especially when the bond rate is zero or close to it. This serves as a weird, semi-Keynesian stimulus for the tech sector as secondary producers that make tools for startups are able to extract a living from these mayfly customers. Labor costs are subsidized by the savings of the previous generation, who pay the living expenses of young “interns” who work for free. Ultimately the game is based on the assumption that somebody, somewhere will come up with something that is more important than Google Glass, actually necessary and marketable in the long term, but there’s a long, long short term during which the traditional rules of Keynesian stimuli apply- for those on the inside anyway.

Its also worth noting that while true Keynesianism, defined as state investment in wage labor to decrease humanitarian problems and increase spending by the lower quartiles, has been attacked as a “moral hazard” (even a moral panic) since it was first invented, the actual moral costs of a quasi-Keynesian venture-capital “boom” going to the 1% are actually far worse than any “undeserving” person driving a nice car every could be.

So what?

There are two major problems with this. The first is that investment in tech “innovation” promotes inequality. Don’t believe me? Try moving to San Francisco, Boston, NYC, or any other “innovation hub.” The second problem is the hopium problem- there’s no reason to believe that any of this will actually play out for the better of the rest of the world, or even the country. Sure, there’s a possibility that Tesla batteries will become a major industry employing millions of average people who didn’t go to Stanford or the Wharton school, but there’s also a possibility that some clever person will discover “zero point energy” and solve the climate crisis without incurring any human lifestyle cost at all. Both represent gambles with very long odds, and both have substantial short-term and possibly long-term downsides. A rational economic policy would accept that some sort of keynesian stimulus for the 99%- okay, the 90%- or better yet a system that decoupled standard of living from economic “growth,” just as a rational climate policy would begin the process of dialing down resource consumption in preparation for a world in which cheap, plentiful energy is simple not available. Instead, we’re promised unbelievable “successes” right around the corner.

The track record so far has been terrible for both “innovation” and “entrepreneurship” and the fact that they remain our official policy can only really be seen as evidence that the powers that be- the economic planners and engineers who determine the priorities of the most powerful corporate and state actors in history, have basically given up.

17 thoughts on “Entrpreneurship Means I Give Up

    • the system is the lovecraftian nightmare that we are also all so afraid of. there is nothing else to complain about, and no way out. of course, it will run out of steam on its’ own accord. then we’ll have some else to complain about. if there’s any of us left to complain, that is.

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  1. “…but there’s also a possibility that some clever person will discover “zero point energy” and solve the climate crisis without incurring any human lifestyle cost at all.”

    “zpe”, as the name implies, is energy at, or near, its’ highest entropic state. it is unavailable to do work. any attempt to harness zpe for use in any way, would require more energy than could be obtained from zpe.

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    • Hopium is our ONLY solution to climate change. We can hope for an innovation miracle or we can hope the scientific community is wrong, but if neither of these happens, we are certainly doomed.

      Global climate change is a global problem. While in the United States, people expect any law to be so strictly and absurdly enforced so that people will be arrested for passing gas, in many countries, new laws just increase the price of the bribes. Do you really think that Russia will vigorously enforce carbon limits? Especially when the worst case scenario is that the giant Russian icebox is a few degrees less frigid. Large carbon emitting industries will suddenly relocate to Russia (or similar countries) citing a “favorable business climate” and tout “miracle solutions” that and simultaneously allow them to meet the nominal legal limits while defying the laws of chemistry. We’ll ignore the obvious problems and continue our lifestyles as before, but now with a clean conscience.

      A global program of preventing climate change is doomed to fail for the same reason that cartels inevitably collapse. The incentive to break the cartel is simply too great.

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  7. Anne, I agree with the basic observations you are making regarding both the Unnecessariat and the inability of entrepreneurship to create large numbers of jobs. What I’m not sure I understand, however, is your presciption for a solution. As best I can see it, virtually the *only* option is to completely decouple income from earnings, and somehow re-allocate whatever value is being created by the “entrepreneurial class” to cover everyone..including the Unnecessariat. We obviously have no current or planned mechanism today that would enable this, nor any political awareness (or political will) to devise a solution, given how drastic is would need to be. What am I missing?

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    • Lets be clear that I am not a policy person. That’s a cop-out, I know, but my brain just doesn’t think that way. To some extent my writing is always informed by the conviction that on some level the economy as it exists (to the extent that there is something called “The Economy” that is separable from the material culture of the world in which it is embedded) is impossible. Something about this conviction makes strange internal contradictions “pop” when I read over them, and I end up with thoughts in my head like this post. Okay, I’m just talking about myself here.

      I am not sold on a UBI, but I think that the debate about a UBI brings up two separate problems that should be talked about distinctly. First, obviously, is the need for people such as the Unnecessariat (and everybody else) to have access to the means of survival. I won’t debate that- if you are one of those who think that allowing people to starve or otherwise off themselves is a good social corrective, well, I don’t think I can talk to you (you’ve given no evidence of this kind of thinking in your question, I’m just touchy.)

      Secondly, though, is the question you raise of value. If the means of survival are only available in exchange for labor or products that *other* people find valuable and want to purchase, then you end up with a situation in which an enormous amount of work-for-labor is done convincing people that what you have is actually something they want. Under classical economics, this counts as “growing the economy” or increasing productivity, because it increases the exchange value of goods and services, but its also a deformation of the market (for conservatives) and a social manipulation by the powerful (for the left.) If you’re starving, and all you have is a pile of, to use the evocative but compromised LATOC term “plastic pumpkins,” then the person who is best able to mess with people’s heads to convince- or coerce- them they truly need a plastic pumpkin wins. Whatever value or growth arises from your labor is then contingent on the stability of the mechanisms that make plastic pumpkins seem valuable.

      I think a lot of the “value… created by the entrepreneurial class” falls into this category. It is, to be short, a sales job. The intent is to create a sales job that eliminates the value effects of the previous sales job. Is that creating actual economic growth or merely reallocating resources towards those best able to manufacture demand?

      But yeah, TL;DR- policy, I have no freaking idea.

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      • John Locke explains at least part of the labor theory of value in his Second Treatise of Government. It has to do with his understanding of the basic “rights” of human beings and when something becomes someone’s property and not just a random thing in the world. An oak tree is one thing, but when I climb the tree to gather acorns and gather the ones that have fallen and then shell them for their hearts and then dry and grind them into flour, I’ve combined my labor with a material product such that the concept of “property” comes into play. I can then trade that property with others to obtain the things I need for my survival and life. I’ve always found his articulation of it helpful and interesting, if not necessarily convincing in all or even many contexts. Yes, there is a “sales’ aspect to it – whatever your combine your labor with to create a piece of “property” must offer some value to others who will want to buy or trade with you for it. That “value” is something either really evident to people (as in there’s already a “market” for it) or you must show people that they really need it (as in an $8 cup of coffee instead of just a 99-cent cup). This is all majorly messed up in globalism and late-stage capiltalism (and maybe in capitalism altogether), of course . . . not detracting from any of your points here.

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