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A blacksmith, from the
Assassin's Creed video game.. |
The American Dream
is a remarkably powerful piece of mythology. Stated simple, it is the
belief that "If you work hard, if you play by the rules, you
will succeed in America." It is so embedded in our national
psyche that few in this country, until recently, have questioned it,
despite the fact that it actually runs counter to history not only
here but abroad as well.
"Work hard
and work within the system, and you will be rewarded for your
efforts" also sounds like the foundation of modern Capitalism,
but again, it is a truism that gets remarkably slippery once you
actually try to apply it to the real world. We live in a country
where the differences in pay between the wealthiest and the poorest -
or even the wealthiest and most of the inhabitants of the country, is
astronomical - quite literally. The median income in the United
States is about $50,000 for a person with a bachelor's degree. The
total wealth of that same person in terms of house, vehicle,
investments, etc. as well as income is roughly double that, or
$100,000.
The upper echelons
of the uber-wealthy start at about the $1 billion dollar mark. To put
that into perspective, that's $1,000,000,000 or five orders of
magnitude higher. That means that, before taxes, an individual would
have to work 100,000 years to get to the same level of income. Given
that this is roughly how long as it has taken for human beings to go
from living in caves and fighting off saber tooth lions to today, the
idea that one can in fact get to be a billionaire by working hard is
actually pretty laughable.
You pay taxes. You
buy food that continues to rise in price, to the extent that cereal
manufactures are faced with the very real problem of being able to
get bulkier cereals into their boxes because they have been shaped
too thin in order to hide how little you're actually getting. You
have to pay for gas that seems to be permanently ensconced around $4
a gallon. You put your kids through school, and then the racket
called "higher education". By the end of the year, if
you're lucky, you've socked away maybe a few thousand dollars in your
savings account, which gets negative real interest (you pay to save).
So, once you do
the math and look at how long it will take to save up that first
billion, you're now in the 100 million year category. The dinosaurs
were still around at that point, and would be for another 40 million
years or so, and the continents were still reeling from just having
split apart a few billion years before. Now, chances are pretty good
that you will drop dead from overwork long before you even get to
that first $100K in the bank that's "discretionary savings"
- what used to be called wealth.
So, suppose that
you don't have those wealthy parents, you have to win at the "lottery
economy". What's that? The lottery economy is actually pretty
close to the economy we have today. In the simplest example, you buy
a ticket and defying all odds, you win the lottery. However, a more
subtle form of this is in the entertainment world. You get blessed
with a handsome face and hot body (or a pretty face and attractive
curves), and then put some work into making those attributes pay off.
Or you have a good singing voice, or you play ball very well, or you
have a strong sense for acting, or you otherwise have physical
attributes and natural talents that can, with a lot of work and
effort, get you considered for the big time.
Yet that "big
time" is still a lottery. For every supermodel there are 10,000
young women who are as beautiful but didn't have the right qualities
for a particular ad campaign or casting call. For every scientific
discovery, there are thousands of scientists who struggled with the
same problem but didn't have the right samples. For every Michael
Jordan, there are thousands of young men who for one reason or
another never quite hit the big break.
Now, that doesn't
mean that hard work is not important here - it absolutely is. You are
trying to prove yourself better than millions of other people, and to
do that you have to work hard. Yet ultimately, there is almost
invariably a lucky break involved that catapults you out of the
unwashed ranks into the ranks of superstardom (and almost always to
the very lowest levels even there).
This holds as true
in business as it does elsewhere, perhaps more so. If Bill Gates had
started Microsoft in 1990, Microsoft would likely be nowhere as
successful as it eventually became. Google survived by changing the
paradigm of search on the web. Apple did not build the first personal
computer, only the first such computer that was designed as a
consumer product. In order for these companies to have done as well
as they did (how's that Facebook stock doing for ya?) they had to
fill a niche that existed for a very tiny window of time, then had to
be ruthless in keeping others from that niche long enough to survive.
A secretary
working for Microsoft in 1980 would be a millionaire today if she'd
been granted stock options (as most were at that time). Did she
materially make a difference in the future of the company? Probably
to the extent that any secretary would have. That secretary probably
was less important in the scheme of things than a systems programmer
twenty years later, but by that time, Microsoft's stocks had
plateau'd. The opportunity had passed.
This is especially
true for investors, which is the ultimate lottery. How many times
have you heard "If I had only bought Apple or Starbucks or
Microsoft at the beginning, I'd be rich right now!"? Yet, the
reality is that most people have comparatively little discretionary
income. A few people get rich by lucking out - picking the right
stock at the right time. In most cases, though, the very wealthy get
even richer by hiring people to invest in a lot of stocks that might
in fact take off, then selling off those that fail early. To do that,
you need money to be able to absorb losses while waiting for the hits
to happen. You can still lose everything, but because you have the
luxury of diversifying your portfolio, in general losses in one area
are typically offset by significant gains in another - and if you can
then right off those losses as tax write-offs, you're actually not
losing all that much money.
There's a certain
threshold that separates the wealthy from everyone else. The exact
value varies, but currently it's around $10 million dollars. Below
$10 million dollars, the drag on wealth from various factor in the
economy makes it harder to accumulate wealth. Above $10 million
dollars, wealth becomes self-perpetuating - so long as your wealth is
reasonably well managed, it will grow with very little risk to the
wealthy, because debt works in the person's favor.
In that respect,
it's worth thinking about the lottery economy as being a rocket, and
that threshold is escape velocity. Any rocket that goes up will
ultimately come down, though it may be in a high enough orbit that it
will take a while to escape the gravitational well of the earth.
However, once it hits escape velocity, the force of gravity acting on
it is not enough to pull it into a parabolic orbit, so it is able to
go to the moon or be shot out into the solar system.
In some cases,
this can be a multistage effort - even if one generation doesn't
quite hit that threshold, a success (against less gravity) for the
next generation may very well do it. Thus, to become wealthy takes a
lot of work and a lot of luck, but to stay wealthy requires simply
not doing stupid things, once you're above that magical threshold.
Not doing
something stupid unfortunately usually involves not doing something
criminal, and that's where things get problematic. Wealth can be used
to buy power. That's not a new thought - the wealthy were buying
governorships in Rome and were probably buying Ziggurat Rulerships in
Mesopotamia. It's usually not hard to find some poor, hard working
civil servant that could use a little extra to buy that nice house in
the country, and with enough money, you can buy votes or even better
vote counts (usually by "helping" your favorite candidate
into the office of his choice, at which point he becomes YOUR
congressman or member of parliament).
Yet there's also
been a fairly long time understanding in the fact that businessmen in
general make for poor civic leaders, for the simple reason that being
a civic leader means insuring the welfare of the people over who you
govern, while being a businessman involves eliciting the maximum
amount of profit from an investment. These usually are antithetical
goals, because maximizing profits typically requires that you are
exploiting all of the available resources within a region as quickly
as possible, without necessarily worrying about long term viability,
while governing a region is essentially attempting to make it
sustainable over the long term, even at the potential cost of short
term profits.
Civic institutions
and financial institutions move with different frequencies, and have
throughout history. Throughout much of the Middle Ages, the church
generally played the role of the banker, attempting to gain political
power large through control of monetary policy, and political leaders
tended to move closer to or farther from the church based largely
upon the state's need for money - to pay for troops, supplies,
equipment, horses, and weaponry. Both Germany and England broke from
the Catholic church in great part because the rise of mercantile
trade significantly enriched these country's coffers, and as such
they were able to reduce the degree to which papal "strings"
could override local autonomy.
However, one
consequence of that was that the mercantilists themselves found
themselves in the position the church had occupied - providing money
to the state for investment in exploration and colonization in return
for increasing political power. In England, a cash hungry monarchy
made it possible to buy and sell lordships, and many a minor lord,
left with the upkeep of the moldering family mansion and increasingly
losing the rents due from tenants on those lands as mobility picked
up, were perfectly happy to sell their inherited titles to the
highest bidder. Similarly many extinct lineages were bought up
(usually with some folderol about service to the crown) by wealthy
mercantilists who then used the political power to further their own
business agendas.
Civic
administrators generally are not interested in empires. They've
developed a working equilibrium with the people under their care, and
they know the cash inputs and outputs in their domain. Empires are
for mercantilists who are seeking to exploit cheap materials and
potentially cheap labor in order to maximize profits, and in some
cases to build captive markets. When mercantilist pressures are
strong (when the merchant class has largely taken control of the
political class) you end up with periods of exploration, wars,
exploitation and schism.
The problem with
the "American Dream", is that it is dependent upon a highly
mercantile state where its client states standards of living are
farthest apart. As those client states dry up (or become more
autonomous), the empire weakens. Resources that had essentially been
subsidized due to the high differential between extraction costs and
standards of living of the client vs. imperial states begin to become
more expensive as the resources get used up and the standards of
living equalize, and this in turn manifests as a diminishing standard
of living in the host.
One way of
thinking about this is to consider that a business started in 1950,
if it manages to survive to 1980, would likely have generated huge
dividends over its lifespan. The same business, however, started in
1980, would generate far smaller dividends, accounting for inflation.
Most business started in 2010 will likely generate comparatively
little in the way of earnings over its lifetime, likely enough to pay
for the wages of its employees and materials, but with razor thin
profits. This is primarily due to the fact that for most people,
discretionary income has diminished as the influence of empire has
dropped.
The mercantile
class is not immune to this - indeed, they are directly impacted by
this. In times past, this typically ends up in an attempt to more
directly control the political class in order to continue to steer
government policy their way. However, while when standards of living
are generally high and the labor class participates in the benefits
of the wealth pump that is part and parcel of empire, when standards
of living drop for the labor class, resistance builds up to the
inequal distribution that tensions rise. In this case, the mercantile
class overreaches and attempts to take control of the state directly.
This is happening today in Greece, Italy, Spain and elsewhere in
Europe, and was one of the big drivers of the Jasmine Spring in 2012
as well as the Occupy movements in the US and elsewhere.
At this stage, the
American Dream is dead. There are an insufficient number of "niches"
or opportunities for a startup company to grow, and this in turn
means that ascending into the lower realms of the wealthy occurs only
by "lottery", with that lottery happening less and less
often. The wealthy in turn, realizing that their wealth is in danger,
start moving it (and themselves) out of the country, away from the
political class, in a move very reminiscent of the church during the
Reformation. The political class, which derives it's power either
directly or indirectly from the people, begins to turn what had been
previously "legal" activities (legal in the sense that the
financial class had managed to get protections enshrined in law) into
"illegal" ones, in order to prevent abuses happening in the
future.
Like most systems,
empires do not die all at once. There is usually an overshoot period,
where the resource pump is beginning to dry up - in the US this
happened around 1971, when the US was no longer able to rely upon its
internal energy and resource stores and so begin importing oil, as
well as implicitly pulling out of the Bretton Woods agreements of the
mid 1940s. American oil companies had already managed to control many
of the major oil producing countries of the world, but one by one
these countries have been nationalizing their oil production.
Standards of living for the labor and professional classes peaked and
began to decline even as the standard of living for the rentier or
mercantile classes continued to rise all starting around the same
period.
Global oil
production peaked in 2005, and has been sitting on a plateau ever
since. New oil discoveries are still being made, but the quality of
those discoveries is declining, and the cost of exploiting them is
rising to a point where there is an insufficient profit motive to be
gained. What's more is that at a certain price point, oil becomes too
expensive in a deflationary environment for certain levels of
economic activity to occur, and so the economy shifts to a lower
economic state. Currently economic activity is roughly on par to
where it was in 1992, despite a significantly higher population, and
there are indications that unless the economy is radically realigned,
it will enter back into recession.
The mercantile class is not
uniform. At any given time, there is usually an established "old
money" class and an emergent "new money" class. The
old money was once new money - years or generations ago, the people
in this class took advantage of an emerging niche in order to
catapult themselves up from the labor class. In this case, that
original class emerged in the 1930s, 40s and 50s in the petroleum,
chemical processing, munitions, aviation, transportation, real estate
and insurance finance industries, all areas that had ties either to
supporting the troops during World War II or enabling the buildup of
the suburban landscape as the troops were coming home. This was also
the period of biggest buildup for the Christian evangelical movement,
which can be thought of as Big Religion. These are all empire
building industries.
The new money of the mercantile class
consists primarily of those industries that are related to
information technology and dealing with the consequences of the old
money industry - information technology, mobile communication,
alternative energy, non-petroleum oriented transportation, biomedical
research, nano-materials engineering, as well as alternative
publishing and the Internet. These rely upon the complexity of the
previous industries, but increasingly are trying to break those
dependencies, and this delinking will only increase over time (the
primary dependency increasingly is upon rare earths, which may be a
critical weakness of these techs).
What
differentiates the two is that each ultimately has to do with how the
economy is structured. Much of the economy of today is still built
around the command and control structures that emulated the military
structures that soldiers returning from war were most familiar with,
an economy in which labor was at the bottom under a pyramid of
increasingly well paid supervisors, managers, vice presidents and
CEOs. The person at the top was the equivalent of a four star
general. The new money economy, however, is far more distributed,
with fewer layers of managers, increasingly with creatives
(designers, engineers, artists, writers, programmers, etc.)
interacting as separate contracting entities, and consequently far
smaller. A lot of management is mediated electronically, and wealth
usually tends to be distributed as shares in ventures.
This model
requires fewer people - not just slightly fewer, but significantly
fewer, and those fewer people generally need to be more competent in
their areas of specialty. This doesn't just hold true in software
companies - new era automotive production requires far fewer shop
workers and smaller facilities, new era energy companies are focused
on localized energy production solutions, new era biomedical firms
typically have a very small footprint. 3D printers will turn
manufacturing into a just in time process, creating only those items
that are needed at a given time, which means that the huge wastage
that is typical of the old era manufacturing and production ceases to
be a problem.
Unfortunately,
while this is good in terms of its impact on the planet, it's impact
upon the rest of society is not so beneficial, at least in the short
term. The new model takes far less capital investment, which means
that the velocity of money is slower. There are fewer entry points
for unskilled and semi-skilled labor – in the 1960s, it was not
uncommon for a career at a big corporation to start in the mailroom.
Today, there's no mailroom. Because of the lower capital investment
requirements and instantaneous communication capabilities, it is also
increasingly common for countries that never made the large
"industrial" stage investments to leapfrog countries that
did by adopting new technology and building up competence with an
Internet connection and mobile computers.
For those within
the new model economy, those who succeed are those who stay competent
in edge technologies – the expertise you acquired from previous
jobs is useful to help establish context, but if you're not
constantly learning, you're road kill. However, for many in the old
model economy, this is antithetical to the way they learned you
learned to do business. A significant portion of the old model
economy is based upon management, which becomes increasingly obsolete
(you need a thin layer of management, but not the layers upon layers
that characterize most Fortune 500 companies). Creatives occupy a
fairly minor part of the whole process, and are usually at a low
mid-tier of the corporate pyramid, while manufacturing workers are at
the bottom.
In
a new model economy, manufacturing workers often overlap with
creatives, and management exists primarily to manage financing,
rather than managing production. Increasingly that funding is crowd
sourced, especially for entertainment, software, and other soft
products. As 3D printers and similar tech comes into play, however,
that may very well change ("Seeking investors to put together
line of specialized computerware vests, seeking total investment of
$40,000, return at 7%"). Once the initial investment is made
(designing the requisite software) then total costs come down to
materials costs and shipping. You would probably see a few big
"custom manufacturies" that would specialize in economy of
scale work with various software driven models, but overall most
manufacturing would be component integrators (a model that's already
used for computer and mobile device development).
Again,
however, one of the big issues that arises here is that such custom
manufacturies will not employ a lot of people, and the people they do
employ will not be "laborers" in the sense used in the
twentieth century, but rather "artisans" – creatives and
designers for the most part, or technical maintenance service people
intended to keep the manufacturies themselves running.
This
is a huge disconnect right now, because many of the people that are
currently out of work were people that were in the FIRE sector –
finance, insurance and real estate in the 2000s. These
jobs are not coming back for years, if not decades.
Management jobs are going away (and have gone away), and the ones
that remain will pay less and be far less powerful. Sales jobs are
also going away (though marketing will remain, ironically).
Accounting jobs have been disappearing for years, as these functions
have moved from pushing paper around to moving electronic documents
through electronic systems in the "cloud".
I see other areas where jobs are disappearing not because they are no longer necessary, but because they are moving outside of contemporary established boundaries. One of the most obvious is teachers. Teachers are critical in an information oriented society, yet if you pick up any newspaper (or more likely read news on the Internet) there seems to be a cultural war on teachers. Part of our society feels that teachers should only be teaching the basics - readin', writin' and 'rithmatic, and that they should not be teaching anything controversial (history, most forms of science, computers are suspect, etc. - in short, anything that questions the validity of the bible, the manifest destiny narrative of American history, or even critical reasoning). Another part believes that the prevailing narrative is racist and sexist, that too much emphasis is placed on the "basics" and that grading and being critical of students will only stunt the development of their self-esteem. Neither wants to pay for it.
For the most part teachers themselves face rigid curricula, low salaries, limited or non-existent expectation of tenure, high student-teacher ratios, critical parents, expensive certifications, and long days on their feet. Given the crap that they endure, it is perhaps not surprising that many burn out quickly, leaving only either the most idealistic or the least competent over time.
It's my expectation that education is on the cusp of both a collapse and a revolution. More school districts are shifting to a magnet school approach where different schools are set up with a focus on different areas or disciplines. One school may focus on mathematics and science, another on art, a third on ecological studies, others on literary careers. At the same time, high schools and even middle schools are being structured more like community colleges, relaxing to a certain extent the requirements that a person must have a Master's degree to teach (though they may be supervised by another who does) and treating teaching less as a formal career and more as a chance for people with experience to teach others about that experience. Put another way - I think the career of "teacher" itself is going away, perhaps in favor of a concept that the Japanese seem to have understood a while ago: Sensei.
A sensei (which translates as both "master" and "teacher") is someone who has achieved a high degree of experience and is now passing that experience along to their pupils. The sensei has more control than a teacher does - they can set their own curricula and can determine success and failure criteria, and can determine when a student succeeds or fails at that criteria. Personally it would make sense for the sensei to also determine when a pupil moves to the next level, and possibly may work with a group of students over the course of the student's tenure at the school.
This will likely occur in the most progressive school districts first, and may become a facet of private instruction as well. I'm not a fan of private schools in general, but I will readily acknowledge that they can act as laboratories for testing such theories of education (magnet schools are another). Similarly, the increasingly confirmed realization that there are in fact several learning styles and that different students respond more or less effectively to each style in consistent ways is pointing towards schooling based less on topic and more on approach - visual and aural learners may best go a more traditional route, tactile and kinetic learners may be more oriented towards a hands on or physical approach, while autodydactic learners may actually set their own curriculum and goals in conjunction with a sensei who acts more as a guide in that respect.
This could end up absorbing a lot of people who have been otherwise displaced job-wise, especially those later in their careers, and also provides a means for transmission of skills, values, and standards that currently doesn't exist. It may also go a long way towards providing a certain degree of fulfillment for the sensei - in creating "professional teachers" our society has robbed itself of the opportunity for people to pass on the knowledge they've learned, something that I think is an invaluable part of the cycle of life. But it does require that we seriously re-evaluate our current command and control educational system and recognize that it is not meeting the needs of anyone.
Another area where I think we'll see a revival is in the "trades", less from the standpoint of construction and more from the standpoint of maintenance and increasingly "deconstruction". The housing collapse caused a temporary glut of tradesmen on the market, but one consequence of the increasingly iliquid economy is that people are generally not moving around as much, staying in their houses longer, and consequently needing more support for plumbing, electrical work and housing extensions. In at least informal surveys I've conducted, most tradespeople have more than enough work now, and there's increasingly shortages of skilled tradespeople in some areas (Mike Rowe, of Discovery Channels' Dirty Jobs, has found this as well, to the extent that he's begun promoting the warning that we have too few people entering into the "dirty jobs" to replace those that are now retiring). Similarly, the "deconstruction" or salvage business is increasingly booming as houses and commercial real estate is being decommissioned and "unbuilt".
Similarly, I think that you're beginning to see the revival of many apparently extinct professions - from iron smithing to dressmaking (cosplay) to customized cooking and baking. These are boutique professions right now targeting a niche market that is too small, too quirky or too esoteric for large companies, but nonetheless has a demand. The irony is that while these items may be priced higher than mass produced goods, as global resource demands put pressures on extended supply chains, such artisan products may actually end up becoming more affordable than less customized ones.
So, to wrap up a long essay, what does come after the American Dream? Perhaps something more sane. The dream of growth has ended. Already businesses are restructuring away from the massive military juggernaut corporations to far more ephemeral virtual companies, the サラリーマン or Sarariman (the Japanese transliteration of "salaryman") has gone from being the norm to being a quaint reminder of another time, and many of the jobs that were dependent upon economic growth and empire wealth pumps are going away.
In a way, I'm not really shedding many tears for those jobs - they were high stress, dehumanizing, politically poisonous and ultimately harmful. The new economy model jobs are not in general as lucrative for a few, but may ultimately provide a far more livable wage for many. They will force a change in the way that we account for the total lifecycle cost of a manufactured good or service, will likely reduce the amount of waste we are producing in order to "mass-produce", and overall will be more geared towards sustaining the economy rather than growing it. As with any large scale societal changes it will take time, and there will be a lot of resistance from the existing stakeholders. However, resource limitations, demographics, and the general vectors of the global economy ultimately are all aligned against the status quo remaining such.
Perhaps the new dream should be this: "I lived my life content, improved the lives of others, taught what I knew, and leave the world in better shape than I found it." I can live with that.
