A New Kind of Economy — An Interview with Andrew Yang

My honest feeling is that the entire capitalism/socialism framing is decades old and unproductive. So, what I’m suggesting is that we need to evolve to the next stage of capitalism, which prioritizes human wellbeing and development. If someone were to say to me, for example, hey, you’re for universal health care, and that’s an idea I associate with socialists…I would shrug and say, sure. [Laughs.] You know? I just think the labels are unfortunate. People have very strong associations with each one.

A friend of mine, Eric Weinstein, said a couple of things that I thought were very profound. First, he said we never knew that capitalism was going to be eaten by its son—technology. Second, we have to become both radically capitalist and radically socialist in different aspects of American life and the economy. And I think both of those things are true.

I just don’t think it’s constructive to try and pick a spot in this arbitrary capitalism/socialism spectrum. What I believe is we have to redefine our economy and re-write the rules so that it centers around us. Capitalism’s efficiency and GDP are going to have an increasingly nonexistent relationship to how most Americans are doing.

Andrew Yang – A New Kind of Economy — An Interview with Andrew Yang

Competition, markets, and open source

On Wednesday, at WEA’s housing and transportation conference, I met an economist who’s studying competition and the shrinking number of small / medium-size businesses. New business formation isn’t behaving as most people would expect it to in a strong economy.

She thought open source, both software and methodology, might be a solution to make small and medium-size businesses more competitive. However, I argued the exact opposite: open source is a business strategy for an extreme form of taking the entire market.

I think one root cause of large companies growing larger is that technology lends itself to extreme operational efficiencies. With a technology company, the marginal cost of an additional customer is effectively zero. If Amazon can operate at 10x global scale with the same operational costs, it can take a smaller margin and still be very competitive. Traditional businesses can’t compete if they have a larger percentage of margin dedicated to operational costs.

So, if it’s true that more of the market is going to larger companies, is this worth solving for? And what are potential solutions? One result of current market dynamics is difficult to unwind: Amazon yields amazing customer value and worsening employment options (either by destroying jobs entirely or offering poorer wages).

A World Without Work

The U.S. labor force has been shaped by millennia of technological progress. Agricultural technology birthed the farming industry, the industrial revolution moved people into factories, and then globalization and automation moved them back out, giving rise to a nation of services. But throughout these reshufflings, the total number of jobs has always increased. What may be looming is something different: an era of technological unemployment, in which computer scientists and software engineers essentially invent us out of work, and the total number of jobs declines steadily and permanently.

Derek Thompson — A World Without Work

An economy of abundance

The key question: how can we better conceptualize the switch from an economy of scarcity to an economy of abundance?

Last night, Leah and I had the fantastic opportunity to fly down to San Francisco to hear Tim O’Reilly speak about the birth of the global mind. As a long time listener of the podcast, it’s always been my dream to attend a Seminar About Long-Term Thinking. The essence of Tim’s talk is well-encapsulated in an essay of the same title. One idea posed in Stewart Brand’s interview at the end touches in the nature of economy in the information age.

Economy, in my perspective, is our way of understanding how we work together. We take many things about it for granted — GDP as a measurement of growth, monetary instruments as our tools for transaction — that aren’t actually hard truths. They exist because at some point along the way we invented them to make our society more prosperous with less effort.

A peculiar situation has manifested itself. Most recently with the web, we’re inventing newer, better ways to function together that are essentially “extra-economy,” or outside how we normally measure economic activity. In these systems, far more value is being created than being captured; and for many, the generated value and associated recognition is more important than financial gain because they lead to influence.

For instance, in what I do with Automattic’s WordPress.com VIP team, a not-insignificant amount of my time each day is spent contributing to open source projects. We don’t directly monetize this work but it generates value that trickles back to us. Releasing our liveblogging plugin has already resulted in several useful contributions from the community. Making money from open source is a hack though, as our currencies are based in scarcity and our peer economies are based in abundance. In the latter, the more people participating means the more everyone benefits.

Our bootstrapping of a new mode of economy is happening hand in hand with another trend: increased productivity making certain types of jobs obsolete. A hundred years ago, the number of people involved in food production was X while today it has dropped to Y, a ten-fold decrease. While we don’t yet have the nutrition we need, we’ve certainly been able to meet our caloric numbers. Douglas Rushkoff observes “we’re living in an economy where productivity is no longer the goal, employment is.” For our government, the focus is to keep the populace in jobs, because unemployment breeds discontent and has a perceived negative impact on our traditional perspective of economy.

I have no idea what comes next. I see an economy of abundance as generative, whose engine is creativity in the very literal sense of the word. And it’s additive too; what’s mine can be yours and vice versa. Don’t ask me “how do I make money?” because I don’t know. That’s the old way of measuring economy and we haven’t invented the new one.