The recent financial crisis exposed some serious flaws in our economic thinking. It has highlighted the need to look at economic policy with more critical, fresh approaches. It has also revealed the limitations of existing tools for structural analysis in factoring in key linkages, feedbacks and trade-offs — for example between growth, inequality and the environment.
Bring on the cyber. If you’re old enough, you remember the brief moment two decades ago when referring to the online digital world as “cyberspace” actually seemed ahead-of-the-curve. That ended fast, but somehow the prefix “cyber-” found a survival niche in the world of foreign-policy wonks and security pundits. It came roaring back to life in last night’s presidential debate, tumbling out of Donald Trump’s mouth in a muddled monologue that left jaws agape and younger viewers, particularly, in giggles (The Verge). Trump railed against ISIS recruiting and sang the praises of his 10-year-old son’s computing prowess, and by the end of the segment, #TheCyber had become a meme. Once the laughing subsided, we could all glumly realize that neither of these aging candidates has a visceral understanding of the digital world that shapes so much of our experience today. Trump has a thing for Twitter, and Clinton may have had her issues with email. But for both of them, “the cyber” seems a forbidding alien landscape — while for a growing proportion of the electorate, it is simply the ground on which we must build our work and our lives. (Props, though, to Clinton for bringing in a crew of digital natives to craft her technology policy.)
Palantir charged with bias against Asians. Palantir Technologies, the Palo Alto-based security and analytics firm that’s high on anyone’s list of “cyber” companies, is being sued by the U.S. Department of Labor for discriminating against Asian job applicants (Reuters). Federal agencies like the CIA, the FBI, and the Pentagon are also among Palantir’s biggest customers. The suit comes as Silicon Valley faces growing criticism for its failure to diversify its work force. Palantir co-founder Peter Thiel has made headlines recently for funding the lawsuit that brought down the feisty Gawker media business, and also for his support of Republican candidate Donald Trump (Thiel spoke at the Republican convention). Will Palantir claim it’s being persecuted because of Thiel’s controversial profile? Will the lawsuit provide the media with new insight into the inner workings of the secretive company? Is tech industry discrimination against Asians the next big diversity story? There’s a lot to play out here.
A new comic tilt on climate numbers. Concerned experts and activists have been struggling for years now to find new ways to explain the urgent but elusive nature of the climate-change threat. Because the data is complex and the effects are measured in small degrees over long terms, this is not an easy problem. But Randall Munroe, the resident nerd-genius behind the XKCD web comic, has found one brilliant solution: A long scrolling chart, like a timeline doing a headstand, that tracks millennia of human history against trends of cooling and warming (XKCD). Munroe keeps you amused with historical tidbits and gags as you scroll down; then he wallops you when the graph reaches the present and takes off on a frightening tangent, illustrating just how far off the charts we’re headed. Come for the stick figure jokes and stay for the angst.
The fall of the house of Rothenberg. Rothenberg Ventures, with about $50 million in its portfolio, wasn’t a huge Silicon Valley venture fund. But it had great connections, threw extravagant parties, touted a “culture of awesome,” and led a high-profile charge into the virtual reality industry (Backchannel). So it was a mini-earthquake in venture-land when Mike Rothenberg laid off nearly all of his employees in August. Now his firm is operating under a new name and faces an uncertain future. The first lesson here shouldn’t be a surprise: The VC business is super risky — that’s its whole point! But Rothenberg’s downfall also involves some very specific failures of transparency and accountability that Backchannel lays out: Rothenberg was apparently funneling the fund’s cash into his own VR-content startup without keeping his limited-partner investors informed. The big trouble with Rothenberg might have been its initial strategic error in taking a fat upfront management fee rather than the more typical small annual percentage, giving the firm an initial cash boost but robbing it of recurring revenue. Or maybe it was that Rothenberg, as some complained, “went Hollywood” and lost his way. However you read it, the Rothenberg saga makes for an important cautionary tale for a VC industry that’s too often eager to win when it should be shrewd, and star-struck when it should be skeptical.
No one ever said changing the world was easy. If you believe that your work can actually put a dent in the universe, you’d also better be prepared for the universe to take its time figuring out what you’re up to (Collaborative Fund blog). From the automobile to the telephone, from the Wright Brothers’ flight at Kitty Hawk to Tim Berners-Lee’s invention of the World Wide Web, the innovations that end up transforming our lives often go unheralded when first introduced. That’s something to ponder as we return to our post-Labor Day labors: “Changing the world” is one thing, “convincing people that you’ve changed the world” is something else. If you hope to accomplish a mission, you need patience as much as you need brilliance.
Patagonia’s secrets of sustainable success. Patagonia started up in 1957 and spent decades growing and refining its approach to sustainability before most businesses had ever heard of the term. The company’s founder, Yvon Chouinard, told one of the classic tales of patient innovation in his 2006 memoir, Let My People Go Surfing. In an interview on the book’s 10th anniversary (FastCoCreate), current Patagonia CEO Rose Marcario talks about the company’s success at achieving profits while sticking to its ideals, and says its biggest challenge today is holding onto those ideals at scale. For instance, as a global brand with $750 million in sales, Patagonia needs a lot of organic cotton — but only 2 percent of the world supply is organic right now.
The European Union takes a tax bite of Apple. Apple owes about $14 billion in back taxes: So says the EU (Bloomberg). Apple says it evaded, er, arranged to avoid, those taxes fair and square via Ireland — so it doesn’t have to pay. Plentry of other multinationals have been basing operations and stowing profits in low-tax havens like Ireland for decades now. This latest fight is largely a jurisdictional squabble between Ireland, which defends its tax giveaways, and the EU, which wants to govern who pays and who doesn’t. The U.S. government is backing home team Apple. Even if it has to pay, the company’s got it covered, with a $232 billion cash hoard, mostly outside the U.S. How should global companies apportion their profits for tax purposes? There’s an army of accountants for that. But whatever the specific outcome here, there’s a clear message for Apple and other BigCos that slosh money around the globe, seeking maximum return through minimum tax rates: Profits are only possible in a society that supports its infrastructure, financial system, education, and healthcare. Taxes do that. Sooner or later, to paraphrase Bob Dylan, you’re gonna have to pay somebody. The more voters around the world feel they’re not getting a fair deal, the less they’re going to support free-trade policies. However much companies hate paying taxes on profits, they’re going to hate tariffs even more.
We know where that planet-warming carbon comes from. Carbon emissions cause climate change, and 90 companies are responsible for most of those emissions, according to one scientist’s accounting (Science). Also: More than half of those emissions took place since 1988 — the year Congress heard testimony that warming was definitely for real. In other words: Neither Exxon nor any other corporation can say, “We didn’t know.” Richard Heede is the “carbon accountant” who did these numbers, which have, predictably galvanized environmental activists and alarmed the energy industry and its political defenders. Critics say Heede’s work just pins big “kick me” signs on the backs of specific companies, when it’s really those companies’ customers — all of us — who are to blame. On the other hand, as a Heede supporter argues, “if everyone is responsible then no one is responsible.” Figuring out where all the carbon has come from is surely a valid first step toward arresting the catastrophic advance of global warming. If that data threatens the fossil-fuel industry, don’t blame — or subpoena — the messenger.
Inflation is here — it’s just not evenly distributed. When we say “inflation is virtually flat these days,” the truth of those low numbers hides a more complex reality. Actually, plenty of prices are rising, while others are dropping (The Washington Post) — averaging out to a nearly flat decade. What’s costing more? Education. Childcare. Healthcare. Food. And of course housing. What’s costing the same or less? Cars. Furniture. Clothing. Electronic stuff. Software. And toys. As you may notice, the first list is dominated by services, the second by goods. Also: The first list is full of necessities, the second is mostly optional or luxuries. The economists who performed this study say that technological efficiencies and international trade keep whittling down the price of manufactured goods, while services don’t benefit from those cost-cutting pressures. In other words, as long as people plan to keep eating and sleeping and raising families, their cost of living will probably rise. These numbers tell us a lot about today’s political passions — and also underscore where the business opportunities lie.
Stock options for cooks and drivers, too. Startups are expanding the spectrum of ownership. At one end of this range, there’s the conventional world of corporate ownership (invest your money, get your share). At the other end lies the idealistic world of worker cooperatives. Somewhere in between you’ll find Silicon Valley’s hybrid model: share stock options with employees. Startups have traditionally used rich option packages to reward founding employees or to lure key talent. Now some NewCos in the platform economy are trying to expand that model by offering equity to their contractors (Fast Company). Josephine, the Bay Area startup that offers homemade meals from neighbors’ kitchens, plans to share 20 percent of its equity with its cooks, starting next year. And Uber competitor Juno has reserved half its shares for its drivers. Option-spreading is no panacea — worker-shareholders might find themselves facing novel conflicts (higher wages or higher profits?). But these ownership experiments are worth watching: At the least they’ll yield valuable data and map how to look for better results the next time we try to solve this problem.
Look, ma, no hands! What Ford’s driverless plan means. Tuesday, Ford announced it’s hitting the accelerator on a self-driving car program and aims to roll out a fleet of autonomous vehicles by 2021. (CEO Mark Fields details the plan in NewCo Shift.) Ford’s news connects three big trends in the NewCo world. First trend: Driverless cars are coming, faster than many thought, and they’re going to uproot lots of assumptions about how our businesses, cities, and lives run. Ford aims to leap straight to self-driving cars — no steering wheels, no pedals — rather than incrementally refine driver-assistance systems. The first vehicles Ford envisions will be costly, so it plans to sell to ride-hailing and sharing services initially, individuals later. (GM is a partner/investor in Lyft, but Ford has no such alliance — yet.) Second trend: Big industrial transitions like this are making BigCos like Ford return to first principles and think the way they did when they were smaller and younger. Ford CEO Mark Fields says its autonomous vehicle will have “as big an impact on society as Ford’s moving assembly line did a hundred years ago.” He frames Ford’s new plan as a refresh of the company’s populist, autos-for-everyman heritage. Ford is also increasing its Silicon Valley presence and investing in tech firms (like Velodyne, which makes distance sensors that use “lidar,” or light radar) to accelerate its self-driving program. Third trend: Ford’s move, like so much else that’s happening in business today, will speed up the handoff of decisions from people to algorithms. At the end of this road, the code that runs your car won’t only be picking routes — it will be making life-or-death choices. For a preview of that world, read up on MIT’s “moral machine” (Quartz) — a thought-experiment project that asks people how driverless cars should prioritize human lives when the cars’ brakes fail.
War is hell, and climate is war. World War III is here, and it’s not a shooting war with a foreign enemy — it’s humanity’s fight against climate change. That military language isn’t just a metaphor, writes activist-author Bill McKibben (The New Republic): The planet’s carbon-driven warming is seizing territory and causing casualties as swiftly and mercilessly as a hostile army would, and if we’re going to have any hope of stopping it, we need to launch an effort as vast, and as unified, as the one that, last century, saved the world from Hitler. What would a climate-focused version of the Second World War’s mobilization and Manhattan Project look like? Stanford researchers offer one vision (pdf). We have the technology; we need the will. The good news is, we’ve mounted this kind of all-out effort before — and it works.
The thousand faces of monopolies. Monopolies are villains because they charge “monopoly rents” — they can and often do hold purchasers hostage and jack up prices. To their owners and investors, however, monopolies can also be heroes — they make people rich (as Peter Thiel reminds us). How many of the tech-driven, city-based institutions now being built by NewCos will end up as monopolies? And should we be rooting for that — or trying to shape the rules of the game to encourage competition? For an overview of that issue, see this collection of long-form links (Redef). In the age of hyper-competitive market-winners like Amazon and sharp-elbowed platforms like Uber, antitrust law might well be outdated and ineffective. But if we want to let a thousand Ubers bloom (City Observatory), a few strategic market interventions could make all the difference. When Uber made good on its threat to pull out of Austin after the city passed regulations the company opposed, customers were upset and inconvenienced in the short run. But now, Austin has become a lab for Uber alternatives. We can’t stop innovative companies from winning new monopolies, but we can try to stop them from squashing the next round of innovation.
The rent is too damn low. Traditionally, rent is the price the owner of some scarce asset — land, an apartment, or a service no one else can provide — charges others to use the asset. But there are more creative ways of thinking about rent: You can take some commonly-owned resource, raise its price, and share the resulting income widely — as Alaska did with its oil reserves. Peter Barnes call this “virtuous rent,” and it has applications beyond public lands and natural resources. You can also imagine charging it for collectively owned digital abstractions like namespaces and other kinds of virtual real estate and goods.
Beyond Big Oil. Even if you don’t believe in Peak Oil (that’s an argument for another day), Big Oil is in for big changes (Bloomberg). “We’re more a gas company than an oil company,” says Shell’s CEO, and that’s an extraordinary statement. The company’s recent $54 billion takeover of BG Group solidified Shell’s standing as a leading player in gas as well as oil, and many are considering gas the key transitional fuel as the world shifts from oil to renewables. That transition may happen very quickly and in an ugly way for incumbents–investment in renewables is growing rapidly and there’s already a glut in the global LNG market–but Shell seems to be diversifying as quickly as it can.
A Deficit of Idealism: Tim O’Reilly on the Next Economy. In the latest entry of our NewCo Shift Dialogs series, our CEO and editor in chief John Battelle talks to O’Reilly Media founder Tim O’Reilly about a broad range of topics, from the responsibility of corporations to why universal basic income, while tempting, might not be the right solution for our current needs.