new economy

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pages: 306 words: 78,893

After the New Economy: The Binge . . . And the Hangover That Won't Go Away by Doug Henwood

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accounting loophole / creative accounting, affirmative action, Asian financial crisis, barriers to entry, borderless world, Branko Milanovic, Bretton Woods, capital controls, corporate governance, corporate raider, correlation coefficient, credit crunch, deindustrialization, dematerialisation, deskilling, ending welfare as we know it, feminist movement, full employment, gender pay gap, George Gilder, glass ceiling, Gordon Gekko, greed is good, half of the world's population has never made a phone call, income inequality, indoor plumbing, intangible asset, Internet Archive, job satisfaction, joint-stock company, Kevin Kelly, labor-force participation, liquidationism / Banker’s doctrine / the Treasury view, manufacturing employment, means of production, minimum wage unemployment, Naomi Klein, new economy, occupational segregation, pets.com, profit maximization, purchasing power parity, race to the bottom, Ralph Nader, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, shareholder value, Silicon Valley, Simon Kuznets, statistical model, structural adjustment programs, Telecommunications Act of 1996, telemarketer, The Bell Curve by Richard Herrnstein and Charles Murray, The Wealth of Nations by Adam Smith, total factor productivity, union organizing, War on Poverty, women in the workforce, working poor, Y2K, zero-sum game

."^^ The poverty rate among such workers is admittedly low—only around 3%—but these are the best-positioned workers in the labor force, and the poverty line is a pretty undemanding benchmark. As the report's subtide said, "America's Full-Time Working Poor Reap Limited Gains in the New Economy." Inclusion of "the New Economy" isn't just PR spin; as the report points out, "an increase in the relative share of low-skill employment is one characteristic of this 'New Economy...,'" though "low-pay" is more relevant to the analysis than "low-skill."That's not what most New Economy rhetoric emphasized, of course, but the bubble's sales force never deployed much of rigorous evidence. Apologists were quick to point out that the Conference Board's report didn't include the beneficial effects of the Earned Income Tax Credit (EITC), which has boosted the incomes of the working poor dramatically: in 1998, almost 20 miUion returns claimed the EITC, and $32 billion was paid to those who filed them (Herman 2000).That works out to an average of $1,600 per return, which is a lot better than nothing, but which amounts to just $4.38 a day.

As Jack Kemp once said in a very different context, if you're going to go for it, you should really go for it. Notes 1 Novelty 1. Though it's sobering to learn that, according to a Scudder Kemper Investments poll, over 80% of Americans have neither heard nor read of a New Economy (reported in Business 2.0, September 12,2000, p. 36). 2. For a classic statement, see Wired's "Encyclopedia of the New Economy" at <hotwired.lycos.com/special/ene/>. There's also former Wired editor Kevin Kelly's "New Rules of the New Economy," <www.wired.coni/5.09/networkeconomy/>, as well as his exuberant but thinly argued expansion of that article into a book. New Rules for the New Economy (Kelly 1999). Kelly—now deposed as editor of Wired, a magazine long past its prime—combines born-again Christianity, Social Darwinism, and classic American huck-sterish optimism into a single package. 3.

Baffler editor Tom Frank (personal communication) says that the earUest claim he could find for the existence of a "new economy" was a 1988 speech by Ronald Reagan at Moscow State University. In it, Reagan said: In the new economy, human invention increasingly makes physical resources obsolete. We're breaking through the material conditions of existence to a world where man creates his own destiny. Even as we explore the most advanced reaches of science, we're returning to the age-old wisdom of our culture, a wisdom contained in the book of Genesis in the Bible: In Novelty the beginning was the spirit, and it was from this spirit that the material abundance of creation issued forth. Reagan's invocation of scripture isn't standard in the New^ Economy literature, but there's no small amount of mysticism and true-beheverhood in the doctrine.


pages: 843 words: 223,858

The Rise of the Network Society by Manuel Castells

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Apple II, Asian financial crisis, barriers to entry, Big bang: deregulation of the City of London, Bob Noyce, borderless world, British Empire, capital controls, complexity theory, computer age, computerized trading, creative destruction, Credit Default Swap, declining real wages, deindustrialization, delayed gratification, dematerialisation, deskilling, disintermediation, double helix, Douglas Engelbart, Douglas Engelbart, edge city, experimental subject, financial deregulation, financial independence, floating exchange rates, future of work, global village, Gunnar Myrdal, Hacker Ethic, hiring and firing, Howard Rheingold, illegal immigration, income inequality, Induced demand, industrial robot, informal economy, information retrieval, intermodal, invention of the steam engine, invention of the telephone, inventory management, James Watt: steam engine, job automation, job-hopping, John Markoff, knowledge economy, knowledge worker, labor-force participation, labour market flexibility, labour mobility, laissez-faire capitalism, Leonard Kleinrock, low skilled workers, manufacturing employment, Marc Andreessen, Marshall McLuhan, means of production, megacity, Menlo Park, moral panic, new economy, New Urbanism, offshore financial centre, oil shock, open economy, packet switching, Pearl River Delta, peer-to-peer, planetary scale, popular capitalism, popular electronics, post-industrial society, postindustrial economy, prediction markets, Productivity paradox, profit maximization, purchasing power parity, RAND corporation, Robert Gordon, Robert Metcalfe, Shoshana Zuboff, Silicon Valley, Silicon Valley startup, social software, South China Sea, South of Market, San Francisco, special economic zone, spinning jenny, statistical model, Steve Jobs, Steve Wozniak, Ted Nelson, the built environment, the medium is the message, the new new thing, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, total factor productivity, trade liberalization, transaction costs, urban renewal, urban sprawl, zero-sum game

Thus, while the whirlwind of factors entering in the valuation process are ultimately expressed in financial value (always uncertain), throughout the process of reaching this critical judgment, managers and workers (that is, people) end up producing and consuming our material world – including the images that shape it and make it. The new economy brings information technology and the technology of information together in the creation of value out of our belief in the value we create. There is an additional, essential component of the new economy: networking. The organizational transformation of the economy, as well as of society at large, are, as in past periods of historical transition, a necessary condition for institutional restructuring and technological innovation to usher in a new world. I will examine this matter in some detail in the next chapter. But before undertaking a new stage of our analytical trip, I will recast the argument presented in this chapter. In sum, what is the new economy? The new economy is certainly, for the time being, a capitalist economy.

As the twenty-first century progresses, the biology revolution is likely to join the information technology industry in creating new business, in stimulating productivity (particularly in health care and in agriculture), and in revolutionizing labor, adding to the virtuous circle of innovation and value generation in the new economy. Under conditions of high productivity, technological innovation, networking, and globalization, the new economy seems to be able to induce a sustained period of high economic growth, low inflation, and low unemployment in those economies able to fully transform themselves into this new mode of development. However, the new economy is not without flaws nor without dangers. On the one hand, its expansion is highly uneven, throughout the planet, and within countries, as argued above in this chapter, and as it will be documented in this book (volume I, chapter 4; volume III, chapter 2). The new economy affects everywhere and everybody but is inclusive and exclusionary at the same time, the boundaries of inclusion varying for every society, depending on institutions, politics, and policies.

Thus, within the value system of productivism/consumerism, there is no individual alternative for countries, firms, or people. Barring a catastrophic meltdown of the financial market, or opting out by people following completely different values, the process of globalization is set, and it accelerates over time. Once the global economy has been constituted, it is a fundamental feature of the new economy. The New Economy The new economy emerged in a given time, the 1990s, a given space, the United States, and around/from specific industries, mainly information technology and finance, with biotechnology looming on the horizon.118 It was in the late 1990s that the seeds of the information technology revolution, planted in the 1970s, seemed to come to fruition in a wave of new processes and new products, spurring productivity growth and stimulating economic competition.


pages: 339 words: 57,031

From Counterculture to Cyberculture: Stewart Brand, the Whole Earth Network, and the Rise of Digital Utopianism by Fred Turner

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1960s counterculture, A Declaration of the Independence of Cyberspace, Apple's 1984 Super Bowl advert, back-to-the-land, bioinformatics, Buckminster Fuller, Claude Shannon: information theory, complexity theory, computer age, conceptual framework, Danny Hillis, dematerialisation, distributed generation, Douglas Engelbart, Douglas Engelbart, Dynabook, Electric Kool-Aid Acid Test, From Mathematics to the Technologies of Life and Death, future of work, game design, George Gilder, global village, Golden Gate Park, Hacker Ethic, Haight Ashbury, hive mind, Howard Rheingold, informal economy, invisible hand, Jaron Lanier, John Markoff, John von Neumann, Kevin Kelly, knowledge economy, knowledge worker, market bubble, Marshall McLuhan, mass immigration, means of production, Menlo Park, Mother of all demos, new economy, Norbert Wiener, peer-to-peer, post-industrial society, postindustrial economy, Productivity paradox, QWERTY keyboard, Ralph Waldo Emerson, RAND corporation, Richard Stallman, Robert Shiller, Robert Shiller, Ronald Reagan, Shoshana Zuboff, Silicon Valley, Silicon Valley ideology, South of Market, San Francisco, Steve Jobs, Steve Wozniak, Steven Levy, Stewart Brand, technoutopianism, Ted Nelson, Telecommunications Act of 1996, theory of mind, urban renewal, Vannevar Bush, Whole Earth Catalog, Whole Earth Review, Yom Kippur War

By the mid-1990s, the technocentric, networked social worlds of the Global Business Network and Out of Control had become widely looked-to examples of the flexibility and individual satisfaction promised by the New Economy. They would soon become emblems of the social possibilities of the Internet and the World Wide Web as well. As they did, they helped shape popular understandings of the New Economy in terms set not only by the New Communalist dream of social transformation, but also by the New Communalist practice of social segregation. Back to the Future at MIT By 1985, despite his founding interest in the WELL, Stewart Brand had begun to get restless. He had edited CoEvolution Quarterly for a decade; the Whole Earth Software Catalog was failing rapidly. “By the time I’d done a half a dozen versions of the book, ending with a Whole Earth Software Catalog in Networking the New Economy [ 177 ] 1985,” Brand later explained, “I had no idea whatever about futures and was operating strictly on reflex.”2 Since Kevin Kelly had taken over the editorship of the Whole Earth Review, and since the WELL seemed to be selfsustaining, Brand felt ready to leave Sausalito for a while.

T h e S h i ft i n g P o l i t i c s o f t h e C o m p u t at i o n a l M e t a p h o r [ 15 ] For Kevin Kelly, executive editor of Wired, this new way of living and the ways in which digital technologies served and modeled it marked a revolutionary transformation in human understanding. In one of the most widely read business manuals of the 1990s, New Rules for the New Economy, Kelly explained that “the principles governing the world of the soft—the world of intangibles, of media, of software, and of services—will soon command the world of the hard—the world of reality, of atoms, of objects, of steel and oil, and the hard work done by the sweat of brows.” The savvy worker would have to become a networker. “Those who obey the logic of the net, and who understand that we are entering into a realm with new rules,” he intoned, “will have a keen advantage in the new economy.”9 Along with this understanding of work, he argued, a singular, almost mystical understanding of the power of information and information systems had begun to arise: “the computational metaphor.”

For this community, the frontier of cyberspace, and especially the village of the WELL, would have to be home. CHAPTER 6 Networking the New Economy In the late 1980s and the early 1990s, the same economic and technological forces that had long shaped work lives in Silicon Valley swept across much of the industrialized world. Networked forms of production, contract employment, global outsourcing, and deregulated marketplaces all became common features of everyday economic life. So did the nearly universal use of computers and computer networks in business and, increasingly, in the home. Together, these developments suggested to many at the time, and particularly to politicians and pundits on the right, that a “new economy” had appeared, one in which digital technologies and networked forms of economic organization combined to liberate the individual entrepreneur.


pages: 209 words: 63,649

The Purpose Economy: How Your Desire for Impact, Personal Growth and Community Is Changing the World by Aaron Hurst

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3D printing, Airbnb, Atul Gawande, barriers to entry, big-box store, business process, call centre, carbon footprint, citizen journalism, commoditize, corporate social responsibility, crowdsourcing, disintermediation, Elon Musk, Firefox, glass ceiling, greed is good, housing crisis, informal economy, Jane Jacobs, jimmy wales, Khan Academy, Kickstarter, Lean Startup, means of production, new economy, pattern recognition, Peter Singer: altruism, Peter Thiel, QR code, Ray Oldenburg, remote working, Richard Feynman, Ronald Reagan, selection bias, sharing economy, Silicon Valley, Silicon Valley startup, Steve Jobs, TaskRabbit, Tony Hsieh, too big to fail, underbanked, women in the workforce, young professional, Zipcar

Causecast has built a platform that enables company employees to do everything from volunteering, to donations, to leading cause campaigns. Where information is the currency of the current economy, Ryan believes that “purpose is the currency of the new economy.” Ryan has successfully transitioned from a visionary in the Information Economy to one in the new economy. He sees that “capitalism, if applied creatively, holds the potential to transform the complex social, economic, and environmental challenges facing the world today.” In the next three chapters, I explore how an organization can thrive in the new economy. Chapter 9 scans key industries, how they are changing, and key opportunities to create value. The following chapter provides an overview of how the needs of employees are changing and the ways in which organizations need to adjust to address them.

In reading the summary of his dissertation, I found something surprisingly similar about what he had described and what I was witnessing both through my work at Taproot and in the economy at large. Specifically, the economy was going through another major restructuring, and that just as the Information Economy supplanted the Industrial Economy, and as the Industrial Economy supplanted the Agrarian Economy before it, a new economy had begun to emerge. Like most people, I had come to see technology as synonymous with innovation, jobs, growth, and our future. And while the Information Economy was clearly still the dominant driver of our economic engine, it had become clear to me that a new economy was emerging, one centered on the need for individuals to find purpose in their work and lives. It wasn’t a pollyannaish vision of the future, but rather a natural course in the evolution of the needs of people and the goods, services and jobs they desired. As I began to share this idea of an emerging Purpose Economy with my friends, partners, and colleagues, it resonated with much of what they had experienced and witnessed in their own work and lives.

In 50 years, would a company even resemble the typical business of today? The clues could be found in studying organizations like the Taproot Foundation and other pioneers working on the front lines of the new economy, and in trying to understand how Purpose Economy organizations like Etsy, Interface, and Airbnb differ from their predecessors of even a decade earlier. As I began to study the pioneers of the Purpose Economy, it became clear that marketing, human resources, and strategic planning were giving way to new methods of organizing and working, and that in order to thrive, organizations would need to rethink the ways they were operating in this new economy. And those are just the impacts of the Purpose Economy within organizations. We will likely also see radical changes to everything from government to parenting to health care.


Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages by Carlota Pérez

agricultural Revolution, Big bang: deregulation of the City of London, Bob Noyce, Bretton Woods, capital controls, commoditize, Corn Laws, creative destruction, David Ricardo: comparative advantage, deindustrialization, distributed generation, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, full employment, Hyman Minsky, informal economy, joint-stock company, Joseph Schumpeter, knowledge economy, late capitalism, market fundamentalism, new economy, nuclear winter, offshore financial centre, post-industrial society, profit motive, railway mania, Robert Shiller, Robert Shiller, Sand Hill Road, Silicon Valley, Simon Kuznets, South Sea Bubble, Thomas Kuhn: the structure of scientific revolutions, Thorstein Veblen, trade route, tulip mania, Upton Sinclair, Washington Consensus

New industries have grown, a new infrastructure is in place; new millionaires have appeared; the new way of doing things with the new technologies has become ‘common sense’. One crucial thing is still missing: a systematic articulation of the new regulatory framework and of the appropriate institutions, capable of steering and facilitating the functioning of the new economy in a socially and economically sustainable manner. Each time around, what can be considered a ‘new economy’ takes root where the old economy had been faltering. But it is all achieved in a violent, wasteful and painful manner. The new wealth that accumulates at one end is often more than counterbalanced by the poverty that spreads at the other end. This is in fact the period when capitalism shows its ugliest and most callous face. It is the time depicted by Charles Dickens and Upton Sinclair, by Friedrich Engels and Thorstein Veblen; the time when the rich get richer with arrogance and the poor get poorer through no fault of their own; when part of the population celebrates prosperity and the other portion (generally much larger) experiences The Turbulent Ending of the Twentieth Century 5 outright deterioration and decline.

This means that a painful and difficult process of learning and adaptation must take place, involving creative destruction across all spheres. It also explains why the fruits of that new growth potential cannot be fully reaped in the The Propagation of Paradigms: Times of Installation, Times of Deployment 43 first decades, when the accommodation and mutual shaping of society and the new economy occur, pushed by the profit motive in spite of institutional inertia and human resistance. Hence, increasing polarization and decoupling both inside the economy and between the new economy and the old social framework characterize the initial diffusion of a technological revolution. So, the installation period is one of tense coexistence of two paradigms, one declining and the other occupying more and more space on the ground, in the market and in the minds of people. These diverging processes are bound to shake, challenge and change the institutional environment.

This intense concentration of capital, local and international, furthering the infrastructure of the new economy can be seen as another of the dynamic roles played by financial capital in furthering technological advance. It is unwittingly an effective way to attract enough funds to make the significant investment necessary to install the basic infrastructure and put it in operation. It is wasteful and likely to overshoot; it can be painful for many, but it does the job of creating the fundamental externalities and facilitating intense social learning for the full unfolding of the revolution later on. 157. Nussbaum (2001) p. 35. 158. Hoover Report (1929) p. xii. The Report appeared a couple of months before the October collapse hailing this particular phenomenon as a feature of the dynamic new economy. 159. Kindleberger (1984) p. 60. 108 F. Technological Revolutions and Financial Capital Mergers and the Creation of Oligopolies Whether a single-purpose mania develops or not, other types of problem are likely to follow from excess investment flowing into the core industries.


pages: 289 words: 99,936

Digital Dead End: Fighting for Social Justice in the Information Age by Virginia Eubanks

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affirmative action, Berlin Wall, call centre, cognitive dissonance, creative destruction, desegregation, Fall of the Berlin Wall, future of work, game design, global village, index card, informal economy, invisible hand, Kevin Kelly, knowledge economy, labor-force participation, labour market flexibility, low-wage service sector, microcredit, new economy, post-industrial society, race to the bottom, rent control, Shoshana Zuboff, Silicon Valley, South of Market, San Francisco, telemarketer, Thomas L Friedman, trickle-down economics, union organizing, urban planning, web application, white flight, women in the workforce, working poor

The attempt to fit the poor into the new economy also assumes that employment in the new economy will provide a better standard of living for workers. But available jobs in the information economy tend to increase poor and working-class women’s economic vulnerability: the jobs held by women in the YWCA community were often unsustainable, exploitative, and failed to pay a living wage. The distributive paradigm in IT policy, therefore, underestimates the ways in which the information economy heightens risk for the economy’s most vulnerable workers. High-Tech Development in an Unflat World The vulnerability of American workers, particularly those already marginalized by race, class, and gender, became increasingly clear as the global financial crisis touched more people’s lives and brought the risks of the new economy to the doorsteps of middle-class homes.

In the popular press, accounts of the information economy posit that increased instability and volatility can offer more horizontal forms of power, free workers to retool their skills and renegotiate their work arrangements, and sweep away old forms of inequity.12 The combination of new IT and leaner, neoliberal governance, optimists argue, results in rapidly increasing wealth and flatter hierarchies, although these claims have been somewhat muted in recent years.13 The most popular of these narratives, penned by business writers, futurists, and management gurus, often make it to the bestseller lists, suggesting that they tap into widely held hopes 56 Chapter 4 and beliefs about the power of IT and the new economy to dismantle outof-date institutions, decentralize power, and create broad-based equity.14 For example, Kevin Kelly, executive editor of Wired magazine, argues in his 1998 book, New Rules for the New Economy, that the network economy is based on the principles of flux. He writes, “Change, even in its shocking forms, is rapid difference. Flux, on the other hand, is more like the Hindu god Shiva, a creative force of destruction and genesis. Flux topples the incumbent and creates a platform for more innovation and birth” (10).

While the 17 percent poverty rate for white women in Troy is distressing, more troubling still is the fact that in 2006–2008, 29 percent of Black or African American women in Troy—and more than half of all Latinas—lived in poverty. Volatile continuity produces new configurations of inequality that extend and shift past legacies of oppression and discrimination. Inequities are generated or deepened even in those regions held up as models of new economy success, belying high-tech boosters’ promises of flatter hierarchies and more level playing fields. For example, in Work in the New Economy, Chris Benner’s 2002 case study of shifting labor markets in Silicon Valley, he argues that economic volatility is not primarily a leveling or flattening force; rather, flexibility has both positive and negative impacts on workers. Flexibility in Silicon Valley labor markets was a key part of the region’s economic success and led to good outcomes for some categories of workers, particularly those with educational advantages.


pages: 598 words: 172,137

Who Stole the American Dream? by Hedrick Smith

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Affordable Care Act / Obamacare, Airbus A320, airline deregulation, anti-communist, asset allocation, banking crisis, Bonfire of the Vanities, British Empire, business process, clean water, cloud computing, collateralized debt obligation, collective bargaining, commoditize, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, David Brooks, Deng Xiaoping, desegregation, Double Irish / Dutch Sandwich, family office, full employment, global supply chain, Gordon Gekko, guest worker program, hiring and firing, housing crisis, Howard Zinn, income inequality, index fund, industrial cluster, informal economy, invisible hand, Joseph Schumpeter, Kenneth Rogoff, Kitchen Debate, knowledge economy, knowledge worker, laissez-faire capitalism, late fees, Long Term Capital Management, low cost carrier, manufacturing employment, market fundamentalism, Maui Hawaii, mega-rich, mortgage debt, negative equity, new economy, Occupy movement, Own Your Own Home, Paul Samuelson, Peter Thiel, Plutonomy: Buying Luxury, Explaining Global Imbalances, Ponzi scheme, Powell Memorandum, Ralph Nader, RAND corporation, Renaissance Technologies, reshoring, rising living standards, Robert Bork, Robert Shiller, Robert Shiller, rolodex, Ronald Reagan, shareholder value, Shenzhen was a fishing village, Silicon Valley, Silicon Valley startup, Steve Jobs, The Chicago School, The Spirit Level, too big to fail, transaction costs, transcontinental railway, union organizing, Unsafe at Any Speed, Vanguard fund, We are the 99%, women in the workforce, working poor, Y2K

The financial cleavage created by wedge economics has provoked popular discontent. Today, two-thirds of Americans—far more than just a couple of years earlier—say they see “strong” conflicts between rich and poor, and they see economics as more divisive than race, age, or ethnic grouping. “The Virtuous Circle” of the 1950s–1970s vs. the New Economy of the 1980s–2000s The New Economy is not smart. It hurts our capacity to grow, as we have seen from America’s painfully slow recovery from the financial collapse of 2008. The job losses and stagnant pay of the New Economy have broken what economists call “the virtuous circle of growth”—long the engine of America’s economic growth and middle-class prosperity. In the heyday of the middle class, for thirty years after World War II, America’s great companies paid high wages and good benefits. Tens of millions of families had steady income, and they spent it, generating high consumer demand.

America Chose a Different Fork America chose a different path, driven by the pro-business power shift in politics and a new corporate mind-set, both of which lie at the root of the economic rift in America today. The New Economy laissez-faire philosophy of the past three decades promised that deregulation, lower taxes, and free trade would lift all boats. It argued that sharply reduced taxes for the rich would generate the capital for America’s economic growth. Its disciples asserted that the free market would spread the wealth. But that is not what has happened. The middle class was left behind—the 150 million people whose family incomes range from nearly $30,000 to $100,000 a year—as well as 90 million more low-income Americans living in poverty or just above. Even the 60 million upper-middle-class Americans and the nation’s wealthiest 5 percent have been falling steadily further behind America’s financial elite, the super-rich 1 percent. The New Economy mind-set marked a sharp break with the corporate philosophy of the postwar era.

CONTENTS Cover Title Page Copyright Epigraph PROLOGUE: THE CHALLENGE FROM WITHIN PART 1: POWER SHIFT CHAPTER 1. THE BUSINESS REBELLION: THE POWER SHIFT THAT CHANGED AMERICAN HISTORY CHAPTER 2. THE PIVOTAL CONGRESS: JIMMY CARTER AND 1977–78 DEMOCRATS CHAPTER 3. MIDDLE-CLASS POWER: HOW CITIZEN ACTION WORKED BEFORE THE POWER SHIFT CHAPTER 4. MIDDLE-CLASS PROSPERITY: HOW “THE VIRTUOUS CIRCLE” WORKED BEFORE THE NEW ECONOMY PART 2: DISMANTLING THE DREAM CHAPTER 5. THE NEW ECONOMY OF THE 1990S: THE WEDGE ECONOMICS THAT SPLIT AMERICA CHAPTER 6. THE STOLEN DREAM: FROM MIDDLE-CLASS TO THE NEW POOR CHAPTER 7. THE GREAT BURDEN SHIFT: FUNDING YOUR OWN SAFETY NET; CRIPPLED BY DEBT CHAPTER 8. THE WEALTH GAP: THE ECONOMICS “OF THE 1%, BY THE 1%, FOR THE 1%” PART 3: UNEQUAL DEMOCRACY CHAPTER 9. THE NEW 2000S POWER GAME: WHY CONGRESS OFTEN IGNORES PUBLIC OPINION CHAPTER 10.


pages: 337 words: 103,273

The Great Disruption: Why the Climate Crisis Will Bring on the End of Shopping and the Birth of a New World by Paul Gilding

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airport security, Albert Einstein, Bob Geldof, BRICs, carbon footprint, clean water, cleantech, Climategate, commoditize, corporate social responsibility, creative destruction, decarbonisation, energy security, Exxon Valdez, failed state, fear of failure, income inequality, Intergovernmental Panel on Climate Change (IPCC), Joseph Schumpeter, market fundamentalism, mass immigration, Naomi Klein, new economy, nuclear winter, oil shock, peak oil, Ponzi scheme, purchasing power parity, Ronald Reagan, shareholder value, The Spirit Level, The Wealth of Nations by Adam Smith, union organizing, University of East Anglia

First will be the old economy and system trying to fix itself with existing assumptions and mechanisms. This response will assume we can continue to have economic growth, but that it needs to be more efficient and with lower carbon intensity. Second will be the push to build a new economy with transformational thinking. This will include a shift from consumerism and a physically defined quality of life along with strong moves to more localized economies and stronger global cooperation. Both the old economy and new economy approaches are critical in different phases; it is not a battle between them. However, it is the new economy response that will ultimately become dominant for the reason outlined in earlier chapters—the physical impossibility of continued material economic growth. The old economy response will be about leveraging existing economic and political models, systems, and beliefs to mobilize society’s emergency response plan.

Many will rail against this, but to little effect. An existing system is powerful and doesn’t give up its power lightly. Besides, we need them to run the war, something they’re very good at! Indeed, if they don’t run a successful war, we will be building a new economy from the village up with just a few hundred million people and a whole lot less technology and knowledge, making that job far harder and slower. Not to mention the suffering of billions of people on the way to that new starting point. The efforts of those who seek to build a new economy should instead be focused on doing just that: working on building new economic models and ownership structures, developing successful purpose-driven businesses, and driving the transformation in culture and values we will need. The laws of physics dictate that the old economy approach will fail because continued material economic growth is impossible.

At first I thought this was just because I understood it better, with my background as an environmental campaigner and the amount of time I had spent examining the science of sustainability and climate change. It also had the drama of a crisis, making it an easier communications task. To correct this, I spent more time exploring the extraordinary range of exciting activities around the world being undertaken by people preparing for the transition to a new economy. There are so many amazing stories, some of which we’ll cover later, it is easy to get excited about what’s possible. Despite learning a great deal and being inspired by the stories and people I came across, I found that my approach didn’t fundamentally change. It was the Crash that got the attention and energy of both my audiences and me. Then, when I was presenting to a Cambridge BSP seminar in New York in 2007, to a largely business audience, I was going through the Crash and was suddenly overwhelmed by a great sense of sadness, and I actually started to cry—not a good look for a big Aussie bloke!


pages: 442 words: 39,064

Why Stock Markets Crash: Critical Events in Complex Financial Systems by Didier Sornette

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Asian financial crisis, asset allocation, Berlin Wall, Bretton Woods, Brownian motion, capital asset pricing model, capital controls, continuous double auction, currency peg, Deng Xiaoping, discrete time, diversified portfolio, Elliott wave, Erdős number, experimental economics, financial innovation, floating exchange rates, frictionless, frictionless market, full employment, global village, implied volatility, index fund, information asymmetry, intangible asset, invisible hand, John von Neumann, joint-stock company, law of one price, Louis Bachelier, mandelbrot fractal, margin call, market bubble, market clearing, market design, market fundamentalism, mental accounting, moral hazard, Network effects, new economy, oil shock, open economy, pattern recognition, Paul Erdős, Paul Samuelson, quantitative trading / quantitative finance, random walk, risk/return, Ronald Reagan, Schrödinger's Cat, selection bias, short selling, Silicon Valley, South Sea Bubble, statistical model, stochastic process, Tacoma Narrows Bridge, technological singularity, The Coming Technological Singularity, The Wealth of Nations by Adam Smith, Tobin tax, total factor productivity, transaction costs, tulip mania, VA Linux, Y2K, yield curve

The Nasdaq Composite consists mainly of stock related to the so-called “New Economy,” that is, the Internet, software, computer hardware, telecommunications, and similar sectors. A main characteristic of these companies is that their price–earning ratios (P/Es), and even more so their price–dividend ratios, often come in three digits. Some, such as VA LINUX, actually have a negative earning/share (of −168). Yet they finan cial crashe s : w h a t, w h y, a n d w h e n? 21 are traded at around $40 per share, which is close to the price of a share of Ford in early March 2000. In constrast, so-called “Old Economy” companies, such as Ford, General Motors, and DaimlerChrysler, have P/E ≈ 10. The difference between Old Economy and New Economy stocks is thus the expectation of future earnings as discussed in [282] (see also [395] for a new view on speculative pricing): investors expect an enormous increase in, for example, the sale of Internet and computer-related products rather than of cars and are hence more willing to invest in Cisco rather than in Ford, notwithstanding the fact that the earning per share of the former is much smaller than for the latter.

Many companies associated with the esoteric high-tech of space travel and electronics sold in 1961 for over 200 times their previous year’s earning. Previously, the traditional rule had been that the price should be a multiple of 10 to 15 times their earnings. This is a story all too familiar! The “tronics boom,” as it was called, actually has remarkably similar features to the New Economy boom preceding the October 1929 crash or the New Economy boom of the late 1990s, ending in the April 2000 crash on the Nasdaq index. The best fit of the DJIA from 1954 to the end of 1961 by the logperiodic power law formula is shown in Figure 7.21. This period of time was followed by a “slow crash,” in the sense that the stock market 268 chapter 7 750 700 650 Dow Jones 600 550 500 450 400 350 300 250 54 55 56 57 58 59 Date 60 61 62 63 Fig. 7.21.

THE NASDAQ CRASH OF APRIL 2000 In the last few years of the second millenium, there was a growing divergence in the stock market between New Economy and Old Economy stocks, between technology and almost everything else. Over 1998 and 1999, stocks in the Standard & Poor’s technology sector rose nearly fourfold, while the S&P 500 index gained just 50%. And without technology, the benchmark would be flat. In January 2000 alone, 30% of net inflows into mutual funds went to science and technology funds, versus just 8.7% into S&P 500 index funds. As a consequence, the average price-over-earnings ratio (P/E) for Nasdaq companies was above 200 (corresponding to a ridiculous earnings yield of 05%), a stellar value above anything that serious economic valuation theory would consider reasonable. It is worth recalling that the very same concept and wording of a so-called New Economy was hot in the minds and mouths of investors in the 1920s and in the early 1960s, as already mentioned.


pages: 204 words: 67,922

Elsewhere, U.S.A: How We Got From the Company Man, Family Dinners, and the Affluent Society to the Home Office, BlackBerry Moms,and Economic Anxiety by Dalton Conley

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3D printing, assortative mating, call centre, clean water, commoditize, dematerialisation, demographic transition, Edward Glaeser, extreme commuting, feminist movement, financial independence, Firefox, Frank Levy and Richard Murnane: The New Division of Labor, Home mortgage interest deduction, income inequality, informal economy, Jane Jacobs, John Maynard Keynes: Economic Possibilities for our Grandchildren, knowledge economy, knowledge worker, labor-force participation, late capitalism, low skilled workers, manufacturing employment, mass immigration, McMansion, mortgage tax deduction, new economy, off grid, oil shock, PageRank, Ponzi scheme, positional goods, post-industrial society, Post-materialism, post-materialism, principal–agent problem, recommendation engine, Richard Florida, rolodex, Ronald Reagan, Silicon Valley, Skype, statistical model, The Death and Life of Great American Cities, The Great Moderation, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, transaction costs, women in the workforce, Yom Kippur War

Similarly, in Communist countries, it was the intellectuals who took over the state bureaucracy who flourished.45 Those American artists who “hid out” during the late 1950s and early 1960s in illegal lofts gave birth to the newly powerful creative class of the new millennium. While individual artists themselves probably attained or retained little power (though, had they purchased their loft conversions, they would have made millions), they spawned a whole new economy. Not only do places like Richmond, Virginia, and even Princeton, New Jersey, now brag that they offer “downtown lofts” (even if some of these are, in fact, new constructions made to look like old industrial conversions), a bohemian-type lifestyle has come to dominate the upper echelons of the new economy. By this I don’t just mean that—as Richard Florida asserts—“creativity” is now cherished and rewarded in a growing sector of the high-wage economy. I mean that the very rhythms of work of most professionals today could be clearly seen in the natural light of the artist live-work lofts of 1960: an integration of home and work; odd hours; individualized, nonsalaried work; status insecurity; social networking; and so on.

Alienated from the labor process and product, it thus was inevitable that he was also alienated from himself: The act of creation that had made him uniquely human was no longer possible (never mind that recent studies have shown that chimps are tool creators as well). Finally, he was alienated from other people, since capitalism makes all relations market relations. Mrs. and Mr. Elsewhere are also alienated from their products. The intangibility of the new economy means that we never have a sense of having produced a single actual thing. The “satisfaction” of having earned a 15 percent return for one’s clients or written the language for the contract of the leveraged buyout or talked the patient through their neuroses simply cannot substitute for the leather shoe or wooden chair that we once fashioned with our own hands. In today’s economy, many are dogged by the question, “What was my value added?”

Not only can you systematize your search for a life partner or casual sexual encounter, but you can also find a meditative body work consultant, a mover, a lawyer, a Tarot card reader who makes house calls, someone to care for your elderly grandmother, someone to struggle through homework with your kids, a yoga consultant, even an ovum whose previous owner scored high on her SATs, or, alternatively, someone to carry your own ovum. Market conquest used to be spatial, that is, global in scale. With periodic crises of capitalism—economic downturns—we continually needed to find new places to sell our “stuff.” Hence colonialism, which solved the problems of finding raw materials and new customers (not to mention cheap labor). Now, with intellectual property laws (key to the new economy) difficult to enforce in emerging markets, a sort of internal colonization is taking place. By internal colonization, I mean that whereas once we sailed the seas in search of new markets for our products and new sources of raw materials and labor, now we do this increasingly domestically by expanding the sheer number and type of markets. Whether embodied by the rise of the bottled-water industry and its displacement of public drinking fountains, or the proliferation of nannies, personal trainers, and assistants, or the ability to sell family memorabilia on eBay, money and market relations have eroded barriers that once maintained the sanctity and clarity of private space.


pages: 239 words: 56,531

The Secret War Between Downloading and Uploading: Tales of the Computer as Culture Machine by Peter Lunenfeld

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Albert Einstein, Andrew Keen, Apple II, Berlin Wall, British Empire, Brownian motion, Buckminster Fuller, Burning Man, butterfly effect, computer age, creative destruction, crowdsourcing, cuban missile crisis, Dissolution of the Soviet Union, don't be evil, Douglas Engelbart, Douglas Engelbart, Dynabook, East Village, Edward Lorenz: Chaos theory, Fall of the Berlin Wall, Francis Fukuyama: the end of history, Frank Gehry, Grace Hopper, gravity well, Guggenheim Bilbao, Honoré de Balzac, Howard Rheingold, invention of movable type, Isaac Newton, Jacquard loom, Jacquard loom, Jane Jacobs, Jeff Bezos, John Markoff, John von Neumann, Mark Zuckerberg, Marshall McLuhan, Mercator projection, Metcalfe’s law, Mother of all demos, mutually assured destruction, Network effects, new economy, Norbert Wiener, PageRank, pattern recognition, peer-to-peer, planetary scale, Plutocrats, plutocrats, Post-materialism, post-materialism, Potemkin village, RFID, Richard Feynman, Richard Feynman, Richard Stallman, Robert Metcalfe, Robert X Cringely, Schrödinger's Cat, Search for Extraterrestrial Intelligence, SETI@home, Silicon Valley, Skype, social software, spaced repetition, Steve Ballmer, Steve Jobs, Steve Wozniak, Ted Nelson, the built environment, The Death and Life of Great American Cities, the medium is the message, Thomas L Friedman, Turing machine, Turing test, urban planning, urban renewal, Vannevar Bush, walkable city, Watson beat the top human players on Jeopardy!, William Shockley: the traitorous eight

But this period was shorter lived than even the Seattle protesters expected it to be. The NASDAQ, a U.S. market heavy on high-technology firms, was the most important index for the New Economy. It crested in March 2000, and within a year had lost more than half its value, vaporizing trillions in paper profits. The stock market losses for three companies alone—AOL, Amazon, and Yahoo!— amounted to three hundred billion dollars.4 The indexes continued to sink for the next year, and then came the critical event that signaled the complete end of the period inaugurated with the dismantling of the Berlin Wall in 1989. It was on September 11, 2001, that the markets took their next massive hit, and the newness of the so-called New Economy had its last bits of hype sucked out of it. For Americans, at least, the faith in the Market to overcome all obstacles suffered a near-fatal blow that day, not simply with the vivid reminder that history in fact had not ended, but also that all those high-flying young engineers, venture capitalists, and entrepreneurs in their Casual-Friday-Every-Day chinos and polo shirts were now being edged out of the spotlight to prepare for the return of the Blue-Suited-Wingtip-Shod-FlagpinLapelled grown-ups (think former Vice President Dick Cheney and Secretary of Defense Donald Rumsfeld).

Intergalactic Computer Network and, 108, 152, 168 Machine Histories, 64 Macintosh computer, 165–167 Macrotelevision, 56–60 Madonna, 63 Madrid, 100, 130 Mahabharata, 28 MAKE magazine, 68–69 MAKER Faires, 68–69 Manchester Mark I computer, 18 “Man-Computer Symbiosis” (Licklider), 151 Mandela, Nelson, 113 Mandiberg, Michael, 41–42 Manhattan Project, 150 Manual labor, 3 Many Eyes, 126, 193n37 Mao Zedong, 86 Marinetti, Filippo Tommaso, 44 Markets bespoke futures and, 97–104, 118, 207 INDEX Markets (continued) 120, 127, 131–132, 137–138 capitalism and, 13, 66, 75, 97–100, 104–105 (see also Commercial culture) culture machine and, 156, 161–167, 173 empowerment and, 8 entrepreneurs and, 99, 109, 156–157, 174 FIRE, 99–100 Global Business Network (GBN) and, 113, 115, 191n18 Great Depression and, 107 Greed and, 100 Internet television and, 9 mass culture and, 184n16 NASDAQ, 99 New Economy and, 97, 99, 104, 131, 138, 144–145, 190n3 prosumers and, 120–121 retail, 103–105 scenario planning and, 111–119, 191n19, 192n20 September 11, 2001 and, 99–101, 130 Slow Food and, 5–6 social campaigns and, 190n8 stickiness and, 13, 16, 24, 30–33, 37 technofabulism and, 99–100 textile, 11 unimodernism and, 45, 48, 58–59, 71, 75 Web n.0 and, 81, 83, 86, 90 Martha Stewart Living magazine, 69 MaSAI (Massively Public Applications of the Imagination), xvi, 112, 120–123, 127, 193nn32 Masai tribe, 193n32 Mashing, 25, 54–55, 57, 74 Massachusetts Institute of Technology (MIT), 71, 117, 144, 148, 151 Matrix, The (film series), 39 Mau, Bruce, 55–56, 102, 190n8 Mauchly, John, 148 McDonald’s, 5 McLuhan, Marshall, 2, 14, 116 Meaningfulness, xvi, 173 bespoke futures and, 119, 123, 128– 129, 133 categorization of, 29–30 defining, 27–29 disrupting flow and, 23–24 Enlightenment and, 129–139 play and, 32–34 power and, 32–34 stickiness and, 14, 17, 20 (see also Stickiness) toggling and, 33–34, 43, 102, 197n30 tweaking and, 32–35, 185nn22,23 unimodernism and, 42, 67, 77 uploading and, xvi, 29 Web n.0 and, 79 Mechanical calculator, 149 Mechanization, 44–45 Medium specificity, 56–57 Meliorism, xvi, 127–129, 133, 137–138 Melodium label, 27 Memex, 108, 149–151 Memory, 46–47, 60, 67, 71, 109, 149, 194nn1,6 Metcalfe, Bob, 86–87 Metro Pictures gallery, 41 Michnik, Adam, 104 Mickey Mouse, 65, 88–90 Mickey Mouse Protection Act, 90 Microcinema, 56–60 Microfilm, 149–150 Microsoft, 144–145, 163–166, 172–173, 175, 196n21 Middle-class, 44 Mindfulness, 77, 79, 183n6 bespoke futures and, 123, 129 capitalism and, 4, 13, 66, 75, 90, 103–105 208 INDEX Mindfulness (continued) disrupting flow and, 23–24 info-triage and, xvi, 20–23, 121, 132, 143 stickiness and, 14, 17, 20–24, 27–29, 42 Mobility, 81–82, 128 Modders, 69–70 “Model B32” (Breuer), 45 Modernism, 36–37, 105–108 Modern Times (film), 45 Moore, Gordon, 156 Moore’s law, 156, 195n13 Morpheus, 92 Moses, Robert, 84 Motorola, 116 Moulin Rouge (Luhrmann), 60–63 Mouse, 158–159 MP3s, 2, 27 MS-DOS, 165–166 MTV, 31, 63 Murakami, Takashi, 49 Murger, Henri, 61 Musée du quai Branly, 66 Museum of Modern Art (MOMA), 42, 117 Music bebop, 25–27 calypso, 35–37 hip-hop, 53–54, 61 jazz, 25–27, 160 Napster and, 54, 92 remixing and, 53–55 (see also Remixing) Mutually assured destruction, xi MySpace, 81 Napoleonic Wars, 21 Napster, 54, 92 Narrative, 2, 8 bespoke futures and, 108, 110, 129–139 blogosphere and, xvii, 30, 34, 49, 68, 80, 92–93, 101, 175, 177, 181n7 capitulationism and, 7, 24, 182n1 209 development of computer and, 143– 145, 174, 178 Enlightenment Electrified and, 129–139 gaming and, 188n25 isotypes and, 44, 125, 193n34 negative dialectics and, 29–30 Oprah and, xv, 180nn3,4 samizdat and, 59 storyline and, 59 unimodernism and, 58–59, 67, 71, 76 NASA, 51, 123 NASDAQ, 99 National Center for Biotechnology Information, 81 “Nature Boy” (Cole), 62 Nelson, Ted, 145, 168 Net.art, 52 Netscape, 169 Networks bespoke futures and, 98–101, 108, 112–113, 116, 119–126, 133, 137 commercial, 4–5 (see also Commercial culture) culture machine and, 143–144, 152, 167–168, 172–175, 178 development of computer, 8–9 flexibility of digital, 10 Global Business Network (GBN) and, 113, 115, 191n18 Intergalactic Computer Network and, 108, 152, 168 Metcalfe’s corollary and, 86–87 patio potato and, 10, 13 peer-to-peer, 15, 54, 92, 116, 126 stickiness and, 16–17, 22, 24, 29–36 unimodernism and, 39, 47–48, 54–57, 60, 64–65, 68–69, 73–74 Web n.0 and, 79–95 Neurath, Otto, 44, 125 New Economy, 190n3 bespoke futures and, 97, 99, 104, 131, 138 INDEX New Economy (continued) dot-com bubble and, 145 fantasies of, 104 Hustlers and, 144 Newtonian physics, 118 New York City, 25–26, 84–86, 100, 130 New Yorker, 135 New York Museum of Modern Art, 42 New York Times, 61, 103 NeXT Cube, 167–168 Nirvana, 62 NLS (oN-Line System), 160 Nobel Prize, 156 Norman, Don, 16 Nouvel, Jean, 66 Noyce, Philip, 156 “Nude on a Red Background” (Léger), 45 Obama, Barack, 31 Odyssey (Homer), 28, 94–95 Offenbach, Jacques, 62 Ogilvy, Jay, 113–114 Open source, 36, 189n12 Creative Commons and, 90–93, 123, 173 development of computer and, 144, 170–173, 177 GNU and, 171, 173 Linux and, 75, 169–173, 197n27 Raymond and, 172 Stallman and, 170–171 Torvalds and, 144, 167–173 unimodernism and, 61, 69, 74–75 Web n.0 and, 116, 121–126 Opera, 40, 45, 60–63, 187n18 Oppenheimer, J.

The post-1989 period contained a multitude of features, but one unifying construct was the belief that after the fall of the Berlin Wall and then the Soviet Union itself, not just Communism, but all the countervailing forces against market capitalism were vanquished, and not just for the moment but literally for all time. The Market with a capital M was the grail at the end of Francis Fukayama’s treatise The End of History.2 The Market was the solution for all questions, the Market would bring peace and prosperity, and would free itself from the tyranny of the business cycle, evolving into an entirely invisible, frictionless, perpetual motion machine that would take the name of the New Economy (again with capital letters).3 This immediate post-1989 period coincided with the most utopian phase of the culture machine: the euphoria of the World Wide Web’s first Wild, Wild West phase. For close to 97 CHAPTER 5 a decade, people talked about bright, posteconomic futures, perfectly transparent global markets, and the glories of pure, unadulterated information flowing around the world at the speed of light.


pages: 478 words: 126,416

Other People's Money: Masters of the Universe or Servants of the People? by John Kay

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Affordable Care Act / Obamacare, asset-backed security, bank run, banking crisis, Basel III, Bernie Madoff, Big bang: deregulation of the City of London, bitcoin, Black Swan, Bonfire of the Vanities, bonus culture, Bretton Woods, call centre, capital asset pricing model, Capital in the Twenty-First Century by Thomas Piketty, cognitive dissonance, corporate governance, Credit Default Swap, cross-subsidies, dematerialisation, diversification, diversified portfolio, Edward Lloyd's coffeehouse, Elon Musk, Eugene Fama: efficient market hypothesis, eurozone crisis, financial innovation, financial intermediation, financial thriller, fixed income, Flash crash, forward guidance, Fractional reserve banking, full employment, George Akerlof, German hyperinflation, Goldman Sachs: Vampire Squid, Growth in a Time of Debt, income inequality, index fund, inflation targeting, information asymmetry, intangible asset, interest rate derivative, interest rate swap, invention of the wheel, Irish property bubble, Isaac Newton, John Meriwether, light touch regulation, London Whale, Long Term Capital Management, loose coupling, low cost carrier, M-Pesa, market design, millennium bug, mittelstand, money market fund, moral hazard, mortgage debt, Myron Scholes, new economy, Nick Leeson, Northern Rock, obamacare, Occupy movement, offshore financial centre, oil shock, passive investing, Paul Samuelson, peer-to-peer lending, performance metric, Peter Thiel, Piper Alpha, Ponzi scheme, price mechanism, purchasing power parity, quantitative easing, quantitative trading / quantitative finance, railway mania, Ralph Waldo Emerson, random walk, regulatory arbitrage, Renaissance Technologies, rent control, Richard Feynman, risk tolerance, road to serfdom, Robert Shiller, Robert Shiller, Ronald Reagan, Schrödinger's Cat, shareholder value, Silicon Valley, Simon Kuznets, South Sea Bubble, sovereign wealth fund, Spread Networks laid a new fibre optics cable between New York and Chicago, Steve Jobs, Steve Wozniak, The Great Moderation, The Market for Lemons, the market place, The Myth of the Rational Market, the payments system, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Tobin tax, too big to fail, transaction costs, tulip mania, Upton Sinclair, Vanguard fund, Washington Consensus, We are the 99%, Yom Kippur War

The dot.com boom began in 1995 with the publication of a research note pointing out the commercial opportunities of the internet from Mary Meeker of Morgan Stanley (who would become known as ‘the internet goddess’) and the flotation of Netscape (which devised the first accessible internet browser).23 By 1999 journalists, consultants and business people talked of a ‘new economy’. Businesses that had never made a penny of profit, and never would, were floated on world stock exchanges at fantastic valuations. The demand for ‘new economy’ stocks spilled over into every business that promoters could associate, however tenuously, with high technology. The last phase of the new economy bubble in early 2000 was aided by the liquidity pumped into the US economy by the Federal Reserve to avert the threat supposedly posed by the ‘millennium bug’: errors in computer programs in handling the date 2000. In the spring of 2000 the new economy boom came to its predictable, if not widely predicted, end. The Fed then cut interest rates and gave a further monetary stimulus.

Ponzi and Madoff went to prison because they lied. But the new economy bubble of 1999–2000 was a – perhaps legal – Ponzi scheme. Early investors made large profits, but it was later investors, attracted by the prospect of similar gains, who provided the funds that made these profits possible. Securities with no intrinsic value were bought and sold repeatedly by people whose motive for buying was knowledge of the profits that had already been made in such stocks and the expectation (fulfilled in many cases) that they would make similar profits by selling these stocks on at higher prices still. Eventually, as in all Ponzi schemes, the supply of fresh buyers ran out, the bubble burst and the share prices of internet stocks collapsed. The boundaries between scam, deception, self-deception and mistake are fuzzy. In the new economy bubble some early-stage investors made money, but most stayed on in the hope of making still more.

In the new economy bubble some early-stage investors made money, but most stayed on in the hope of making still more. Even highly intelligent people overestimate their ability to time the correction of market mispricing. Legendary investors such as Julian Robertson and George Soros misjudged the new economy bubble and damaged their reputations. Warren Buffett stayed resolutely on the sidelines, and was derided for his failure to ‘get it’. Isaac Newton famously lost money in the South Sea Bubble, an early Ponzi scheme. As the new economy bubble expanded, I asked myself often, ‘Do people in financial conglomerates selling products really believe these things, or are they cynical in their deception?’ I came to realise that the truth lay somewhere in between: neither naïveté nor fraud provided sufficient explanation. It was convenient to repeat the received opinions of organisations and colleagues.


pages: 361 words: 81,068

The Internet Is Not the Answer by Andrew Keen

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3D printing, A Declaration of the Independence of Cyberspace, Airbnb, AltaVista, Andrew Keen, augmented reality, Bay Area Rapid Transit, Berlin Wall, bitcoin, Black Swan, Bob Geldof, Burning Man, Cass Sunstein, citizen journalism, Clayton Christensen, clean water, cloud computing, collective bargaining, Colonization of Mars, computer age, connected car, creative destruction, cuban missile crisis, David Brooks, disintermediation, Donald Davies, Downton Abbey, Edward Snowden, Elon Musk, Erik Brynjolfsson, Fall of the Berlin Wall, Filter Bubble, Francis Fukuyama: the end of history, Frank Gehry, Frederick Winslow Taylor, frictionless, full employment, future of work, gig economy, global village, Google bus, Google Glasses, Hacker Ethic, happiness index / gross national happiness, income inequality, index card, informal economy, information trail, Innovator's Dilemma, Internet of things, Isaac Newton, Jaron Lanier, Jeff Bezos, job automation, Joseph Schumpeter, Julian Assange, Kevin Kelly, Kickstarter, Kodak vs Instagram, Lean Startup, libertarian paternalism, lifelogging, Lyft, Marc Andreessen, Mark Zuckerberg, Marshall McLuhan, Martin Wolf, Metcalfe’s law, move fast and break things, move fast and break things, Nate Silver, Network effects, new economy, Nicholas Carr, nonsequential writing, Norbert Wiener, Norman Mailer, Occupy movement, packet switching, PageRank, Paul Graham, peer-to-peer, peer-to-peer rental, Peter Thiel, Plutocrats, plutocrats, Potemkin village, precariat, pre–internet, RAND corporation, Ray Kurzweil, ride hailing / ride sharing, Robert Metcalfe, Second Machine Age, self-driving car, sharing economy, Silicon Valley, Silicon Valley ideology, Skype, smart cities, Snapchat, social web, South of Market, San Francisco, Steve Jobs, Steve Wozniak, Steven Levy, Stewart Brand, TaskRabbit, Ted Nelson, telemarketer, The Future of Employment, the medium is the message, the new new thing, Thomas L Friedman, Tyler Cowen: Great Stagnation, Uber for X, urban planning, Vannevar Bush, Whole Earth Catalog, WikiLeaks, winner-take-all economy, working poor, Y Combinator

It would be “decentralizing, globalizing, harmonizing and empowering.”25 One of the most frequently quoted books about the Internet economy published in the wake of the August 1995 IPO was Kevin Kelly’s New Rules for the New Economy.26 Kelly’s economic manifesto, which came out as a series of articles he wrote as the founding executive editor for Wired magazine, became an appropriately magical handbook for startup entrepreneurs in the surreal dot-com era. The personally very gracious and well-meaning Kelly, one of the founders of the countercultural WELL BBS and a born-again Christian techno-mystic who would later write a book about how technology has a mind of its own,27 stoked the already irrational exuberance of the late nineties with a new economy manifesto that today reads like a parody of digital utopianism. Kelly’s mistake was to assume that the Internet’s open technology would automatically be reflected by what he, borrowing Negroponte’s messianic verbiage, called the “decentralized ownership and equity” of a “global economic culture.”28 More digital shaman than economist, Kelly presented the new economy as an uneconomy—one in which the traditional laws of supply and demand and abundance and scarcity no longer applied.

Kelly’s mistake was to assume that the Internet’s open technology would automatically be reflected by what he, borrowing Negroponte’s messianic verbiage, called the “decentralized ownership and equity” of a “global economic culture.”28 More digital shaman than economist, Kelly presented the new economy as an uneconomy—one in which the traditional laws of supply and demand and abundance and scarcity no longer applied. With rules like “Embrace the Swarm,” “Opportunities Before Efficiencies,” and “Plenitude, Not Scarcity,” Kelly’s book—part McLuhan, part Mao, part plain meshuggah—described the Internet economy as a collectivist cornucopia that would climax in what he called “a thousand points of wealth.” But not everyone embraced the swarm and learned to speak this kind of gobbledygook. In 1995, two American economists published a less hyped but much more prescient book about the depressingly old rules of our new economy. In The Winner-Take-All Society,29 Robert Frank and Philip Cook argue that the defining feature of late-twentieth-century global capitalism was a growing financial chasm between a narrow elite and the rest of society.

What Kevin Kelly incorrectly predicted as the Internet’s “decentralized ownership and equity” structure has, in fact, turned out to be a rigidly centralized economy controlled by what Fred Wilson, the New York City–based cofounder of Union Square Ventures and one of the smartest early-stage investors in the Internet economy, calls “dominant networks that are emerging all around us,” like “Google, Twitter, YouTube, SoundCloud [and] Uber.” 36 Wilson explains that “for all of its democratizing power, the Internet, in its current form, has simply replaced the old boss with a new boss and these new bosses have market power that, in time, will be vastly larger than that of the old boss.”37 The rules of this new economy are thus those of the old industrial economy—on steroids. The bigger Amazon has become, the cheaper its prices and the more reliable its services, the more invulnerable it has become to competition. “Amazon is increasingly looking like a monopoly in publishing,” Wilson explains, warning that the Internet has gone “from laughable toys to dominant monopolies in less than a decade.”38 Scale matters more than ever in the online economy, particularly in e-commerce, where the margins are extremely tight. “Opportunities before efficiencies” was one of Kevin Kelly’s new rules for the new economy. But Amazon, while certainly not averse to the strategic opportunities in the digital market, has built its economic power upon the tactical efficiencies of a company that, in 2013, booked $75 billion in sales, but a profit of just $274 million.39 In 2002, Amazon’s growing financial clout enabled it to take on United Parcel Service, wringing significant price concessions from the shipping giant, thereby giving it a major cost advantage over its rivals and, as Brad Stone notes, teaching Amazon “an enduring lesson about the power of scale and the reality of Darwinian survival in the world of big business.”40 Amazon’s financial resources allowed the notoriously parsimonious company in 2001 to even build its own, customized back-end fulfillment software, which, Stone notes, allowed it “innumerable advantages,” such as being able to promise its customers when their packages will arrive and enabling the introduction of its lucrative subscription-based Amazon Prime two-day delivery service.41 The winner-take-all economy is a euphemism for a market that tends toward monopoly—and that’s exactly what Amazon, with its tighter and tighter control of online commerce, is becoming.


pages: 416 words: 118,592

A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing by Burton G. Malkiel

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3Com Palm IPO, accounting loophole / creative accounting, Albert Einstein, asset allocation, asset-backed security, backtesting, beat the dealer, Bernie Madoff, BRICs, capital asset pricing model, compound rate of return, correlation coefficient, Credit Default Swap, Daniel Kahneman / Amos Tversky, diversification, diversified portfolio, Edward Thorp, Elliott wave, Eugene Fama: efficient market hypothesis, experimental subject, feminist movement, financial innovation, fixed income, framing effect, hindsight bias, Home mortgage interest deduction, index fund, invisible hand, Isaac Newton, Long Term Capital Management, loss aversion, margin call, market bubble, money market fund, mortgage tax deduction, new economy, Own Your Own Home, passive investing, Paul Samuelson, pets.com, Ponzi scheme, price stability, profit maximization, publish or perish, purchasing power parity, RAND corporation, random walk, Richard Thaler, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, Robert Shiller, short selling, Silicon Valley, South Sea Bubble, survivorship bias, The Myth of the Rational Market, the rule of 72, The Wisdom of Crowds, transaction costs, Vanguard fund, zero-coupon bond

The venerable investment firm Goldman Sachs argued in mid-2000 that the cash burned by the dot-com companies was primarily an “investor sentiment” issue and not a “long-term risk” for the sector or “space,” as it was often called. A few months later, hundreds of Internet companies were bankrupt, proving that the Goldman report was inadvertently correct. The cash burn rate was not a long-term risk—it was a short-term risk. Until that moment, anyone scoffing at the potential for the “New Economy” was a hopeless Luddite. As the chart NASDAQ Composite Stock Index, July 1999–July 2002 indicates, the NASDAQ Index, an index essentially representing high-tech New Economy companies, more than tripled from late 1998 to March 2000. The price-earnings multiples of the stocks in the index that had earnings soared to over 100. NASDAQ COMPOSITE STOCK INDEX, JULY 1999–JULY 2002 A Broad-Scale High-Tech Bubble At the bubble’s height, scoffers were as hard to find as the Maytag repairman.

And if aggressive earnings targets proved hard to meet, “creative accounting” could be used so that not only the published street estimates but even the “whisper numbers” could be surpassed. One spectacular example was the rise and subsequent bankruptcy of Enron—at one time the seventh-largest corporation in America. The collapse of Enron, where over $65 billion of market value was wiped out, can be understood only in the context of the enormous bubble in the New Economy part of the stock market. Enron was seen as the perfect New Economy stock that could dominate the market not just for energy but also for broadband communications, widespread electronic trading, and commerce. Enron was a clear favorite of Wall Street analysts. Even after it began to unravel during the fall of 2001, sixteen out of seventeen security analysts covering Enron had “buy” or “strong buy” ratings on the stock. Old utility and energy companies were likened by Fortune magazine to “a bunch of old fogies and their wives shuffling around to the sounds of Guy Lombardo.”

Companies that changed their names enjoyed an increase in price during that ten-day period that was 125 percent greater than that of their peers. This price increase occurred even when the company’s core business had nothing whatsoever to do with the Net. In the market decline that followed, shares in these companies became worthless. As the following table shows, investors suffered punishing losses even in the leading Internet companies. HOW EVEN THE LEADING NEW ECONOMY STOCKS RUINED INVESTORS Stock High 2000 Low 2001–2002 Percentage Decline Amazon.com 75.25 5.51 98.7 Cisco Systems 82.00 11.04 86.5 Corning 113.33 2.80 99.0 JDS Uniphase 297.34 2.24 99.5 Lucent Technologies 74.93 1.36 98.3 Nortel Networks 143.62 .76 99.7 Priceline.com 165.00 1.80 99.4 Yahoo.com 238.00 8.02 96.4 PalmPilot, the maker of Personal Digital Assistants (PDAs), is an example of the insanity that went well beyond irrational exuberance.


pages: 435 words: 127,403

Panderer to Power by Frederick Sheehan

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Asian financial crisis, asset-backed security, bank run, banking crisis, Bretton Woods, British Empire, call centre, central bank independence, collateralized debt obligation, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, deindustrialization, diversification, financial deregulation, financial innovation, full employment, inflation targeting, interest rate swap, inventory management, Isaac Newton, John Meriwether, Long Term Capital Management, margin call, market bubble, McMansion, Menlo Park, money market fund, mortgage debt, Myron Scholes, new economy, Norman Mailer, Northern Rock, oil shock, Paul Samuelson, place-making, Ponzi scheme, price stability, reserve currency, rising living standards, rolodex, Ronald Reagan, Sand Hill Road, savings glut, shareholder value, Silicon Valley, Silicon Valley startup, South Sea Bubble, supply-chain management, supply-chain management software, The Great Moderation, too big to fail, transaction costs, trickle-down economics, VA Linux, Y2K, Yom Kippur War, zero-sum game

He did not speak much about money and credit. These had been the main concerns of previous Fed chairmen. The government had designed the Federal Reserve System to monitor money and credit. Greenspan rarely discussed either. 34 John Cassidy, “The Fountainhead,” New Yorker, April 24, 2000. 35Alan Greensan, “The Revolution in Information Technology,” before the Boston College Conference on the New Economy, Boston, MA, March 6, 2000. 36 Ibid. 37 Ibid. 38 Arthur Levitt, “The New Economy,” speech at The Finance Conference 2000, Boston College, Boston, March 6, 2000. 39 Gretchen Morgenson,“A Onetime Highflying Hedge Fund Appears Likely to Shut Down,” “Market Place,” New York Times, March 31, 2000. He may have enjoyed his superstar status to such a degree that he preferred to speak about a hot topic. Or, he may have avoided discussions of money if he came to realize he was illequipped to mention it.

Yet—and this is the mark of a zealot—the Federal Reserve could not forecast a recession because of the limited technology of models—all models: “There is no way to forecast when [a recession will] happen except by luck.… There are those who look back and say ‘I forecasted the recession,’ and I’m saying it was good luck because that’s what it was.”16 The late January 2001 meeting was chock-full of confessions. He finally admitted that he believed in the new era: a description he had deliberately avoided: “I think part of the answer is the new economy. We can’t explain it all [recessions] in terms of the new economy because the model reflects the history of all previous periods.”17 “All previous periods” is all a model can reflect. 14 FOMC meeting transcript, January 30–31, 2001, p. 181. 15 Ibid., pp. 174–181. On February 13, 2001, in testimony before the Senate Banking Committee, Greenspan was upbeat about “strength in capital accumulation and sustained elevated growth of structural productivity over the longer term.”18 An article in the Financial Times reported Greenspan’s testimony under the title: “Greenspan Sees a Quick Rebound.”19 Andy Grove, chairman of Intel Corporation, disagreed.

(John Pierpont), 81 Morgan Stanley, 112, 116, 233, 244, 272, 321, 347n.48 Mortgage lenders, 328 Mortgagebacked securities, 266–268, 270–272, 313 Mortgages, 22, 265–280 in 1995, 254 in 2002, 262 in 2004–2005, 293–294 40-year loans, 298 adjustable-rate, 107, 292–293, 328–329, 344 and broker leverage, 272–273 bubble in, 331 collateralized mortgage obligations (CMOs), 130 and Fannie Mae/Freddie Mac, 266–272 FHA (Federal Housing Authority), 273, 277 fixed-rate, 292 FLEX-ARM, 288 held by banks, 312 HELOCs (home equity line of credit), 298 and inflation of 1970s, 44, 63 “Liar’s loans,” 328 negative-amortization mortgages, 107 novel products, 298–299 option ARMs, 298 subprime, 296, 329–333, 340 “2 and 28,” 325 Piggyback mortgages, 298 underwriting systems for, 278–280 Wall Street participation in, 273–277 (See also Home equity loans) Moskow, Michael, 194, 196 Motorola, 207 Mozilo, Angelo, 275, 279 M3, 135 Mullins, David, 137 Mutual funds: in the 1960s, 33 of junk bonds, 80 in late 1990s, 142 and recession of early 1990s, 127 N Nasdaq: in 1995, 139 in 1997, 166 in 1998, 188, 191 in 1999, 191, 215–216 in 2000, 215–216, 219 in 2002, 284 in late 1990s, 145 technology stocks on, 216 Nasdaq 100, 177 Nasdaq Composite Index: in 1999, 188 in 2000, 224, 225, 235 in 2001, 237, 238, 246 in late 1990s, 177 National Association of Realtors, 316 National Commission on Social Security Reform, 83–84 National debt, 305 National Industrial Conference Board, 13 National policy, economists and, 361 National Public Radio, 343 NationsBank, 130 NBCi, 174 Negative-amortization mortgages, 107 Nehemiah Corporation of America, 273, 291 NetGravity, 174 Netscape, 141 New Century Financial Corporation, 165, 278–279, 328, 330 New Economics, 26–27, 39, 121, 350 New Economy, 196 New Economy conference (2000), 222 New Republic, 353 New York City, 2, 36, 352–357 1920s real estate speculation in, 352–353 1970s migration from, 51–52 and early 1990s recession, 114 as leading economic indicator, 22–23 poverty in, 78 New York Federal Reserve Bank, 66 New York Mercantile Exchange, 220 New York Stock Exchange, 19, 33 New York Post, 347 New York Times, 3, 5, 6, 19, 22, 25, 32, 33, 35, 42, 43, 48, 52, 55, 56, 59, 61, 63, 64, 65, 67, 68, 71, 73–76, 82, 83, 84, 86, 90, 92–93, 117, 118, 133, 134, 141–142, 164, 204–205, 212, 217, 221, 223, 236, 239, 245, 278, 279, 283, 294, 299–300, 327, 337–338, 340, 342, 346, 364 New York University, 11, 59 New York University School of Commerce, Accounts and Finance, 11 New Yorker, 53 New York (magazine), 342 Newsweek, 5, 57, 97 Ney, Robert, 277–278 Nikkei index, 216, 246 Nixon, Richard, 4–5, 32, 36, 41, 44 Nobel Prize in economic sciences, 26, 81, 112, 143, 183–184, 187, Nock, Albert Jay, 24 Nonbank banks, 99 O Objectivism, 3, 13–15, 27, 32 Office of Federal Housing Enterprise Oversight (OFHEO), 269 Okun, Arthur, 39, 42, 61 Old Economy, 196 O’Neal, Stanley, 333 O’Neil, C.


pages: 506 words: 146,607

Confessions of a Wall Street Analyst: A True Story of Inside Information and Corruption in the Stock Market by Daniel Reingold, Jennifer Reingold

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barriers to entry, Berlin Wall, corporate governance, estate planning, Fall of the Berlin Wall, fixed income, George Gilder, high net worth, informal economy, margin call, mass immigration, new economy, pets.com, Robert Metcalfe, rolodex, Saturday Night Live, shareholder value, short selling, Silicon Valley, stem cell, Telecommunications Act of 1996, thinkpad, traveling salesman

Sol Trujillo, a friendly but intense career US West employee who had worked his way up to the top, clearly saw this deal as a way to transform his conservative, slow-growing, dividend-paying telecom company into a high-growth new-economy outfit. He had been enamored with the buzz—and stock prices—these new-economy companies were fetching ever since he had attended the Vortex Conference at Laguna Niguel a year earlier. But neither Global Crossing’s nor US West’s shareholders were enthusiastic about the deal. The conservative US West holders saw it as radical and risky, while Global Crossing’s holders, new-economy-Kool-Aid drinkers, saw it as a waste of money on old, tired assets. Global’s shares, which had hit an all-time record of $64 a share by May 13, fell 30 percent in three weeks, closing at $45.75 on June 2.

After a three-week road show—the traveling circus in which Qwest’s top executives traveled around the world, visiting institutional investors in 10 cities in the U.S. and five in Europe, to try to sell the stock—it went public on June 24, 1997, at $22. Jack’s $2.2 billion and our $1.8 billion estimates looked laughable after the first day of trading, when the stock closed at $28, valuing the company at an unbelievable $2.8 billion. We had all dramatically underestimated some things that didn’t figure in to our models at all: the market’s appetite for new economy telecom startups and the degree to which an association with the Internet—a big part of Qwest’s road show—would propel valuations. Yet Jack, even though he had blown up his numbers with an air pump, was still closer to reality than I was. It killed me. Ultimately, Qwest would peak at $66, three years later. It didn’t matter how meticulous our research was in an environment like this, I realized.

The conference was chock-a-block with new companies trying to get funded, existing companies touting their technology, and, of course, bankers, analysts, and investors. The speakers included John Chambers, CEO of Cisco Systems, Internet guru George Gilder, and others. Frank Quattrone, tech banker extraordinaire, was there, mobbed by startups looking for funding or merger partners. Sol Trujillo, CEO of US West, was there, trying desperately to gain some credibility as he tried to transform his company, and himself, from a boring old Baby Bell into a “new-economy” superstar. And Jim Crowe, my flat-topped buddy from MFS, was there, spreading the Internet word again, but this time on behalf of his new company, Level 3 Communications. One afternoon as we sipped cocktails by the Ritz’s pool overlooking the Pacific Ocean, Jim explained to me that Level 3 was going to provide the tubes through which the information economy would flow. It would run a national long distance network that would carry only data, not voice.


pages: 278 words: 82,069

Meltdown: How Greed and Corruption Shattered Our Financial System and How We Can Recover by Katrina Vanden Heuvel, William Greider

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Asian financial crisis, banking crisis, Bretton Woods, capital controls, carried interest, central bank independence, centre right, collateralized debt obligation, conceptual framework, corporate governance, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, declining real wages, deindustrialization, Exxon Valdez, falling living standards, financial deregulation, financial innovation, Financial Instability Hypothesis, fixed income, floating exchange rates, full employment, housing crisis, Howard Zinn, Hyman Minsky, income inequality, information asymmetry, John Meriwether, kremlinology, Long Term Capital Management, margin call, market bubble, market fundamentalism, McMansion, money market fund, mortgage debt, Naomi Klein, new economy, offshore financial centre, payday loans, pets.com, Plutocrats, plutocrats, Ponzi scheme, price stability, pushing on a string, race to the bottom, Ralph Nader, rent control, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, sovereign wealth fund, structural adjustment programs, The Great Moderation, too big to fail, trade liberalization, transcontinental railway, trickle-down economics, union organizing, wage slave, Washington Consensus, women in the workforce, working poor, Y2K

It is this intellectual unanimity about the nature and the pur pose of economies, as much as the technological advances of recent years, that we refer to when we talk so triumphantly about the “New Economy.” It is this nearly airtight consensus—this assurance that no matter what happens or who wins in November, a strong labor movement and an interventionist government will not be returning—that has made possible the unprecedented upward transfer of wealth that we saw in the Clinton years, that has permitted the bull market without end, and that has made the world so safe for billionaires. This is not to say that in the nineties Americans simply decided they wanted nothing so much as to toil for peanuts on an assembly line somewhere, that they loved plutocracy and that robber barons rocked after all. On the contrary: At the center of the “New Economy” consensus was a vision of economic democracy as extreme and as militant-sounding as anything to emanate from the CIO in the thirties.

Businessmen and pro-business politicians have always protested the use of “class war” by their critics on the left; during the nineties, though, they happily used the tactic themselves, depicting the workings of the market as a kind of permanent social revolution in which daring entrepreneurs are endlessly toppling fat cats and picking off millions of lazy rich kids. Wherever the earthshaking logic of the “New Economy” touched down, old money was believed to quake and falter. The scions of ancient banking families were said to be finding their smug selves wiped out by the streetwise know-how of some kid with a goatee; the arrogant stockbrokers of old were being humiliated by the e-trade masses; the WASPs with their regimental ties were getting their asses kicked by the women, the Asians, the Africans, the Hispanics; the buttoned-down whip-cracking bosses were being fired by the corporate “change agents”; the self-assured network figures were being reduced to tears by the Vox Populi of the web.

And when Al Gore began annoying the men of privilege with his recent attacks on big business, the paper responded in the most direct manner imaginable. “Mr. Bush should tell Americans,” online Journal executive James Taranto opined in an Op-Ed late last summer, “when my opponent attacks ‘big corporations,’ he’s attacking you and me.” Market populism can seem quite absurd at times. We are, after all, living through one of the least populist economic eras in the past hundred years. The “New Economy” has exalted the rich and forgotten about the rest with a decisiveness that we haven’t seen since the twenties. Its greatest achievement—the booming stock market of recent years—has been based in no small part on companies’ enhanced abilities to keep wages low even while CEO compensation soars to record levels. Market populism is, in many ways, the most blatant apologia for economic inequality since social Darwinism.


pages: 193 words: 98,671

The Inmates Are Running the Asylum by Alan Cooper

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Albert Einstein, delayed gratification, Donald Trump, Howard Rheingold, informal economy, iterative process, Jeff Bezos, Menlo Park, natural language processing, new economy, pets.com, Robert X Cringely, Silicon Valley, Silicon Valley startup, skunkworks, Steve Jobs, Steven Pinker, telemarketer, urban planning

During the last few years of the twentieth century, as the dot-com bubble inflated, truckloads of ink were used to sell the idea that there was a "new economy" on the Internet. The pundits said that selling things on the World Wide Web, where stores were made of clicks instead of bricks, was a fundamentally different way of doing business, and that the "old economy" was as good as dead. Of course, almost all of those new-economy companies are dead and gone, the venture capitalists who backed them are in shock, and the pundits who pitched the new economy have now recanted, claiming it was all a hopeless dream. The new, new thinking says we must still be in the old, old economy. Actually, I believe that we really are in a new economy. What's more, I think that the dot-coms never even participated in it. Instead, the dot-coms were the last gasp of the old economy: the economy of manufacturing.

Unfortunately, they have yet to address the new realities of the information age, in which products are no longer made from atoms but are mostly software, made only from the arrangements of bits. And bits don't follow the same economic rules that atoms do. Some fundamental truths hold for both the old and the new economies. The goal of all business is to make a sustainable profit, and there is only one legal way to do so: Sell some goods or services for more money than it costs you to make or acquire them. It follows that there are two ways to increase your profitability: Either reduce your costs or increase your revenues. In the old economy, reducing your costs worked best. In the new economy, increasing your revenue works much, much better. Today's most vital and expensive products are made largely or completely of software. They consume no raw materials. They have no manufacturing cost. They have no transportation cost.

When Pets.com sold dog food over the Internet, it didn't offer better dog food, and it didn't offer a customer experience better than you could get at the local brick-and-mortar pet store; it didn't offer any better information, intelligence, or confidence. All it offered was cheaper shipping, stocking, and selling— variable costs all—for Pets.com. It was a classic industrial-age-economy tactic of cost reduction that ignored the fundamental principles of the new economy. Far from being the first breath of a new economy, it was the last gasp of the old. I am absolutely convinced that you can sell anything on the Internet profitably and successfully. The trick is that your online store must offer a measurably greater degree of shopper satisfaction than any competing retail medium, and price is only one small component of satisfaction. There is only one way to accomplish this: You must architect your system to deliver the highest possible end-user satisfaction.


pages: 382 words: 92,138

The Entrepreneurial State: Debunking Public vs. Private Sector Myths by Mariana Mazzucato

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Apple II, banking crisis, barriers to entry, Bretton Woods, California gold rush, call centre, carbon footprint, Carmen Reinhart, cleantech, computer age, creative destruction, credit crunch, David Ricardo: comparative advantage, demand response, deskilling, endogenous growth, energy security, energy transition, eurozone crisis, everywhere but in the productivity statistics, Financial Instability Hypothesis, full employment, G4S, Growth in a Time of Debt, Hyman Minsky, incomplete markets, information retrieval, intangible asset, invisible hand, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, knowledge worker, natural language processing, new economy, offshore financial centre, Philip Mirowski, popular electronics, profit maximization, Ralph Nader, renewable energy credits, rent-seeking, ride hailing / ride sharing, risk tolerance, shareholder value, Silicon Valley, Silicon Valley ideology, smart grid, Steve Jobs, Steve Wozniak, The Wealth of Nations by Adam Smith, Tim Cook: Apple, too big to fail, total factor productivity, trickle-down economics, Washington Consensus, William Shockley: the traitorous eight

And the point is that Apple understood this game: creatively pioneering the field of consumer electronic dreams by stepping up to the plate and playing off the positive externalities left behind by the government’s heavy hitters. But, today, it is companies like Apple who continue to ride the wave of success, keeping track on only one side of the scoreboard and rigging the end result to their advantage. Apple’s job-creation myth: Not all jobs are created equally Apple is not only a ‘new economy’ company in the sense of the type of technology and knowledge that it makes intense use of, but also in terms of its strategy with the labour market. In this respect, it is useful to first consider the difference between the New Economy Business Model (NEBM) and the Old Economy Business Model (OEBM), emphasized by Lazonick (2009). The latter dominated the US corporate environment from the immediate post–Second World War era until the 1980s, and was characterized by stable employment opportunities in hierarchical corporations, generous and equitable earnings, subsidized medical coverage and substantial defined-benefit pension schemes upon retirement (Lazonick 2009, 2).

Patrick 97 Medical Research Council (MRC) 20, 67 Merrick, Sarah 125 meso perspective 36 micro–macro connection 31–2 microprocessors 109 Ministry for Research and Technology (Germany) 149 Ministry of International Trade and Industry (MITI) 37–8, 40; see also Japan Minsky, Hyman 32n3 Minuteman II missile programme 98 Miranda, Javier 45 Mirowski, Philip 49 MIT 24, 178, 178n6 Mitterrand, François 57 Motoyama, Yasuyuki 83–4, 85 Mowery, David C. 61–2 multi-touch screens 102 myths: about business investment requirements 53–5; about entrepreneurship and innovation 22; about innovation and growth 10; of Europe’s problem being commercialization 48, 52–3; government captured by 19; of innovation being about R&D 44, 159–60; of knowledge economy and patents 50–52; of market as self-regulating 30, 195; of small is beautiful 45–7, 142, 160–61; of venture capital as risk loving 47–50, 142 Nanda, Ramana 127 NASDAQ 50 National Academy of Sciences (NAS) (US) 176 National Aeronautics and Space Agency (NASA) (US) 98, 145, 150 National Endowment for Science, Technology and the Arts (NESTA) (UK) 45 National Fabricated Products 150n4 National Institute of Standards and Technology (NIST) (US) 107, 108 National Institutes of Health (NIH) (US): applied research by 136; budgets of 1938–2011 69, 70; creating the wave vs. surfing it 68–71; knowledge base funded by 8; NMEs based on research of 66; spending 25; Taxol royalties 188 ‘national market’ 195 National Nanotechnology Initiative (NNI) (US) 84–6 National Organization for Rare Disorders 82 National Renewable Energy Laboratory (NREL) 151 National Science Foundation (US) 20, 84, 85, 104, 108, 166 National Systems of Innovation perspective 42 NAVSTAR GPS system 105, 109 Nelson, Richard 193 neoclassical economics 33, 186 Netherlands 51, 54 networks: DARPA’s development of 77, 83; innovation 36, 40, 74; linkages of 39; in nontechnologies 83–4; SBIR building of 79, 83; science—industry links 193 New Deal 74 New Economy Business Model (NEBM) 168–9, 172, 177; see also Old Economy Business Model (OEBM) ‘new growth’ theory 34–6, 44, 59–60 new investment in renewable energy 120, 121 Nielsen, Kristian H. 145 Nokia 190 ‘No More Solyndra’s Act’ 130–31n12 Norway 120n4, 121 Novartis 81 Noyce, Robert 98 OECD, GERD (gross domestic expenditure on R&D) as a percentage of GDP in 43 Office of Science and Technology Policy (OSTP) (US) 109 oil company role in solar power 161n8 Old Economy Business Model (OEBM) 168–9, 177; see also New Economy Business Model (NEBM) Organisation for Economic Cooperation and Development (OECD) 18 organizational change 197 Orphan Drug Act (ODA) of 1983 81–2 Osborne, George 51 outsourcing 16, 108 Pacific Solar 152 Parker, Rachel 83–5 Parris, Stuart 44 patents: First Solar’s 151; focus on venture capital and 49; GE’s lead in 148; in knowledge economy 10; myth of knowledge economy and 50–52; ‘patent box’ policy 51–2; pharmaceutical 66; potential government retention of 189; success of as measure of innovation performance 34, 41 Perez, Carlota 117 Perkins, Thomas 57 Pfizer 8, 26, 69, 82 pharmaceutical companies (‘pharma’): funding development of 10, 17, 24; growth from R&D in 44; radical vs.

Highlighting the active role that the State has played in the ‘hotbeds’ of innovation and entrepreneurship – like Silicon Valley – was the key to showing that the State can not only facilitate the knowledge economy, but actively create it with a bold vision and targeted investment. This expanded version of the DEMOS report (more than double its size) builds on that initial research and pushes it harder, drawing out further implications at the firm and sectoral level. Chapter 5, dedicated entirely to Apple, looks at the whole span of State support that this leading ‘new economy’ company has received. After looking at the role of the State in making the most courageous investments behind the Internet and IT revolution, Chapters 6 and 7 look at the next big thing: ‘green’ technology. Unsurprisingly we find that across the globe the countries leading in the green revolution (solar and wind energy are the paradigmatic examples explored) are those where the State is playing an active role beyond that which is typically attributed to market failure theory.


pages: 159 words: 45,073

GDP: A Brief but Affectionate History by Diane Coyle

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Asian financial crisis, Berlin Wall, big-box store, Bretton Woods, BRICs, clean water, computer age, conceptual framework, crowdsourcing, Diane Coyle, double entry bookkeeping, en.wikipedia.org, endogenous growth, Erik Brynjolfsson, Fall of the Berlin Wall, falling living standards, financial intermediation, global supply chain, happiness index / gross national happiness, income inequality, income per capita, informal economy, John von Neumann, Kevin Kelly, Long Term Capital Management, mutually assured destruction, Nathan Meyer Rothschild: antibiotics, new economy, Occupy movement, purchasing power parity, Robert Shiller, Robert Shiller, Ronald Reagan, shareholder value, Silicon Valley, Simon Kuznets, The Wealth of Nations by Adam Smith, Thorstein Veblen, University of East Anglia, working-age population

“This is for everyone,” as he put it.3 The Web started to get ordinary users online in the mid-1990s, and twenty years later being online is almost ubiquitous in developed countries and spreading rapidly in developing countries. This latter trend is thanks in large part to mobile telephones and smartphones. Because separately, telecommunications technology has been revolutionized by a sequence of innovations such as fiber-optic cables, and in particular mobile telephony and other wireless communications. This epoch of the information and communications revolution has spanned forty years. THE NEW ECONOMY BOOM It was obvious by the mid-1980s that a lot of businesses were buying and using computers, but what effect this was having on the economy was not at all apparent. Robert Solow wrote a frequently quoted New York Times Book Review article in 1987 claiming, “You can see the computer age everywhere but the productivity statistics.”4 In fact, it took the convergence of a number of separate streams of technological innovation, plus the investment in new computer and communications equipment, plus the reorganization of businesses to use these new tools, before any benefit in terms of productivity or GDP could occur.

The average growth of productivity in the United States climbed from an annual average of 1.38 percent in 1972–1996 to 2.46 percent in 1996–2004.7 Estimates for the potential U.S. growth rate rose dramatically from less than 2 percent a year to more than 3 percent a year according to the most optimistic views. In case this change sounds small, remember the power of compound arithmetic, this time operating favorably: at 2 percent a year, GDP will double after thirty-five years; at 3 percent a year after only twenty-four years. The new technologies were shaping up to outdo the Golden Age of the immediate postwar years if this continued. Suddenly, everyone was talking about the New Economy or the New Paradigm. The new technologies seemed to have made possible a lasting increase in the productivity of the economy. Prominent among the enthusiasts was Alan Greenspan, then the long-serving chairman of the Federal Reserve Board. His judgment about the economy’s potential growth rate was crucial because it was his job to use interest rates and monetary policy to choke off growth in demand that would prove inflationary.

In his memoir The Age of Turbulence, Greenspan describes his first discussion in 1995 with his Fed colleagues of the possibility of a “paradigm change” in the economy: “I’ve been looking at business cycles since the late 1940s. There has been nothing like this,” he told them. “The depth and persistence of such technological changes appear only once every fifty or one hundred years.”8 He was right—and then he was wrong. From today’s side of the financial crisis, the New Economy hype looks almost delusional. In the United States and elsewhere, GDP has been growing slowly, if at all, for five years (as I write this) and the rate of growth of productivity has slowed correspondingly. For a decade from the mid-nineties to the mid-noughties, though, all the evidence was stacking up in favor of a lasting change for the better in the economy, even looking at the published statistics for GDP.


pages: 372 words: 107,587

The End of Growth: Adapting to Our New Economic Reality by Richard Heinberg

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3D printing, agricultural Revolution, back-to-the-land, banking crisis, banks create money, Bretton Woods, carbon footprint, Carmen Reinhart, clean water, cloud computing, collateralized debt obligation, computerized trading, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, David Graeber, David Ricardo: comparative advantage, dematerialisation, demographic dividend, Deng Xiaoping, Elliott wave, en.wikipedia.org, energy transition, falling living standards, financial deregulation, financial innovation, Fractional reserve banking, full employment, Gini coefficient, global village, happiness index / gross national happiness, I think there is a world market for maybe five computers, income inequality, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Isaac Newton, Kenneth Rogoff, late fees, liberal capitalism, mega-rich, money market fund, money: store of value / unit of account / medium of exchange, mortgage debt, naked short selling, Naomi Klein, Negawatt, new economy, Nixon shock, offshore financial centre, oil shale / tar sands, oil shock, peak oil, Ponzi scheme, post-oil, price stability, private military company, quantitative easing, reserve currency, ride hailing / ride sharing, Ronald Reagan, short selling, special drawing rights, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, too big to fail, trade liberalization, tulip mania, working poor, zero-sum game

Fundamentally new technologies, products, and trends in business (as opposed to minor tweaks in existing ones) tend to develop at a slow pace. “Many of the big, resource-consuming trends of the near past are soon coming to an end in terms of their ability to attract investment and cover the cost of resources for development, production, and implementation.” Back in the late 1990s business was buzzing with talk of a “new economy” based on e-commerce. Internet start-up companies attracted enormous amounts of investment capital and experienced rapid growth. But while e-commerce flourished, many expectations about profit opportunities and rates of growth proved unrealistic. Automation has reached the point where most businesses need dramatically fewer employees. “Presumably, this should make companies more profitable and increase their willingness to invest in new products and services,” writes Larsson.

At some point in the next few years, stock and real estate values will plunge, banks will close, and businesses will shutter their doors. Monetary, financial, and social systems built upon the expectation of growth will simply fail in growth’s absence. In the worst instance, that failure could take the form of a nearly complete cessation of trade, as occurred nationally in Argentina in December, 2001. Some sort of new economy would inevitably emerge from the wreckage, but in scale and scope it would be a shadow of the one we knew just a few years ago. Measured in GDP, it might correspond to the world economy of fifty, a hundred, or even a hundred and fifty years ago. The pursuit of the ideals of fairness, openness, and freedom, and the fights against corruption, greed, and tyranny will of course continue, as they must, but these struggles will play out within the constraints of a shrinking economy.

Resolving the conflict entirely in favor of individuals is no solution if this results in a substantial reduction in the integrity of the social bonds the economy knits together: that is, if we are reduced to a random collection of seven billion humans, each scrambling for survival in the absence of functioning currencies and governments. In that case, the result would be universal chaos, confusion, and suffering. Somehow we have to prepare individually for the ending of growth (a process likely to be accompanied by economic and political upheavals) while at the same time preserving and building social cohesion and laying the groundwork for a new economy that can function in a post-growth, post-fossil fuel environment. It’s a tall order, but nothing less will do. Setting Priorities As someone who has for several years been speaking and writing about the consequences of impending energy scarcity, I’m often asked for personal advice. “Where should I live in order to avoid the worst impacts from Peak Oil?” “What career should I prepare myself for?”


pages: 181 words: 50,196

The Rich and the Rest of Us by Tavis Smiley

affirmative action, Affordable Care Act / Obamacare, back-to-the-land, Bernie Madoff, Bernie Sanders, Buckminster Fuller, Corrections Corporation of America, Credit Default Swap, death of newspapers, deindustrialization, ending welfare as we know it, F. W. de Klerk, fixed income, full employment, housing crisis, Howard Zinn, income inequality, job automation, liberation theology, Mahatma Gandhi, mass incarceration, mega-rich, new economy, obamacare, Occupy movement, Plutocrats, plutocrats, profit motive, Ralph Waldo Emerson, Ronald Reagan, shareholder value, Silicon Valley, Steve Jobs, traffic fines, trickle-down economics, War on Poverty, We are the 99%, white flight, women in the workforce, working poor

Poverty refused to discriminate on the basis of religious creed or ethnic identity.1 While many whom we met fit what some define as the “old poor” (people who were impoverished before the beginning of the “Great Recession” in late 2007), we were also gathered with shockingly large numbers of the “new poor”—citizens who were once bona fide members of America’s middle class, whose lives have been ravaged by the new economy’s middle class. They are the grandchildren and great grandchildren of a generation that embodied artist Norman Rockwell’s American Dream. They once possessed relatively predictable and reasonably comfortable lives until they were inexplicably cast into a maelstrom of economic dispossession and spiritual despair. When the bottom fell out of the American Dream, the formerly lower, middle, and upper-middle classes found themselves recast in the nightmares of the downtrodden.

Yet here we are, only two decades into a digital revolution that has impacted every aspect of American life. In a very real sense, no matter which recovery prognosticators you believe, now’s the time to hold the government accountable while simultaneously holding ourselves accountable as we regain the capacity to “do-for-self.” At the January 2012 symposium, Suze Orman emphasized “personal responsibility” and learning “how to make more out of less” as necessary strategies for survival in the new economy. “You need to know what to do with money, who to give it to, how to invest it in your retirement plans, and how to be able to take care of yourself in the future,” Orman cautioned. “Because my biggest fear is that they’re just going to keep pushing all of this down the road. You’re not going to have Medicare. You’re not going to have Social Security in the way that you think it’s going to be.

While 60 percent of the jobs lost during the economic downturn were in mid-wage occupations, 73 percent of the jobs added have been in lower-wage occupations such as cashiers, stock clerks, and food preparation workers. The Post Office, once a middle class safe haven for nonskilled workers, recently announced a downsizing plan that will eliminate 35,000 jobs. Where and how will those workers be absorbed in the new economy? 4. Minorities receive the majority of government entitlements. False: Nearly half (48.5 percent) of all Americans, live in a household that received some type of government benefit in the first quarter of 2010, according to Census data. Seventy percent of food stamp recipients are white. 5. No one goes hungry in America. False: According to Feeding America, 50 million Americans go to bed hungry and have no idea where their next meal will come from.

Deep Work: Rules for Focused Success in a Distracted World by Cal Newport

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8-hour work day, Albert Einstein, barriers to entry, business climate, Cal Newport, Capital in the Twenty-First Century by Thomas Piketty, Clayton Christensen, David Brooks, David Heinemeier Hansson, deliberate practice, Donald Knuth, Donald Trump, Downton Abbey, en.wikipedia.org, Erik Brynjolfsson, experimental subject, follow your passion, Frank Gehry, informal economy, information retrieval, Internet Archive, Jaron Lanier, knowledge worker, Mark Zuckerberg, Marshall McLuhan, Merlin Mann, Nate Silver, new economy, Nicholas Carr, popular electronics, remote working, Richard Feynman, Richard Feynman, Ruby on Rails, Silicon Valley, Silicon Valley startup, Snapchat, statistical model, the medium is the message, Watson beat the top human players on Jeopardy!, web application, winner-take-all economy, zero-sum game

(If I had such secrets, it’s unlikely I’d share them in a book.) The other two winning groups, however, are accessible. How to access them is the goal we tackle next. How to Become a Winner in the New Economy I just identified two groups that are poised to thrive and that I claim are accessible: those who can work creatively with intelligent machines and those who are stars in their field. What’s the secret to landing in these lucrative sectors of the widening digital divide? I argue that the following two core abilities are crucial. Two Core Abilities for Thriving in the New Economy 1. The ability to quickly master hard things. 2. The ability to produce at an elite level, in terms of both quality and speed. Let’s begin with the first ability. To start, we must remember that we’ve been spoiled by the intuitive and drop-dead-simple user experience of many consumer-facing technologies, like Twitter and the iPhone.

And when only a human will do, improvements in communications and collaboration technology are making remote work easier than ever before, motivating companies to outsource key roles to stars—leaving the local talent pool underemployed. This reality is not, however, universally grim. As Brynjolfsson and McAfee emphasize, this Great Restructuring is not driving down all jobs but is instead dividing them. Though an increasing number of people will lose in this new economy as their skill becomes automatable or easily outsourced, there are others who will not only survive, but thrive—becoming more valued (and therefore more rewarded) than before. Brynjolfsson and McAfee aren’t alone in proposing this bimodal trajectory for the economy. In 2013, for example, the George Mason economist Tyler Cowen published Average Is Over, a book that echoes this thesis of a digital division.

Nate Silver, of course, with his comfort in feeding data into large databases, then siphoning it out into his mysterious Monte Carlo simulations, is the epitome of the high-skilled worker. Intelligent machines are not an obstacle to Silver’s success, but instead provide its precondition. The Superstars The ace programmer David Heinemeier Hansson provides an example of the second group that Brynjolfsson and McAfee predict will thrive in our new economy: “superstars.” High-speed data networks and collaboration tools like e-mail and virtual meeting software have destroyed regionalism in many sectors of knowledge work. It no longer makes sense, for example, to hire a full-time programmer, put aside office space, and pay benefits, when you can instead pay one of the world’s best programmers, like Hansson, for just enough time to complete the project at hand.


pages: 840 words: 202,245

Age of Greed: The Triumph of Finance and the Decline of America, 1970 to the Present by Jeff Madrick

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accounting loophole / creative accounting, Asian financial crisis, bank run, Bretton Woods, capital controls, collapse of Lehman Brothers, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, desegregation, disintermediation, diversified portfolio, Donald Trump, financial deregulation, fixed income, floating exchange rates, Frederick Winslow Taylor, full employment, George Akerlof, Hyman Minsky, income inequality, index fund, inflation targeting, inventory management, invisible hand, John Meriwether, Kitchen Debate, laissez-faire capitalism, locking in a profit, Long Term Capital Management, market bubble, minimum wage unemployment, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, Myron Scholes, new economy, North Sea oil, Northern Rock, oil shock, Paul Samuelson, Philip Mirowski, price stability, quantitative easing, Ralph Nader, rent control, road to serfdom, Robert Bork, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, Ronald Reagan: Tear down this wall, shareholder value, short selling, Silicon Valley, Simon Kuznets, technology bubble, Telecommunications Act of 1996, The Chicago School, The Great Moderation, too big to fail, union organizing, V2 rocket, value at risk, Vanguard fund, War on Poverty, Washington Consensus, Y2K, Yom Kippur War

News & World Report, April 3, 2000. 12 “A NEW ERA ECONOMY”: Partnoy, Infectious Greed, p. 107. 13 YET THERE WERE MANY HISTORICAL ANALOGIES: See, for example, Murray N. Rothbard, The Panic of 1819 (New York: AMS, 1962). 14 THE ECONOMIST WROTE IN 1999: The Economist, September 29, 1991, quoted by Jeff Madrick, The Business Media and the New Economy, Joan Shorenstein Center, Harvard University, December 2001, p. 13. 15 AS LATE AS 2000: Peter Schwartz and Peter Leyden, “The Long Boom: A History of the Future, 1980–2020,” Wired, July 1997. 16 THERE WAS BROAD SUPPORT: “Question: Is There a New Economy?,” Speech by Alan Greenspan at the University of California, Berkeley, September 4, 1998. 17 THE MEDIA PAID GROWING ATTENTION: Madrick, The Business Media and the New Economy. 18 FORTUNE ANALYZED HOW JACK WELCH: Betsy Morris, “Tearing Up the Jack Welch Playbook,” Fortune, July 11, 2006. 19 CORPORATIONS WILL NORMALLY MINIMIZE: Alan Murray, “Inflated Profits in Corporate Books Is Half the Story,” Wall Street Journal, July 2, 2002, cited by Partnoy, Infectious Greed, p. 210. 20 THE SUPREME COURT RULED: Central Bank of Denver v.

Greenspan was convinced that computer technologies were at last taking hold across American business, meaning that the nation could get rising output per worker—more productivity—and pay substantial raises without raising prices. He became the leading government advocate of a New Economy. In fact, in 1997 the unemployment rate fell to 4.5 percent, far lower than economists—even Democratic economists—believed possible without stoking inflation. And long-term interest rates were falling sharply. From mid-1998 to the end of 1999, the Dow Jones Industrials rose roughly 4,000 points from about 7,500 to 11,500 on the conviction there was a New Economy, and the unemployment rate fell to nearly 4 percent without stimulating inflation. The extreme government deficits turned into sizable surpluses, as tax revenues rose with incomes and the capital gains taken on the rising stock market.

Such technological advances arrived every twenty to thirty years—the mass production surge of autos, washing machines, record players, and radios that accompanied the spread of electricity in the 1920s; the development of television, jet travel, plastic consumer products, computers, new drugs, and nuclear power in the 1950s and 1960s. The commercialization of radio in the 1920s and 1930s and television in the 1950s were every bit as rapid as the spread of the Internet. The financial media were swept up in the speculative fever. In 1996, references to the “New Economy” of the Internet were relatively few, but by 1997, these references grew rapidly and by 1998 they were ubiquitous. BusinessWeek, Fortune, and Forbes were all advocates. The Economist wrote in 1999 that “this is not just a matter of accumulating extra capital. The new economy is about the specific potential to change the way businesses work and thereby yield a quantum shift in productivity.” The increase in the rate of productivity growth rose almost to the rates reached in the 1950s and 1960s, but any “quantum” shift remained starry-eyed myth.


pages: 741 words: 179,454

Extreme Money: Masters of the Universe and the Cult of Risk by Satyajit Das

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affirmative action, Albert Einstein, algorithmic trading, Andy Kessler, Asian financial crisis, asset allocation, asset-backed security, bank run, banking crisis, banks create money, Basel III, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Black Swan, Bonfire of the Vanities, bonus culture, Bretton Woods, BRICs, British Empire, capital asset pricing model, Carmen Reinhart, carried interest, Celtic Tiger, clean water, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, corporate raider, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Daniel Kahneman / Amos Tversky, debt deflation, Deng Xiaoping, deskilling, discrete time, diversification, diversified portfolio, Doomsday Clock, Edward Thorp, Emanuel Derman, en.wikipedia.org, Eugene Fama: efficient market hypothesis, eurozone crisis, Fall of the Berlin Wall, financial independence, financial innovation, financial thriller, fixed income, full employment, global reserve currency, Goldman Sachs: Vampire Squid, Gordon Gekko, greed is good, happiness index / gross national happiness, haute cuisine, high net worth, Hyman Minsky, index fund, information asymmetry, interest rate swap, invention of the wheel, invisible hand, Isaac Newton, job automation, Johann Wolfgang von Goethe, John Meriwether, joint-stock company, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, Kevin Kelly, labour market flexibility, laissez-faire capitalism, load shedding, locking in a profit, Long Term Capital Management, Louis Bachelier, margin call, market bubble, market fundamentalism, Marshall McLuhan, Martin Wolf, mega-rich, merger arbitrage, Mikhail Gorbachev, Milgram experiment, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, mortgage tax deduction, mutually assured destruction, Myron Scholes, Naomi Klein, negative equity, Network effects, new economy, Nick Leeson, Nixon shock, Northern Rock, nuclear winter, oil shock, Own Your Own Home, Paul Samuelson, pets.com, Philip Mirowski, Plutocrats, plutocrats, Ponzi scheme, price anchoring, price stability, profit maximization, quantitative easing, quantitative trading / quantitative finance, Ralph Nader, RAND corporation, random walk, Ray Kurzweil, regulatory arbitrage, rent control, rent-seeking, reserve currency, Richard Feynman, Richard Feynman, Richard Thaler, Right to Buy, risk-adjusted returns, risk/return, road to serfdom, Robert Shiller, Robert Shiller, Rod Stewart played at Stephen Schwarzman birthday party, rolodex, Ronald Reagan, Ronald Reagan: Tear down this wall, Satyajit Das, savings glut, shareholder value, Sharpe ratio, short selling, Silicon Valley, six sigma, Slavoj Žižek, South Sea Bubble, special economic zone, statistical model, Stephen Hawking, Steve Jobs, survivorship bias, The Chicago School, The Great Moderation, the market place, the medium is the message, The Myth of the Rational Market, The Nature of the Firm, the new new thing, The Predators' Ball, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, trickle-down economics, Turing test, Upton Sinclair, value at risk, Yogi Berra, zero-coupon bond, zero-sum game

Rather than making things, trained engineers joined banks to provide turbo-charged financial structures for companies. Until its spectacular implosion, Enron epitomized the new economy. Under Kenneth “Kenny Boy” Lay and Jeffrey Skilling, the merged Omaha-based InterNorth and Houston Natural Gas evolved from a natural gas producer and pipeline company into a trading company. Enteron, the original selected name of the merged firm, meant “intestine” in Greek and was hastily changed. Enron had “no meaning other than what we make it mean.”8 Enron’s center of gravity was its main trading floor in Houston, not its pipelines or natural gas operations. There was the old economy business—generating and distributing energy. Then there was the new economy business—trading energy and ultimately everything. Enron shifted from the low return and regulated business of managing physical assets to the higher return unregulated business of trading.

By 2008 $4–5 of debt was required to create $1 of growth, up from $1–2 needed 20 years earlier. In the frenzy of low interest rates and rising asset prices, collateral cover and ability to service the loans deteriorated, increasing debt levels to unsustainable levels. A perpetual motion machine indefinitely produces more energy than it consumes. The new economy was a perpetual growth machine, producing high rates of growth using debt. Perpetual motion is a Gedanken—thought experiment—designed to test a hypothesis. The new economy ultimately proved impossible to sustain. Sigmund Freud remarked that: Illusions commend themselves to us because they save us pain and allow us to enjoy pleasure instead. We must therefore accept it without complaint when they sometimes collide with a bit of reality against which they are dashed to pieces.10 The financial crisis was the reality on which the fake pleasure of the Great Moderation and the Goldilocks Economy was smashed.

It targeted new super-rich billionaires created by the oil and minerals boom of recent years in commodity-rich Kazakhstan. Kazkommertsbank, the second largest bank in Kazakhstan, planned to issue 1,000 cards, at a rate of about 30 a month, to VIP customers. Each card had an annual fee of $1,000 and a credit limit of $50,000, more than twice the limit on MasterCard platinum cards. The instant gratification provided by readily accessible money replaced restraint and deferred consumption. In the new economy, there were three kinds of people: the haves, the have-nots, and the have-not-paid-for-what-they-haves.7 Casino Banking Banks also began to trade financial instruments, taking the advice of Fear of Flying author Erica Jong: “If you don’t risk anything then you risk even more.” Initially, banks traded currencies and government bonds. Volatility of currencies increased following the collapse of the Bretton Woods agreement and the demise of the gold standard.


pages: 791 words: 85,159

Social Life of Information by John Seely Brown, Paul Duguid

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AltaVista, business process, Claude Shannon: information theory, computer age, cross-subsidies, disintermediation, double entry bookkeeping, Frank Gehry, frictionless, frictionless market, future of work, George Gilder, George Santayana, global village, Howard Rheingold, informal economy, information retrieval, invisible hand, Isaac Newton, John Markoff, Just-in-time delivery, Kenneth Arrow, Kevin Kelly, knowledge economy, knowledge worker, loose coupling, Marshall McLuhan, medical malpractice, moral hazard, Network effects, new economy, Productivity paradox, Robert Metcalfe, rolodex, Ronald Coase, shareholder value, Shoshana Zuboff, Silicon Valley, Steve Jobs, Superbowl ad, Ted Nelson, telepresence, the medium is the message, The Nature of the Firm, The Wealth of Nations by Adam Smith, Thomas Malthus, transaction costs, Turing test, Vannevar Bush, Y2K

Harmondsworth, Middlesex: Penguin Books. Jonkheer, Kees. 1999. "Intelligent Agents, Markets, and Competition: Consumers' Interests and Functionality of Destination Sites." First-Monday [Online] 4 (6). Available: http://firstmonday.org/issues/issue4_6/jonkheer/index.html [1999, July 21]. Kelly, Kevin. 1997. "New Rules for the New Economy." Wired [Online] 5.09 (September). Available: http://www.wired.com/wired/archive/5.09/newrules.html [1999, July 21]. . 1998. "New Economy? What New Economy?" Wired [Online] 6.05 (May). Available: http://www.wired.com/wired/archive/6.05/Krugman.html [1999, July 21]. Kenney, Martin, and Urs von Burg. 1999. "Technology and Path Dependence: The Divergence between Silicon Valley and Route 128." Industrial and Corporate Change 8 (1): 67 103. Kogut, Bruce, Gordon Walker, and Dong-Jae Kim. 1995.

Anyone seeking to shape our new world by harnessing the power of information technology should read this book." JOHN HAGEL, Partner, McKinsey & Company, and Author of Net Worth "Despite all predictions that the information revolution will bring us a bloodless workplace of machines and Dilberts, Brown and Duguid show us that human interactions, human conversations, and human meaning will still form the beating heart of business. Wonderful! A necessary read for everyone interested in the new economy." W. BRIAN ARTHUR, Citibank Professor, Santa Fe Institute "In The Social Life of Information, Brown and Duguid help people throughout business, academia, government, and society at large to better understand that information technology can have an appropriate and positive impact only if we design technology and social systems holistically. This is a book that I have long awaited, and that should be required reading for the information technology system researchers and designers, managers, policy makers, and executives in every information-intensive organization."

Indeed, many shifts that the 6-Ds reveal are not the first step in Page 23 an unresisting downward spiral from complex to simple. Rather, they are parts of profound and often dramatic shifts in society's dynamic equilibrium, taking society from one kind of complex arrangement to another, as a quick review of a few Ds will suggest. Dimensions of the Ds Much talk about disaggregation and demassification readily assumes that the new economy will be a place of ever-smaller firms, light, agile, and unencumbered. It was once commonplace, for example, to compare the old Goliath, GM, against the new David, Microsoft. As Microsoft's market capitalization passed GM's, the latter had some 600,000 employees and the former barely 25,000. The difference is stark. Not, though, stark enough to step from here to what the business writers Larry Downes and Chunka Mui call the "Law of Diminishing Firms."


pages: 385 words: 101,761

Creative Intelligence: Harnessing the Power to Create, Connect, and Inspire by Bruce Nussbaum

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3D printing, Airbnb, Albert Einstein, Berlin Wall, Black Swan, Chuck Templeton: OpenTable, clean water, collapse of Lehman Brothers, creative destruction, Credit Default Swap, crony capitalism, crowdsourcing, Danny Hillis, declining real wages, demographic dividend, Elon Musk, en.wikipedia.org, Eugene Fama: efficient market hypothesis, Fall of the Berlin Wall, follow your passion, game design, housing crisis, Hyman Minsky, industrial robot, invisible hand, James Dyson, Jane Jacobs, Jeff Bezos, jimmy wales, John Gruber, John Markoff, Joseph Schumpeter, Kickstarter, lone genius, manufacturing employment, Marc Andreessen, Mark Zuckerberg, Martin Wolf, new economy, Paul Graham, Peter Thiel, QR code, race to the bottom, reshoring, Richard Florida, Ronald Reagan, shareholder value, Silicon Valley, Silicon Valley ideology, Silicon Valley startup, six sigma, Skype, Steve Ballmer, Steve Jobs, Steve Wozniak, supply-chain management, Tesla Model S, The Chicago School, The Design of Experiments, the High Line, The Myth of the Rational Market, thinkpad, Tim Cook: Apple, too big to fail, tulip mania, We are the 99%, Y Combinator, young professional, Zipcar

Top bankers received astonishing salaries—the brightest grads from Ivy League universities saw salaries starting at $200,000 to $300,000 plus a fat annual bonus several times that—to use their understanding of mathematical models to create esoteric financial instruments that sliced and diced mortgages and other kinds of debt. So complex were the models created by the Wizards of Wall Street that few bank CEOs actually knew what they really were or, more important, how much they were worth. We all know how that turned out. It wasn’t supposed to be like this. Placing our trust in the experts in finance and trading was, we were all told, a crucial part of the New Economy. When BusinessWeek ran a cover on the New Economy in 2000, it was a celebration of technology, finance, strategy, consulting, sales, service, and experience. The message was that we should ship all our manufacturing overseas and concentrate on higher-level, value-added information activities. Using your head, not your hands, was considered a higher evolutionary state of economic—and social—affairs. It paid more and you “didn’t have to get your hands dirty.”

Only when both the manufacturing sector and the service sector began to bleed jobs did blue- and white-collar interests find common cause. As Americans began to feel the effects of the Great Recession, it became clear that the economic benefits of the New Economy disproportionately went to a tiny elite, while the vast middle class saw immiseration and downward mobility. We witnessed an inequality gap that hadn’t been as wide since the 1920s and the Great Depression. The Occupy Wall Street movement, with its rallying cry “We are the 99 percent,” crystallized the sense that something needed to change. You knew something fundamental was about to change when both the Tea Party and Occupy Wall Street found a common enemy, publicly blaming “Crony Capitalism” for destroying the American Dream. Even while the New Economy was at its peak, alternative ways of thinking and doing had begun springing up around the nation. Alice Waters’s groundbreaking organic restaurant Chez Panisse served as inspiration for a local food movement, which, four decades later, has gone truly global.

In a 2010 interview with Martin Wolf, the economics correspondent for the Financial Times, Lawrence Summers, former Treasury Secretary under President Clinton and ex-assistant for economic policy for Barack Obama, grudgingly admitted he was surprised at the failure of efficient markets in the crisis. Summers was, after all, a chief architect of the deregulation that helped provoke the financial crash in 2007. In 1999, Summers, along with Treasury Secretary and ex-Goldman Sachs co-CEO Robert Rubin, did away with Glass-Steagall, the Depression-era regulation of the financial markets, calling the repeal “historic legislation” that will “better enable American companies to compete in the new economy.” Perhaps no one believed more in the rationality and efficiency of markets than the former chairman of the Federal Reserve. But in October 2008, Greenspan told a congressional committee that he had put too much faith in the self-correcting powers of the markets. “Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself included, are in a state of shocked disbelief,” he told the House Committee on Oversight and Government Reform, as reported in the New York Times.


pages: 370 words: 102,823

Rethinking Capitalism: Economics and Policy for Sustainable and Inclusive Growth by Michael Jacobs, Mariana Mazzucato

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3D printing, balance sheet recession, banking crisis, basic income, Bernie Sanders, Bretton Woods, business climate, Carmen Reinhart, central bank independence, collaborative economy, complexity theory, conceptual framework, corporate governance, corporate social responsibility, creative destruction, credit crunch, Credit Default Swap, crony capitalism, David Ricardo: comparative advantage, decarbonisation, deindustrialization, dematerialisation, Detroit bankruptcy, double entry bookkeeping, Elon Musk, endogenous growth, energy security, eurozone crisis, factory automation, facts on the ground, fiat currency, Financial Instability Hypothesis, financial intermediation, forward guidance, full employment, G4S, Gini coefficient, Growth in a Time of Debt, Hyman Minsky, income inequality, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), Internet of things, investor state dispute settlement, invisible hand, Isaac Newton, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, labour market flexibility, low skilled workers, Martin Wolf, mass incarceration, Mont Pelerin Society, neoliberal agenda, Network effects, new economy, non-tariff barriers, paradox of thrift, Paul Samuelson, price stability, private sector deleveraging, quantitative easing, QWERTY keyboard, railway mania, rent-seeking, road to serfdom, savings glut, Second Machine Age, secular stagnation, shareholder value, sharing economy, Silicon Valley, Steve Jobs, the built environment, The Great Moderation, The Spirit Level, Thorstein Veblen, too big to fail, total factor productivity, transaction costs, trickle-down economics, universal basic income, very high income

This development forced major US semiconductor companies to retreat from this segment of the market, with Intel facing the possibility of bankruptcy in the process.31 However, led by Intel with its microprocessor for the IBM PC and its clones, US companies became world leaders in chip design. Indeed, the IBM PC, with its open-systems architecture, was the basis for the rise of a ‘New Economy business model’ that has dramatically altered the conditions of innovative enterprise. As I have detailed in a number of studies, the principles of strategic control, organisational integration and financial commitment remained central to the success of companies that pioneered or adopted the New Economic business model.32 At the same time, however, innovative New Economy companies could eschew investment in integrated skill bases that were as deep and broad as those under the ‘Old Economy’ business model, because of the availability of accumulated knowledge from the research labs of the Old Economy corporations upon which these could draw.

William Lazonick is Professor of Economics at University of Massachusetts Lowell. He is co-founder and president of the Academic-Industry Research Network. Previously, he was Assistant and Associate Professor of Economics at Harvard University, Professor of Economics at Barnard College of Columbia University and Distinguished Research Professor at INSEAD. His book Sustainable Prosperity in the New Economy? Business Organization and High-Tech Employment in the United States (Upjohn Institute, 2009) won the 2010 Schumpeter Prize. His article, ‘Innovative Business Models and Varieties of Capitalism’ received the Henrietta Larson Award from Harvard Business School for best article in Business History Review in 2010. His article ‘Profits Without Prosperity: Stock Buybacks Manipulate the Market and Leave Most Americans Worse Off’ was awarded the HBR McKinsey Award for outstanding article in Harvard Business Review in 2014.

They are not; they are better at exploiting them. Successful start-ups almost always begin with an idea that has ripened in the research organisation of a large company. Lose the large companies, or research organisations of large companies, and start-ups disappear.33 While, some two decades after Moore made this statement, technology start-ups have yet to disappear, there is no doubt that the New Economy business model has been far better at commercialising existing technologies than developing new ones. Increasingly, moreover, US corporate executives look to the government to provide them with the new technologies that they need,34 even as these executives have turned toward enriching themselves by boosting their companies’ stock prices and with them their stock-based pay.35 Elsewhere I have analysed in detail the shift of US industrial corporations from a ‘retain-and-reinvest’ resource-allocation regime, under which corporate revenues and personnel are retained and re-invested in innovative capabilities, to a ‘downsize-and-distribute’ allocation regime in which these companies downsize their experienced labour forces and distribute corporate cash to shareholders in the name of ‘maximising shareholder value’.


pages: 452 words: 110,488

The Cheating Culture: Why More Americans Are Doing Wrong to Get Ahead by David Callahan

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1960s counterculture, affirmative action, corporate governance, corporate raider, creative destruction, David Brooks, deindustrialization, East Village, fixed income, forensic accounting, full employment, game design, greed is good, high batting average, housing crisis, illegal immigration, income inequality, job satisfaction, mandatory minimum, market fundamentalism, McMansion, microcredit, moral hazard, new economy, New Urbanism, offshore financial centre, oil shock, old-boy network, Plutocrats, plutocrats, postindustrial economy, profit maximization, profit motive, RAND corporation, Ray Oldenburg, Robert Bork, rolodex, Ronald Reagan, shareholder value, Shoshana Zuboff, Silicon Valley, Steve Jobs, The Bell Curve by Richard Herrnstein and Charles Murray, The Chicago School, Thorstein Veblen, War on Poverty, winner-take-all economy, World Values Survey, young professional, zero-sum game

When the stock did, in fact, hit that level a month later, Blodget was hailed as an oracle. Shortly thereafter he moved to Merrill Lynch with a $3 million contract. There, he reigned as the single most visible adviser to investors hoping to score big in the Internet gold rush. Blond and affable, with telegenic good looks, Blodget was everywhere with his stock predictions as well as broader prognostications about the new economy. What Blodget didn't mention to CNBC junkies or Merrill Lynch's own clients was that his role at Merrill went far beyond analyzing stocks. Like other star analysts of the time, he also became deeply involved in Merrill's investment banking business, helping to bring Internet companies— and fat underwriting fees—to Merrill. One of the companies Merrill's investment banking division represented was Go2Net, a company that InfoSpace was in the process of purchasing in 2000.

He spent his days working on a book for Random House and meeting regularly with lawyers. In 2003, Blodget settled with Spitzer's office, agreeing to pay a $4 million penalty—yet admitting no wrongdoing. The settlement was easy enough to afford. Blodget had pulled in nearly $20 million during his brief star turn at Merrill. HENRY BLODGET and the ATM looters have nothing in common and much in common. Blodget was among the ranks of the big winners in the new economy—the very top earners who saw unprecedented income gains during the boom of the 1990s. His education and background had helped him to secure his place in the Winning Class: successful parents, private schools, Yale University, connections on Wall Street. The ATM looters, by contrast, were among the far larger ranks of Americans who had either stayed put economically or realized only modest gains during the boom years.

The creation of this mass upper middle class is a historic accomplishment on par with the creation of the mass middle class after World War II. Yet this gain has come at a significant cost. The vast gulf between the top tiers of American earners and everyone else is the most obvious of these costs. How big is this gulf? Very big. To get a sense of these gaps, stick around the Banana Republic store. The people working the cash register and sales floor are typical of the losers in the new economy. Most of them are young entry-level workers without college degrees. As unskilled entry-level workers, these salespeople are doing terribly, in historical terms, and may well be making less money than their parents. If they're making the minimum wage, they're earning a wage that has decreased in constant dollars by over 20 percent since 1979. If they're making more than the minimum wage, they're still not doing well.


pages: 375 words: 88,306

The Sharing Economy: The End of Employment and the Rise of Crowd-Based Capitalism by Arun Sundararajan

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3D printing, additive manufacturing, Airbnb, Amazon Mechanical Turk, autonomous vehicles, barriers to entry, basic income, bitcoin, blockchain, Burning Man, call centre, collaborative consumption, collaborative economy, collective bargaining, commoditize, corporate social responsibility, cryptocurrency, David Graeber, distributed ledger, employer provided health coverage, Erik Brynjolfsson, ethereum blockchain, Frank Levy and Richard Murnane: The New Division of Labor, future of work, George Akerlof, gig economy, housing crisis, Howard Rheingold, information asymmetry, Internet of things, inventory management, invisible hand, job automation, job-hopping, Kickstarter, knowledge worker, Kula ring, Lyft, Marc Andreessen, megacity, minimum wage unemployment, moral hazard, moral panic, Network effects, new economy, Oculus Rift, pattern recognition, peer-to-peer, peer-to-peer lending, peer-to-peer model, peer-to-peer rental, profit motive, purchasing power parity, race to the bottom, recommendation engine, regulatory arbitrage, rent control, Richard Florida, ride hailing / ride sharing, Robert Gordon, Ronald Coase, Second Machine Age, self-driving car, sharing economy, Silicon Valley, smart contracts, Snapchat, social software, supply-chain management, TaskRabbit, The Nature of the Firm, total factor productivity, transaction costs, transportation-network company, two-sided market, Uber and Lyft, Uber for X, universal basic income, Zipcar

Madison: University of Wisconsin Center for Cooperatives. http://reic.uwcc.wisc.edu/sites/all/REIC_FINAL.pdf. 27. See the SELC website at http://www.theselc.org/. 28. See an introduction to Rustrum’s Digital-Cooperative 101 at http://rustrum.com/digital-cooperative-101/. 29. See, for example, Nathan Schneider and Trebor Scholz, “The Internet Needs a New Economy,” November 8, 2015. http://www.thenextsystem.org/the-internet-needs-a-new-economy/. Their concurrent thinking from late 2014 is also interesting, for example, by Scholz, “Platform Cooperativism vs. the Sharing Economy,” Medium, December 5, 2014 (https://medium.com/@trebors/platform-cooperativism-vs-the-sharing-economy-2ea737f1b5ad#.v78qh7ewj) and by Schneider, “Owning Is the New Sharing,” Shareable, December 21, 2014 (http://www.shareable.net/blog/owning-is-the-new-sharing). 30.

So, for example, the buyer and seller could resolve their dispute themselves.) There’s a rating system to help choose sellers, buyers, and notaries. It’s a little different from what’s used in a centralized marketplace, and is not completely immune to manipulation.10 There is a more sophisticated class of contracts (called smart contracts) emerging for blockchain-based transactions. In Blockchain: Blueprint for a New Economy, Melanie Swan explains that while a traditional contract is an agreement between two or more parties to do something, in the case of a smart contract, the same terms exist, but with one exception—trust that comes from having a third-party is less important.11 This is because the smart contract protocol can specify, as computer code, terms under which certain obligations are fulfilled, and can execute actions like sending a payment or deactivating a file once there is evidence of the contract’s terms being fulfilled.

It is very computationally intensive to actually find this nonce-identifier combination, but once the combination has been found, it is very easy to verify that the combination satisfies the mathematical property. 9. Albert Wenger, “Bitcoin as Protocol,” USV Blog, October 31, 2013. https://www.usv.com/blog/bitcoin-as-protocol. 10. Dionysis Zindros, “A Pseudonymous Trust System for a Decentralized Anonymous Marketplace,” GitHub Gist, 2015, https://gist.github.com/dionyziz/e3b296861175e0ebea4b. 11. Melanie Swan, Blockchain: Blueprint for a New Economy (Sebastopol, CA: O’Reilly Media, Inc., 2015). 12. Primavera De Fillipi, “Ethereum: Freenet or Skynet?,” Talk presented at the Berkman Center for Internet & Society, Harvard University, Cambridge, MA, April 15, 2014. 13. Lawrence Lessig, Code and Other Laws of Cyberspace (New York: Basic Books, 1999). 14. Vitalik Buterin, “Decentralized Protocol Monetization and Forks,” Ethereum Blog, April 30, 2014. https://blog.ethereum.org/2014/04/30/decentralized-protocol-monetization-and-forks. 15.


pages: 283 words: 85,824

The People's Platform: Taking Back Power and Culture in the Digital Age by Astra Taylor

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A Declaration of the Independence of Cyberspace, American Legislative Exchange Council, Andrew Keen, barriers to entry, Berlin Wall, big-box store, Brewster Kahle, citizen journalism, cloud computing, collateralized debt obligation, Community Supported Agriculture, conceptual framework, corporate social responsibility, creative destruction, cross-subsidies, crowdsourcing, David Brooks, digital Maoism, disintermediation, don't be evil, Donald Trump, Edward Snowden, Fall of the Berlin Wall, Filter Bubble, future of journalism, George Gilder, Google Chrome, Google Glasses, hive mind, income inequality, informal economy, Internet Archive, Internet of things, invisible hand, Jane Jacobs, Jaron Lanier, Jeff Bezos, job automation, John Markoff, Julian Assange, Kevin Kelly, Kickstarter, knowledge worker, Mark Zuckerberg, means of production, Metcalfe’s law, Naomi Klein, Narrative Science, Network effects, new economy, New Journalism, New Urbanism, Nicholas Carr, oil rush, peer-to-peer, Peter Thiel, Plutocrats, plutocrats, pre–internet, profit motive, recommendation engine, Richard Florida, Richard Stallman, self-driving car, shareholder value, sharing economy, Silicon Valley, Silicon Valley ideology, slashdot, Slavoj Žižek, Snapchat, social graph, Steve Jobs, Stewart Brand, technoutopianism, trade route, Whole Earth Catalog, WikiLeaks, winner-take-all economy, Works Progress Administration, young professional

(Income polarization was actually increasing at the time, the already affluent becoming ever more so while wages for most U.S. workers stagnated at levels below 1970s standards.)3 The wonders of computing meant skyrocketing productivity, plentiful jobs, and the end of recessions. The combination of the Internet and IPOs (initial public offerings) had flattened hierarchies, computer programming jobs were reconceived as hip, and information was officially more important than matter (bits, boosters liked to say, had triumphed over atoms). A new economy was upon us. Despite the hype, the new economy was never that novel. With some exceptions, the Internet companies that fueled the late nineties fervor were mostly about taking material from the off-line world and simply posting it online or buying and selling rather ordinary goods, like pet food or diapers, and prompting Internet users to behave like conventional customers. Due to changes in law and growing public enthusiasm for high-risk investing, the amount of money available to venture capital funds ballooned from $12 billion in 1996 to $106 billion in 2000, leading many doomed ideas to be propped up by speculative backing.

Rebecca Solnit wrote movingly of the negative consequences of the first dot-com boom on San Francisco in her book Hollow City: Gentrification and the Eviction of Urban Culture (New York: Verso, 2001) and has written similarly astute observations on the effects of the latest boom on the community. Rebecca Solnit, “Google Invades,” London Review of Books 35, no. 3 (February 7, 2013). 2. Doug Henwood, After the New Economy (New York: The New Press, 2003), 1. 3. Alan Greenspan, “The American Economy in a World Context,” 35th Annual Conference on Bank Structure and Competition of the Federal Reserve Bank of Chicago, Chicago, May 16, 1999; Henwood, After the New Economy, 79 and 86. 4. Ibid., 201 and 217. 5. Tom Rosenstiel, “Five Myths About the Future of Journalism,” Washington Post, April 7, 2011. 6. Eli Pariser, The Filter Bubble: What the Internet Is Hiding from You (New York: Penguin Press, 2011), 49. 7. Lacy, Once You’re Lucky, Twice You’re Good, 92–93. 8.

Massive sums were committed to enterprises that replicated efforts: multiple sites specialized in selling toys or beauty supplies or home improvement products, and most of them flopped. Barring notable anomalies like Amazon and eBay, online shopping failed to meet inflated expectations. The Web was declared a wasteland and investments dried up, but not before many venture capitalists and executives profited handsomely, soaking up underwriting fees from IPOs or exercising their options before stocks went under.4 Although the new economy evaporated, the experience set the stage for a second bubble and cemented a relationship between technology and the market that shapes our digital lives to this day. As business and technology writer Sarah Lacy explains in her breathless account of Silicon Valley’s recent rebirth, Once You’re Lucky, Twice You’re Good, a few discerning entrepreneurs extracted a lesson from the bust that they applied to new endeavors with aplomb after the turn of the millennium: the heart of the Internet experience was not e-commerce but e-mail, that is to say, connecting and communicating with other people as opposed to consuming goods that could easily be bought at a store down the street.

Culture and Prosperity: The Truth About Markets - Why Some Nations Are Rich but Most Remain Poor by John Kay

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Albert Einstein, Asian financial crisis, Barry Marshall: ulcers, Berlin Wall, Big bang: deregulation of the City of London, California gold rush, complexity theory, computer age, constrained optimization, corporate governance, corporate social responsibility, correlation does not imply causation, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, Donald Trump, double entry bookkeeping, double helix, Edward Lloyd's coffeehouse, equity premium, Ernest Rutherford, European colonialism, experimental economics, Exxon Valdez, failed state, financial innovation, Francis Fukuyama: the end of history, George Akerlof, George Gilder, greed is good, Gunnar Myrdal, haute couture, illegal immigration, income inequality, industrial cluster, information asymmetry, intangible asset, invention of the telephone, invention of the wheel, invisible hand, John Meriwether, John Nash: game theory, John von Neumann, Kenneth Arrow, Kevin Kelly, knowledge economy, labour market flexibility, late capitalism, light touch regulation, Long Term Capital Management, loss aversion, Mahatma Gandhi, market bubble, market clearing, market fundamentalism, means of production, Menlo Park, Mikhail Gorbachev, money: store of value / unit of account / medium of exchange, moral hazard, Myron Scholes, Naomi Klein, Nash equilibrium, new economy, oil shale / tar sands, oil shock, Pareto efficiency, Paul Samuelson, pets.com, popular electronics, price discrimination, price mechanism, prisoner's dilemma, profit maximization, purchasing power parity, QWERTY keyboard, Ralph Nader, RAND corporation, random walk, rent-seeking, Right to Buy, risk tolerance, road to serfdom, Ronald Coase, Ronald Reagan, second-price auction, shareholder value, Silicon Valley, Simon Kuznets, South Sea Bubble, Steve Jobs, telemarketer, The Chicago School, The Death and Life of Great American Cities, The Market for Lemons, The Nature of the Firm, the new new thing, The Predators' Ball, The Wealth of Nations by Adam Smith, Thorstein Veblen, total factor productivity, transaction costs, tulip mania, urban decay, Vilfredo Pareto, Washington Consensus, women in the workforce, yield curve, yield management

General Motors, which had for long defined and exemplified the modern corporation, came under acute pressure from the growth of global competi- {10} John Kay tion. General Electric, whose strategic planning systems had been the envy of other businesses, prospered through being quick to dismantle them. 2 European states and underdeveloped countries pursued policies of privatization and deregulation. The United States economy performed well in the 1990s. Business Week proclaimed the "new economy": technology had transformed America's long-term growth potential. With the aid of Blootnberg television, this strong economic performance was translated into an extraordinary stock market boom. In 1996, the chairman of the Federal Reserve Board, Alan Greenspan, warned of "irrational exuberance." As he spoke the valuation of stocks was at the highest level ever recorded in American history-surpassing the records of 1929.

But the measurement ofGDP and the framework of national income accounts should be seen primarily as a way of organizing the information we have about the national economy, rather than as an attempt to measure welfare. It is difficult to maintain this position because economic data is widely used in political debate. In the 1990s the Bureau of Economic Analysis, which compiles the U.S. national accounts, was under obvious pressure, particularly from Chairman Greenspan, to support the assertions then made about the "new economy." On the other side of the political fence, those who argue that GDP should account for environmental costs or unpaid work are more concerned to make environmental or feminist arguments than to enhance the integrity of national accounting frameworks. GDP and other economic measurements are likely to be of greatest use to a wide range of users if as far as is possible the measurement relates to issues of objective fact.

Diversity is itself an important feature of economic life. In the decade since the Cold War ended, admiring eyes have switched from Japan, whose own boom ended with its own bubble in the late 1980s, to Germany, whose successful social market economy struggled with the burden of reunification in the 1990s. Attention was diverted to the Asian tigers-Singapore, Korea, Hong Kong-but ended with the financial crisis of 1997. And since then America's New Economy has occupied center stage. In superficial economic commentary, trends of a few years or even months are projected into an indefinite future with the transience of designer fashions. The really important observation is that differences in economic performance and experience among rich states are small and temporary, while differences between rich and poor states are large and enduring. Any theory of the relative success and failure of economic systems must explain this central fact.


pages: 189 words: 64,571

The Cheapskate Next Door: The Surprising Secrets of Americans Living Happily Below Their Means by Jeff Yeager

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asset allocation, carbon footprint, delayed gratification, dumpster diving, index card, job satisfaction, late fees, mortgage debt, new economy, payday loans, Skype, upwardly mobile, Zipcar

It’s a whole new economy. Who would have thought a few years ago that Ken Lay’s Enron would begin to look like a model for good corporate management? That during the Christmas shopping season of 2008, I would swear I saw then–U.S. Treasury Secretary Henry Paulson in my local dollar store? I was shocked to discover that Cabinet members are apparently allowed to moonlight. Everything has changed in this new economy, even our language. Marketers invented the term “under-buyers” to refer to those people who are now spending less—either less than they did before or less than they can afford. I guess they thought the word “cheapskate” would hurt people’s feelings. Yes, when it comes to the economy, we’ve come a long way, baby. And it’s all been downhill. Or has it? It’s a new economy now, and I believe it is inviting us to take a new approach to money, and to life.

I probably caught up to that standard just about the day it became obsolete and the bar was raised even higher. In fact, to be successful by that measure, I would have needed to earn more than double the $10,000 salary I received in my first nonprofit job … or else still be in the fourth grade. Fortunately, I’ve never had any interest in attending my class reunions. And so I’m somewhat reluctant to propose a new measure of personal financial success for this new economy we’re living in, knowing that it, too, can’t possibly apply to everyone. But the interesting thing about the new standard for success I’m proposing—spend less than your age—is that spending is nearly always more controllable than earning. This is a standard that a great many Americans should be able to achieve, because the vast majority of the time we control our spending. Even when we neglect it or try to abdicate our responsibility, those are choices, too.

Even the stoic Amish folks I spoke with had a spark of 120-volt envy in their eyes when I mentioned the Crock-Pot, saying with an audible sense of resignation (or so I thought) that they were perfectly content with their stovetop pressure cookers. Yep, if the status-appliance of the last decade was a $10,000 Viking gas range, then the good old-fashioned Crock-Pot (at about $30 new) is the kitchen appliance du jour for the new economy. It’s little wonder that the cheapskates next door are crazy for their Crock-Pots. Slow cookers are energy-sippers compared to most other cooking methods, even after taking into account the fact that it might take eight hours or even longer to cook a dish in a Crock-Pot. It uses just 100 watts of electricity, which means that if you use it once a week for eight hours at a time, it’ll cost you only about thirty cents a month in electricity.


pages: 283 words: 73,093

Social Democratic America by Lane Kenworthy

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affirmative action, Affordable Care Act / Obamacare, barriers to entry, basic income, Celtic Tiger, centre right, clean water, collective bargaining, corporate governance, David Brooks, desegregation, Edward Glaeser, endogenous growth, full employment, Gini coefficient, hiring and firing, Home mortgage interest deduction, illegal immigration, income inequality, invisible hand, Kenneth Arrow, labor-force participation, manufacturing employment, market bubble, minimum wage unemployment, new economy, postindustrial economy, purchasing power parity, race to the bottom, rent-seeking, rising living standards, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, school choice, shareholder value, sharing economy, Skype, Steve Jobs, too big to fail, Tyler Cowen: Great Stagnation, union organizing, universal basic income, War on Poverty, working poor, zero day

Domestic industries, such as restaurants and hotels, face more competitors too, as technological advances, falling construction and transportation costs, and deregulation have reduced barriers to entry. In addition, shareholders now want rapid appreciation in stock values. Whereas a generation ago they were happy with a consistent dividend payment and some long-term increase in the stock price, they now demand buoyant quarterly profits and constant growth. Robert Reich has an apt label for this new economy: “supercapitalism.” American firms, he notes, “now have little choice but to relentlessly pursue profits.”2 This shift benefits investors, consumers, and some employees. But it encourages companies to resist pay increases, drop health-insurance plans, cut contributions to employee pensions, move abroad, downsize, replace regular employees with temporary ones, and pursue a variety of other cost-cutting strategies that weaken economic security, limit opportunity for the less skilled, and reduce income growth for many ordinary Americans.3 For better or worse, the new hypercompetitive, risk-filled economy is here to stay.

Fewer children grow up in a home with both biological parents. Participation in local civic associations has declined. And barely one in ten employed Americans is a union member. Even more problematic, these changes have a class tilt: families, community organizations, and unions have weakened most among those with less education and income.4 Some believe the best way to address the stresses and strains of the new economy is to strengthen these institutions. It’s a laudable aim. It would be good if more American children grew up in intact families, if unions ensured stable jobs and rising wages for a significant share of workers, and if community organizations provided guidance and support to more people in difficult circumstances. But that’s not likely to happen.5 Advocates of revitalizing these institutions tend to offer lots of hope but little evidence that it can be done.

“Asymmetries in the Opportunity Structure: Intergenerational Mobility Trends in Europe.” Research in Social Stratification and Mobility 30: 473–487. Fair, Ray. 2012. Predicting Presidential Elections and Other Things. 2nd ed. Stanford, CA: Stanford University Press. Families USA. 2009. “Americans at Risk: One in Three Uninsured.” Washington, DC. Farber, Henry S. 2010. “Job Loss and the Decline in Job Security in the United States.” Pp. 223–262 in Labor in the New Economy. Edited by Katharine G. Abraham, James R. Spletzer, and Michael Harper. Chicago: University of Chicago Press. Feingold, Russ. 2013. “Building a Permanent Majority for Reform.” Democracy, Winter: 45–49. Ferguson, Thomas and Joel Rogers. 1986. Right Turn: The Decline of the Democrats and the Future of American Politics. New York: Hill and Wang. Ferrarini, Tommy and Ann-Zofie Duvander. 2010. “Earner-Carer Model at the Cross-Roads: Reforms and Outcomes of Sweden’s Family Policy in Comparative Perspective.”


pages: 209 words: 80,086

The Global Auction: The Broken Promises of Education, Jobs, and Incomes by Phillip Brown, Hugh Lauder, David Ashton

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active measures, affirmative action, barriers to entry, Branko Milanovic, BRICs, business process, business process outsourcing, call centre, collective bargaining, corporate governance, creative destruction, credit crunch, David Ricardo: comparative advantage, deindustrialization, deskilling, Frederick Winslow Taylor, full employment, future of work, glass ceiling, global supply chain, immigration reform, income inequality, industrial cluster, industrial robot, intangible asset, job automation, Joseph Schumpeter, knowledge economy, knowledge worker, labour market flexibility, low skilled workers, manufacturing employment, market bubble, market design, neoliberal agenda, new economy, Paul Samuelson, pensions crisis, post-industrial society, profit maximization, purchasing power parity, QWERTY keyboard, race to the bottom, Richard Florida, Ronald Reagan, shareholder value, Silicon Valley, sovereign wealth fund, stem cell, The Bell Curve by Richard Herrnstein and Charles Murray, The Wealth of Nations by Adam Smith, Thomas L Friedman, trade liberalization, transaction costs, trickle-down economics, winner-take-all economy, working poor, zero-sum game

Those who showed themselves to be unfit due to unemployment and poverty had no one to blame but themselves and, with the right incentives, could reenter the workforce or invest in an education that would propel them into middle-class jobs. This bargain was also touted as offering everyone an equal chance to become unequal in the competition for jobs, status, and income. Widening access to university was, for instance, presented as an extension of meritocratic competition giving all the opportunity to acquire knowledge and skills required in the new economy with credentials the currency of opportunity. Changes in employer demands for talent also pointed toward a fairer society, as companies could no longer rely on the established stereotypes of managerial leadership based on the Ivy League or Oxbridge man. Going to a top university and living as part of a cloistered elite were no longer seen as sufficient in an increasingly multicultural and global economic environment.

Bartlett, The Individualized Corporation: A Fundamentally New Approach to Management (London: Random House, 2000), 8. 12. Michael B. Arthur and Denise M. Rousseau (eds.), The Boundaryless Career: A New Employment Principle for a New Organizational Era (New York: Oxford University Press, 1996). 13. Ibid., 4 and 6. 14. Maureen S. Bogdanowicz and Elaine K. Bailey, “The Value of Knowledge and the Values of the New Worker: Generation X and the New Economy.” Journal of European Industrial Training, 26 (2002): 127. 15. Peter Sheahan, Generation Y: Thriving and Surviving with Generation Y at Work. Hardie Grant Books. http://www.managementbooks.com.au/bookweb/details. cgi?ITEMNO=9781740663175 166 Notes to Pages 16–19 16. Richard Rosecrance, The Rise of the Virtual State: Wealth and Power in the Coming Century (New York: Basic Books, 1999), xi. 17.

See “Motorola Eyes Research China 3G Market.” http://www.cn-c114.net/577/ a318213.html; see also http://www.motorola.com.cn/en/about/inchina/default. asp See United Nations Conference on Trade and Development, World Investment Report 2006: FDI from Developing and Transition Economies: Implications for Development (Geneva, UNCTAD, 2006), 56. http://www.unctad.org/Templates/Webflyer.asp?docID=6337&intItemID=2068 &lang=1 The Washington Times, November 24, 2008; see also, “U.S. Automakers Say Labor Costs Must Shrink to Compete,” June 20, 2007. www.workforce.com/ section/00/article/24/96/64.html See Steve Hargreaves, “The New ‘Good’ Job: 12 Bucks an Hour,” CNNMoney. com (2009). www.money.cnn.com/2009/06/04/news/economy/green_jobs/ Financial Times, July 9, 2007. Amy Lee, “Dr Reddy’s Charts New Path for Indian Drugmakers,” Financial Times, December 19, 2006. See http://money.cnn.com/magazines/fortune/global500/2009/ Ming Zeng and Peter J. Williamson, (2007) Dragons at Your Door: How Chinese Cost Innovation Is Disrupting Global Competition (Boston, Mass.: Harvard Business School Press, 2007), 2. Ibid., 89. Ibid., 14.


pages: 265 words: 69,310

What's Yours Is Mine: Against the Sharing Economy by Tom Slee

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4chan, Airbnb, Amazon Mechanical Turk, asset-backed security, barriers to entry, Berlin Wall, big-box store, bitcoin, blockchain, citizen journalism, collaborative consumption, congestion charging, Credit Default Swap, crowdsourcing, data acquisition, David Brooks, don't be evil, gig economy, Hacker Ethic, income inequality, informal economy, invisible hand, Jacob Appelbaum, Jane Jacobs, Jeff Bezos, Khan Academy, Kibera, Kickstarter, license plate recognition, Lyft, Marc Andreessen, Mark Zuckerberg, move fast and break things, move fast and break things, natural language processing, Netflix Prize, Network effects, new economy, Occupy movement, openstreetmap, Paul Graham, peer-to-peer, peer-to-peer lending, Peter Thiel, pre–internet, principal–agent problem, profit motive, race to the bottom, Ray Kurzweil, recommendation engine, rent control, ride hailing / ride sharing, sharing economy, Silicon Valley, Snapchat, software is eating the world, South of Market, San Francisco, TaskRabbit, The Nature of the Firm, Thomas L Friedman, transportation-network company, Uber and Lyft, Uber for X, ultimatum game, urban planning, WikiLeaks, winner-take-all economy, Y Combinator, Zipcar

Collaborative Consumption, July 31, 2014. http://www.collaborativeconsumption.com/2014/ 07/31/collaborative-finance-by-the-people-for-the-people/. ———. “The Sharing Economy Lacks A Shared Definition.” Co.Exist, November 21, 2013. http://www.fastcoexist.com/3022028/the-sharing-economy-lacks-a-shared-definition. ———. “Transcript of ‘The Currency of the New Economy Is Trust.’” TED talk, September 2012. http://www.ted.com/talks/rachel_botsman_the_currency_of_the_new_economy_is_trust/transcript. ———. “Welcome to the New Reputation Economy.” Wired, September 2012. http://www.wired.co.uk/magazine/archive/2012/09/features/welcome-to-the-new-reputation-economy. Botsman, Rachel, and Roo Rogers. What’s Mine Is Yours: The Rise of Collaborative Consumption. Harper Business, 2010. Bowles, Nellie. “Tech Titans on Income Inequality and Their ‘Stingy, Stingy’ Industry.”

But a moment later, he is more interested in building businesses: I attended a meeting of Sharing Economy participants . . . they were developing ideas—brilliant ideas actually—to share customers with each other, across verticals. One person even suggested that there could be a peer economy currency—maybe Bitcoin. Or even points to encourage people to cross verticals and recruit new people into this new economy. So it is not surprising that almost all the campaigns at Peers were focused on the well-funded sectors of the Sharing Economy represented by Airbnb and Lyft. The highest-profile campaigns, such as the 2014 ridesharing initiative in Seattle, operated side-by-side with well-funded efforts driven by Lyft and Uber themselves. Whatever the intent of the more community-focused Peers activists, the group functioned in part as a front for Silicon Valley lobbying.

That rate is based on an annual study of the costs of vehicle operation—those things like repairs, insurance, maintenance, gas and depreciation that were not factored into Uber’s study.56 Based on this figure Dean Baker of the Center for Economic and Policy Research estimated that the average length of a drive would have to be “considerably less than 8 miles” for Uber drivers to come out ahead of traditional cab drivers.57 Baker also notes that if Uber drivers do not pay for commercial insurance, or do not invest in the upkeep of their cars to the extent that commercial drivers are expected to, they would have fewer expenses and more take home pay: “If that’s the case, this would be a typical story of getting rich in the new economy. Find a way to get around the rules and then claim it as a great innovation.” We do have one other source of information about driver pay, which is the drivers themselves. One of the most multifaceted and careful is an account by Philadelphia journalist Emily Guendelsberger of her time as an Uber driver.58 After meticulously tracking her own expenses and those of other drivers who shared them with her, she made about $17 per hour gross, and after Uber’s 28% cut and the 19% that went to expenses she ended up with just $9.34 an hour.


pages: 239 words: 45,926

As the Future Catches You: How Genomics & Other Forces Are Changing Your Work, Health & Wealth by Juan Enriquez

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Albert Einstein, Berlin Wall, bioinformatics, borderless world, British Empire, Buckminster Fuller, creative destruction, double helix, global village, half of the world's population has never made a phone call, Howard Rheingold, Jeff Bezos, Joseph Schumpeter, Kevin Kelly, knowledge economy, more computing power than Apollo, new economy, personalized medicine, purchasing power parity, Ray Kurzweil, Richard Feynman, Richard Feynman, Robert Metcalfe, Search for Extraterrestrial Intelligence, SETI@home, Silicon Valley, spice trade, stem cell, the new new thing

One of the great minds on competitive analysis is Harvard Business School professor Michael Porter. He has looked at flowers as well as a myriad of other industries in various books, including The Competitive Advantage of Nations, Competitive Advantage, and Competitive Strategy. 7. A lot of people have written on this phenomenon of a new economy; one of my favorites is Wired editor Kevin Kelly. Many of the ideas in this chapter come from his book New Rules for the New Economy (New York: Viking, 1998). Peter F. Drucker has also been detailing these changes for decades, starting with The End of the Economic Man (1939). See also his Post-Capitalist Society (1993). 8. Robert Metcalf, founder of 3Com, argues the value of a network is proportional to the square of the number of people in it. 9. Attempting to regulate these decentralized networks is certain to give bureaucrats ulcers— or worse.

The rules of an economy Based on knowledge and networks Are very different from those Of a manufacturing-based economy.7 In the old economy … if something was scarce … it was valuable. Those who controlled the mines, owned the exclusive rights to a product, or had the only copy of something could become very wealthy. Today it is just the opposite. (Of course, there are still some fuddy-duddy economists using ever more complex equations to try to convince you that some basic economic “laws” haven’t changed … that there is no new economy.) Even though there are still many exclusive gewgaws we can buy … With a brand name … Expensive … These goods are not what drive most economic growth. And therefore those who control these products … are no longer the richest people in the world. WHEN YOU ARE TRYING TO SPREAD, AND SELL, KNOWLEDGE … KEEPING SOMETHING “EXCLUSIVE” AND “RARE” OFTEN LEADS TO A LOSS OF VALUE. WHAT MATTERS MOST IS THAT THE PURCHASER BECOMES PART OF A NETWORK … AND THAT THE NETWORK KEEPS GROWING.8 The first purchaser of a telephone, or a fax machine, had a useless product … He could not communicate with anyone.

AS A DEVELOPING COUNTRY … YOU CAN LOWER INFLATION … REDUCE CORRUPTION … CUT YOUR BUDGET … PRIVATIZE … AND STILL NOT GET RICH … Because you are not generating knowledge … just product … (North America, Western Europe, and Japan generated 84 percent of all scientific papers published during 1995.) Chile, often cited as the shining example of Latin American economic reform … Carefully followed the recommendations of the most orthodox Ph.D.s in economics … Nicknamed the “Chicago Boys” … For a decade, its economy grew spectacularly. But even Chile may be headed toward a crash … Because it took the inefficiency out of the old economy … But failed to build a new economy. Two commodities, copper and cellulose, represent 40 percent of Chile’s total exports … Most of what Chile exports contains very little technology. One can get a sense of how knowledge-intensive an economy is by dividing: If the resulting ratio is greater than one, the country exports more knowledge-based products than raw materials. If it is less than one, the economy remains vulnerable to commodity cycles.


pages: 193 words: 47,808

The Flat White Economy by Douglas McWilliams

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access to a mobile phone, banking crisis, Big bang: deregulation of the City of London, bonus culture, Chuck Templeton: OpenTable, cleantech, cloud computing, computer age, correlation coefficient, Edward Glaeser, en.wikipedia.org, Erik Brynjolfsson, eurozone crisis, George Gilder, hiring and firing, income inequality, informal economy, knowledge economy, loadsamoney, low skilled workers, mass immigration, Metcalfe’s law, Network effects, new economy, offshore financial centre, Pareto efficiency, Peter Thiel, Productivity paradox, Robert Metcalfe, Silicon Valley, smart cities, special economic zone, Steve Jobs, working-age population, zero-sum game

Graham is not only a great chief executive, but a truly decent human being and I am proud to be considered a friend of his (which I was for many years before he came to work with me). Although the whole Cebr office have supported me, the greatest help has come from Charles Davis, currently Cebr director and Rob Harbron, Joint Managing Economist for Macroeconomics for Cebr. It was during a meeting when Graham, Charles, Rob and I were considering how to handle our data on this new economy that Rob came up with the suggested name – the Flat White Economy – that became the title for the book. So the title is his and he deserves credit for it. Charles provided me with a lot of helpful data, and Chapter 6 on London’s relationship with the rest of the UK is partly based on the report which he and colleagues prepared for the Corporation of London covering the fiscal aspect of this.

Skills, talent and a lively labour supply of young creative people – that’s why the Flat White Economy is in London. And why EC1V? Why the Old Street area? Well, it is the nearest point of what might loosely be called Central London that’s within reach of the less expensive housing in East and North London. That is why Old Street Roundabout has become popularly known as ‘Silicon Roundabout. The scale of this new economy is such that it has affected – directly or indirectly – the whole UK economy. Roughly one third of the UK economy (30.7%) is now in business and financial services: this contributed 54% of the total GDP growth between 2010 and Q2 of 2014. Obviously not all of this growth is from the Flat White Economy. But it is the driving force behind this growth. And it appears probable from my analysis for this book that even the rapid growth officially recorded understates the Flat White Economy’s contribution.

I also thought that some of the damage to the financial system from the financial collapse would only fully show itself by slowing down the recovery rather than by adding to the immediate impact of the recession. Both conclusions were probably valid, but they failed to explain why London should since have recovered so much faster than the rest of the country. Figure 1.1: House prices in London 1983–2013. Source: Lloyds Regional House Price Data, 2014 Recovery: a new economy? The recovery in London started at the end of 2009. Employment had fallen by a sharp 1.7% that year, but it grew by 0.5% in 2010, with similar growth in 2011. By 2012 employment growth in London was really on a roll, with a massive 2.3% growth. In 2013 employment growth in London was even more spectacular – at 4.4%. I’ve used employment as an indicator because (as I will explain later) there is some doubt about the GDP/GVA5 data.


pages: 223 words: 58,732

The Retreat of Western Liberalism by Edward Luce

3D printing, affirmative action, Airbnb, basic income, Berlin Wall, Bernie Sanders, Branko Milanovic, Bretton Woods, call centre, carried interest, centre right, cognitive dissonance, colonial exploitation, colonial rule, computer age, corporate raider, cuban missile crisis, currency manipulation / currency intervention, Dissolution of the Soviet Union, Doha Development Round, Donald Trump, double entry bookkeeping, Erik Brynjolfsson, European colonialism, everywhere but in the productivity statistics, Fall of the Berlin Wall, Francis Fukuyama: the end of history, future of work, George Santayana, gig economy, Gini coefficient, global supply chain, illegal immigration, imperial preference, income inequality, informal economy, Internet of things, Jaron Lanier, knowledge economy, liberal capitalism, Marc Andreessen, Mark Zuckerberg, Martin Wolf, mass immigration, means of production, Monroe Doctrine, moral panic, more computing power than Apollo, mutually assured destruction, new economy, New Urbanism, Norman Mailer, offshore financial centre, one-China policy, Peace of Westphalia, Peter Thiel, Plutocrats, plutocrats, precariat, purchasing power parity, reserve currency, Richard Florida, Robert Gordon, Ronald Reagan, Second Machine Age, self-driving car, sharing economy, Silicon Valley, Skype, Snapchat, software is eating the world, South China Sea, Steve Jobs, superstar cities, TaskRabbit, telepresence, The Wealth of Nations by Adam Smith, Thomas L Friedman, Tyler Cowen: Great Stagnation, universal basic income, unpaid internship, Washington Consensus, We are the 99%, We wanted flying cars, instead we got 140 characters, white flight, World Values Survey, Yogi Berra

Tyler Cowen has coined a new acronym to replace Nimbys (Not in My Backyard): Bananas (Build Absolutely Nothing Anywhere Near Anything).50 Such risk aversion breeds its own failure. So deeply rooted is gentrification that Richard Florida has now modified his widely acclaimed thesis about the rise of the creative classes. Cities are becoming too successful for their own good. Until recently, he believed they would be the engine rooms of the new economy, embracing the diversity necessary to attract talent. That has certainly happened. Gay pride parades seem to get larger every year. A thousand multicultural flowers are blooming. Yet in squeezing out income diversity, the new urban economies are also shutting off the scope for serendipity. The West’s global cities are like tropical islands surrounded by oceans of resentment. Florida’s latest book is called The New Urban Crisis.

In 2014, it bought WhatsApp, with fifty-five employees, for $19 billion, at a staggering $345 million per employee.54 Such riches are little comfort to the thousands of engineers who cannot find work. Facebook’s data servers are now managed by Cyborg, a software program. It requires one human technician for every twenty thousand computers. Almost any job that involves sitting in front of a screen and manipulating information is disappearing, or will do soon. Software can now drive cars and mark student essays. By skewing the gains of the new economy to a few, robots also weaken the chief engine of growth: middle-class demand. As labour becomes pricier relative to machines, spending power falls. The US economy produces more than a third more today than it did in 1998 with the same-sized labour force and a significantly larger population. It still makes sense for people to obtain degrees. Graduates earn more than those who have completed only high school.

As the real value of pensions and social security goes down, the pressure to postpone retirement grows. Again, we should be careful not to generalise: some older people are working because they enjoy it. Yet we should not romanticise what is happening either. The age of automation is making labour increasingly dispensable, so companies are constantly on the lookout for ways to slim down. The new economy has created digital platforms that enable people to offer their services online. Yet what they find is generally far less secure than what they lost. Such work does not provide healthcare or matching retirement contributions. Nor does it always pay. Almost three-quarters of independent workers in the US report serious difficulties in chasing up what they are owed. Average arrears were $6000 – a large sum for those on the edge.


pages: 370 words: 105,085

Joel on Software by Joel Spolsky

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barriers to entry, c2.com, commoditize, George Gilder, index card, Jeff Bezos, knowledge worker, Metcalfe's law, Network effects, new economy, PageRank, Paul Graham, profit motive, Robert X Cringely, shareholder value, Silicon Valley, Silicon Valley startup, six sigma, slashdot, Steve Ballmer, Steve Jobs, the scientific method, thinkpad, VA Linux, web application

But wait, that's not even the amusing part; the amusing part was watching the worst business plans fail, as their stock went from 316 to 3/16. Take that, new economy blabbermouths! Ah, the schadenfreudef. Ah, the glee, when once again, Wired magazine proves that as soon as it puts something on the cover, that thing will be proven to be stupid and wrong within a few short months. And with this New Economy thing, Wired really blew it, because they should have known by then what a death kiss their cover was for any technology or company or meme, after years of touting smell-o-rama and doomed game companies and how PointCast was going to replace the Web,2 no, wait, PointCast already replaced the Web, in March 1997. But they tempted fate anyway, and didn't just put the New Economy on the cover, they devoted the whole goddamn issue to the New Economy,3 thus condemning the NASDAQ to plummet like a sheep learning to fly. __________ 2.

We're adding features we forgot about that became obviously necessary. And we're getting closer to shipping! Hurrah! And thankfully, we no longer have to contend with 37 companies, each with $25 million in VC, competing against us by giving away their product for free in exchange for agreeing to have a big advertisement tattooed on your forehead. In the post-new economy, everybody is trying to figure out how much they can get away with charging. There's nothing wrong with the post-new economy, if you're smart. But all the endless news about the "dot coma" says more about the lack of creativity of business press editors than anything else. Sorry, fuckedcompany.com, it was funny for a month or so, now it's just pathetic. We'll focus on improving our product, and we'll focus on staying in business, by listening to our customers and eating our own dog food, instead of flying all over the country trying to raise more venture capital.

See also Windows bill presentment system blunders business model management strategies–2nd master programmers–2nd opposing forces inside–2nd program managers–2nd Microsoft Project–2nd Microsoft Typography group mistakes in business strategies in programming questions money, substituting for time–2nd, 3rd monopolies, transition tipping points for–2nd mood swings morale and performance reviews Mozilla program completion of cross-platform problem in delays in, 2nd as open source size of switching to MSDN Magazine Camp at Microsoft–2nd victories of–2nd MSN Auctions site multiple-person interviews multitasking–2nd Murphy's Law week frozen pipes Linux server failure–2nd web server down–2nd Murray, Mike mystrcat function myths 80/20–2nd testers–2nd Unicode–2nd N Naked Chef–2nd native facilities with Java negative performance reviews .NET backward compatibility of for cell phones cross-language strategy hype for–2nd memory management in–2nd products using runtimes in–2nd, 3rd–4th strategy for moving to–2nd as upgrade product–2nd white paper for Netscape. See also Mozilla program mentoring in open sources for–2nd rewriting from scratch–2nd, 3rd Netscape Defense–2nd network effects network libraries network software network transparency–2nd neutralizing bozos–2nd Never Rewrite From Scratch rule .NET violation of Netscape example–2nd New Economy NFS-mounted drives, home directories on Nielsen, Jakob NIH (Not-Invented-Here) syndrome–2nd no-design idea, 2nd nongoals in functional specifications, 2nd nontechnical management types, dealing with–2nd nontraditional workers as testers Norton, Peter Not-Invented-Here (NIH) syndrome–2nd null characters null-terminated Pascal strings O object-oriented programming Oddpost application OEM character set–2nd old code, reusing benefits of–2nd vs.


pages: 561 words: 87,892

Losing Control: The Emerging Threats to Western Prosperity by Stephen D. King

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Admiral Zheng, asset-backed security, barriers to entry, Berlin Wall, Bernie Madoff, Bretton Woods, BRICs, British Empire, capital controls, Celtic Tiger, central bank independence, collateralized debt obligation, corporate governance, credit crunch, crony capitalism, currency manipulation / currency intervention, currency peg, David Ricardo: comparative advantage, demographic dividend, demographic transition, Deng Xiaoping, Diane Coyle, Fall of the Berlin Wall, financial deregulation, financial innovation, fixed income, Francis Fukuyama: the end of history, full employment, George Akerlof, German hyperinflation, Gini coefficient, hiring and firing, income inequality, income per capita, inflation targeting, invisible hand, Isaac Newton, knowledge economy, labour market flexibility, labour mobility, liberal capitalism, low skilled workers, market clearing, Martin Wolf, mass immigration, Mexican peso crisis / tequila crisis, Naomi Klein, new economy, old age dependency ratio, Paul Samuelson, Ponzi scheme, price mechanism, price stability, purchasing power parity, rent-seeking, reserve currency, rising living standards, Ronald Reagan, savings glut, Silicon Valley, Simon Kuznets, sovereign wealth fund, spice trade, statistical model, technology bubble, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Market for Lemons, The Wealth of Nations by Adam Smith, Thomas Malthus, trade route, transaction costs, Washington Consensus, women in the workforce, working-age population, Y2K, Yom Kippur War

These waves of influence are hardly trivial. In the late 1990s, both central bankers (notably Alan Greenspan, the then Chairman of the Federal Reserve) and economic commentators argued in favour of the so-called new economy, a view that undoubtedly contributed to large – and ultimately unsustainable – increases in equity prices, as observed in Chapter 4. The new economy was being driven, apparently, by sweeping productivity gains that would lead to both elevated economic growth and ever higher stock prices. In the late 1990s, there certainly was some evidence consistent with the ‘new economy’. In the US, growth was unexpectedly strong and inflation was unusually low. But does this constitute proof? Not necessarily. First, although US economic growth was, indeed, exceptionally strong in the late 1990s, this strength came after a period of disappointing weakness in the first half of the 1990s.

Second, while technology innovations can improve productivity growth and, hence, allow an economy to grow more quickly without bumping into an inflationary constraint, commodity-price declines create a very similar effect, at least for commodity-consuming nations. It’s easy to be seduced by the idea that economic success comes from technological improvements or wise policy decisions. As perceptions about the new economy began to pick up in the late 1990s, Alan Greenspan, who had famously warned of ‘irrational exuberance’ in 1996,12 seemed happy to jump on the new economy bandwagon later in the decade. His case was helped by the improving split between growth and inflation. But was he right? When the Asian crisis struck in 1997, triggered by a collapse in the value of the Thai baht, many argued that the end of the economic world was nigh. The Asian tigers had, apparently, been the main engines of global growth for a number of years.

The inflows helped push down short- and long-term interest rates, lifted the US equity market and contributed to an ongoing boom in domestic demand. This was, perhaps, the first indication that the US economy could be at the mercy of international capital flows over which policymakers had no direct control. The bubble in equities could not be sustained. While it lasted many people were happy to extol the wonders of the ‘new economy’. There certainly was an improvement in productivity growth led by cutting-edge technologies, but, as time passed, the impact of these technologies on rising living standards began to fade. Economic growth in the developed world slowed following the 2000 stock-market crash and would have been slower still in the absence of a global housing boom and a massive, and unsustainable, expansion of credit.


words: 49,604

The Weightless World: Strategies for Managing the Digital Economy by Diane Coyle

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barriers to entry, Berlin Wall, Big bang: deregulation of the City of London, blue-collar work, Bretton Woods, clean water, computer age, Corn Laws, creative destruction, cross-subsidies, David Ricardo: comparative advantage, dematerialisation, Diane Coyle, Edward Glaeser, everywhere but in the productivity statistics, financial deregulation, full employment, George Santayana, global village, hiring and firing, Howard Rheingold, income inequality, informal economy, invisible hand, Jane Jacobs, Joseph Schumpeter, knowledge economy, labour market flexibility, laissez-faire capitalism, lump of labour, Marshall McLuhan, mass immigration, McJob, microcredit, moral panic, Network effects, new economy, Nick Leeson, night-watchman state, North Sea oil, offshore financial centre, pension reform, pensions crisis, Ronald Reagan, Silicon Valley, spinning jenny, The Death and Life of Great American Cities, the market place, The Wealth of Nations by Adam Smith, Thorstein Veblen, Tobin tax, two tier labour market, very high income, War on Poverty, winner-take-all economy, working-age population

The multimillionaire businessman Steve Forbes, on the other hand, praised the possibilities opened up by this new world order. He said: ‘The economic transformation that we are on the threshold of will unleash an expansive future for America, a future far greater than anything we’ve seen before. The industrial machine was about hierarchies, big companies, The Weightless World 9 big unions, big cities, big government. The thrust of this new economy is more Jeffersonian. It gives power to individuals. It gives power to people.’14 Populism versus techno-populism, perhaps. For a while the Buchanan version made all the running. The New York Times ran a special series of long articles on corporate ‘downsizing’, and Time magazine made it a cover story in the early stages of the election campaign. According to the New York Times, more than 43 million jobs had been erased in the US since 1979, and nearly three-quarters of households had encountered a layoff.

Stephen Oliner and Daniel Sichel, Brookings Papers, Vol. 2, 1994. See Moths to the Flame, Gregory Rawlins, p 116. ‘The Dynamo and the Computer’, Paul David, American Economic Review, May 1990. ‘The Competitive Crash in Large Scale Computing’, Timothy Bresnahan and Shane Greenstein, NBER Working Paper No. 4901, 1995. October 1996 issue. New York Times Magazine, Sunday 29 September 1996. Both reported in ‘It’s The New Economy, Stupid’ by John Heilemann, Wired magazine, San Francisco, CA, March 1996. ‘The Downsizing of America’, New York Times special report, Times books, 1996. The New York Review, 3 October 1996. The State of Working America 1996-97, Employment Policy Institute, Washington DC. (http://epn.org/epi/epswa-ex.html). ‘The Economics of Superstars’, Sherwin Rosen, American Economic Review, December 1981.

From boom to bust in less than a decade — a decline and fall shared by all of the West’s industrial regions. The early 1980s recession brought more redundancies as old industries shrank, with bitterness and pain. The American commentator James Fallows The Weightless World 34 described, in a long article in The Atlantic Monthly in March 1985, the ruined lives left behind by South Chicago’s retreating steel industry. ‘To the steelworkers of South Chicago everything about the ‘new’ economy is bad. They see the movement of jobs to the American south-west or to Taiwan as just another way to undercut the workingman’s wage. Few of them see a way to adapt to the new order. Why should they even think of moving? Everyone has a story about the friend or nephew who drove to Houston or Denver, found himself stacking bottles at the Seven-Eleven or competing with illegal Mexican immigrants for construction jobs, and drove back home.’


pages: 353 words: 91,211

The Shock of the Old: Technology and Global History Since 1900 by David Edgerton

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agricultural Revolution, anti-communist, British Empire, Computer Numeric Control, conceptual framework, creative destruction, deglobalization, dematerialisation, desegregation, deskilling, endogenous growth, global village, Haber-Bosch Process, interchangeable parts, knowledge economy, Mahatma Gandhi, manufacturing employment, means of production, megacity, microcredit, new economy, post-industrial society, Productivity paradox, Ronald Reagan, Silicon Valley, spinning jenny, Upton Sinclair, urban planning, V2 rocket

In these respects the industrialisation of China has been very different from that of Japan. Market Stalinism and foreign investment were critical in China’s drive to industrialise. Despite its scale and speed and its impact on the global economy, the growth of China is not the product of a profoundly new economy. It has a distinctly old feel to it. At the beginning of the twenty-first century China was sucking in vast quantities of heavy raw materials, from oil to copper, driving up world prices. It became easily the largest steel producer in the world, with rates of growth comparable to those of steel in the long boom. The ‘new economy’ was being replaced by a very old economy driven by commodity prices. Far from the information superhighway being the conduit for all this new production, it was none other than the ship that carried the great bulk of Chinese production, and indeed world trade as a whole.

The timelines of technological history, and they abound, are based on dates of invention and innovation. The most significant twentieth-century technologies are often reduced to the following: flight (1903), nuclear power (1945), contraception (1955), and the internet (1965). We are told that change is taking place at an ever-accelerating pace, and that the new is increasingly powerful. The world, the gurus insist, is entering a new historical epoch as a result of technology. In the new economy, in new times, in our post-industrial and postmodern condition, knowledge of the present and past is supposedly ever less relevant. Inventors, even in these post-modern times, are ‘ahead of their time’, while societies suffer from the grip of the past, resulting in a supposed slowness to adapt to new technology. There are new things under the sun, and the world is indeed changing radically, but this way of thinking is not among them.

The usual story of production goes like this: there has been a shift in employment and output from agriculture to industry and then to services. The first is labelled the industrial revolution. The second is called a transition to post-industrial, knowledge or information societies, linked to what many called post-modernism, what some Marxists called ‘new times’, and, what capitalist Wall Street gurus called the ‘new economy’.1 In one version peddled in the 1990s, modern economies are becoming ‘weightless’ and ‘dematerialised’. Such accounts resurrect an old argument, as if it had never been made before, that in future it will not be land or capital which will have power, but knowledge. They promise, again, a world where ‘intellectual property’ and ‘human capital’ rule. Yet this stage theory of history, focusing on shares of employment, easily misrepresents the whole.


pages: 275 words: 84,980

Before Babylon, Beyond Bitcoin: From Money That We Understand to Money That Understands Us (Perspectives) by David Birch

agricultural Revolution, Airbnb, bank run, banks create money, bitcoin, blockchain, Bretton Woods, British Empire, Broken windows theory, Burning Man, capital controls, cashless society, Clayton Christensen, clockwork universe, creative destruction, credit crunch, cross-subsidies, crowdsourcing, cryptocurrency, David Graeber, dematerialisation, Diane Coyle, distributed ledger, double entry bookkeeping, ethereum blockchain, facts on the ground, fault tolerance, fiat currency, financial exclusion, financial innovation, financial intermediation, floating exchange rates, Fractional reserve banking, index card, informal economy, Internet of things, invention of the printing press, invention of the telegraph, invention of the telephone, invisible hand, Irish bank strikes, Isaac Newton, Jane Jacobs, Kenneth Rogoff, knowledge economy, Kuwabatake Sanjuro: assassination market, large denomination, M-Pesa, market clearing, market fundamentalism, Marshall McLuhan, Martin Wolf, mobile money, money: store of value / unit of account / medium of exchange, new economy, Northern Rock, Pingit, prediction markets, price stability, QR code, quantitative easing, railway mania, Ralph Waldo Emerson, Real Time Gross Settlement, reserve currency, Satoshi Nakamoto, seigniorage, Silicon Valley, smart contracts, social graph, special drawing rights, technoutopianism, the payments system, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, tulip mania, wage slave, Washington Consensus, wikimedia commons

It seems that the cheque may well be the first payment instrument to vanish in my lifetime because the existence of instant payment systems means it no longer has an economic function. I’ll return to this later in the book when we move on to the spread of instant payments and the potential for a ‘push for push’ in retail payments. Buttons and bank acts Industrializing Britain saw more changes in the way that money worked as it strove to reinvent money for its new economy. As the nature of that economy had changed, so the nature of money had needed to change too, but it lags. At the time, it was not clear exactly what needed doing. People could see that there were problems but not what do to about them. Naturally I refer to this time because the Internet, mobile phones and online commerce are creating a vortex that is sucking in monetary innovation at an accelerating rate, my point being that we have been here before.

President Nazarbayev was not the only world leader to experiment with new forms of money in response to the financial crisis. In Venezuela, as in Greece and other countries, community currencies were explored. An example was the cimarrón there. The circular cardboard tokens (with a picture of a runaway slave on them) were supported by President Chavez with the aim of tackling poverty and establishing new economies. These types of currency tend to be used to mediate barter in ‘prosumer’ markets, where you can’t get the currency to buy things without producing things. Imagine something along these lines at Internet scale: currencies that are specific to markets, that you can’t obtain without bringing things to the market. Interesting, not in the sense of Mr Chavez’s national socialism but in the sense of reputation currencies, a favourite topic of mine.

Unable to reach her either at home or the office… It has been at least a decade since my wife called me either at home or at the office or, indeed, anywhere else. If she wants to talk to me, she calls me, she doesn’t call a place where I might be. The mobile phone didn’t just change the payphone business, it changed the communications paradigm: the common mental model that we share as the basis for thinking about communications. Uneven The Canadian novelist William Gibson – author of the wonderful Neuromancer (the seminal work of fiction for the new economy) and the man who coined the term ‘cyberspace’ – famously observed that ‘the future is already here, it’s just unevenly distributed’. He means that the technologies that will shape society in our lifetimes already exist, it’s just that we might not have noticed them yet. One of the key elements missing from that 1988 vision of 2013 was the mobile phone, despite it having existed for a decade.


The Metropolitan Revolution: How Cities and Metros Are Fixing Our Broken Politics and Fragile Economy by Bruce Katz, Jennifer Bradley

3D printing, additive manufacturing, Affordable Care Act / Obamacare, British Empire, business climate, carbon footprint, clean water, cleantech, collapse of Lehman Brothers, deindustrialization, demographic transition, desegregation, double entry bookkeeping, edge city, Edward Glaeser, global supply chain, immigration reform, income inequality, industrial cluster, intermodal, Jane Jacobs, jitney, Kickstarter, knowledge economy, lone genius, Mark Zuckerberg, Masdar, megacity, Menlo Park, Moneyball by Michael Lewis explains big data, Network effects, new economy, New Urbanism, Occupy movement, place-making, postindustrial economy, purchasing power parity, race to the bottom, Richard Florida, Shenzhen was a fishing village, Silicon Valley, smart cities, smart grid, sovereign wealth fund, the built environment, The Death and Life of Great American Cities, the market place, The Spirit Level, Tony Hsieh, too big to fail, trade route, transit-oriented development, urban planning, white flight

In his 2012 TED talk, “Be the Entrepreneur of Your Own Life,” the venture capitalist Reid Hoffman, cofounder of LinkedIn, extolled the power of “network literacy,” which is, he said, “absolutely critical to how we’ll navigate the world.” He continued, “In a networked age, identity is not so simply determined. Your identity is actually multivariate, distributed, and partly out of your control. Who you know shapes who you are.”62 Northeast Ohio’s efforts to use networks to bring about a new economy—built on the foundations of its old economy—are aligned with powerful social, economic, and cultural forces. This feeling of alignment motivates people like Chris Thompson to go to all those meetings and bring all those doughnuts. He believes that his work and the work of the Fund for Our Economic Future reflects “the civic challenge of our time. We live in an era where power is diffuse and value is created through networks built on trust, not hierarchy.

Second, the launch of M1 Rail exemplifies the collaborative spirit and integrated nature of economy shaping and place making at the heart of the metropolitan revolution. Detroit’s revival is being inspired, accelerated, and supported by an intricate web of philanthropic and business leaders and a remarkable set of nonprofit and quasi-public intermediaries that are painstakingly connecting the dots between hundreds of separate actions and transactions. The New Economy Initiative for Southeast Michigan— a $100 million consortium of ten local and national foundations—is a major investor in Detroit’s midtown and downtown. Since its inception in 2007, the initiative has supported or created several investment funds for start-ups and provided capital for significant place-making infrastructure, particularly in TechTown in midtown and its surrounding area, and its grants have helped launch 417 new companies, create 6,700 jobs, and leverage $261 million in additional investment in start-up companies supported by its grantees.100 06-2151-2 ch6.indd 139 5/20/13 6:53 PM 140 THE RISE OF INNOVATION DISTRICTS Living Cities, another philanthropic consortium, has invested $22 million in the Woodward Corridor Initiative to “redensify” the corridor and realize the full potential of the transit investment.101 The Kresge Foundation alone committed $150 million over the next five years to implement the recommendations and strategies outlined in the Detroit Future City report, doubling down on the investments it has already made along the riverfront, in M1 Rail, in the planning for the Detroit Future City effort, and as part of both the New Economy Initiative and Living Cities.102 In 2011 the Henry Ford Health System, the Detroit Medical Center, and Wayne State University, along with state and philanthropic support, launched the Live Midtown initiative, which provides financial incentives for employees who move to the area and entices existing renters and homeowners to stay and reinvest.103 Based on the program’s success, a group of downtown corporations—Quicken Loans, Blue Cross Blue Shield, Compuware, Strategic Staffing Solutions, Marketing Associates, and DTE Energy—created the Live Downtown Initiative.

Since its inception in 2007, the initiative has supported or created several investment funds for start-ups and provided capital for significant place-making infrastructure, particularly in TechTown in midtown and its surrounding area, and its grants have helped launch 417 new companies, create 6,700 jobs, and leverage $261 million in additional investment in start-up companies supported by its grantees.100 06-2151-2 ch6.indd 139 5/20/13 6:53 PM 140 THE RISE OF INNOVATION DISTRICTS Living Cities, another philanthropic consortium, has invested $22 million in the Woodward Corridor Initiative to “redensify” the corridor and realize the full potential of the transit investment.101 The Kresge Foundation alone committed $150 million over the next five years to implement the recommendations and strategies outlined in the Detroit Future City report, doubling down on the investments it has already made along the riverfront, in M1 Rail, in the planning for the Detroit Future City effort, and as part of both the New Economy Initiative and Living Cities.102 In 2011 the Henry Ford Health System, the Detroit Medical Center, and Wayne State University, along with state and philanthropic support, launched the Live Midtown initiative, which provides financial incentives for employees who move to the area and entices existing renters and homeowners to stay and reinvest.103 Based on the program’s success, a group of downtown corporations—Quicken Loans, Blue Cross Blue Shield, Compuware, Strategic Staffing Solutions, Marketing Associates, and DTE Energy—created the Live Downtown Initiative.


pages: 277 words: 80,703

Revolution at Point Zero: Housework, Reproduction, and Feminist Struggle by Silvia Federici

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Community Supported Agriculture, declining real wages, equal pay for equal work, feminist movement, financial independence, fixed income, global village, illegal immigration, informal economy, invisible hand, labor-force participation, land tenure, mass incarceration, means of production, microcredit, neoliberal agenda, new economy, Occupy movement, planetary scale, Scramble for Africa, statistical model, structural adjustment programs, the market place, trade liberalization, UNCLOS, wages for housework, Washington Consensus, women in the workforce, World Values Survey

Pyle, “Transnational Migration and Gendered Care Work: Introduction,” Globalizations 3, no. 3 (2006): 289; Arlie Hochschild and Barbara Ehrenreich, Global Women: Nannies, Maids and Sex Workers in the New Economy (New York: Holt, 2002). 13. Dario Di Vico, “Le badanti, il nuovo welfare privato. Aiutano gli anziani e lo Stato risparmia,” Corriere della Sera, June 13, 2004, 15. 14. Arlie Hochschild, “Global Care Chains and Emotional Surplus Value,” in Global Capitalism, eds. Will Hutton and Anthony Giddens (New York: The New Press, 2000); Arlie Hochschild and Barbara Ehrenreich, Global Women: Nannies, Maids and Sex Workers in the New Economy (New York: Holt, 2002), 26-27. 15. New York Times, January 28, 2009. 16. The Bill of Rights Domestic Workers United campaigned for and won in 2010 in New York State was the first in the country that recognized that care workers are workers, entitled to the same rights that other categories of workers have. 17.

This is not a utopia, but a process already under way in many parts of the world and likely to expand in the face of a collapse of the world financial system. Governments are now attempting to use the crisis to impose stiff austerity regimes on us for years to come. But through land takeovers, urban farming, community-supported agriculture, through squats, the creation of various forms of barter, mutual aid, alternative forms of healthcare—to name some of the terrains on which this reorganization of reproduction is more developed—a new economy is beginning to emerge that may turn reproductive work from a stifling, discriminating activity into the most liberating and creative ground of experimentation in human relations. As I stated, this is not a utopia. The consequences of the globalized world economy would certainly have been far more nefarious except for the efforts that millions of women have made to ensure that their families would be supported, regardless of their value on the capitalist labor market.

In Witchcraft Beliefs and Accusations in Contemporary Africa, edited by Gerrie Ter Haar, 229-46. Trenton, NJ: Africa World Press, 2007. Hochschild, Adam. King Leopold’s Ghost, Boston: Houghton Mifflin Co., 1998. Hochschild, Arlie. “Global Care Chains and Emotional Surplus Value.” In Global Capitalism, edited by Will Hutton and Anthony Giddens. New York: The New Press, 2000. Hochschild, Arlie, and Barbara Ehrenreich. Global Women: Nannies, Maids and Sex Workers in the New Economy. New York: Holt, 2002. Holloway, John. Change the World Without Taking Power. London: Pluto Press, 2002. _. Crack Capitalism. London: Pluto Press, 2010. Holmstrom, Nancy, ed. The Socialist Feminist Project: A Contemporary Reader in Theory and Politics. New York: Monthly Review Press, 2002. hooks, bell. Yearning: Race, Gender, and Cultural Politics. Boston: South End Press, 1990. Human Rights Watch (Africa).


pages: 299 words: 91,839

What Would Google Do? by Jeff Jarvis

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23andMe, Amazon Mechanical Turk, Amazon Web Services, Anne Wojcicki, barriers to entry, Berlin Wall, business process, call centre, cashless society, citizen journalism, clean water, commoditize, connected car, credit crunch, crowdsourcing, death of newspapers, disintermediation, diversified portfolio, don't be evil, fear of failure, Firefox, future of journalism, Google Earth, Googley, Howard Rheingold, informal economy, inventory management, Jeff Bezos, jimmy wales, Kevin Kelly, Mark Zuckerberg, moral hazard, Network effects, new economy, Nicholas Carr, old-boy network, PageRank, peer-to-peer lending, post scarcity, prediction markets, pre–internet, Ronald Coase, search inside the book, Silicon Valley, Skype, social graph, social software, social web, spectrum auction, speech recognition, Steve Jobs, the medium is the message, The Nature of the Firm, the payments system, The Wisdom of Crowds, transaction costs, web of trust, Y Combinator, Zipcar

Google Rules New Relationship • Give the people control and we will use it • Dell hell • Your worst customer is your best friend • Your best customer is your partner New Architecture • The link changes everything • Do what you do best and link to the rest • Join a network • Be a platform • Think distributed New Publicness • If you’re not searchable, you won’t be found • Everybody needs Googlejuice • Life is public, so is business • Your customers are your ad agency New Society • Elegant organization New Economy • Small is the new big • The post-scarcity economy • Join the open-source, gift economy • The mass market is dead—long live the mass of niches • Google commodifies everything • Welcome to the Google economy New Business Reality • Atoms are a drag • Middlemen are doomed • Free is a business model • Decide what business you’re in New Attitude • There is an inverse relationship between control and trust • Trust the people • Listen New Ethic • Make mistakes well • Life is a beta • Be honest • Be transparent • Collaborate • Don’t be evil New Speed • Answers are instantaneous • Life is live • Mobs form in a flash New Imperatives • Beware the cash cow in the coal mine • Encourage, enable, and protect innovation • Simplify, simplify • Get out of the way If Google Ruled the World Media • The Google Times: Newspapers, post-paper • Googlewood: Entertainment, opened up • GoogleCollins: Killing the book to save it Advertising • And now, a word from Google’s sponsors Retail • Google Eats: A business built on openness • Google Shops: A company built on people Utilities • Google Power & Light: What Google would do • GT&T: What Google should do Manufacturing • The Googlemobile: From secrecy to sharing • Google Cola: We’re more than consumers Service • Google Air: A social marketplace of customers • Google Real Estate: Information is power Money • Google Capital: Money makes networks • The First Bank of Google: Markets minus middlemen Public Welfare • St.

A large proportion of its ad revenue also comes from Google. About.com might as well be a division of Google, but it’s not. It’s merely built on Google’s platform. About.com is owned by The New York Times Company, which bought it in 2005 for $410 million (and hired me to consult there). I’ll confess I was dubious about the acquisition when it occurred, but I was wrong. Today, as papers struggle in the new economy, About.com is one of the rare bright spots in any newspaper company’s P&L. About.com at first wanted to compete with Google or even to be Google. Started by Scott Kurnit as The Mining Company in 1997—a year before Google was incorporated—its goal was to provide a human-powered guide to the internet. But as Yahoo also learned, that was hard and expensive, especially as the internet grew so unfathomably large.

We also have new ethics and attitudes that spring from this new organization and change society in ways we cannot yet see, with openness, generosity, collaboration, efficiency. We are using the internet’s connective tissue to leap over borders—whether they surround countries or companies or demographics. We are reorganizing society. This is Google’s—and Facebook’s and craigslist’s—new world order. New Economy Small is the new big The post-scarcity economy Join the open-source, gift economy The mass market is dead—long live the mass of niches Google commodifies everything Welcome to the Google economy Small is the new big Mind you, big is still big. Wal-Mart is the largest company on earth. Bigbox stores such as Home Depot continue to drive mom-and-pop hardware shops out of business. Media companies are conglomerating.


pages: 327 words: 90,542

The Age of Stagnation by Satyajit Das

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9 dash line, accounting loophole / creative accounting, additive manufacturing, Airbnb, Albert Einstein, Alfred Russel Wallace, Anton Chekhov, Asian financial crisis, banking crisis, Berlin Wall, bitcoin, Bretton Woods, BRICs, British Empire, business process, business process outsourcing, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Clayton Christensen, cloud computing, collaborative economy, colonial exploitation, computer age, creative destruction, cryptocurrency, currency manipulation / currency intervention, David Ricardo: comparative advantage, declining real wages, Deng Xiaoping, deskilling, disintermediation, Downton Abbey, Emanuel Derman, energy security, energy transition, eurozone crisis, financial innovation, financial repression, forward guidance, Francis Fukuyama: the end of history, full employment, gig economy, Gini coefficient, global reserve currency, global supply chain, Goldman Sachs: Vampire Squid, happiness index / gross national happiness, Honoré de Balzac, hydraulic fracturing, Hyman Minsky, illegal immigration, income inequality, income per capita, indoor plumbing, informal economy, Innovator's Dilemma, intangible asset, Intergovernmental Panel on Climate Change (IPCC), Jane Jacobs, John Maynard Keynes: technological unemployment, Kenneth Rogoff, knowledge economy, knowledge worker, labour market flexibility, labour mobility, light touch regulation, liquidity trap, Long Term Capital Management, low skilled workers, Lyft, Mahatma Gandhi, margin call, market design, Marshall McLuhan, Martin Wolf, Mikhail Gorbachev, mortgage debt, mortgage tax deduction, new economy, New Urbanism, offshore financial centre, oil shale / tar sands, oil shock, old age dependency ratio, open economy, passive income, peak oil, peer-to-peer lending, pension reform, Plutocrats, plutocrats, Ponzi scheme, Potemkin village, precariat, price stability, profit maximization, pushing on a string, quantitative easing, race to the bottom, Ralph Nader, Rana Plaza, rent control, rent-seeking, reserve currency, ride hailing / ride sharing, rising living standards, risk/return, Robert Gordon, Ronald Reagan, Satyajit Das, savings glut, secular stagnation, seigniorage, sharing economy, Silicon Valley, Simon Kuznets, Slavoj Žižek, South China Sea, sovereign wealth fund, TaskRabbit, The Chicago School, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, the market place, the payments system, The Spirit Level, Thorstein Veblen, Tim Cook: Apple, too big to fail, total factor productivity, trade route, transaction costs, unpaid internship, Unsafe at Any Speed, Upton Sinclair, Washington Consensus, We are the 99%, WikiLeaks, Y2K, Yom Kippur War, zero-coupon bond, zero-sum game

Gordon, “Is US Economic Growth Over? Faltering Innovation Confronts the Six Headwinds,” Centre for Economic Policy Research, Policy Insight, no. 63 (September 2012). 10 Robert Salow, “We'd Better Watch Out,” New York Times Book Review, 12 July 1987. 11 See Founders Fund, “What Happened to the Future?” www.foundersfund.com/the-future. 12 Andy Xie, “Mirage of the ‘New Economy,’” Marketwatch, 26 March 2014. www.marketwatch.com/story/mirage-of-the-new-economy-2014-03-26. 13 Suzanne Woolley, “Amazon May Have Just Created a Weapon of Mass Consumption,” Financial Times, 21 June 2014. 14 Jill Lepore, “The Disruption Machine: What the Gospel of Innovation Gets Wrong,” New Yorker, 23 June 2014. www.newyorker.com/reporting/2014/06/23/140623fa_fact_lepore?currentPage=all. 15 Alfred North Whitehead, Science and the Modern World, Macmillan, 1925, p. 96. 16 Jonathan Huebner, “A Possible Declining Trend for Worldwide Innovation,” Technological Forecasting & Social Change, vol. 72, no. 8 (2005), pp. 980–86. 17 Mentioned in a conference about automation held by the UAW–CIO union in November 1954. http://quoteinvestigator.com/2011/11/16/robots-buy-cars/. 18 John Steinbeck, The Grapes of Wrath, Penguin (1939) 1992, p. 44. 5.

One commentator wryly dismissed social networking sites as “just places for people to express their narcissism cheaply.”12 In June 2014, Amazon announced its latest innovation, a smartphone that uses image-recognition technology to allow customers to purchase products by pointing it at more than 70 million objects in its online store. Designed to minimize barriers to spending, it exemplifies the instantaneous gratification that passes for innovation in the new economy. Critics have branded it a weapon of mass consumption that allows you to point and shoot yourself in the foot.13 Many new technologies displace existing industries, limiting the effect on growth and productivity. Recent innovations have focused on marketing and distributing existing goods and services, rather than on creating entirely new industries. Smartphones and tablets have cannibalized desktop and laptop computers.

Emerging nations combined their cheap labor and local or imported resources with foreign technology or capital to manufacture and export goods and services to developed countries. Improvements in technology, telecommunications, and transport allowed cheaper emerging nations to compete with advanced economies. One-off events were important. The Y2K software problems fueled the development of India's software industry. The new economy was centered on China, now the world's factory, exporting around 50 percent of its output. It imported resources and parts that were then assembled or processed and shipped out again. Smaller emerging economies, especially in Asia, became integrated into new Sino-centric global supply chains. Consultant David Rothkopf highlighted the uneven balance of power within emerging markets: “Without China, the BRICs are just the BRI, a bland, soft cheese that is primarily known for the whine [sic] that goes with it…”8 China was now the largest purchaser of iron ore and other metals, and one of the biggest purchasers of cotton and soybeans.


pages: 196 words: 57,974

Company: A Short History of a Revolutionary Idea by John Micklethwait, Adrian Wooldridge

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affirmative action, barriers to entry, Bonfire of the Vanities, borderless world, business process, Corn Laws, corporate governance, corporate raider, corporate social responsibility, creative destruction, credit crunch, crony capitalism, double entry bookkeeping, Etonian, hiring and firing, industrial cluster, invisible hand, James Watt: steam engine, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, knowledge economy, knowledge worker, laissez-faire capitalism, manufacturing employment, market bubble, mittelstand, new economy, North Sea oil, race to the bottom, railway mania, Ronald Coase, Silicon Valley, six sigma, South Sea Bubble, Steve Jobs, Steve Wozniak, strikebreaker, The Nature of the Firm, The Wealth of Nations by Adam Smith, Thorstein Veblen, trade route, transaction costs, tulip mania, wage slave, William Shockley: the traitorous eight

Yet, over the next forty years, its great companies enabled it to replace Britain as Europe’s leading industrial power. In the late nineteenth century, the finest examples of the “new economy” in Europe were all in Germany: the vast electrical-equipment producing complex at Siemenstadt, the huge chemical works of Leverkusen, Ludwigshafen, and Frankfurt, the massive machinery works and steel mills in the Ruhr and along the Rhine. When Alfred Krupp died in 1887, his company employed twenty thousand people, and boasted its own hospitals and schools. Britain had nothing comparable to offer. Germany’s companies were similar to America’s in their focus on the new economy: almost two-thirds of the top two hundred dealt with metals, chemicals, and machinery. But they embodied a rather different sort of capitalism—one that emphasized cooperation rather than competition and that gave a leading role to the state.

Worried by the buccaneering spirit that deregulation had unleashed and by the piratical excesses of some corporate captains, governments sporadically tried to call the bosses of companies more firmly to account. In some cases, regulators breached the corporate veil—holding directors personally responsible for their firms’ actions. In Britain, for instance, the 1986 Insolvency Act made directors liable for the debts a company incurred after the point when they might reasonably be expected to have closed it down. But the real onslaught occurred in America, after the New Economy bubble burst. ENRON AND BEYOND The 1990s was a decade of infatuation with companies. The number of magazines devoted to business multiplied, even as the ages of the smiling chief executives on their covers plummeted. But the adoration went well beyond young whippersnappers. When Roberto Goizueta, the veteran boss of Coca-Cola, tried to justify his $80 million pay packet to a shareholder meeting, he was interrupted four times—with applause.

The spread of mutual funds and the change from defined-benefit to defined-contribution retirement plans meant that this was a truly democratic crash: most of the households in America lost money directly. The specific catalyst was, ironically enough, one of the firms that Bush had turned to to design his energy policy. Enron was a darling of the 1990s—a new form of energy company that did not rely on drilling and gas stations but on teams of financial traders. A Harvard Business School case study was approvingly titled “Enron’s Transformation: From Gas Pipelines to New Economy Powerhouse.” Unfortunately, the energy trading company took its penchant for innovation just a little too far. Its managers used highly complicated financial engineering—convoluted partnerships, off-the-books debt, and exotic hedging techniques—to hide huge losses. And when those losses emerged, they sold millions in company stock while their employees were prohibited from doing likewise. All the corporate overseers who were employed to monitor Enron on behalf of its shareholders—the outside directors, auditors, regulators, and stockbroking analysts—were found wanting.


pages: 484 words: 136,735

Capitalism 4.0: The Birth of a New Economy in the Aftermath of Crisis by Anatole Kaletsky

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bank run, banking crisis, Benoit Mandelbrot, Berlin Wall, Black Swan, bonus culture, Bretton Woods, BRICs, Carmen Reinhart, cognitive dissonance, collapse of Lehman Brothers, Corn Laws, correlation does not imply causation, creative destruction, credit crunch, currency manipulation / currency intervention, David Ricardo: comparative advantage, deglobalization, Deng Xiaoping, Edward Glaeser, Eugene Fama: efficient market hypothesis, eurozone crisis, experimental economics, F. W. de Klerk, failed state, Fall of the Berlin Wall, financial deregulation, financial innovation, Financial Instability Hypothesis, floating exchange rates, full employment, George Akerlof, global rebalancing, Hyman Minsky, income inequality, information asymmetry, invisible hand, Isaac Newton, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, laissez-faire capitalism, Long Term Capital Management, mandelbrot fractal, market design, market fundamentalism, Martin Wolf, money market fund, moral hazard, mortgage debt, new economy, Northern Rock, offshore financial centre, oil shock, paradox of thrift, Pareto efficiency, Paul Samuelson, peak oil, pets.com, Ponzi scheme, post-industrial society, price stability, profit maximization, profit motive, quantitative easing, Ralph Waldo Emerson, random walk, rent-seeking, reserve currency, rising living standards, Robert Shiller, Robert Shiller, Ronald Reagan, shareholder value, short selling, South Sea Bubble, sovereign wealth fund, special drawing rights, statistical model, The Chicago School, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, too big to fail, Vilfredo Pareto, Washington Consensus, zero-sum game

Then, forty years after the Great Depression, another enormous economic crisis—the global inflation of the late 1960s and 1970s—inspired the free-market revolution of Margaret Thatcher and Ronald Reagan, creating a third version of capitalism, clearly distinct from the previous two. Forty years after the great inflation of the late 1960s, the global economy was hit by another systemic crisis, in 2007-09. The argument of this book is that this crisis is creating a fourth version of the capitalist system, a new economy as different from the designs of Reagan and Thatcher as those were from the New Deal. Hence the birth of a new economy in the subtitle of this book. The concept of capitalism as an evolutionary system, whose economic rules and political institutions are subject to profound change, may seem controversial and even subversive from the standpoint of precrisis thinking. The Thatcher-Reagan revolution of the early 1980s was widely proclaimed as a rediscovery of true capitalism after the cryptosocialist heresies and deviations of the Keynesian period—and this worldview is still held by most conservative politicians and business leaders.

The propensity of modern economic theory for unjustified and oversimplified assumptions allowed politicians, regulators, and bankers to create for themselves the imaginary world of market fundamentalist ideology, in which financial stability is automatic, involuntary unemployment is impossible, and efficient, omniscient markets can solve all economic problems, if only the government will stand aside. In the new economy emerging from the 2007-09 crisis, the self-serving assumptions of efficient, self-stabilizing markets have been discredited, but something will have to be put in their place. Since the eighteenth century, each transformation of the capitalist system has coincided with a transformed understanding of economics—Smith and Ricardo from 1780 to 1820; the marginalist revolution of Mill, Jevons, and Walras in the 1870s; Keynes in the 1930s; and Friedman in the 1970s.

The third essential feature of the new economics, both as a cause and consequence of the other two, will be a focus on the inherent unpredictability of human behavior and economic events. The emphasis on unpredictability introduced by Keynes, Schumpeter, and Frank Knight will be a guiding principle of the new theories competing for leadership in the intellectual marketplace during the next phase of economic thinking. In the new economy emerging from the 2007-09 crisis, all participants will recognize that the markets and the government are both liable to be wrong. In a world where the future is indeterminate and depends on reflexive interactions between human behavior, expectations, and reality, the concept of a single correct model of how the economy operates, assumed by rational expectations, is an absurd delusion. In an indeterminate world, both economic and institutional decisions will have to proceed by a zigzag process of trial and error.


pages: 457 words: 128,838

The Age of Cryptocurrency: How Bitcoin and Digital Money Are Challenging the Global Economic Order by Paul Vigna, Michael J. Casey

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3D printing, Airbnb, altcoin, bank run, banking crisis, bitcoin, blockchain, Bretton Woods, California gold rush, capital controls, carbon footprint, clean water, collaborative economy, collapse of Lehman Brothers, Columbine, Credit Default Swap, cryptocurrency, David Graeber, disintermediation, Edward Snowden, Elon Musk, ethereum blockchain, fiat currency, financial innovation, Firefox, Flash crash, Fractional reserve banking, hacker house, Hernando de Soto, high net worth, informal economy, intangible asset, Internet of things, inventory management, Julian Assange, Kickstarter, Kuwabatake Sanjuro: assassination market, litecoin, Long Term Capital Management, Lyft, M-Pesa, Marc Andreessen, Mark Zuckerberg, McMansion, means of production, Menlo Park, mobile money, money: store of value / unit of account / medium of exchange, Network effects, new economy, new new economy, Nixon shock, offshore financial centre, payday loans, Pearl River Delta, peer-to-peer, peer-to-peer lending, pets.com, Ponzi scheme, prediction markets, price stability, profit motive, QR code, RAND corporation, regulatory arbitrage, rent-seeking, reserve currency, Robert Shiller, Robert Shiller, Satoshi Nakamoto, seigniorage, shareholder value, sharing economy, short selling, Silicon Valley, Silicon Valley startup, Skype, smart contracts, special drawing rights, Spread Networks laid a new fibre optics cable between New York and Chicago, Steve Jobs, supply-chain management, Ted Nelson, The Great Moderation, the market place, the payments system, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, tulip mania, Turing complete, Tyler Cowen: Great Stagnation, Uber and Lyft, underbanked, WikiLeaks, Y Combinator, Y2K, zero-sum game, Zimmermann PGP

One solution that the Film Annex is now pursuing in conjunction with bitcoin-trading platform Atlas ATS is a Pakistan-based exchange for swapping bitcoins into traditional currencies. But Rulli only reluctantly went along with this; it was too soft an option, he felt. He wanted the exchange to be solely in bitcoin for other digital currencies, with no option to buy rupees or dollars: “The belief I have is that if you lock these people into this new economy, they will make that new economy as efficient as possible. If you start giving people opportunities to get out of the economy, they will just cut it down, whereas if the only way for you to enrich yourself is by trading bitcoins for litecoins and dogecoins, you are going to become an expert in that … you will become the best trader in Pakistan.” Rulli prefers to focus on another route that the Film Annex has pursued to give his contributors spending options.

If you believe the copy of this e-book you are reading infringes on the authors’ copyright, please notify the publisher at: us.macmillanusa.com/piracy. For Elizabeth —PV For Mum and Dad —MC Contents Title Page Copyright Notice Dedication Introduction: Digital Cash for a Digital Age 1. From Babylon to Bitcoin 2. Genesis 3. Community 4. Roller Coaster 5. Building the Blockchain 6. The Arms Race 7. Satoshi’s Mill 8. The Unbanked 9. The Everything Blockchain 10. Square Peg Meets Round Hole 11. A New New Economy Conclusion: Come What May Acknowledgments Notes Index Also by Michael J. Casey About the Authors Copyright Introduction DIGITAL CASH FOR A DIGITAL AGE Money won’t create success, the freedom to make it will. —Nelson Mandela Even though Parisa Ahmadi was in the top of her class at the all-girls Hatifi High School in Herat, Afghanistan, her family was initially against her enrolling in classes being offered by a private venture that promised to teach young girls Internet and social-media skills—and even pay them for their efforts.

And society itself is already undergoing profound change, the result of sweeping technological, demographic, and global economic shifts. In this evolving environment, cryptocurrencies are poised to play a highly disruptive role. It will be up to us, the citizens, voters, and economic agents of this future society, to figure out how much of a role we want this technology to take and thus which of the two cryptocurrency models ends up dominant. Eleven A NEW NEW ECONOMY Progress is a comfortable disease. —E. E. Cummings Until now, we’ve largely focused on how cryptocurrencies have developed and the benefits and challenges they pose to society. But these new forms of money and ways of organizing commercial activity are not landing in a static, dormant society, as if human beings were just waiting to be woken by a new monetary idea. Society itself is changing, rapidly.


pages: 565 words: 151,129

The Zero Marginal Cost Society: The Internet of Things, the Collaborative Commons, and the Eclipse of Capitalism by Jeremy Rifkin

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3D printing, active measures, additive manufacturing, Airbnb, autonomous vehicles, back-to-the-land, big-box store, bioinformatics, bitcoin, business process, Chris Urmson, clean water, cleantech, cloud computing, collaborative consumption, collaborative economy, Community Supported Agriculture, Computer Numeric Control, computer vision, crowdsourcing, demographic transition, distributed generation, en.wikipedia.org, Frederick Winslow Taylor, global supply chain, global village, Hacker Ethic, industrial robot, informal economy, Intergovernmental Panel on Climate Change (IPCC), intermodal, Internet of things, invisible hand, Isaac Newton, James Watt: steam engine, job automation, John Markoff, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Julian Assange, Kickstarter, knowledge worker, labour mobility, Mahatma Gandhi, manufacturing employment, Mark Zuckerberg, market design, mass immigration, means of production, meta analysis, meta-analysis, natural language processing, new economy, New Urbanism, nuclear winter, Occupy movement, off grid, oil shale / tar sands, pattern recognition, peer-to-peer, peer-to-peer lending, personalized medicine, phenotype, planetary scale, price discrimination, profit motive, QR code, RAND corporation, randomized controlled trial, Ray Kurzweil, RFID, Richard Stallman, risk/return, Ronald Coase, search inside the book, self-driving car, shareholder value, sharing economy, Silicon Valley, Skype, smart cities, smart grid, smart meter, social web, software as a service, spectrum auction, Steve Jobs, Stewart Brand, the built environment, The Nature of the Firm, The Structural Transformation of the Public Sphere, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, Thomas L Friedman, too big to fail, transaction costs, urban planning, Watson beat the top human players on Jeopardy!, web application, Whole Earth Catalog, Whole Earth Review, WikiLeaks, working poor, zero-sum game, Zipcar

While I suspect that capitalism will remain part of the social schema for at least the next half century or so, I doubt that it will be the dominant economic paradigm by the second half of the twenty-first century. Although the indicators of the great transformation to a new economic system are still soft and largely anecdotal, the Collaborative Commons is ascendant and, by 2050, it will likely settle in as the primary arbiter of economic life in most of the world. An increasingly streamlined and savvy capitalist system will continue to soldier on at the edges of the new economy, finding sufficient vulnerabilities to exploit, primarily as an aggregator of network services and solutions, allowing it to flourish as a powerful niche player in the new economic era, but it will no longer reign. I understand that this seems utterly incredible to most people, so conditioned have we become to the belief that capitalism is as indispensable to our well-being as the air we breathe.

[companies] must be able to anticipate selling their products at a profit to someone.11 Summers and DeLong opposed government subsidies to cover the upfront costs, arguing that the shortcomings of “administrative bureaucracy,” “group-think,” and “red-tape” “destroy the entrepreneurial energy of the market.”12 In lieu of government intervention, the two distinguished economists reluctantly suggested that perhaps the best way to protect innovation in an economy where “goods are produced under conditions of substantial increasing returns to scale” was to favor short-term natural monopolies.13 Summers and DeLong made the point that “temporary monopoly power and profits are the reward needed to spur private enterprise to engage in such innovation.”14 They both realized the bind this put private enterprise in, admitting that “natural monopoly does not meet the most basic conditions for economic efficiency: that price equal marginal cost.”15 Indeed, the modus operandi of a monopoly, as every economist knows, is to hold back would-be competitors from introducing new innovations that increase productivity, reduce marginal costs, and lower the price to customers. Nonetheless, Summers and DeLong concluded that in the “new economy” this might be the only way forward. In an incredible admission, the two acknowledged that “the right way to think about this complex set of issues is not clear, but it is clear that the competitive paradigm cannot be fully appropriate . . . but we do not yet know what the right replacement paradigm will be.”16 Summers and DeLong found themselves hopelessly trapped. Although economists and entrepreneurs never intended for the capitalist system to self-destruct (they expected it to reign forever), a careful look at its operating logic reveals the inevitability of a future of near zero marginal cost.

They are also sharing cars, homes, and even clothes with one another via social media sites, rentals, redistribution clubs, and cooperatives, at low or near zero marginal cost. An increasing number of people are collaborating in “patient-driven” health-care networks to improve diagnoses and find new treatments and cures for diseases, again at near zero marginal cost. And young social entrepreneurs are establishing ecologically sensitive businesses, crowdfunding new enterprises, and even creating alternative social currencies in the new economy. The result is that “exchange value” in the marketplace is increasingly being replaced by “shareable value” on the Collaborative Commons. When prosumers share their goods and services on a Collaborative Commons, the rule book that governs a market-exchange economy becomes far less relevant to the life of society. The current debate among economists, business leaders, and public officials on what appears to be a new type of long-term economic stagnation emerging around the world is an indicator of the great transformation taking place as the economy shifts from exchange value in the marketplace to sharable value on the Collaborative Commons.


pages: 313 words: 84,312

We-Think: Mass Innovation, Not Mass Production by Charles Leadbeater

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1960s counterculture, Andrew Keen, barriers to entry, bioinformatics, c2.com, call centre, citizen journalism, clean water, cloud computing, complexity theory, congestion charging, death of newspapers, Debian, digital Maoism, double helix, Douglas Engelbart, Edward Lloyd's coffeehouse, frictionless, frictionless market, future of work, game design, Google Earth, Google X / Alphabet X, Hacker Ethic, Hernando de Soto, hive mind, Howard Rheingold, interchangeable parts, Isaac Newton, James Watt: steam engine, Jane Jacobs, Jaron Lanier, Jean Tirole, jimmy wales, John Markoff, John von Neumann, Kevin Kelly, knowledge economy, knowledge worker, lone genius, M-Pesa, Mark Shuttleworth, Mark Zuckerberg, Marshall McLuhan, Menlo Park, microcredit, new economy, Nicholas Carr, online collectivism, planetary scale, post scarcity, Richard Stallman, Shoshana Zuboff, Silicon Valley, slashdot, social web, software patent, Steven Levy, Stewart Brand, supply-chain management, The Death and Life of Great American Cities, the market place, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, Whole Earth Catalog, Zipcar

The Whole Earth Catalog contained elements now recognisable in trendy Web 2.0-style businesses like eBay and Craigslist. Much of the content was submitted by readers, and those who were first to recommend something interesting got their names listed in the magazine. Brand went on to help create the Whole Earth ’Lectronic Link, an early Internet bulletin board, which in turn spawned the Electronic Frontier Foundation, which campaigns for freedom of speech online, and Wired magazine, the bible of the New Economy. More than any other magazine, Wired lionised technology entrepreneurs as the carriers of revolution. By 1971, however, the workload on the Whole Earth Catalog was taking its toll on Brand and he decided to close the magazine down with a Demise Party, held on 21 June at the Palace of Fine Arts in the centre of San Francisco. The entertainment included clowns, belly dancers, trampolinists and a band called Golden Toad who played Irish jigs and Tibetan temple music.

They are collaborative individualists – they have a strong sense of their individual rights, ambitions and aspirations but they have grown up being highly social, thanks to the web and mobile phones. When my stepdaughter Henrietta organises her friends with text messages they are like an electronic herd grazing across north London until they converge on the same bar. Worries that they are over-socialised are wide of the mark, especially as most critics of the new economy, such as Richard Sennett,complain of exactly the opposite: that young people are too individualistic and atomised. If Sennett is right, we need more social tethering, not less. The web is certainly changing how young people establish their sense of individuality; it is not extinguishing it. Our freedom as consumers has also grown, not only because we can now search more easily across many more products but also because the digital economy allows a far greater diversity of products to co-exist.

Clark, Design Rules (Cambridge, MA/London: MIT Press, 2000) Chapter 4 1 Richard Sennett, The Culture of the New Capitalism (New Haven, CT/London: Yale University Press, 2006) 2 Mitch Kapor, blog.kapor.com 3 Henry Chesbrough, Wim Vanhaverbeke and Joel West (Eds), Open Innovation: Researching a New Paradigm (Oxford University Press, 2006) 4 John Hartley, ‘Culture Business and the Value Chain of Meaning’, The New Economy, Creativity and Consumption – A Symposium (Brisbane: Queensland University of Technology Publications, 2002), pp. 39–46 5 http://www.blizzard.com/inblizz/profile.shtml 6 Nicolas Ducheneaut, Nicholas Yee, Eric Nickell and Robert J. Moore, ‘Alone Together? Exploring the Social Dynamics of Massively Multiplayer Online Games’, Conference on Human Factors in Computing Systems,2006, p. 3. Available from http://www.parc.xerox.com/ research/publications/files/5599.pdf 7 David Barboza, ‘Ogre to Slay?


pages: 318 words: 85,824

A Brief History of Neoliberalism by David Harvey

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affirmative action, Asian financial crisis, Berlin Wall, Bretton Woods, business climate, capital controls, centre right, collective bargaining, creative destruction, crony capitalism, debt deflation, declining real wages, deglobalization, deindustrialization, Deng Xiaoping, Fall of the Berlin Wall, financial deregulation, financial intermediation, financial repression, full employment, George Gilder, Gini coefficient, global reserve currency, illegal immigration, income inequality, informal economy, labour market flexibility, land tenure, late capitalism, Long Term Capital Management, low-wage service sector, manufacturing employment, market fundamentalism, mass immigration, means of production, Mexican peso crisis / tequila crisis, Mont Pelerin Society, mortgage tax deduction, neoliberal agenda, new economy, Pearl River Delta, phenotype, Ponzi scheme, price mechanism, race to the bottom, rent-seeking, reserve currency, Ronald Reagan, Silicon Valley, special economic zone, structural adjustment programs, the built environment, The Chicago School, transaction costs, union organizing, urban renewal, urban sprawl, Washington Consensus, Winter of Discontent

Since degree of neoliberalization was increasingly taken by the IMF and the World Bank as a measure of a good business climate, the pressure on all states to adopt neoliberal reforms ratcheted upwards.2 Thirdly, the Wall Street–IMF–Treasury complex that came to dominate economic policy in the Clinton years was able to persuade, cajole, and (thanks to structural adjustment programmes administered by the IMF) coerce many developing countries to take the neoliberal road.3 The US also used the carrot of preferential access to its huge consumer market to persuade many countries to reform their economies along neoliberal lines (in some instances through bilateral trade agreements). These policies helped produce a boom in the US in the 1990s. The US, riding a wave of technological innovation that underpinned the rise of a so-called ‘new economy’, looked as if it had the answer and that its policies were worthy of emulation, even though the relatively full employment achieved was at low rates of pay under conditions of diminishing social protections (the number of people without health insurance grew). Flexibility in labour markets and reductions in welfare provision (Clinton’s draconian overhaul of ‘the welfare system as we know it’) began to pay off for the US and put competitive pressures on the more rigid labour markets that prevailed in most of Europe (with the exception of Britain) and Japan.

The most immediate question concerns what sort of crisis might serve the US best in resolving its own situation, for that choice is indeed within the realm of policy options. In presenting these options it is important to recall that the US has not been immune to financial difficulties over the last twenty years. The stock market crash of 1987 deleted nearly 30 per cent of asset values, and at the trough of the crash that followed the bursting of the new economy bubble in the late 1990s more that $8 trillion in paper assets was lost, before the recovery to former levels. The bank and savings and loan failures of 1987 cost nearly $200 billion to remedy, and in that year matters became so bad that William Isaacs, chairman of the Federal Deposit Insurance Corporation, warned that ‘the US may be headed towards the nationalization of banking’. And the huge bankruptcies of Long Term Capital Management, Orange County, and others who speculated and lost, followed by the collapse of several major companies in 2001–2 in the midst of astonishing accounting lapses, not only cost the public dear but also demonstrated how fragile and fictitious much of neoliberal financialization has become.

The story of Thatcher’s path to neoliberalism is outlined in D. Yergin and J. Stanislaw, The Commanding Heights: The Battle Between Government and Market Place that is Remaking the Modern World (New York: Simon & Schuster, 1999). 18. L. Panitch and S. Gindin, ‘Finance and American Empire’, in The Empire Reloaded: Socialist Register 2005 (London: Merlin Press, 2005) 46–81. 19. D. Henwood, After the New Economy (New York: New Press, 2003), 208. 20. L. Alvarez, ‘Britain Says U.S. Planned to Seize Oil in ’73 Crisis’, New York Times, 4 Jan. 2004, A6. On the Saudi agreement to recycle petrodollars through the US see P. Gowan, The Global Gamble: Washington’s Faustian Bid for World Dominance (London: Verso, 1999), 20. 21. D. Harvey, The New Imperialism (Oxford: Oxford University Press, 2003); N. Smith, American Empire, Roosevelt’s Geographer and the Prelude to Globalization (Berkeley: University of California Press, 2003); N.

When the Money Runs Out: The End of Western Affluence by Stephen D. King

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Albert Einstein, Asian financial crisis, asset-backed security, banking crisis, Basel III, Berlin Wall, Bernie Madoff, British Empire, capital controls, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, congestion charging, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, cross-subsidies, debt deflation, Deng Xiaoping, Diane Coyle, endowment effect, eurozone crisis, Fall of the Berlin Wall, financial innovation, financial repression, fixed income, floating exchange rates, full employment, George Akerlof, German hyperinflation, Hyman Minsky, income inequality, income per capita, inflation targeting, invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, joint-stock company, liquidationism / Banker’s doctrine / the Treasury view, liquidity trap, London Interbank Offered Rate, loss aversion, market clearing, mass immigration, moral hazard, mortgage debt, new economy, New Urbanism, Nick Leeson, Northern Rock, Occupy movement, oil shale / tar sands, oil shock, old age dependency ratio, price mechanism, price stability, quantitative easing, railway mania, rent-seeking, reserve currency, rising living standards, South Sea Bubble, sovereign wealth fund, technology bubble, The Market for Lemons, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas Malthus, Tobin tax, too big to fail, trade route, trickle-down economics, Washington Consensus, women in the workforce, working-age population

The second, predating the financial crisis that began in 2007, was simply a loss of momentum following the exuberance associated 28 4099.indd 28 29/03/13 2:23 PM Taking Progress for Granted with the so-­called ‘new economy’ in the 1990s. This seemingly miraculous development offered an intoxicating mix of rapid productivity gains (particularly in the US), technological advance, strong growth, low inflation and ever higher stock prices. The elixir of ever rising wealth that, temporarily, had been Japan’s monopoly to enjoy in the 1980s had been uncovered by the US and, in patchy fashion, by Europe too. Technology companies with only the vaguest of business plans found that money grew on trees, a repeat of the extraordinary events first seen in the 1720 South Sea Bubble when, famously, a company hoped to raise money ‘for carrying out an undertaking of great advantage, but nobody to know what it is’. Such was the enthusiasm for the new economy that Business Week ran the following story at the end of January 2000 under the headline ‘The New Economy: It works in America: Will it go global?’

Such was the enthusiasm for the new economy that Business Week ran the following story at the end of January 2000 under the headline ‘The New Economy: It works in America: Will it go global?’ It seems almost too good to be true. With the information technology sector leading the way, the U.S. has enjoyed almost 4% growth since 1994. Unemployment has fallen from 6% to about 4%, and inflation just keeps getting lower and lower. Leaving out food and energy, consumer inflation in 1999 was only 1.9%, the smallest increase in 34 years. This spectacular boom was not built on smoke and mirrors. Rather, it reflects a willingness to undertake massive risky investments in innovative information technology, combined with a decade of retooling U.S. financial markets, governments, and corporations to cut costs and increase flexibility and efficiency. The result is the so-­called New Economy: faster growth and lower inflation.

L. 41 Knickerbocker Trust Company 131 Korea 14, 193, 195, 202–4, 205 Krugman, Paul 112–15, 117, 118–19 labour market 115–16, 252 productivity 53 Landes, David 26 Latin American debt crisis 216 Layard, Richard 114, 117 Lehman Brothers 30, 255 Leveson inquiry 148 Libor 126 life expectancy 47 liquidity 84, 90 liquidity trap 72 Liquidity Coverage Ratio (LCR) 83 Little Dorrit (Dickens) 138–9 living standards 11, 27, 158, 169, 180–1 belief in ever rising 13, 34 China 27 Indonesia 197 Japan 23 Korea 195 late 19th century 185, 186 Malaysia 198 post-Second World War 139 US 11, 163 loan-to-value ratios, mortgage 51–2 Long Depression 189–90 loss aversion 40–1 lotteries 164–5 Macroeconomic Imbalance Procedure (MIP) 233 macroeconomic policies 32, 60, 121, 181, 253 Japan 21 macroprudential rules 256 Madoff, Bernie 35 Mahathir Mohamad 198–201, 205 Malaysia 193, 198–201, 205 Malthus, Thomas 37–9 Manchester United 165–6 Marr, Wilhelm 189 Marx, Karl 57, 179–80 Mary Poppins 131–2 May Report 98 Megawati Sukarnoputri 197 Mellon, Andrew 106, 108 Mexico 158 Mieno, Yasushi 21 miners 103–4 Mississippi 163 mistrust creditors and debtors 141 cross-border 176 endemic 147–9 governments 140, 217–18 of money 219–21 and political extremism 227 monetarism 59 monetary policy 58, 68–74, 77–9, 87–9, 97, 111–12 a new monetary framework 245–50 see also Gold Standard; interest rates; quantitative easing (QE) Monetary Policy Committee 90–1 monetary unions 236–7 see also eurozone moral hazard 62 mortgage-backed securities 30, 65, 136–7 mortgages 51–2, 63–5 Napoleon Bonaparte 156 Napoleon III 182 National Bank of North America 131 national incomes 32, 49–50, 141–2, 247 Germany 33 Japan 32 UK 33, 110–11, 112 US 33, 70, 109, 115, 117–18 284 4099.indd 284 29/03/13 2:23 PM Index National Lottery 164–5 nationalism 228 the Netherlands 48 New Deal 108–9 ‘new economy’ of the 1990s 29–30 New Order (Indonesia) 197 New Zealand 187 Nicholson, Viv 50 Nigeria 19 Northern Rock 30, 51–2, 129, 255 Norway 158 Occupy movement 162, 170–1 Office for Budget Responsibility 33 Oliver Twist (Dickens) 43 Osborne, George 231 Overend, Gurney and Co. 131 painkillers 70–1, 89 ‘The Panic of 1873’ 186 Paul, Ron 93 Peasants’ Revolt 213 Pension Protection Fund (PPF) 172 pensioners’ voting patterns 88 pensions 47, 51, 75, 171–3, 174 per capita incomes 27, 49, 159–60, 163 Argentina and Germany 14 China 251 France 101, 105 Germany 101, 105 India 27, 251 Indonesia 197 Japan 21 Korea 202 Malaysia 198 UK 1, 44, 101, 105 US 14, 101, 105 Perón, Eva 16 Perón, Juan 16–17 Pew Center report 173 Pickett, Kate 159 Pigou, Arthur 59 policies and central bankers 65 fiscal 58, 66–7, 69–70, 77–8, 246–7 macroeconomic 21, 32, 60, 121, 181, 253 monetary 58, 68–74, 77–9, 87–9, 97, 111–12 new monetary framework 245–50 political extremism 226–9 politics and central bankers 78, 89–90, 91–5 and economics 24–6, 34, 102, 191–2, 217 and the eurozone 224–5, 237 and expectations 152–3 and income inequality 160–1 and lack of trust 147–8, 149 and monetary regimes 119–20 voters 50, 78, 88, 222, 242–4 poll tax 211 populations, ageing 78, 88, 250 age-related expenditure 48 generational divide 171–4, 241, 243–5 Germany 136 Japan 23, 25 Portugal 50, 146, 158, 191 precious metal standards 183–4 see also Gold Standard prices asset 73 commodity 77, 109, 116–17 rising 157 see also deflation; inflation property sector see housing markets protectionism 214–15 capital controls 16, 199–200, 201, 234 tariffs 16 Protestant work ethic 26, 28 public sector see governments public spending 49–50, 66, 142, 147–8, 203 government spending 58, 109, 119 social spending 45–7 quantitative easing (QE) 72–82, 84–6, 91, 97, 176–7 ratings agencies 234–5 rationing 114–15, 142–3 recessions 2 recovery from the Asian crisis 195–6, 204–5, 206, 208–9 UK in the 1930s 101–2 redistribution by stealth 90 Reform Acts 222, 242–3 regulation 125, 256 dangers of further 214, 251 dollar transactions 177 reduction 168 the regulatory trap 83–4 Statute of Labourers 213 renminbi (currency) 177 Réveillon, Jean-Baptiste 155–6 Ricardo, David 183–4 Richard II 211–12 ringgit (currency) 198 285 4099.indd 285 29/03/13 2:23 PM When the Money Runs Out risk and banks 255–6 creditors and debtors imbalance 234 and financial services 168 and rapid economic change 170 risk aversion 216 Roosevelt, Franklin Delano 107–9, 117–18, 119, 219 Royal Bank of Scotland 30 Royal Navy 99 Russia 117, 135 Rwanda 19 Samuel, Herbert 104 Saudi Arabia 117, 135 savers and banks 136 confidence 65 and illusions 137 and income inequality 162–3 and interest rates 90, 91, 97 and the subprime boom 133–4 schisms between debtors and creditors 174–7, 191 generational 170–4 income inequality 158–70 Schwartz, Anna 59, 106, 188 second-hand car market 123–4 Sierra Leone 163 silver standard 183 SIVs (structured investment vehicles) 129–30 Skidelsky, R. and E. 37 Smith, Adam 39–40, 207 melancholy state 42, 124–5, 159–60 Snowden’s budget 99–102, 105 soccer 165 social contract, between generations 244–5 social insurance 44–8 social security systems 12 social spending 45–7 Soros, George 200 South Korea 14, 193, 195, 202–4, 205 South Sea Bubble 29 space exploration 9–10, 35 Spain deficit 54, 134 and the eurozone 191, 235–6 exports 82 fiscal position 85 government borrowing 144 interest rates 146 political disenfranchisement 95 property bubble 140 suicide of Amaia Egana 153 spending government 58, 109, 119 public sector 49–50, 66, 142, 147–8, 203 social 45–7 stagnation 37–43, 50, 52–3, 158, 219 and political extremism 227–8 Standard & Poor’s 80 ‘stately home’ effect 221–3 Statute of Labourers 211, 213 sterling 98–106, 110 Stern Review 38–9 stimulus 3–4 and jobs 116 monetary and fiscal 30, 57–8, 181 Paul Krugman 112–15, 118–19 policy 32, 69–70, 82 political debate 205 prior to the financial crisis 67 stock markets 20–1, 30, 193 stock-market crashes 18, 61–2, 66, 99, 186 Straw, Jack 212 structured investment vehicles (SIVs) 129–30 subprime boom 130, 133–4 crisis 190 Suharto 196–7, 205 surpluses 66, 135–7, 204, 232–4 Sweden 158, 204 Switzerland 158, 184 Taiwan 14 Takeshita, Noburo 24 Tanzania 19 tariffs 16 tax avoidance 49, 211, 214 taxation ancien régime and the French Revolution 154–5 death duties 139 medieval poll tax 211 taxpayers 145, 170, 174, 215, 254 technological progress 2–3, 10–11 dotcom bubble 169 and financial industry wages 167 Industrial Revolution 38 Thailand 193, 195 Thaler, R.


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The Option of Urbanism: Investing in a New American Dream by Christopher B. Leinberger

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American Society of Civil Engineers: Report Card, asset allocation, big-box store, centre right, commoditize, credit crunch, David Brooks, desegregation, Donald Trump, drive until you qualify, edge city, full employment, Intergovernmental Panel on Climate Change (IPCC), Jane Jacobs, knowledge economy, McMansion, mortgage tax deduction, new economy, New Urbanism, peak oil, Ponzi scheme, postindustrial economy, RAND corporation, Report Card for America’s Infrastructure, reserve currency, Richard Florida, Seaside, Florida, the built environment, transit-oriented development, urban planning, urban renewal, urban sprawl, walkable city, white flight

The next American Dream is not based upon nostalgic memory of what we have lost—the memory of 1955 Hill Valley—in our rush to build drivable sub-urban development. Nor is it just the recognition that the unintended consequences of 1985 Hill Valley, drivable sub-urbanism, including a myriad of social, environmental, fiscal, and economic issues, need to be addressed and solved. The next American Dream is based upon the recognition that the market wants a built environment that provides choice, lines up with the new economy that is emerging and is more environmentally, fiscally, and economically sustainable. This book also points out some of the probable unintended consequences of this next American Dream—it wouldn’t be fair if we didn’t leave our grandchildren some problems to solve. 1 F UTUR AMA AND THE 20 TH -C ENTURY A MERICAN D REAM I magine yourself living a middle-class life in 1939 in one of America’s cities, such as Philadelphia, Chicago, or Seattle.

This second version of the American Dream manifested itself far differently than the agricultural version in its effect on the built environment, because a suburban subdivision obviously is laid out on the ground far differently than is a farm. However, this change showed that the American Dream is not immutable; its physical development could be fundamentally modified. In 1920, manufacturing jobs caught up with agricultural jobs; each sector had about twenty-six percent of the total jobs in the economy. This signaled the shift to the then new economy, the industrial economy, which was primarily based in metropolitan areas. In the 1920 U.S. Census, for the first time in American history, a majority of Americans were living in metropolitan areas, not in rural areas.24 24 | THE OPTION OF URBANISM Manufacturing jobs stayed at about twenty-six percent of all U.S. jobs until 1970, the peak of the industrial economy. But it was not just an industrial economy, it was a car-based industrial economy.25 At the 1970s peak, the automotive sector of the economy (car manufacturing and suppliers) held 1.7 percent of all jobs and accounted for two percent of the economy.26 However, these figures do not count the other sectors of the economy necessary for automotive manufacturing, maintenance, operations, and finance—the oil industry, steel, mining, car sales and repair, car finance and insurance, road building and repair, etc., which multiplies those totals many times.27 In total, the direct impact of automobile manufacturing and the many ancillary businesses was at least ten percent of all jobs at its peak and, therefore, possibly a third of all jobs when the indirect impact (the “ripple effect”) is considered.

The late sociologist Robert Nisbet was convinced that boredom is a major cause in motivating societal actions—people got bored with the negative consequences. The boredom of having only the option of drivable sub-urban life, including the unintended consequences of ever longer and more congested commutes and the running of nearly every errand in a car, is not to be underestimated. T H E M A R K E T R E D I S C OV E R S WA L K A B L E U R B A N I S M | 9 1 Alongside these demographic changes, the economy has made a fundamental change. The new economy has been called many things: the virtual economy, the service economy, the postindustrial economy, the knowledge economy, and the creative economy. This has come to mean a focus on the up front, creative portion of a product or service development and the back-end marketing and distribution of that product or service. The actual production may be outsourced abroad, or it may be accomplished with fewer employees in this country due to advances in technology, which lead to increased productivity.


pages: 270 words: 79,068

The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers by Ben Horowitz

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Airbnb, business intelligence, cloud computing, financial independence, Google Glasses, hiring and firing, Isaac Newton, Jeff Bezos, Marc Andreessen, Mark Zuckerberg, move fast and break things, move fast and break things, new economy, nuclear winter, Peter Thiel, Productivity paradox, random walk, Ronald Reagan, Silicon Valley, six sigma, Steve Ballmer, Steve Jobs

More than that, the IPO was an earthquake in the business world. As my friend and investment banker Frank Quattrone said at the time, “No one wanted to tell their grandchildren that they missed out on this one.” The deal changed everything. Microsoft had been in business for more than a decade before its IPO; we’d been alive for sixteen months. Companies began to get defined as “new economy” or as “old economy.” And the new economy was winning. The New York Times called the Netscape IPO “world-shaking.” But there was a crack in our armor: Microsoft announced that it would be bundling its browser, Internet Explorer, with its upcoming breakthrough operating system release, Windows 95—for free. This posed a huge problem to Netscape, because nearly all of our revenue came from browser sales, and Microsoft controlled more than 90 percent of operating systems.

We deconstructed IIS and found that it had every feature that we had—including the security in our high-end product—and was five times faster. Uh-oh. I figured that we had about five months before Microsoft released IIS to solve the problem or else we would be toast. In the “old economy,” product cycles typically took eighteen months to complete, so this was an exceptionally short time frame even in the “new economy.” So I went to see our department head, Mike Homer. With the possible exception of Marc, Mike Homer was the most significant creative force behind Netscape. More important, the worse a situation became, the stronger Mike would get. During particularly brutal competitive attacks, most executives would run from the press. Mike, on the other hand, was always front and center. When Microsoft unveiled its famous “embrace and extend” strategy—a dramatic pivot to attack Netscape—Mike took every phone call, sometimes even talking to two reporters at once with a phone in each hand.

The NASDAQ peaked at 5,048.62 on March 10, 2000—more than double its value from the year before—and then fell by 10 percent ten days later. A Barron’s cover story titled “Burning Up” predicted what was to come. By April, after the government declared Microsoft a monopoly, the index plummeted even further. Startups lost massive value, investors lost massive wealth, and dot-coms, once heralded as the harbinger of a new economy, went out of business almost overnight and became known as dot-bombs. The NASDAQ eventually fell below 1,200, an 80 percent drop from its peak. We thought our business might have been the fastest growing of all time at that point. That was the good news. The bad news was that we needed to raise even more money in this disastrous climate; nearly all of the $66 million in equity and debt we had raised had already been deployed in our quest to build the number-one cloud service and to support our now fast-growing set of customers.


pages: 255 words: 75,172

Sleeping Giant: How the New Working Class Will Transform America by Tamara Draut

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affirmative action, Affordable Care Act / Obamacare, always be closing, battle of ideas, big-box store, blue-collar work, collective bargaining, creative destruction, David Brooks, declining real wages, deindustrialization, desegregation, Detroit bankruptcy, Donald Trump, Edward Glaeser, ending welfare as we know it, Ferguson, Missouri, financial deregulation, full employment, immigration reform, income inequality, invisible hand, job satisfaction, knowledge economy, knowledge worker, low skilled workers, mass incarceration, minimum wage unemployment, mortgage tax deduction, new economy, obamacare, occupational segregation, payday loans, pink-collar, Plutocrats, plutocrats, Powell Memorandum, profit motive, race to the bottom, Ralph Nader, rent-seeking, rising living standards, Ronald Reagan, The Bell Curve by Richard Herrnstein and Charles Murray, The Wealth of Nations by Adam Smith, trickle-down economics, union organizing, upwardly mobile, War on Poverty, white flight, women in the workforce, young professional

The most profound impact of globalization and technology has been the upheaval experienced by workers without college degrees. With so many factories shuttered, typical “men’s work” steadily eroded and lower-paying service jobs took its place. As the economic contribution of these former working-class heroes to our nation dwindled, millions of men became zeroes in many people’s minds. They seemed to be a dusty anachronism in a sparkling new economy. Meanwhile, the ranks of women in the workforce grew steadily during the 1980s and 1990s, and waves of immigration began to change the ethnic and racial composition of the workforce. Seeking refuge from the economic dislocation, millions of Americans earned bachelor’s and advanced degrees, a process that perversely exacerbated already hardened lines of privilege, with whites earning college degrees at a much greater rate than blacks or Latinos.

Department of Labor, Bureau of Labor Statistics, Occupational Outlook Handbook, 2014–15, Food and Beverage Serving and Related Workers, at http://www.​bls.​gov/​ooh/​food-​preparation-​and-​serving/​food-​and-​beverage-​serving-​and-​related-​workers.​htm#tab-1. Chapter Two: The New Indignity of Work 1. Annalyn Kurtz, “Subway Leads Fast Food in Under-Paying Workers,” CNN Money, May 1, 2014, at http://money.​cnn.​com/​2014/​05/​01/​news/​economy/​subway-​labor-​violations/; http://www.​nelp.​org/​page/​-/​Justice/​2014/​Whos-​the-​Boss-​Restoring-​Accoun​tability-​Labor-​Standards-​Outsourced-​Work-​Report.​pdf​?nocdn=1. 2. Author’s analysis of Department of Labor’s “Wage and Hour Compliance Action Database,” at http://ogesdw.​dol.​gov/​views/​data_​summary.​php. 3. Hart Research Memorandum, “Key Findings for Survey of Fast Food Workers, April 1, 2014,” at http://big.​assets.​huffing​tonpost.​com/​National​Wage​The​ftPoll​Memo.​pdf; Tiffany Hsu, “Nearly 90% of Fast-Food Workers Allege Wage Theft, Survey Finds,” Los Angeles Times, April 1, 2014, at http://articles.​latimes.​com/​2014/​apr/​01/​business/​la-​fi-​mo-​wage-​theft-​survey-​fast-​food-​20140331. 4.

Hart Research Memorandum, “Key Findings for Survey of Fast Food Workers, April 1, 2014,” at http://big.​assets.​huffing​tonpost.​com/​National​Wage​The​ftPoll​Memo.​pdf; Tiffany Hsu, “Nearly 90% of Fast-Food Workers Allege Wage Theft, Survey Finds,” Los Angeles Times, April 1, 2014, at http://articles.​latimes.​com/​2014/​apr/​01/​business/​la-​fi-​mo-​wage-​theft-​survey-​fast-​food-​20140331. 4. U.S. Department of Labor, Wage and Hour Division, “Fiscal Year Statistics for WHD, FY 1997-FY2014,” at http://www.​dol.​gov/​whd/​statistics/​statstables.​htm#flsa. 5. Kurtz, “Subway Leads Fast Food Industry.” 6. Annalyn Kurtz, “10 Big Overtime Pay Violators,” CNN Money, August 5, 2014, at http://money.​cnn.​com/​gallery/​news/​economy/​2014/​03/​13/​overtime-​violations/​?iid=EL. 7. Ibid. 8. Ross Eisenbrey, “Improving the Quality of Jobs Through Better Labor Standards,” Full Employment, April 2, 2014, at http://www.​pathto​fullem​ployment.​org/​wp-​content/​uploads/​2014/​04/​eisenbrey.​pdf. 9. Brady Meixell and Ross Eisenbrey, “An Epidemic of Wage Theft Is Costing Workers Hundreds of Millions of Dollars a Year,” Economic Policy Institute, September 11, 2014, at https://docs.​google.​com/​viewer?​


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The Third Industrial Revolution: How Lateral Power Is Transforming Energy, the Economy, and the World by Jeremy Rifkin

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3D printing, additive manufacturing, Albert Einstein, barriers to entry, borderless world, carbon footprint, centre right, collaborative consumption, collaborative economy, Community Supported Agriculture, corporate governance, decarbonisation, distributed generation, en.wikipedia.org, energy security, energy transition, global supply chain, hydrogen economy, income inequality, industrial cluster, informal economy, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Isaac Newton, job automation, knowledge economy, manufacturing employment, marginal employment, Martin Wolf, Masdar, megacity, Mikhail Gorbachev, new economy, off grid, oil shale / tar sands, oil shock, open borders, peak oil, Ponzi scheme, post-oil, purchasing power parity, Ray Kurzweil, Ronald Reagan, Silicon Valley, Simon Kuznets, Skype, smart grid, smart meter, Spread Networks laid a new fibre optics cable between New York and Chicago, supply-chain management, the market place, The Wealth of Nations by Adam Smith, Thomas Malthus, too big to fail, transaction costs, trickle-down economics, urban planning, urban renewal, Yom Kippur War, Zipcar

The new, second-generation electricity communication, by contrast, is distributed in nature and ideally suited to manage distributed forms of energy—that is, renewable energy—and the lateral kinds of business activity that accompany such an energy regime. The new distributed communications technologies would have to wait another two decades to hook up with distributed energies and create the basis for a new infrastructure and a new economy. In the 1990s and the first decade of the twenty-first century, the Information and Communication Technology (ICT) revolution was grafted on to the older, centralized Second Industrial Revolution. It was, from the start, an unnatural fit. While ICT enhanced productivity, streamlined practices, and created some new business opportunities and jobs—which probably extended the useful life of an aging industrial model—it could never achieve its full distributed communication potential because of the inherent constraints that come with being attached to a centralized energy regime and commercial infrastructure.

The funds will be used to install digital electric meters, transmission grid sensors, and energy storage technologies to enable high-tech electricity distribution; this will transform the existing power grid into an Internet of energy. CPS Energy in San Antonio, Texas; Xcel Utility in Boulder, Colorado; and PG&E, Sempra, and Southern ConEdison in California will be laying down parts of the smart grid over the next several years. The smart grid is the backbone of the new economy. Just as the Internet created thousands of new businesses and millions of new jobs, so too will the intelligent electricity network—except “this network will be 100 or 1,000 times larger than the Internet,” says Marie Hattar, vice president of marketing in Cisco’s network systems solutions group. Hattar points out that while “some homes have Internet access, . . . some don’t. Everyone has electricity access—all of those homes could potentially be connected.”39 For twenty years, heads of state and global business leaders asked me, “How do you expect to manage the energy needs of a complex global economy with ‘soft’ renewable energies?”

Again, this assumes that the city takes a systems approach in laying out a new infrastructure. The real multiplier effect occurs when the interaction between pillars gives rise to a new emergent paradigm. While each of the five pillars that make up the Third Industrial Revolution infrastructure, taken alone, would add only marginal value to the economy, when they are connected in an interactive system that acts like an evolving organism, the new economy takes off. And just like any organism, it passes through a juvenile, mature, and senescent stage. I stress this because our team ran up against a miscommunication that threatened to undermine our efforts in the weeks just before CPS was to formally release the master plan to the public. CPS told news sources that our Third Industrial Revolution plan was going to cost a whopping $16 billion and significantly increase electricity bills.


pages: 448 words: 142,946

Sacred Economics: Money, Gift, and Society in the Age of Transition by Charles Eisenstein

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Albert Einstein, back-to-the-land, bank run, Bernie Madoff, big-box store, Bretton Woods, capital controls, clean water, collateralized debt obligation, commoditize, corporate raider, credit crunch, David Ricardo: comparative advantage, debt deflation, deindustrialization, delayed gratification, disintermediation, diversification, fiat currency, financial independence, financial intermediation, fixed income, floating exchange rates, Fractional reserve banking, full employment, global supply chain, God and Mammon, happiness index / gross national happiness, hydraulic fracturing, informal economy, invisible hand, Jane Jacobs, land tenure, land value tax, Lao Tzu, liquidity trap, lump of labour, McMansion, means of production, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, new economy, off grid, oil shale / tar sands, Own Your Own Home, Paul Samuelson, peak oil, phenotype, Ponzi scheme, profit motive, quantitative easing, race to the bottom, Scramble for Africa, special drawing rights, spinning jenny, technoutopianism, the built environment, Thomas Malthus, too big to fail

Chapter 15: Local and Complementary Currency The Catch-22 of Local Currency Experiments in Local Money Reclaiming the Credit Commons Chapter 16: Transition to Gift Economy Chapter 17: Summary and Roadmap 1. Negative-Interest Currency 2. Elimination of Economic Rents, and Compensation for Depletion of the Commons 3. Internalization of Social and Environmental Costs 4. Economic and Monetary Localization 5. The Social Dividend 6. Economic Degrowth 7. Gift Culture and P2P Economics PART III: LIVING THE NEW ECONOMY Chapter 18: Relearning Gift Culture Chapter 19: Nonaccumulation Chapter 20: Right Livelihood and Sacred Investing The Dharma of Wealth Robbing Peter to Pay Paul Old Accumulations to New Purposes Right Livelihood Chapter 21: Working in the Gift Trusting Gratitude Business in the Gift The Sacred Professions Chapter 22: Community and the Unquantifiable Chapter 23: A New Materialism Conclusion: The More Beautiful World Our Hearts Tell Us Is Possible Appendix: Quantum Money and the Reserve Question Bibliography About the Author INTRODUCTION The purpose of this book is to make money and human economy as sacred as everything else in the universe.

Obviously, if we are to make money into something sacred, nothing less than a wholesale revolution in money will suffice, a transformation of its essential nature. It is not merely our attitudes about money that must change, as some self-help gurus would have us believe; rather, we will create new kinds of money that embody and reinforce changed attitudes. Sacred Economics describes this new money and the new economy that will coalesce around it. It also explores the metamorphosis in human identity that is both a cause and a result of the transformation of money. The changed attitudes of which I speak go all the way to the core of what it is to be human: they include our understanding of the purpose of life, humanity’s role on the planet, the relationship of the individual to the human and natural community; even what it is to be an individual, a self.

Are people happier living in prefab units or McMansions than they were in old New England stone farmhouses or wigwams? Are we happier? Has any new need been met? Even if it has not, I won’t discard the entire corpus of technology, despite all the ruin it has wrought upon nature and humanity. In fact, the achievements of science and technology do meet important needs, needs that are key drivers of sacred economics. They include the need to explore, to play, to know, and to create what we in the New Economy movement call “really cool stuff.” In a sacred economy, science, technology, and the specialization of labor that goes along with them will continue to be among the agents for the meeting of these needs. We can see this higher purpose of science and technology already, like a recessive gene that crops up irrepressibly in spite of its endless commercialization. It is in the heart of every true scientist and inventor: the spirit of wonder, excitement, and the thrill of novelty.


pages: 504 words: 126,835

The Innovation Illusion: How So Little Is Created by So Many Working So Hard by Fredrik Erixon, Bjorn Weigel

Airbnb, Albert Einstein, asset allocation, autonomous vehicles, barriers to entry, Basel III, Bernie Madoff, bitcoin, Black Swan, blockchain, BRICs, Burning Man, Capital in the Twenty-First Century by Thomas Piketty, Cass Sunstein, Clayton Christensen, Colonization of Mars, commoditize, corporate governance, corporate social responsibility, creative destruction, crony capitalism, dark matter, David Graeber, David Ricardo: comparative advantage, discounted cash flows, distributed ledger, Donald Trump, Elon Musk, Erik Brynjolfsson, fear of failure, first square of the chessboard / second half of the chessboard, Francis Fukuyama: the end of history, George Gilder, global supply chain, global value chain, Google Glasses, Google X / Alphabet X, Gordon Gekko, high net worth, hiring and firing, Hyman Minsky, income inequality, income per capita, index fund, industrial robot, Internet of things, Jeff Bezos, job automation, job satisfaction, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, joint-stock company, Joseph Schumpeter, Just-in-time delivery, Kevin Kelly, knowledge economy, labour market flexibility, laissez-faire capitalism, lump of labour, Lyft, manufacturing employment, Mark Zuckerberg, market design, Martin Wolf, mass affluent, means of production, Mont Pelerin Society, Network effects, new economy, offshore financial centre, pensions crisis, Peter Thiel, Potemkin village, price mechanism, principal–agent problem, Productivity paradox, QWERTY keyboard, RAND corporation, Ray Kurzweil, rent-seeking, risk tolerance, risk/return, Robert Gordon, Ronald Coase, Ronald Reagan, savings glut, Second Machine Age, secular stagnation, Silicon Valley, Silicon Valley startup, Skype, sovereign wealth fund, Steve Ballmer, Steve Jobs, Steve Wozniak, technological singularity, telemarketer, The Chicago School, The Future of Employment, The Nature of the Firm, The Wealth of Nations by Adam Smith, too big to fail, total factor productivity, transaction costs, transportation-network company, tulip mania, Tyler Cowen: Great Stagnation, University of East Anglia, unpaid internship, Vanguard fund, Yogi Berra

The fact that a lot of entertainment and information is free at marginal cost is because the marginal value of those services is pretty low. It is a standard lesson of microeconomics that marginal cost equals marginal value – and new digital services are better than offline services in exploiting the relation between costs and value for consumers, especially at the margin. Present criticism of GDP standards often resembles the idea some 20 years ago about a “new economy” that would change the way the economy works. Like the belief in the new economy, there are charges of GDP mismeasurement that confuse definitions of GDP and value-added creation in the economy. Some of it goes back to corporate valuation: the high valuation of companies is a sign of markets understanding the real value generation of, say, free online services that statistical authorities are not capturing. However, despite high corporate valuations, many technology firms clearly struggle to develop sustainable business models.

., “Growth and Renewal in the United States,” 28–9. 57.OECD, “Growing Income Inequality in OECD Countries.” 58.Mui, “Companies Have Found Something to Give their Workers.” 59.Mui, “Companies Have Found Something to Give their Workers.” 60.Lawrence, “The Growing Gap between Real Wages and Labor Productivity.” 61.Shapiro, “Income Growth and Decline.” 62.Karabarbounis and Neiman, “The Global Decline of the Labor Share.” 63.Benzell et al., “Robots Are Us.” 64.Groemling, “Falling Labor Share in Germany,” 1–20. 65.Feldstein, “Did Wages Reflect Growth in Productivity?” 66.Bridgam, “Is Labor’s Loss Capital’s Gain?” 67.Diewert and Fox. “The New Economy and an Old Problem.” 68.Lawrence, “Recent Declines in Labor’s Share in US Income.” 69.Acemoglu and Robinson, “The Rise and Decline of General Laws of Capitalism.” 70.Pessoa and Van Reenen, “Decoupling of Wage Growth and Productivity Growth?” 71.Roine and Waldenström, “On the Role of Capital Gains in Swedish Income Inequality.” 72.Konjunktur Institutet, “Lönebildningsrapporten,” 30. 73.US President, “Economic Report,” 34. 74.US President, “Economic Report,” 34. 75.Mokyr, “What Today’s Economic Gloomsayers Are Missing.” 76.Marvin, When Old Technologies Were New. 77.Frey and Osborne, “The Future of Employment,” 45. 78.Ford, Rise of the Robots, 284. 79.Kan, “Foxconn Expects Robots to Take over More Factory Work.” 80.Kan, “Foxconn Expects Robots to Take over More Factory Work.” 81.Kan, “Foxconn’s CEO Backpedals on Robot Takeover at Factories.” 82.IFR, “Robots Improve Manufacturing Success and Create Jobs.” 83.Graetz and Michaels, “Robots at Work.” 84.Fox Nation, “Obama Blames ATMs for High Unemployment.” 85.Bessen, Learning by Doing, 108. 86.Approximately in 1745 in England, and one year later in France. 87.Joyce, Ulysses, 82. 88.Rothschild, “The Sourdough Hotel.” 89.Marx and Engels, The Communist Manifesto, 12. 90.Haltiwanger, Hathaway, and Miranda, “Declining Business Dynamism in the US High-Technology Sector,” 1. 91.Andrews, Criscuolo, and Gal, “Frontier Firms, Technology Diffusion and Public Policy,” 14. 9 The Future and How to Prevent It 1.Toynbee, A Study of History: Abridgement of Volumes I–VI, 273. 2.Buiter, Rahbari, and Seydl, “The Long-Run Decline in Advanced-Economy Investment.” 3.Kotlikoff and Burns, The Clash of Generations, 229. 4.Wilson and Purushothaman, “Dreaming with BRICs.” 5.Xie, “Goldman’s BRIC Era Ends.” 6.Das, India Grows at Night. 7.Magnus, “Hitting a BRIC Wall.” 8.IMF, “Adjusting to Lower Commodity Prices.” 9.Hoenig, “Back to Basics.” 10.The Economist, “One Regulator to Rule Them All.” 11.Zingales, “Does Finance Benefit Society?”

World Economy, 32.9 (2009): 1271–90. Dettmer, Bianka, Fredrik Erixon, Andrea Freytag, and Pierre-Olivier Legault Tremblay, “The Dynamics of Structural Change: Trade between the European Union and China.” Chinese Economy, 44.4 (2011): 42–74. DOI:10.2753/CES1097-1475440403. Diamandis, Peter H., and Steven Kotler, Abundance: The Future Is Better Than You Think. Free Press, 2012. Diewert, W. Erwin, and Kevin J. Fox, “The New Economy and an Old Problem: Net versus Gross Output.” Center for Applied Economic Research, Jan. 2005. Doidge, Craig, G. Andrew Karolyi, and René M. Stulz, “The US Listing Gap.” NBER Working Paper No. 21181. National Bureau of Economic Research, May 2015. Downes, Larry, “Fewer, Faster, Smarter.” Democracy, No. 38 (Fall 2015). At http://www.democracyjournal.org/38/fewer-faster-smarter.php?page=all, page 41.


pages: 162 words: 51,473

The Accidental Theorist: And Other Dispatches From the Dismal Science by Paul Krugman

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Bonfire of the Vanities, Bretton Woods, clean water, collective bargaining, computerized trading, corporate raider, declining real wages, floating exchange rates, full employment, George Akerlof, George Gilder, Home mortgage interest deduction, income inequality, indoor plumbing, informal economy, invisible hand, Kenneth Arrow, knowledge economy, life extension, lump of labour, new economy, Nick Leeson, paradox of thrift, Paul Samuelson, Plutocrats, plutocrats, price stability, rent control, Ronald Reagan, Silicon Valley, trade route, very high income, working poor, zero-sum game

Only a relative handful of “good job” holders (which is to say only a few hundred thousand a year) experience serious reverses. America’s middle class may be anxious, but objectively, it is doing fine. The people who are really doing badly are those who do not have good jobs and never did. Those with lousy jobs have seen their already-low wages slowly but steadily sink. In other words, the main victims of (to use another of Reich’s phrases) the “new economy” are not the few thousand managers who have become hamburger flippers but the tens of millions of hamburger flippers, janitors, and so on whose real wages have been declining 1 or 2 percent per year for the last two decades. Does this distinction matter? It does if you are trying to set any sort of policy priorities. Should we, as some in the administration wanted, focus our attention on preserving the jobs of well-paid employees at big corporations?

The biggest problem with many businesspeople, political leaders, and others is that while they are willing to talk and read about economics ad nauseam, they are not willing to do anything that feels like going back to school. They would rather read five books by David Halberstam than one chapter in an undergraduate textbook; and they absolutely hate the idea that they need to work their way through whimsical stories about cloth and wine and baby-sitting rather than get right into pontificating about globalization and the new economy. But there is no way around it. If you want to be truly well-informed about economics (or anything else), you must go back to school—and keep going back, again and again. You must be prepared to work through little models before you can use the big words—in fact, it is usually a good idea to try to avoid the big words altogether. If you balk at this task—if you think that you are too grown-up for this sort of thing—then you may sound impressive and sophisticated, but you will have no idea what you are talking about.

David Hackett Fischer’s The Great Wave: Price Revolutions and the Rhythm of History has already generated considerable buzz. Remarkably for a book that spends most of its five-hundred-plus pages dwelling on events centuries (and occasionally millennia) in the past, a good deal of the buzz comes from the business community, not usually noted for its interest in history. Indeed, Fischer is getting favorable mention from people who tell us in the next breath that we live in a New Economy to which old rules no longer apply. There is a reason for this peculiar affinity between a historian with an eight-century perspective and business commentators obsessed with the new; what these pundits really want, it turns out, is to use his account of alleged patterns in the distant past as an excuse to ignore the lessons of more recent history. Fischer’s book looks promising on the face of it.


pages: 225 words: 55,458

Back to School: Why Everyone Deserves a Second Chance at Education by Mike Rose

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blue-collar work, centre right, creative destruction, delayed gratification, George Santayana, income inequality, moral panic, new economy, Ronald Reagan, The Bell Curve by Richard Herrnstein and Charles Murray, the built environment, urban renewal, War on Poverty

Among the few policy initiatives in place are ones aimed at increasing enrollments in postsecondary education, and several private foundations, notably Gates and Lumina, have been sponsoring such initiatives as well. These efforts are laudable; however, they reach a fairly small percentage of poor and low-income Americans and on average are targeted toward the more academically skilled among them—though many still require remedial English and mathematics. The economic rationale for increased postsecondary education rests on some widely held—and continually broadcasted— assumptions. Work in the “new economy” requires more literacy, numeracy, and computer skills as well as so-called “soft skills” like collaboration and communication. A further assumption is that there is a “skills mismatch” between many Americans and the labor market; that is, there are jobs out there that go unfilled because the local labor pool doesn’t possess the technological or behavioral skills to do the work. These beliefs have become gospel, repeated daily in policy speeches and documents and on opinion pages.

Though this college-versus-work debate can slip into a reductive either/or polemic, I think that it does raise to awareness a 64 W HO SHOULD G O TO COLLEG E ? number of important issues, central not only to education but also to the economy, to the meaning of work, and to democratic life: the skyrocketing cost of college and the poor record of retention and graduation in higher education, the disconnect between the current labor market and the politically popular rhetoric of “educating our way into the new economy,” and the significant commitment of financial and human resources that will be needed to make college-for-all a reality. On a broader scale the debate raises the issues of the purpose of education in a free society, the issue of the variability of human interests and talents, and the class-based bias toward entire categories of knowledge and activity—a bias institutionalized in the structure of the American high school.

In line with the history I have sketched, the cognitive content of occupations is given short shrift. But as with remedial education, this is a promising moment. All those Perkins-initiated reforms of the last few decades have yielded some terrific programs and ideas. The notion of contextualized learning is getting wide attention. And public and private resources are being directed toward workforce development for the new economy. As with attempts at reform of remediation, the big question is: What kind of education will all this yield? Let me close with several observations. When I was teaching remedial English, one of my primary goals was to change the model of writing my students carried in their heads. Over our time together, I wanted them to begin to conceive of writing as a way to think something through and give order to those thoughts.


pages: 827 words: 239,762

The Golden Passport: Harvard Business School, the Limits of Capitalism, and the Moral Failure of the MBA Elite by Duff McDonald

activist fund / activist shareholder / activist investor, Affordable Care Act / Obamacare, Albert Einstein, barriers to entry, Bayesian statistics, Bernie Madoff, Bob Noyce, Bonfire of the Vanities, business process, butterfly effect, capital asset pricing model, Capital in the Twenty-First Century by Thomas Piketty, Clayton Christensen, cloud computing, collateralized debt obligation, collective bargaining, commoditize, corporate governance, corporate raider, corporate social responsibility, creative destruction, deskilling, discounted cash flows, disintermediation, Donald Trump, family office, financial innovation, Frederick Winslow Taylor, full employment, George Gilder, glass ceiling, Gordon Gekko, hiring and firing, income inequality, invisible hand, Jeff Bezos, job-hopping, John von Neumann, Joseph Schumpeter, Kenneth Arrow, London Whale, Long Term Capital Management, market fundamentalism, Menlo Park, new economy, obamacare, oil shock, pattern recognition, performance metric, Peter Thiel, Plutocrats, plutocrats, profit maximization, profit motive, pushing on a string, Ralph Nader, Ralph Waldo Emerson, RAND corporation, random walk, rent-seeking, Ronald Coase, Ronald Reagan, Sand Hill Road, Saturday Night Live, shareholder value, Silicon Valley, Skype, Steve Jobs, survivorship bias, The Nature of the Firm, the scientific method, Thorstein Veblen, union organizing, urban renewal, Vilfredo Pareto, War on Poverty, William Shockley: the traitorous eight, women in the workforce, Y Combinator

The only problem was that as far as the entrepreneurial community was concerned, the jury was still out on the value of an MBA to companies like Netscape, AOL, or even Microsoft. And then, as if out of nowhere, Skilling put all those questions to rest and then some. Overnight, he and his elite corps of MBAs turned Enron into a New Economy darling without sacrificing the revenue stream of an Old Economy industrial giant in the process—the company reported $60 billion in revenues in 2000. A job at Enron promised Wall Street pay without having to take a Wall Street job, it offered New Economy mojo and Old Economy respect, and it had taken the most frequently cited criticisms of MBAs (impatience, lack of follow-through, self-interest, excessive faith in analytical ability) and practically turned them into job requirements. And then a massive accounting fraud was revealed, and it all came crashing down.

Annual steel production was going through the roof, climbing from 77,000 tons in 1870 to 11.2 million at the turn of the century.7 There were 140,000 factories in the country in 1865; by 1900, there were 512,000. And this was a new kind of factory—whereas an old-school New England mill employed just a few hundred people, the Ford Motor Company’s first plant had 15,000 on the payroll. The population was also transforming to meet the needs of the new economy. Between 1870 and 1900, the U.S. population rose from 40 million to 76 million, while the population of its cities grew from 10 million to 30 million. In the second half of the nineteenth century, San Francisco doubled in size, Milwaukee tripled, and Denver grew twentyfold.8 Boston, home to Harvard and already one of America’s most important cities, saw its population surge as well, more than doubling from 250,000 in 1870 to 560,000 by 1900.

With the launch of Harvard Business School Publishing in 1993, the School served notice that it was no longer simply in the business of teaching its own students. Henceforth, it would be educating the rest of us as well. What did they teach us? In One Market Under God: Extreme Capitalism, Market Populism, and the End of Economic Democracy, Thomas Frank details just how much of the ideology of the “New Economy” was nothing more than snake oil, and the ways in which the likes of HBS helped sell it. In awe of the booming stock market, Americans swallowed the dubious notion that simply because we, too, could own stocks, then we were all in it together, even when faced with overwhelming evidence to the contrary. “[The] manager sets out to re-enchant the world,” writes Nigel Thrift in Knowing Capitalism.


pages: 1,242 words: 317,903

The Man Who Knew: The Life and Times of Alan Greenspan by Sebastian Mallaby

airline deregulation, airport security, Andrei Shleifer, anti-communist, Asian financial crisis, balance sheet recession, bank run, barriers to entry, Benoit Mandelbrot, Bretton Woods, central bank independence, centralized clearinghouse, collateralized debt obligation, conceptual framework, corporate governance, correlation does not imply causation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency peg, energy security, equity premium, fiat currency, financial deregulation, financial innovation, fixed income, Flash crash, forward guidance, full employment, Hyman Minsky, inflation targeting, information asymmetry, interest rate swap, inventory management, invisible hand, Kenneth Rogoff, Kitchen Debate, laissez-faire capitalism, Long Term Capital Management, low skilled workers, market bubble, market clearing, Martin Wolf, money market fund, moral hazard, mortgage debt, Myron Scholes, new economy, Nixon shock, Northern Rock, paper trading, paradox of thrift, Paul Samuelson, Plutocrats, plutocrats, popular capitalism, price stability, RAND corporation, rent-seeking, Robert Shiller, Robert Shiller, rolodex, Ronald Reagan, Saturday Night Live, savings glut, secular stagnation, short selling, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, unorthodox policies, upwardly mobile, WikiLeaks, women in the workforce, Y2K, yield curve, zero-sum game

The Fed had underestimated the credit crunch of 1991–92, and so had run tighter policy than it had intended. It had misread the economy in 1993, wrongly attributing declining long-term interest rates to falling inflation expectations.37 And yet regardless of the Fed’s errors, deeper forces were conspiring to bring down inflation: global competition, advancing technology, declining labor-union membership. In this unfamiliar new economy, periods of monetary looseness were more likely to result in bubbles than in consumer price spikes. But nobody bothered with such obscure quibbles. Greenspan was presiding over low inflation and strong growth. His reputation prospered marvelously. The other doubt about the maestro’s emergence was more immediate. Almost inevitably, the big interest-rate hikes of 1994 were going to cause a blowup.

And the keys to American ascendancy lay precisely in those forces with which Greenspan was identified: in the new computing and communications wizardry, whose impact on productivity the Fed chairman had been early to divine; in the superiority of the market-based system that he had championed since his youth; in the quantitative and pragmatic approach to the world, which he exemplified so perfectly. Two decades earlier, Henry Kissinger had become the improbable celebrity of an era shaped by geopolitical forces, from the Soviet challenge to Vietnam. Now America’s fate hinged on economic and technological currents that Greenspan interpreted—and embodied. • • • Of course, this brave new economy was not without its worries. As well as crises in East Asia and the perplexing emergence of the megabanks, the nation was facing a bewildering proliferation of derivatives. In the three and a half years since the shocking losses at Orange County, Procter & Gamble, and Gibson Greeting Cards, swaps of all varieties had roughly tripled in volume: if they had proved their potential to cause trouble back in 1994, they were now even scarier.7 At his breakfasts with his friends at Treasury, Greenspan would occasionally ponder this problem, siding with Lawrence Summers and against Bob Rubin.

Paul Volcker might have acquired Churchillian status by offering the nation blood, toil, tears, and sweat. But Greenspan’s cult status had come to depend on continual growth, exuberant finance, and miraculously low unemployment.20 His identity had fused with the national expectation of prosperity without limit. He was imprisoned by his reputation. On September 4, 1998, the maestro appeared on a stage at Berkeley’s business school to deliver a long-planned speech on technology and the new economy. Given America’s extraordinary performance, he might have stuck to his script. The markets were jittery, with the S&P 500 index down by around a tenth since Russia’s default; but this did not amount to a crisis—during the Asian crisis the previous autumn, Greenspan had welcomed the sharp sell-off on Wall Street as a salutary correction. This time, however, he took the opposite approach. Working from an amended version of his prepared remarks, he warned his Berkeley audience that the United States could not expect to be an “oasis of prosperity” amid global turmoil; and he hinted that the Fed might be ready to offset this turmoil with looser-than-expected policy.


pages: 337 words: 89,075

Understanding Asset Allocation: An Intuitive Approach to Maximizing Your Portfolio by Victor A. Canto

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accounting loophole / creative accounting, airline deregulation, Andrei Shleifer, asset allocation, Bretton Woods, buy low sell high, capital asset pricing model, commodity trading advisor, corporate governance, discounted cash flows, diversification, diversified portfolio, fixed income, frictionless, high net worth, index fund, inflation targeting, invisible hand, John Meriwether, law of one price, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, market bubble, merger arbitrage, money market fund, new economy, passive investing, Paul Samuelson, price mechanism, purchasing power parity, risk tolerance, risk-adjusted returns, risk/return, Ronald Reagan, selection bias, shareholder value, Sharpe ratio, short selling, statistical arbitrage, survivorship bias, the market place, transaction costs, Y2K, yield curve, zero-sum game

This suggests historical relationships—such as market returns and the variance–covariance matrix—constitute the relevant data for strategic asset allocation; identifying the optimal historical mix serves the investor best over the long run. Once again, mean-reversion becomes the asset-allocation version of indexing. Meanwhile, the new-economy view argued that the shifts in relative performance during the 1995–1999 period represented permanent change that would require new long-run allocating. Proponents of mean-reversion point to the last five years as evidence in support of their view: In the most recent period, we have in fact reverted to a small-cap value environment. This shift damages the new-economy view, but it does not in any way harm the hypothesis deviations from the long-run mean are not random. More, if this is the case (as I believe it is), a third alternative emerges neither group considered: These shifts are cyclical.

The fact that large-cap growth companies ruled during the 1995–1999 time period represents a dramatic shift in performance; for the 30-year period ending in 2004, small-cap value stocks ruled the investment world. As the 1995–1999 experience unfolded, there was a major debate in the investment community, with some suggesting a long-lasting shift in relative equity valuations was occurring while others pointed to a string of unexpected temporary shocks. The issue had important implications for portfolio allocation decisions. Some managers espoused a mean-reversion hypothesis while others voiced a new-economy view. The investment implications of the two are quite different. Under the mean-reversion hypothesis, the 1995–1999 years (largecap growth) were an aberration and the economy would eventually revert to historical patterns (small-cap value). An implication of this assumption was that even though temporary deviations from historical patterns can be observed, historical variances and covariances of returns would be stable over the long run.

See also strategic asset allocation (SAA) length of sample period, 285n optimal mixes, 40-43, 118, 127, 274-275 Long-Term Capital Management (LTCM) example, 228 low cost-managed index funds, 110 LTCM (Long-Term Capital Management) example, 228 M M&As (mergers and acquisitions), 77 market allocations for benchmark portfolio, 108-115, 266-269 312 market breadth, size cycles and, 168-170, 237-238 market portfolio, 3 market risk, 19 market valuation, CEM (capitalized earnings model), 90-94 modifying for earnings growth, 94-96 performance indicators and, 96-100 market-timing strategy, value-timing strategy versus, 243-250, 276-277 markets, correlation of, 186 mean return, Sharpe ratio, 2 mean-reversion hypothesis, 4, 18, 46, 59 mergers and acquisitions (M&As), 77 Meriwether, John, 228 Microsoft, 84 Milkin, Michael, 75-76 mobile factors, immobile factors versus, 187-189, 273-274 mobility, elasticity and, 208 monetary policy style cycles and, 55-56 tax rates and, 88-90 Monte Carlo simulations, 4-6 N national factor, 191 negative incentives, 81 new-economy view, mean-reversion hypothesis versus, 59 NIPA (National Income and Product Accounts), 77 Nixon, Richard, 89 nominal interest rate, 128 O-P oil prices global economy and, 219-224 location effect and, 200-201 supply shift and tax increase example, 216-219 OPEC (Organization of the Petroleum Exporting Countries), 220 P/E ratio, 79, 90-94 passive management, 164. See also benchmarks; indexing active management and, xx, 166-168, 180-182, 252-255 hedge funds, 235-239 reasons for, 164-166 size cycles active versus passive management during, 170-172, 175, 271-272 equal-weighted versus cap-weighted indexes, 175-180 performance of asset classes, 16-18 UNDERSTANDING ASSET ALLOCATION performance indicators, CEM (capitalized earnings model) and, 96-100 periodic table of asset returns, 6-11, 46 Phillips curve, 98 portable-alpha strategy, 256-257, 260-264, 269-270 portfolio volatility.


pages: 523 words: 111,615

The Economics of Enough: How to Run the Economy as if the Future Matters by Diane Coyle

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accounting loophole / creative accounting, affirmative action, bank run, banking crisis, Berlin Wall, bonus culture, Branko Milanovic, BRICs, call centre, Cass Sunstein, central bank independence, collapse of Lehman Brothers, conceptual framework, corporate governance, correlation does not imply causation, Credit Default Swap, deindustrialization, demographic transition, Diane Coyle, disintermediation, Edward Glaeser, endogenous growth, Eugene Fama: efficient market hypothesis, experimental economics, Fall of the Berlin Wall, Financial Instability Hypothesis, Francis Fukuyama: the end of history, George Akerlof, Gini coefficient, global supply chain, Gordon Gekko, greed is good, happiness index / gross national happiness, Hyman Minsky, If something cannot go on forever, it will stop - Herbert Stein's Law, illegal immigration, income inequality, income per capita, industrial cluster, information asymmetry, intangible asset, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Jane Jacobs, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, knowledge economy, labour market flexibility, light touch regulation, low skilled workers, market bubble, market design, market fundamentalism, megacity, Network effects, new economy, night-watchman state, Northern Rock, oil shock, Pareto efficiency, principal–agent problem, profit motive, purchasing power parity, railway mania, rising living standards, Ronald Reagan, selective serotonin reuptake inhibitor (SSRI), Silicon Valley, South Sea Bubble, Steven Pinker, The Design of Experiments, The Fortune at the Bottom of the Pyramid, The Market for Lemons, The Myth of the Rational Market, The Spirit Level, transaction costs, transfer pricing, tulip mania, ultimatum game, University of East Anglia, web application, web of trust, winner-take-all economy, World Values Survey, zero-sum game

If we do not think through the complex problems just described, or fail to do so in short order, we face a society increasingly characterized, in the words of JK Galbraith, by private affluence and public squalor. Already, unmistakable and disquieting signs are available for all to see.12 He is right. The political rows about school or police budgets, about low pay in the caring services, about fair access to the best possible health care, are ubiquitous and intense. How should these services be valued and priced, and how paid for? And are there any clues in the way we think about “new economy” sectors that are starting to experience the same effects? THE ECONOMICS OF MUSIC As Baumol pointed out, the same pattern applies to many services—his other example was the performing arts. Take a string quartet. They will sell some recordings but a high proportion of their income is likely to come from live performances. Of course, they will earn less than Bono of U2 or Madonna make from concert tours.

There are many businesses complaining that they can’t get consumers to pay for digital content, although it remains to be seen how far this is due to their reluctance to change what it is they charge for and how they do it; a few businesses and nonprofits are getting users to pay by contributing their time rather than money. There has been a vigorous debate about the challenge the presumption of “free” content poses to businesses in music, movies, and publishing. Less attention has been paid to the implications for measuring the economy, and yet conventional statistics do not capture at all well the shape or growth of the new economy taking shape. There has been real progress in improving economic statistics: in the development of dashboards to supplement GDP; in the measurement of intangible value; and in looking at time use as an indicator of what people value. In each of these avenues, more progress is needed. GDP needs to be joined by a measure of comprehensive wealth; the role of intangibles needs to be better conceptualized in order to collect statistics; and time use surveys based on diaries are neither detailed nor frequent enough to give rich insights into what people do.

New York: Wiley. Helliwell, J., C. Barrington-Leigh, A. Harris, and H. Huang. 2010. “International Evidence on the Social Context of Well-being.” In International Differences in Well-being, ed. Ed Diener, J. F. Helliwell, and D. Kahneman. New York: Oxford University Press. Helpman, Elhanan. 2004. The Mystery of Economic Growth. Cambridge, MA: Harvard University Press. Henwood, Doug. 2003. After the New Economy. New York: New Press. Hepburn, Cameron, and Paul Klemperer. 2006. “Discounting Climate Change Damages: Working Note for the Stern Review.” London, UK. Heshmati, Almas. 2006. “The World Distribution of Income and Income Inequality: A Review of the Economics Literature.” Journal of World-Systems Research 12:1, pp. 60–107. Hirsch, Fred. 1976. Social Limits to Growth. Cambridge, MA: Harvard University Press.


pages: 378 words: 110,518

Postcapitalism: A Guide to Our Future by Paul Mason

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Alfred Russel Wallace, bank run, banking crisis, banks create money, Basel III, basic income, Bernie Madoff, Bill Gates: Altair 8800, bitcoin, Branko Milanovic, Bretton Woods, BRICs, British Empire, business process, butterfly effect, call centre, capital controls, Cesare Marchetti: Marchetti’s constant, Claude Shannon: information theory, collaborative economy, collective bargaining, Corn Laws, corporate social responsibility, creative destruction, credit crunch, currency manipulation / currency intervention, currency peg, David Graeber, deglobalization, deindustrialization, deskilling, discovery of the americas, Downton Abbey, drone strike, en.wikipedia.org, energy security, eurozone crisis, factory automation, financial repression, Firefox, Fractional reserve banking, Frederick Winslow Taylor, full employment, future of work, game design, income inequality, inflation targeting, informal economy, information asymmetry, intangible asset, Intergovernmental Panel on Climate Change (IPCC), Internet of things, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Kenneth Arrow, Kevin Kelly, knowledge economy, knowledge worker, late capitalism, low skilled workers, market clearing, means of production, Metcalfe's law, money: store of value / unit of account / medium of exchange, mortgage debt, Network effects, new economy, Norbert Wiener, Occupy movement, oil shale / tar sands, oil shock, Paul Samuelson, payday loans, Pearl River Delta, post-industrial society, precariat, price mechanism, profit motive, quantitative easing, race to the bottom, RAND corporation, rent-seeking, reserve currency, RFID, Richard Stallman, Robert Gordon, Robert Metcalfe, secular stagnation, sharing economy, Stewart Brand, structural adjustment programs, supply-chain management, The Future of Employment, the scientific method, The Wealth of Nations by Adam Smith, Transnistria, union organizing, universal basic income, urban decay, urban planning, Vilfredo Pareto, wages for housework, women in the workforce

Once the Cold War starts, about 20 per cent of the world’s GDP is being produced outside the market.31 After 1989 the sudden availability of new markets and a new labour force plays an important part in prolonging the wave; so does the West’s new freedom of action to shape markets in neutral countries that were formerly off-limits. In other words, between 1917 and 1989 capitalism’s full potential for complex adaptive behaviour was suppressed. After 1989 it experienced a sugar-rush: labour, markets, entrepreneurial freedom and new economies of scale. On this basis, 1989 must – on its own – account for some of the phase-distortion story I am about to tell. But it cannot account for all of it. The long-wave pattern has been disrupted. The fourth long cycle was prolonged, distorted and ultimately broken by factors that have not occurred before in the history of capitalism: the defeat and moral surrender of organized labour, the rise of information technology and the discovery that once an unchallenged superpower exists, it can create money out of nothing for a long time. 4 The Long, Disrupted Wave In 1948 the Marshall Plan kicked in, the Cold War began and Bell Laboratories invented the transistor.

Suddenly a network economy was taking shape. Kelly wrote: ‘I prefer the term network economy, because information isn’t enough to explain the discontinuities we see. We have been awash in a steadily increasing tide of information for the past century … but only recently has a total reconfiguration of information itself shifted the whole economy.’22 Kelly himself was no advocate of postcapitalism. Indeed, his book New Rules for the New Economy was a breathless survival manual for old businesses as they tried to engage with the interconnected world. But his contribution was important. It was the moment we began to understand that the ‘intelligent machine’ was not the computer but the network, and that the network would speed up the rate of change and make it unpredictable. In a statement that defines our era, Kelly said: ‘We are now engaged in a grand scheme to augment, amplify, enhance, and extend the relationships and communications between all beings and all objects.’23 The milestones between then and now are the launch of eBay (1997), which led to the dotcom boom.

Milanovic, ‘Global Income Inequality by the Numbers: In History and Now’, Policy Research Working Paper 6259, World Bank, November 2012, p. 13 46. R. Freeman, ‘The New Global Labor Market’, Focus, vol. 26 (1) (2008), University of Wisconsin–Madison Institute for Research on Poverty, http://www.irp.wisc.edu/publications/focus/pdfs/foc261a.pdf 47. S. Kapsos and E. Bourmpoula, ‘Employment and Economic Class in the Developing World’, ILO Research Paper 6, June 2013 PART II 1. K. Kelly, ‘New Rules for the New Economy’, Wired, 5 September 1977, http://archive.wired.com/wired/archive/5.09/newrules.html 5. THE PROPHETS OF POSTCAPITALISM 1. R. Singh, ‘Civil Aero Gas Turbines: Technology and Strategy’, Speech, Cranfield University, 24 April 2001, p. 5 2. J. Leahy, ‘Navigating the Future’, Global Market Forecast 2012–2031, Airbus, 2011 3. D. Lee et al, ‘Aviation and Global Climate Change in the 21st Century’, Atmospheric Aviation, vol. 43, 2009, pp. 3520–37 4.


pages: 394 words: 85,734

The Global Minotaur by Yanis Varoufakis, Paul Mason

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active measures, banking crisis, Berlin Wall, Big bang: deregulation of the City of London, Bretton Woods, business climate, capital controls, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, colonial rule, corporate governance, correlation coefficient, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, debt deflation, declining real wages, deindustrialization, endogenous growth, eurozone crisis, financial innovation, first-past-the-post, full employment, Hyman Minsky, industrial robot, Joseph Schumpeter, Kenneth Rogoff, labour market flexibility, light touch regulation, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, market fundamentalism, Mexican peso crisis / tequila crisis, money market fund, mortgage debt, Myron Scholes, negative equity, new economy, Northern Rock, paper trading, Paul Samuelson, planetary scale, post-oil, price stability, quantitative easing, reserve currency, rising living standards, Ronald Reagan, special economic zone, Steve Jobs, structural adjustment programs, systematic trading, too big to fail, trickle-down economics, urban renewal, War on Poverty, Yom Kippur War

It was a New Age faith in the financial sector’s powers to create ‘riskless risk’, which culminated in the belief that the planet could now sustain debts (and bets made on the back of these debts) that were many multiples of actual, global income. Vulgar empiricism shored up such mystical beliefs: back in 2001, when the so-called ‘new economy’ collapsed, destroying much of the paper wealth made from the dotcom bubble and the Enron-like scams, the system held together. The 2001 new economy bubble was, in fact, worse than the sub-prime mortgage equivalent that burst six years later. And yet the ill effects were contained efficiently by the authorities (even though employment did not recover until 2004–05). If such a large shock could be absorbed so readily, surely the system could sustain smaller shocks, like the $500 billion sub-prime losses of 2007–08.

Both ‘consolidation’ waves (of the 1900s and the 1990s) had momentous consequences on Wall Street, effectively multiplying by a considerable factor the capital flows that the banks and other financial institutions were handling. However, the 1990s version was more explosive because of the effects of two new phenomena: the Minotaur-induced capital flight toward America, and the way in which the so-called New Economy, and predominantly the prospects for e-commerce, mesmerized investors. In 1998, Germany’s flagship vehicle maker, Daimler-Benz, was lured to the United States, where it attempted, successfully, to take over Chrysler, the third-largest American auto manufacturer. The price the German company paid for Chrysler, $36 billion, sounded exorbitant – but at the time it seemed like a good price, in view of Wall Street’s valuation of the merged company, which amounted to a whopping $130 billion!

., New Frontier social programmes, 83, 84 Keynes, John Maynard: Bretton Woods conference, 59, 60, 62, 109; General Theory, 37; ICU proposal, 60, 66, 90, 109, 254, 255; influence on New Dealers, 81; on investment decisions, 48; on liquidity, 160–1; trade imbalances, 62–6 Keynsianism, 157 Kim Il Sung, 77 Kissinger, Henry, 94, 98, 106 Kohl, Helmut, 201 Korea, 91, 191, 192 Korean War, 77, 86 labour: as a commodity, 28; costs, 104–5, 104, 105, 106, 137; hired, 31, 45, 46, 53, 64; scarcity of, 34–5; value of, 50–2 labour markets, 12, 202 Labour Party (British), 69 labourers, 32 land: as a commodity, 28; enclosure, 64 Landesbanken, 203 Latin America: effect of China on, 215, 218; European banks’ exposure to, 203; financial crisis, 190 see also specific countries lead, prices, 96 Lebensraum, 67 Left-Right divide, 167 Lehman Brothers, 150, 152–3 leverage, 121–2 leveraging, 37 Liberal Democratic Party (Japan), 187 liberation movements, 79, 107 LIBOR (London Interbank Offered Rate), 148 liquidity traps, 157, 190 Lloyds TSB, 153, 156 loans: and CDOs, 7–8, 129–31; defaults on, 37 London School of Economics, 4, 66 Long-Term Capital Management (LTCM) hedge fund collapse, 13 LTCM (Long-Term Capital Management) hedge fund collapse, 2, 13 Luxembourg, support for Dexia, 154 Maastricht Treaty, 199–200, 202 MacArthur, Douglas, 70–1, 76, 77 machines, and humans, 50–2 Malaysia, 91, 191 Mao, Chairman, 76, 86, 91 Maresca, John, 106–7 Marjolin, Robert, 73 Marshall, George, 72 Marshall Plan, 71–4 Marx, Karl: and capitalism, 17–18, 19, 34; Das Kapital, 49; on history, 178 Marxism, 181, 182 Matrix, The (film), 50–2 MBIA, 149, 150 McCarthy, Senator Joseph, 73 mercantilism, in Germany, 251 merchant class, 27–8 Merkel, Angela, 158, 206 Merrill Lynch, 149, 153, 157 Merton, Robert, 13 Mexico: effect of China on, 214; peso crisis, 190 Middle East, oil, 69 MIE (military-industrial establishment), 82–3 migration, Crash of 2008, 3 military-industrial complex mechanism, 65, 81, 182 Ministry for International Trade and Industry (Japan), 78 Ministry of Finance (Japan), 187 Minotaur legend, 24–5, 25 Minsky, Hyman, 37 money markets, 45–6, 53, 153 moneylenders, 31, 32 mortgage backed securities (MBS) 232, 233, 234 NAFTA (North American Free Trade Agreement), 214 National Bureau of Economic Research (US), 157 National Economic Council (US), 3 national income see GDP National Security Council (US), 94 National Security Study Memorandum 200 (US), 106 nationalization: Anglo Irish Bank, 158; Bradford and Bingley, 154; Fortis, 153; Geithner–Summers Plan, 179; General Motors, 160; Icelandic banks, 154, 155; Northern Rock, 151 NATO (North Atlantic Treaty Organization), 76, 253 negative engineering, 110 negative equity 234 neoliberalism, 139, 142; and greed, 10 New Century Financial, 147 New Deal: beginnings, 45; Bretton Woods conference, 57–9; China, 76; Global Plan, 67–71, 68; Japan, 77; President Kennedy, 84; support for the Deutschmark, 74; transfer union, 65 New Dealers: corporate power, 81; criticism of European colonizers, 79 ‘new economy’, 5–6 New York stock exchange, 40, 158 Nietzsche, Friedrich, 19 Nixon, Richard, 94, 95–6 Nobel Prize for Economics, 13 North American Free Trade Agreement (NAFTA), 214 North Atlantic Treaty Organization (NATO), 76 North Korea see Korea Northern Rock, 148, 151 Obama administration, 164, 178 Obama, Barack, 158, 159, 169, 180, 230, 231 OECD (Organisation for Economic Co-operation and Development), 73 OEEC (Organisation for European Economic Co-operation), 73, 74 oil: global consumption, 160; imports, 102–3; prices, 96, 97–9 OPEC (Organization of the Petroleum Exporting Countries), 96, 97 paradox of success, 249 parallax challenge, 20–1 Paulson, Henry, 152, 154, 170 Paulson Plan, 154, 173 Penn Bank, 40 Pentagon, the, 73 Plaza Accord (1985), 188, 192, 213 Pompidou, Georges, 94, 95–6 pound sterling, devaluing, 93 poverty: capitalism as a supposed cure for, 41–2; in China, 162; reduction in the US, 84; reports on global, 125 predatory governance, 181 prey–predator dynamic, 33–5 prices, flexible, 40–1 private money, 147, 177; Geithner–Summers Plan, 178; toxic, 132–3, 136, 179 privatization, of surpluses, 29 probability, estimating, 13–14 production: cars, 70, 103, 116, 157–8; coal, 73, 75; costs, 96, 104; cuts in, 41; in Japan, 185–6; processes, 30, 31, 64; steel, 70, 75 production–distribution cycle, 54 property see real estate prophecy paradox, 46, 47, 53 psychology, mass, 14 public debt crisis, 205 quantitative easing, 164, 231–6 railway bubbles, 40 Rational Expectations Hypothesis (REH), 15–16 RBS (Royal Bank of Scotland), 6, 151, 156; takeover of ABN-Amro, 119–20 Reagan, Ronald, 10, 99, 133–5, 182–3 Real Business Cycle Theory (RBCT), 15, 16–17 real estate, bubbles, 8–9, 188, 190, 192–3 reason, deferring to expectation, 47 recession predictions, 152 recessions, US, 40, 157 recycling mechanisms, 200 regulation, of banking system, 10, 122 relabelling, 14 religion, organized, 27 renminbi (RMB), 213, 214, 217, 218, 253 rentiers, 165, 187, 188 representative agents, 140 Reserve Bank of Australia, 148 reserve currency status, 101–2 risk: capitalists and, 31; riskless, 5, 6–9, 14 Roach, Stephen, 145 Robbins, Lionel, 66 Roosevelt, Franklin D., 165; attitude towards Britain, 69; and bank regulation, 10; New Deal, 45, 58–9 Roosevelt, Theodore (‘Teddy’), 180 Royal Bank of Scotland (RBS), 6, 151, 156; takeover of ABN-Amro, 119–20 Rudd, Kevin, 212 Russia, financial crisis, 190 Saudi Arabia, oil prices, 98 Scandinavia, Gold Standard, 44 Scholes, Myron, 13 Schopenhauer, Arthur, 19 Schuman, Robert, 75 Schumpter, Joseph, 34 Second World War, 45, 55–6; aftermath, 87–8; effect on the US, 57–8 seeds, commodification of, 163 shares, in privatized companies, 137, 138 silver, prices, 96 simulated markets, 170 simulated prices, 170 Singapore, 91 single currencies, ICU, 60–1 slave trade, 28 SMEs (small and medium-sized enterprises), 186 social welfare, 12 solidarity (asabiyyah), 33–4 South East Asia, 91; financial crisis, 190, 191–5, 213; industrialization, 86, 87 South Korea see Korea sovereign debt crisis, 205 Soviet Union: Africa, 79; disintegration, 201; Marshall Plan, 72–3; Marxism, 181, 182; relations with the US, 71 SPV (Special Purpose Vehicle), 174 see also EFSF stagflation, 97 stagnation, 37 Stalin, Joseph, 72–3 steel production, in Germany, 70 Strauss-Kahn, Dominique, 60, 254, 255 Summers, Larry, 230 strikes, 40 sub-prime mortgages, 2, 5, 6, 130–1, 147, 149, 151, 166 success, paradox of, 33–5, 53 Suez Canal trauma, 69 Suharto, President of Indonesia, 97 Summers, Larry, 3, 132, 170, 173, 180 see also Geithner–Summers Plan supply and demand, 11 surpluses: under capitalism, 31–2; currency unions, 61; under feudalism, 30; generation in the EU, 196; manufacturing, 30; origin of, 26–7; privatization of, 29; recycling mechanisms, 64–5, 109–10 Sweden, Crash of 2008, 155 Sweezy, Paul, 73 Switzerland: Crash of 2008, 155; UBS, 148–9, 151 systemic failure, Crash of 2008, 17–19 Taiwan, 191, 192 Tea Party (US), 162, 230, 231, 281 technology, and globalization, 28 Thailand, 91 Thatcher, Margaret, 117–18, 136–7 Third World: Crash of 2008, 162; debt crisis, 108, 219; interest rate rises, 108; mineral wealth, 106; production of goods for Walmart, 125 tiger economies, 87 see also South East Asia Tillman Act (1907), 180 time, and economic models, 139–40 Time Warner, 117 tin, prices, 96 toxic theory, 13–17, 115, 133–9, 139–42 trade: balance of, 61, 62, 64–5; deficits (US), 111, 243; global, 27, 90; surpluses, 158 trades unions, 124, 137, 202 transfer unions, New Deal, 65 Treasury Bills (US), 7 Treaty of Rome, 237 Treaty of Versailles, 237 Treaty of Westphalia, 237 trickle-down, 115, 135 trickle-up, 135 Truman Doctrine, 71, 71–2, 77 Truman, Harry, 73 tsunami, effects of, 194 UBS, 148–9, 151 Ukraine, and the Crash of 2008, 156 UN Security Council, 253 unemployment: Britain, 160; Global Plan, 96–7; rate of, 14; US, 152, 158, 164 United States see US Unocal, 106 US economy, twin deficits, 22–3, 25 US government, and South East Asia, 192 US Mortgage Bankers Association, 161 US Supreme Court, 180 US Treasury, 153–4, 156, 157, 159; aftermath of the Crash of 2008, 160; Geithner–Summers Plan, 171–2, 173; bonds, 227 US Treasury Bills, 109 US (United States): aftermath of the Crash of 2008, 161–2; assets owned by foreign state institutions, 216; attitude towards oil price rises, 97–8; China, 213–14; corporate bond purchases, 228; as a creditor nation, 57; domestic policies during the Global Plan, 82–5; economy at present, 184; economy praised, 113–14; effects of the Crash of 2008, 2, 183; foreign-owned assets, 225; Greek Civil War, 71; labour costs, 105; Plaza Accord, 188; profit rates, 106; proposed invasion of Afghanistan, 106–7; role in the ECSC, 75; South East Asia, 192 value, costing, 50–1 VAT, reduced, 156 Venezuela, oil prices, 97 Vietnamese War, 86, 91–2 vital spaces, 192, 195, 196 Volcker, Paul: 2009 address to Wall Street, 122; demand for dollars, 102; and gold convertibility, 94; interest rate rises, 99; replaced by Greenspan, 10; warning of the Crash of 2008, 144–5; on the world economy, 22, 100–1, 139 Volcker Rule, 180–1 Wachowski, Larry and Andy, 50 wage share, 34–5 wages: British workers, 137; Japanese workers, 185; productivity, 104; prophecy paradox, 48; US workers, 124, 161 Wal-Mart: The High Cost of Low Price (documentary, Greenwald), 125–6 Wall Street: Anglo-Celtic model, 12; Crash of 2008, 11–12, 152; current importance, 251; Geithner–Summers Plan, 178; global profits, 23; misplaced confidence in, 41; private money, 136; profiting from sub-prime mortgages, 131; takeovers and mergers, 115–17, 115, 118–19; toxic theory, 15 Wallace, Harry, 72–3 Walmart, 115, 123–7, 126; current importance, 251 War of the Currents, 39 Washington Mutual, 153 weapons of mass destruction, 27 West Germany: labour costs, 105; Plaza Accord, 188 Westinghouse, George, 39 White, Harry Dexter, 59, 70, 109 Wikileaks, 212 wool, as a global commodity, 28 working class: in Britain, 136; development of, 28 working conditions, at Walmart, 124–5 World Bank, 253; origins, 59; recession prediction, 149; and South East Asia, 192 World Trade Organization, 78, 215 written word, 27 yen, value against dollar, 96, 188, 193–4 Yom Kippur War, 96 zombie banks, 190–1


pages: 398 words: 108,889

The Paypal Wars: Battles With Ebay, the Media, the Mafia, and the Rest of Planet Earth by Eric M. Jackson

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bank run, business process, call centre, creative destruction, disintermediation, Elon Musk, index fund, Internet Archive, iterative process, Joseph Schumpeter, market design, Menlo Park, Metcalfe’s law, money market fund, moral hazard, Network effects, new economy, offshore financial centre, Peter Thiel, Robert Metcalfe, Sand Hill Road, shareholder value, Silicon Valley, Silicon Valley startup, telemarketer, The Chicago School, the new new thing, Turing test

Peter never turned up and I ended up leaving Palo Alto more confused and concerned than when I’d arrived. My angst lasted through the evening until I finally managed to catch the CEO on his cell phone; he explained that unforeseen events had forced him to be out of the office and he assured me that everything would be in order for my first day on Friday. Despite the false start, my journey into the new economy was indeed under way. If I’d expected to see a little more structure on my first day on the job than during my introductory visit, this notion was quickly dispelled. Following Peter’s suggestion I reported for work at ten that Friday morning. This struck me as a little late to get started, but I reasoned that the extra time would allow my new colleagues to get ready for my arrival. After ascending the slippery stairs and crossing the tiny courtyard into the reception area it became apparent that my expectations were again off the mark.

As with the supposedly revolutionary Japanese keiretsu in the eighties, during the late nineties the heralding of the dot-com movement was a popular fad in business reporting. It’s easy to understand why the topic fascinated journalists. For one thing, dot-coms’ high-flying IPOs, irreverent advertising, and creative business plans made for good copy. In a broader sense, though, the seemingly endless supply of venture capital financing suggested that investors believed the U.S. really was on the verge of developing a new economy. For a journalist, it just didn’t make sense to risk missing the boat, especially when all of his peers were on board. How else can one explain why columnists and talking-head gurus never blinked when Accenture CEO George Shaheen—proclaimed the “digital messiah” by Forbes11—left his position with the $9 billion consultancy to become the head of home grocer Webvan? In 1999 and early-2000 the Internet was in vogue and a myopic view prevailed, meaning that dot-coms like PayPal could do no wrong.

Declining costs also helped our margins. The transaction processing expense rate dropped from -1.67% to -1.36% in Q1 as more users chose bank accounts instead of credit cards to fund their payments, and our fraud losses improved by 13 basis points to -0.48%. This dramatic about-face in our transaction margins was no puzzle to Peter Thiel. It was a few weeks into his stint as the acting-CEO when I heard him compare our new economy payments network to an abstract old economy machine. PayPal’s many policies—such as the fees charged to sellers, spending limits placed on unverified buyers, and our behind-the-scenes fraud algorithms—were like levers, dials, and pulleys. The key was to adjust each of them carefully in unison with the others until the machine hummed along at cruising speed. And Peter had no choice but to tinker.


pages: 320 words: 96,006

The End of Men: And the Rise of Women by Hanna Rosin

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affirmative action, call centre, cognitive dissonance, David Brooks, delayed gratification, edge city, facts on the ground, financial independence, hiring and firing, housing crisis, income inequality, informal economy, job satisfaction, low skilled workers, manufacturing employment, meta analysis, meta-analysis, new economy, New Urbanism, Norman Mailer, Northern Rock, postindustrial economy, purchasing power parity, Results Only Work Environment, Silicon Valley, Steven Pinker, union organizing, upwardly mobile, white picket fence, women in the workforce, young professional

Then the commercial abruptly cuts to the fantasy, a Dodge Charger vrooming toward the camera, punctuated by bold all caps: MAN’S LAST STAND. But the motto is unconvincing. After that display of muteness and passivity, you can only imagine a woman—one with shiny lips—steering the beast. DAVID GODSALL describes himself as “adapting pretty well to the new world order.” The twenty-nine-year-old Vancouverite is not like one of those blue-collar guys who are just “humiliated and fucked in this new economy” because they can’t retool and go to college and find a new profession. He has a master’s degree and a job, as an editor at a Vancouver city magazine. He has an apartment he shares with his steady girlfriend, a kitchen full of nice appliances, a car in the garage, a bullmastiff. But this steady accumulation of life’s comforts has only uncovered for him how uncomfortable he actually feels. At the moment, his girlfriend, Clare, makes more money than he does.

Go to a beach in the Hamptons on any summer Friday and you will still find the surf full of moms waiting for their husbands to maybe or maybe not arrive from their jobs in the city—proof that there are still pockets up in the thinner air where men rule the public domain while women rule the snacks and the sunscreen. Anyway, these young college-educated urbanites are not like the working-class men of the South, who openly mourn the old chivalrous ways and grieve for what the new economy has robbed from them. For these guys, traditional manly ideals exist, if at all, as a fashion statement encountered in Brooklyn boutiques that stock nothing but hunting jackets and flasks and old copies of Playboy, kitsch recycled in an ironic-nostalgic mode the same way old Stalin-era buttons wash up in Moscow dance clubs. These men took a feminist theory class or two in college, maybe read Judith Butler and Kate Millett.

For the towns around it that are still struggling, Auburn offers a model of future success that requires not looking backward and yearning for the old manufacturing age to come back, but instead embracing what has already begun to happen, turning themselves over fully to the new feminized economy. And what about the men? How do they fit in to that kind of economy? In the last year or so manufacturing jobs around the country have bounced back and the men have been rushing to fill them. But this will only make up for a small percentage of the recently unemployed. Local community colleges have started to get very creative about how they prepare men for the new economy. In Opelika, the college is using 3-D simulation technology that feels like living inside a video game in order to keep the interest of the young men. The sign over the simulation lab does not say “use your hands” but “expand your mind.” Other colleges have begun to specialize in green technology or other fields of the future. And some at Opelika have started to run close studies on ways to make men feel less out of place in school and to set up a support system for them.


pages: 366 words: 94,209

Throwing Rocks at the Google Bus: How Growth Became the Enemy of Prosperity by Douglas Rushkoff

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3D printing, activist fund / activist shareholder / activist investor, Airbnb, algorithmic trading, Amazon Mechanical Turk, Andrew Keen, bank run, banking crisis, barriers to entry, bitcoin, blockchain, Burning Man, business process, buy low sell high, California gold rush, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, centralized clearinghouse, citizen journalism, clean water, cloud computing, collaborative economy, collective bargaining, colonial exploitation, Community Supported Agriculture, corporate personhood, corporate raider, creative destruction, crowdsourcing, cryptocurrency, disintermediation, diversified portfolio, Elon Musk, Erik Brynjolfsson, ethereum blockchain, fiat currency, Firefox, Flash crash, full employment, future of work, gig economy, Gini coefficient, global supply chain, global village, Google bus, Howard Rheingold, IBM and the Holocaust, impulse control, income inequality, index fund, iterative process, Jaron Lanier, Jeff Bezos, jimmy wales, job automation, Joseph Schumpeter, Kickstarter, loss aversion, Lyft, Marc Andreessen, Mark Zuckerberg, market bubble, market fundamentalism, Marshall McLuhan, means of production, medical bankruptcy, minimum viable product, Naomi Klein, Network effects, new economy, Norbert Wiener, Oculus Rift, passive investing, payday loans, peer-to-peer lending, Peter Thiel, post-industrial society, profit motive, quantitative easing, race to the bottom, recommendation engine, reserve currency, RFID, Richard Stallman, ride hailing / ride sharing, Ronald Reagan, Satoshi Nakamoto, Second Machine Age, shareholder value, sharing economy, Silicon Valley, Snapchat, social graph, software patent, Steve Jobs, TaskRabbit, The Future of Employment, trade route, transportation-network company, Turing test, Uber and Lyft, Uber for X, unpaid internship, Y Combinator, young professional, zero-sum game, Zipcar

Now we’re back to limited-run artisanal beers and one-of-a-kind items. Our digital renaissance quite literally retrieves the digits—human fingers—as essential to the creation of value in a networked age. Even if renaissance is a long shot, we may have no other option: like an overdue fetus becoming toxic to its mother, a new economy must be born or our very survival will be threatened. Economically driven climate change should be a big enough cue that it’s time to go into labor; the polar shelf collapsing may as well be our water breaking. Indeed, history and humanity are both on the side of a new economy characterized less by industrial extraction than by digital distribution. And the planet appears to be demanding it, or else. But how do we push toward such a wonderful outcome? The many examples of more distributive business practices I’ve proposed throughout the book are, sadly, more exceptions than the rule.

Thanks to Jane Cavolina for bringing the full power of the English language to the service of these ideas, and Leah Trouwborst for turning the perfunctory into the delightful. Thanks to the students who took my Digital Economics lab at ITP, for researching and workshopping many of these ideas, as well as innovating so many of your own. Thanks especially to Venessa Miemis, Adam Quinn, and Jon Wasserman for growing from brilliant students into inspiring colleagues. Thanks to Shareable, FastCoExist, Techonomy, the P2P Foundation, and the New Economy Coalition for sharing so many ideas, and to the funders and attendees of the Contact Summit I convened in 2011 for prototyping technological development outside the venture capital bubble. Thanks to everyone at Occupy for modeling alternative approaches to activism and at Burning Man for experimenting with new approaches to value exchange. For consistently challenging my own assumptions about economics, I thank Bernard Lietaer, Brian Lehrer, Trebor Scholz, Amanda Palmer, and Micah Sifry.

Swaminathan Foundation, Chennai (Madras), India, April 29, 1999, available at Food and Agriculture Organization of the United Nations, FAO.org. 51. Juliet B. Schor, The Overworked American: The Unexpected Decline of Leisure (New York: Basic Books, 1992). 52. Juliet Schor and Julia Slay, “Attitudes About Work Time and the Path to a Shorter Working Week,” New Economics Institute, Strategies for a New Economy Conference, June 2012, vimeo.com/47179682. 53. Juliet B. Schor, Plenitude: The New Economics of True Wealth (New York: Penguin Press, 2010). 54. “Telecommuters with Flextime Stay Balanced up to 19 Hours Longer,” accounting.smartpros.com, July 2010; Daniel Cook, “Rules of Productivity Presentation,” lostgarden.com, September 28, 2008. 55. Jenny Brundin, “Utah Finds Surprising Benefits in 4-Day Workweek,” npr.org, April 10, 2009. 56.


pages: 124 words: 39,011

Beyond Outrage: Expanded Edition: What Has Gone Wrong With Our Economy and Our Democracy, and How to Fix It by Robert B. Reich

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2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, affirmative action, banking crisis, carried interest, collateralized debt obligation, collective bargaining, Credit Default Swap, credit default swaps / collateralized debt obligations, desegregation, full employment, Home mortgage interest deduction, job automation, Mahatma Gandhi, minimum wage unemployment, money market fund, new economy, Occupy movement, offshore financial centre, Plutocrats, plutocrats, Ponzi scheme, race to the bottom, Ronald Reagan, single-payer health, special drawing rights, The Wealth of Nations by Adam Smith, Tim Cook: Apple, too big to fail, trickle-down economics, women in the workforce, working poor, zero-sum game

But everyone else struggled with costs that were growing and paychecks that weren’t—and too many families found themselves racking up more and more debt just to keep up. He’s absolutely right, and it’s the first time he or any other president clearly stated the long-term structural problem that’s been widening the gap between the very top and everyone else for thirty years—the breaking of the basic bargain linking pay to productivity gains. For many years, credit cards and home equity loans papered over the harsh realities of this new economy. But in 2008, the house of cards collapsed. Exactly. But the first papering over was when large numbers of women went into paid work, starting in the late 1970s and the 1980s, in order to prop up family incomes that were stagnating or dropping because male wages were under siege—from globalization, technological change, and the decline of unions. Only when this coping mechanism was exhausted, and when housing prices started to climb, did Americans shift to credit cards and home equity loans as a means of papering over the new harsh reality of an economy that was working for a minority at the top but not for most of the middle class.

Our real problem, he argues, lies in the increasing concentration of wealth in the hands of the richest Americans, while stagnant wages and rising costs have forced the middle class to go deep into debt. Reich’s thoughtful and detailed account of the American economy—and how we can fix it—is a practical, humane, and much-needed blueprint for rebuilding our society. Economy THE FUTURE OF SUCCESS Working and Living in the New Economy Americans may be earning more than ever before, but they’re paying a steep price: they’re working longer and seeing their families less, and their communities are fragmenting. With clarity and insight, Robert B. Reich delineates what success has come to mean in modern times. Although people have more choices as consumers and investors, these choices are undermining the rest of their lives. It is getting harder for them to be confident of what they will earn next year, or even next month.


pages: 409 words: 145,128

Fighting Traffic: The Dawn of the Motor Age in the American City by Peter D. Norton

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clean water, Frederick Winslow Taylor, garden city movement, invisible hand, jitney, new economy, New Urbanism, Ralph Nader, Silicon Valley, smart transportation, Thorstein Veblen, Unsafe at Any Speed, urban planning, urban renewal

Chandler, especially in The Visible Hand: The Managerial Revolution in American Business (Belknap, 1977), has shown the importance of firms which have unusually high economies of scale to the rise of a new economy with new degrees of organization and centralization. Chandler calls such enterprises “center firms,” and though none qualify as natural monopolies, their substantial economies of scale gave them monopolistic tendencies, and they ultimately prompted regula- 314 Notes to Chapter 4 tion much like the natural monopolies did. McCraw has related Chandler’s findings to the rise of state and federal regulation, both negative and positive; see Prophets of Regulation, esp. chapters 1–4. See also Morton Keller, Regulating a New Economy: Public Policy and Economic Change in America, 1900–1933 (Harvard University Press, 1990). 84. Principles of Political Economy (1848), book 2, chapter 15, §4 (Longmans, Green and Co., 1923), p. 410.

Cooke, “The Influence of Scientific Management upon Government— Federal, State and Municipal” (paper presented to the Taylor Society, Jan. 26, 1924), Bulletin of the Taylor Society 9 (Feb. 1924), 31–38 (33); Cooke echoes the earlier assertion by corporation lawyer William C. Redfield that “the modern spirit in America . . . has set its face to the task of correcting the things that here and now are wrong” by abandoning the “Days of the Rule of Thumb”; Redfield, The New Industrial Day (New York, 1912), 16–17; quoted in Morton Keller, Regulating a New Economy: Public Policy and Economic Change in America, 1900–1933 (Harvard University Press, 1990), 9; see also Taylor, The Principles of Scientific Management (New York, 1911; reprint, W. W. Norton, 1967), 16: “The inefficient rule-of-thumb methods . . . are still almost universal in all trades. . . .” 308 Notes to Chapter 4 35. Blanchard, “Chambers of Commerce and Public Highways,” American City 13 (Sept. 1915), 217–220 (217).

In part this is due to McCraw’s interest in federal and state-level regulation, in which lawyers were indeed prevalent. Since its founding in 1887, three quarters of the members of the Interstate Commerce Commission have been lawyers (McCraw, 136); a 1929 study found that half of state public utility regulators were lawyers, and only one in six were engineers. (See Morton Keller, Regulating a New Economy: Public Policy and Economic Change in America, 1900–1933, Harvard University Press, 1990, 61.) McCraw’s findings are also for government regulators of all kinds, not just public utilities regulators, among whom the engineers were concentrated. McCraw’s own evidence shows that as late as 1974, on the state of New York’s Public Service Commission, engineers were second only to “inspectors and investigators” in number, with lawyers well behind.


pages: 422 words: 131,666

Life Inc.: How the World Became a Corporation and How to Take It Back by Douglas Rushkoff

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affirmative action, Amazon Mechanical Turk, banks create money, big-box store, Bretton Woods, car-free, colonial exploitation, Community Supported Agriculture, complexity theory, computer age, corporate governance, credit crunch, currency manipulation / currency intervention, David Ricardo: comparative advantage, death of newspapers, don't be evil, Donald Trump, double entry bookkeeping, easy for humans, difficult for computers, financial innovation, Firefox, full employment, global village, Google Earth, greed is good, Howard Rheingold, income per capita, invention of the printing press, invisible hand, Jane Jacobs, John Nash: game theory, joint-stock company, Kevin Kelly, laissez-faire capitalism, loss aversion, market bubble, market design, Marshall McLuhan, Milgram experiment, moral hazard, mutually assured destruction, Naomi Klein, negative equity, new economy, New Urbanism, Norbert Wiener, peak oil, peer-to-peer, place-making, placebo effect, Ponzi scheme, price mechanism, price stability, principal–agent problem, private military company, profit maximization, profit motive, race to the bottom, RAND corporation, rent-seeking, RFID, road to serfdom, Ronald Reagan, short selling, Silicon Valley, Simon Kuznets, social software, Steve Jobs, Telecommunications Act of 1996, telemarketer, The Wealth of Nations by Adam Smith, Thomas L Friedman, too big to fail, trade route, trickle-down economics, union organizing, urban decay, urban planning, urban renewal, Vannevar Bush, Victor Gruen, white flight, working poor, Works Progress Administration, Y2K, young professional, zero-sum game

Information Age economies will replace commercial markets with more efficient, high-trust, self-organizing social networks that immediately channel appropriate resources where they are needed. Just as factories and finance were high-leverage tools of the Industrial Age, social software and reputation currencies that fuel these new social markets are the tools of the new economy. And yes, these markets move real value. It is already happening with software (open source), accommodations (couchsurfing), knowledge (MIT open courseware), and many domains. There is a family of projects fostering these new economies and wielding currencies as something more powerful than money. They recognize currencies as formal symbol systems for shaping, enabling, and measuring currents—currents of time, attention, participation, resources, sharing, trust, giving, information, knowledge, goods, and services—as well as tools for exchanging value.

Worse yet for the aristocracy, as merchants set sail they were to benefit from the vast resources of other territories. While the new bourgeoisie were becoming members of the fledgling global marketplace, the traditional aristocracy was essentially landlocked. What official authority they had left to offer their subjects was diminishing as rapidly as their wealth, influence, and numbers. The aristocracy longed for a way to participate in the new economy—a way to invest that didn’t put them or their good names at any risk. For their part, the new merchant class had certainly increased the speed and breadth of wealth creation—but this also made for a highly competitive and fluid business environment. Sudden wealth could be followed by a sudden wipeout if a single ship got lost at sea or a fire took down an entire workshop. Merchant businesses were still mostly family run, and rarely operated more than a few voyages before a shipwreck or other calamity took them down.

In the United States, in an assumption of centralized value creation that reached a crescendo under the Nixon administration, the Federal Reserve won the authority to create money by fiat, based on nothing but faith in its own corporate chutzpah. The massive potential of computers and networking, technologies developed in many cases by engineers hoping to decentralize the very power structures funding their projects, was quickly recontextualized as a market opportunity—the beginning of a “long boom”—and appropriated as NASDAQ’s stepchild. New rules for a new economy were invented, in which people’s ability to access interactive technology for free or to create value independent of any corporation could be understood as the power of the network to leverage what were formerly “externalities.” The dot-com boosters sought to reconcile the incompatibility of an abundant, decentralized media space with the legacy of a scarce, centralized monetary system. Everything is “open source,” except, of course, money itself.


pages: 385 words: 128,358

Inside the House of Money: Top Hedge Fund Traders on Profiting in a Global Market by Steven Drobny

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Albert Einstein, asset allocation, Berlin Wall, Bonfire of the Vanities, Bretton Woods, buy low sell high, capital controls, central bank independence, Chance favours the prepared mind, commoditize, commodity trading advisor, corporate governance, correlation coefficient, Credit Default Swap, diversification, diversified portfolio, family office, fixed income, glass ceiling, high batting average, implied volatility, index fund, inflation targeting, interest rate derivative, inventory management, John Meriwether, Long Term Capital Management, margin call, market bubble, Maui Hawaii, Mexican peso crisis / tequila crisis, moral hazard, Myron Scholes, new economy, Nick Leeson, oil shale / tar sands, oil shock, out of africa, paper trading, Paul Samuelson, Peter Thiel, price anchoring, purchasing power parity, reserve currency, risk tolerance, risk-adjusted returns, risk/return, rolodex, Sharpe ratio, short selling, Silicon Valley, The Wisdom of Crowds, too big to fail, transaction costs, value at risk, yield curve, zero-coupon bond, zero-sum game

In the 1970s, gold was going up for some very sound supply and demand reasons. As the gold bull market gathered strength, it pulled in everybody so that in the last year or two it tripled. Just like the NASDAQ in 1998 and 1999. Everybody was shrieking that gold always has been, always will be an inflation hedge. Just like in 1998 when people were saying “The dot-com, new-economy revolution will go on forever.” But again, just like the dot-commers, the gold bugs hadn’t read their history.We have had new economies and new eras every 30 or 40 years for the past 500 years all over the world. If anybody had gone back to look at gold, they would have seen some very long periods where it has done nothing, and long periods where it has actually gone down during inflationary periods. (See Figure 11.4.) The number of mystics in gold is greatly reduced now, although there 700 600 Dollars per Ounce 500 400 300 200 100 FIGURE 11.4 Source: CRB.

It was widely perceived that dotcom and tech stocks were in a bubble but, as shares rallied ceaselessly, it was all but impossible for many investors to jump on the bandwagon. Indeed, Soros Fund Management flipped its position in late 1999, going from short to long high tech stocks, and in the process converted a 19 percent loss into a 35 percent gain for the year. Julian Robertson, on the other hand, chose to maintain his core theme of long “old economy” versus short “new economy,” which led to further losses in 1999 and 2000 as old economy stocks continued to decline and growth rallied. Eventually, Robertson was forced to close Tiger 1600 5500 1500 5000 Russia/LTCM Crisis Hiccup 1400 4500 S&P 500 Index 4000 1200 3500 Greenspan’s “Irrational Exuberance” Speech 1100 3000 1000 2500 900 2000 800 S&P 500 Index NASDAQ 700 1500 Boom! 1996–2000 Source: Bloomberg. 0 -0 ar M 99 -9 9 De c 9 n9 pSe 9 Ju M ar -9 98 cDe -9 8 Se p 8 -9 n98 Ju -9 7 ar M 7 p9 De c 97 FIGURE 2.14 Se nJu -9 7 1000 M ar De c -9 6 600 NASDAQ Composite 1300 28 INSIDE THE HOUSE OF MONEY Management as investor redemptions piled up and assets under management sank from $25 billion to $6 billion.

Going into that, we were up 24 percent on the year and lost 15 percent that day, so we still had some performance cushion. Stan’s whole thing was to never get backed into a corner, so we started liquidating our other positions.We wanted to be able to add to the trades we liked so we trimmed the ideas where we had the least conviction. Let’s talk about the technology boom/bust of 1999 to 2000. Both Soros and Julian Robertson were famous naysayers on tech shares and the “new economy” but were clearly hurting toward the end of the move. I remember reading about Druckenmiller flipping the portfolio from short to long, a reversal that saved Quantum in 1999 but then hurt it a few months later in 2000. Stan’s better at changing his mind than anybody I’ve ever seen. Maybe he stayed with it a little too long, but one of the great things about Stan is that he can and does turn on a dime.

Investment: A History by Norton Reamer, Jesse Downing

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activist fund / activist shareholder / activist investor, Albert Einstein, algorithmic trading, asset allocation, backtesting, banking crisis, Berlin Wall, Bernie Madoff, break the buck, Brownian motion, buttonwood tree, California gold rush, capital asset pricing model, Carmen Reinhart, carried interest, colonial rule, credit crunch, Credit Default Swap, Daniel Kahneman / Amos Tversky, debt deflation, discounted cash flows, diversified portfolio, equity premium, estate planning, Eugene Fama: efficient market hypothesis, Fall of the Berlin Wall, family office, Fellow of the Royal Society, financial innovation, fixed income, Gordon Gekko, Henri Poincaré, high net worth, index fund, information asymmetry, interest rate swap, invention of the telegraph, James Hargreaves, James Watt: steam engine, joint-stock company, Kenneth Rogoff, labor-force participation, land tenure, London Interbank Offered Rate, Long Term Capital Management, loss aversion, Louis Bachelier, margin call, means of production, Menlo Park, merger arbitrage, money market fund, moral hazard, mortgage debt, Myron Scholes, negative equity, Network effects, new economy, Nick Leeson, Own Your Own Home, Paul Samuelson, pension reform, Ponzi scheme, price mechanism, principal–agent problem, profit maximization, quantitative easing, RAND corporation, random walk, Renaissance Technologies, Richard Thaler, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, Robert Shiller, Sand Hill Road, Sharpe ratio, short selling, Silicon Valley, South Sea Bubble, sovereign wealth fund, spinning jenny, statistical arbitrage, survivorship bias, technology bubble, The Wealth of Nations by Adam Smith, time value of money, too big to fail, transaction costs, underbanked, Vanguard fund, working poor, yield curve

Investment Company Institute, “Recent Mutual Fund Trends,” in 2014 Investment Company Fact Book, accessed 2014, http://www.icifactbook. org/fb_ch2.html. 5. FRAUD, MARKET MANIPULATION, AND INSIDER TRADING 1. Steve Fishman, “The Monster Mensch,” New York, February 22, 2009, http://nymag.com/news/businessfinance/54703; Aaron Smith, “Madoff Arrives at N.C. Prison,” CNN Money, July 14, 2009, http:// money.cnn.com/2009/07/14/news/economy/madof f_prison _transfer; Patricia Hurtado, “Andrew, Ruth Madoff Say Were Unaware of $65 Billion Fraud Until Confession,” Bloomberg Businessweek, November 8, 2011, http://www.businessweek.com/news/2011-11-08 /andrew-ruth-madoff-say-they-were-unaware-of-65-billion-fraud.html. 2. Hurtado, “Andrew, Ruth Madoff Say Were Unaware.” 358 5. Fraud, Market Manipulation, and Insider Trading 3. Andrew Clark, “Bernard Madoff’s Sons Say: We’re Victims Too,” The Guardian, March 17, 2010, http://www.theguardian.com /business/2010/mar/17/bernard-madoff-usa; Christopher Matthews, “Five Former Employees of Bernie Madoff Found Guilty of Fraud,” Wall Street Journal, March 25, 2014, http://online.wsj.com/news/articles /SB10001424052702304679404579459551977535482. 4.

Lipscy and Hirofumi Takinami, “The Politics of Financial Crisis Response in Japan and the United States,” Japanese Journal of Political Science 14, no. 3 (September 2013): 331–335. 40. Baird Webel, “Troubled Asset Relief Program (TARP): Implementation and Status,” Congressional Research Service, Library of Congress, Washington, DC, June 27, 2013, https://www.fas.org/sgp/crs/misc /R41427.pdf, 1; “Treasury’s Bailout Proposal,” CNN Money, September 20, 2008, http://money.cnn.com/2008/09/20/news/economy /treasury_proposal; US Department of the Treasury, “TARP Programs,” accessed January 2015, http://www.treasury.gov/initiatives/financial -stability/TARP-Programs/Pages/default.aspx; Congressional Budget Office, “Report on the Troubled Asset Relief Program—October 2012,” October 11, 2012, http://www.cbo.gov/sites/default/files/TARP10 -2012_0.pdf, 1. 41. Michael A. Fletcher, “Obama Leaves D.C. to Sign Stimulus Bill,” Washington Post, February 18, 2009, http://www.washingtonpost.com/wp -dyn/content/article/2009/02/17/AR2009021700221.html; Council of Economic Advisers, Executive Office of the President, “The Economic Impact of the American Recovery and Reinvestment Act Five 7.

“Foundation History.” Accessed 2015. http://carnegie.org/about-us/mission-and-vision/foundation -history. ——. “Founding and Early Years.” Accessed 2014. http://carnegie.org /about-us/foundation-history/founding-and-early-years. ——. “Programs.” Accessed 2014. http://carnegie.org/programs. Censky, Annalyn. “Federal Reserve Launches QE3.” CNN Money, September 13, 2012. http://money.cnn.com/2012/09/13/news/economy /federal-reserve-qe3. “A Century of Ponzi Schemes.” DealBook (blog), New York Times, December 15, 2008. http://dealbook.nytimes.com/2008/12/15/a-century-of-ponzi -schemes. Chandrasekhar, C. P. “Private Equity: A New Role for Finance?” International Development Economics Associates. Last modified May 22, 2007. http:// www.networkideas.org/featart/may2007/Private_Equity.pdf. Christensen, Donald.


pages: 422 words: 113,830

Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism by Kevin Phillips

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algorithmic trading, asset-backed security, bank run, banking crisis, Bernie Madoff, Black Swan, Bretton Woods, BRICs, British Empire, collateralized debt obligation, computer age, corporate raider, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, currency peg, diversification, Doha Development Round, energy security, financial deregulation, financial innovation, fixed income, Francis Fukuyama: the end of history, George Gilder, housing crisis, Hyman Minsky, imperial preference, income inequality, index arbitrage, index fund, interest rate derivative, interest rate swap, Joseph Schumpeter, Kenneth Rogoff, large denomination, Long Term Capital Management, market bubble, Martin Wolf, Menlo Park, mobile money, money market fund, Monroe Doctrine, moral hazard, mortgage debt, Myron Scholes, new economy, oil shale / tar sands, oil shock, old-boy network, peak oil, Plutocrats, plutocrats, Ponzi scheme, profit maximization, Renaissance Technologies, reserve currency, risk tolerance, risk/return, Robert Shiller, Robert Shiller, Ronald Reagan, Satyajit Das, shareholder value, short selling, sovereign wealth fund, The Chicago School, Thomas Malthus, too big to fail, trade route

Part of the reason for sketching some of the realignment of wealth that has flowed from the rise of the financial sector is simply to underscore how yesteryear’s support for the creative destruction of a free and fast-flowing marketplace would logically have evolved into support for an assets “Plunge Protection Team” or a federal assets-maintenance strategy instead. Keep the markets up. Please, gentlemen, especially with all of those crazy people in the Middle East and the dollar coming unglued. Meanwhile, the new economy is breeding more stratification and inheritance than mobility. Money makes money. When Barron’s published its 2007 survey of the top forty wealth-management firms in the United States—most part of banks or other large financial institutions—among them they appeared to have some seventy thousand private client managers.47 Wealth management has become a large and growing business in the United States, and wealthy Americans are no more likely to submit their swollen and cherished assets to the unfettered whims of the free market than Japanese asset owners were when Japan’s real estate and stock bubble began to deflate in 1989.

By the end of 2007, however, government officials, mortgage lenders, packagers of asset-backed securities, and top financial executives faced an unexpected risk of their own: potential blame for what was starting to be imagined as the biggest U.S. housing crash since the Great Depression. ORDINARY AMERICANS: A NEW AND GROWING RISK BURDEN The economic uncertainty and disillusionment of Middle America has become a commonplace. The five-year stagnation of median family incomes, the additional millions lacking health insurance coverage, and the increasing share of personal income required for debt service have taken the wind out of the sails of even new-economy soothsayers. If household-sector risk consciousness had a quantifier, it would be at or near a record. If risk—more specifically, its minimalization or its widest feasible dispersal—has been a major preoccupation of the financial sector, corporate America and the federal government have been moving in comparable directions, dumping this or that onetime responsibility. Corporations facing Darwinian markets and globalization pressures have spared few efforts to curb defined-benefit pension obligations, minimize wages, and reduce employee and retiree health costs.

As Daniel Gross hypothesized in Bull Run: Wall Street, the Democrats, and the New Politics of Personal Finance (2000), a new “democratization of money”—the convergence of pension fund power, broad public ownership of mutual funds, and supposed Clinton administration talent had turned the mass of individual investors into the new “monied interests,” displacing the New Yorker cartoon figures as the principal beneficiaries of the stock market. Thus, he argued, “the Democrats can be the party of Wall Street and Main Street, of the rich and the poor,” while the Republicans paint themselves into a southern and culturally non-cosmopolitan corner.19 Although the new-economy utopian pretenses generally disappeared after the 2000-2002 stock market crash, major legacies of this new Democratic economic contemplation remained relevant in 2008. A Washington-to-Boston geography, with a New Jersey-New York- Connecticut center of gravity, grew even more vivid. Besides the Clintons’ taking on New York coloration, Jon Corzine, the former co-chairman of Goldman Sachs, became the Democratic governor of New Jersey.


pages: 475 words: 149,310

Multitude: War and Democracy in the Age of Empire by Michael Hardt, Antonio Negri

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affirmative action, Berlin Wall, Bretton Woods, British Empire, conceptual framework, continuation of politics by other means, David Graeber, Defenestration of Prague, deskilling, Fall of the Berlin Wall, feminist movement, Francis Fukuyama: the end of history, friendly fire, global village, Howard Rheingold, Howard Zinn, illegal immigration, Joseph Schumpeter, labour mobility, land reform, land tenure, late capitalism, liberation theology, means of production, Naomi Klein, new economy, Paul Samuelson, private military company, race to the bottom, RAND corporation, reserve currency, Richard Stallman, Slavoj Žižek, The Chicago School, The Structural Transformation of the Public Sphere, Thomas Malthus, Thorstein Veblen, Tobin tax, transaction costs, union organizing, War on Poverty, Washington Consensus

(The strikes and demonstrations of nurses in France in the early 1990s illustrated well the gender basis of the exploitation of affective and material labor.13) Furthermore, when affective production becomes part of waged labor it can be experienced as extremely alienating: I am selling my ability to make human relationships, something extremely intimate, at the command of the client and the boss.14 Alienation was always a poor concept for understanding the exploitation of factory workers, but here in a realm that many still do not want to consider labor—affective labor, as well as knowledge production and symbolic production—alienation does provide a useful conceptual key for understanding exploitation. The hegemony of immaterial labor, then, does not make all work pleasant or rewarding, nor does it lessen the hierarchy and command in the workplace or the polarization of the labor market. Our notion of immaterial labor should not be confused with the utopian dreams in the 1990s of a “new economy” that, largely through technological innovations, globalization, and rising stock markets, was thought by some to have made all work interesting and satisfying, democratized wealth, and banished recessions to the past.15 The hegemony of immaterial labor does, though, tend to change the conditions of work. Consider, for example, the transformation of the working day in the immaterial paradigm, that is, the increasingly indefinite division between work time and leisure time.

Hegemony and the Latin Resistance,” Indiana Journal of Global Legal Studies 10, no. 1 (Winter 2003): 383-448. 45 See Mariano-Florentino Cuéllar, “The International Criminal Court and the Political Economy of Antitreaty Discourse,” Stanford Law Review 55, no. 5 (May 2003): 1597-1632. 46 For the justification of preemptive wars, see George W. Bush, “The National Security Strategy of the United States of America,” September 2002. 47 It should not be surprising, then, if we see in the future a coalescence under the name of security of a war against abstract enemies together with a violent campaign against the power and cooperation of the new forms of labor. See Christian Marazzi, Capitale e linguaggio: Dalla New Economy all’economia di guerra (Rome: Derive/Approdi, 2002). 48 See Mahmood Mamdani, When Victims Become Killers: Colonialism, Nativism, and the Genocide in Rwanda (Princeton, NJ: Princeton University Press, 2001). 49 Michel Crozier, Samuel Huntington, and Joji Watanuki, The Crisis of Democracy (New York: New York University Press, 1975). 50 See Samuel Huntington, “The Clash of Civilizations?” Foreign Affairs (Summer 1993) and the subsequent book version, The Clash of Civilizations and the Remaking of World Order (New York: Simon and Schuster, 1996). 51 Huntington’s claim is “not just about the future,” Wang Gungwu, a sympathetic reader, recognizes, “but may actually help shape it” (Wang Gungwu, “A Machiavelli for Our Times,” The National Interest 46 (Winter 1996).

Martin’s Press, 1999). 78 Saskia Sassen argues that many aspects of economic decision-making are being “denationalized” and that, for example, national economic minsters and central bankers are increasingly today acting in the interest of both national and global capital. See Saskia Sassen, “The State and Globalization” in Rodney Hall and Thomas Biersteker, eds., The Emergence of Private Authority in Global Governance (Cambridge: Cambridge University Press, 2002), 91-112. 79 On the economic costs of the global wars, see Christian Marazzi, Capitale e linguaggio: Dalla New Economy all’economia di guerra. For an analysis of the extreme difficulties facing the U.S. project of unilatateralist global control, see Emanuel Todd, Après l’Empire (Paris: Gallimard, 2002). Todd’s argument is overly polemical and exagerated in several regards (claiming, for example, that U.S. power has already steeply declined just as Soviet power did before it), but he does give a clear view of the obstacles preventing U.S. unilateralism. 80 See, for example, Boris Porchnev, Les soulèvements populaires en France de 1623 à 1648 (Paris: S.E.V.P.E.N., 1963); and Ranajit Guha, Elementary Aspects of Peasant Insurgency in Colonial India (Delhi: Oxford University Press, 1983). 81 See Friedrich Engels, Engels as Military Critic (Manchester: Manchester University Press, 1959).


pages: 331 words: 60,536

The Sovereign Individual: How to Survive and Thrive During the Collapse of the Welfare State by James Dale Davidson, Rees Mogg

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affirmative action, agricultural Revolution, bank run, barriers to entry, Berlin Wall, borderless world, British Empire, California gold rush, clean water, colonial rule, Columbine, compound rate of return, creative destruction, Danny Hillis, debt deflation, ending welfare as we know it, epigenetics, Fall of the Berlin Wall, falling living standards, feminist movement, financial independence, Francis Fukuyama: the end of history, full employment, George Gilder, Hernando de Soto, illegal immigration, income inequality, informal economy, information retrieval, Isaac Newton, Kevin Kelly, market clearing, Martin Wolf, Menlo Park, money: store of value / unit of account / medium of exchange, new economy, New Urbanism, offshore financial centre, Parkinson's law, pattern recognition, phenotype, price mechanism, profit maximization, rent-seeking, reserve currency, road to serfdom, Ronald Coase, school vouchers, seigniorage, Silicon Valley, spice trade, statistical model, telepresence, The Nature of the Firm, the scientific method, The Wealth of Nations by Adam Smith, Thomas L Friedman, Thomas Malthus, trade route, transaction costs, Turing machine, union organizing, very high income, Vilfredo Pareto

As Mancur Olson argued in The Rise and Decline of Nations, long-lived industries tend to develop more effective "distributional coalitions" to lobby and struggle over political booty. 7 This problem is magnified immeasurably when it comes to the economy of the Information Age. The more creative participants in the new economy are geographically distributed. Therefore, they are unlikely to form a sufficient concentration to gain the attention of legislators, the way that salmon fishers in Scotland or wheat farmers in Saskatchewan do. Indeed, many of the dynamic personalities of the new economy are unlikely to be citizens of even the most encompassing jurisdiction. Thus they will have little ''voice in the legislative deliberations of representative democracies. As a telling example, consider the disreputable efforts of American math PhDs to block foreign mathematicians from taking jobs in the United States.

Instead of contributing value, they subtract it." 23 167 Admittedly, the example of Russia after the collapse of Communism is an extreme one, but there is ample evidence that reducing state control of resources tends to improve economic efficiency. Growth rates cited by the Economist suggest that economic liberty is strongly correlated with economic growth, with the most rapid rates of growth in the freest countries. The cybereconomy of the Information Age will be more free than any other commercial realm in history. It is therefore reasonable to expect that the cybereconomy will rapidly become the most important new economy of the new millennium. Its success will attract new participants from everywhere on the globe, in the same way that the wide use of fax machines made telecopying increasingly attractive for nonusers. But even more important, freedom from predatory violence will allow the cybereconomy to grow at far higher compound rates of growth than conventional economies dominated by nation-states. That is perhaps the most important point to be made in anticipating the economic impact of the likely collapse of monopoly taxing and inflating capacities of government.

Current law makes U.S. citizenship even a larger liability. The IRS has become one of America's leading exports. More than any other country, the United States reaches to the corners of the earth to extract income from its nationals. If a 747 jetliner filled with one investor from each jurisdiction on earth touched down in a newly independent country, and each investor risked $1,000 in a start-up 235 venture in the new economy, the American would face a far higher tax than anyone else on any gains. Special, penal taxation of foreign investment, exemplified by the so-called PFIC taxation, plus the U.S. nationality tax, can result in tax liabilities of 200 percent or more on long-term assets held outside the United States. A successful American could reduce his total lifetime tax burden as a citizen of any of more than 280 other jurisdictions on the globe.


pages: 224 words: 64,156

You Are Not a Gadget by Jaron Lanier

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1960s counterculture, accounting loophole / creative accounting, additive manufacturing, Albert Einstein, call centre, cloud computing, commoditize, crowdsourcing, death of newspapers, digital Maoism, Douglas Hofstadter, Extropian, follow your passion, hive mind, Internet Archive, Jaron Lanier, jimmy wales, John Conway, John von Neumann, Kevin Kelly, Long Term Capital Management, Network effects, new economy, packet switching, PageRank, pattern recognition, Ponzi scheme, Ray Kurzweil, Richard Stallman, Silicon Valley, Silicon Valley startup, slashdot, social graph, stem cell, Steve Jobs, Stewart Brand, Ted Nelson, telemarketer, telepresence, The Wisdom of Crowds, trickle-down economics, Turing test, Vernor Vinge, Whole Earth Catalog

We ought to at least find support in the new economy for them. Can 26,000 musicians each find 1,000 true fans? Or can 130,000 each find between 200 and 600 true fans? Furthermore, how long would be too long to wait for this to come about? Thirty years? Three hundred years? Is there anything wrong with enduring a few lost generations of musicians while we wait for the new solution to emerge? The usual pattern one would expect is an S curve: there would be only a small number of early adaptors, but a noticeable trend of increase in their numbers. It is common in Silicon Valley to see incredibly fast adoption of new behaviors. There were only a few pioneer bloggers for a little while—then, suddenly, there were millions of them. The same could happen for musicians making a living in the new economy. So at this point in time, a decade and a half after the start of the web, a decade after the widespread adoption of music file sharing, how many examples of musicians living by new rules should we expect to find?

Or you might be a realist, and think that it’s still early; 300 might be a more realistic figure. I was a little afraid to just post about my quest openly on the net, because even though I’m a critic of the open/free orthodoxy I didn’t want to jinx it if it had a chance. Suppose I came up with a desultory result? Would that discourage people who would otherwise have made the push to make the new economy work? Kevin Kelly thought my fear was ridiculous. He’s more of a technological determinist: he thinks the technology will find a way to achieve its destiny whatever people think. So he volunteered to publicize my quest on his popular Technium blog in the expectation that exemplars of the new musical economy would come forward. I also published a fire-breathing opinion piece in the New York Times and wrote about my fears in other visible places, all in the hope of inspiring contact from the new vanguard of musicians who are making a living off the open web.


pages: 247 words: 81,135

The Great Fragmentation: And Why the Future of All Business Is Small by Steve Sammartino

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3D printing, additive manufacturing, Airbnb, augmented reality, barriers to entry, Bill Gates: Altair 8800, bitcoin, BRICs, Buckminster Fuller, citizen journalism, collaborative consumption, cryptocurrency, David Heinemeier Hansson, Elon Musk, fiat currency, Frederick Winslow Taylor, game design, Google X / Alphabet X, haute couture, helicopter parent, illegal immigration, index fund, Jeff Bezos, jimmy wales, Kickstarter, knowledge economy, Law of Accelerating Returns, lifelogging, market design, Metcalfe's law, Metcalfe’s law, Minecraft, minimum viable product, Network effects, new economy, peer-to-peer, post scarcity, prediction markets, pre–internet, profit motive, race to the bottom, random walk, Ray Kurzweil, recommendation engine, remote working, RFID, Rubik’s Cube, self-driving car, sharing economy, side project, Silicon Valley, Silicon Valley startup, skunkworks, Skype, social graph, social web, software is eating the world, Steve Jobs, survivorship bias, too big to fail, US Airways Flight 1549, web application, zero-sum game

Companies that want to thrive during the technology era need to seriously revise their economic playbook. The efficiencies these corporations generated have made high-end technology disposable, or at the very least, low cost. It’s difficult to make a profit when products have to improve each year and cost less than they did last year. This means that in the new economy we’re all required to do some unlearning to stay profitable and relevant. It means the only way of achieving revenue upside is to sell more units, but there are only so many mobile phones and televisions a person can own. This means that in the new economy we’re all required to do some unlearning to stay profitable and relevant. A new business infrastructure The entire economic, political and social infrastructure is going through a 200-year shift from the industrial era to the technology era. All of the elements that make up our economic infrastructure are experiencing a technological disruption.

A good strategy, then and now, only cares about achieving objectives via consideration of all of the methods at its disposal. What’s your electricity strategy? As I write this, successful companies are still littered with digital XYZs: digital marketing managers, digital strategists, digital sales managers … the list is endless. Just go into any job-posting site and type in the word ‘digital’. Everyone in business is in ‘digital’. If we want to participate in the new economy, we have to be in ‘digital’, just as we have to be able to read and write. The days of digital strategy are over. The days of digital anything in a job title are over as well. They should never have existed in the first place. Anyone who doesn’t get digital, doesn’t get strategy. Any person or organisation that has not invested the time to understand and embrace the changes is saying, ‘We’re not serious about surviving the present-day upheaval’.


pages: 254 words: 72,929

The Age of the Infovore: Succeeding in the Information Economy by Tyler Cowen

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Albert Einstein, Asperger Syndrome, Cass Sunstein, cognitive bias, David Brooks, en.wikipedia.org, endowment effect, Flynn Effect, framing effect, Google Earth, impulse control, informal economy, Isaac Newton, loss aversion, Marshall McLuhan, Naomi Klein, neurotypical, new economy, Nicholas Carr, pattern recognition, phenotype, placebo effect, Richard Thaler, selection bias, Silicon Valley, the medium is the message, The Wealth of Nations by Adam Smith, theory of mind

BOOKS ARE AVAILABLE AT QUANTITY DISCOUNTS WHEN USED TO PROMOTE PRODUCTS OR SERVICES. FOR INFORMATION PLEASE WRITE TO PREMIUM MARKETING DIVISION, PENGUIN GROUP (USA) INC., 375 HUDSON STREET, NEW YORK, NEW YORK 10014. CONTENTS PREFACE 1. THE FUTURE OF THINKING DIFFERENTLY 2. HIDDEN CREATIVITY 3. WHY MODERN CULTURE IS LIKE MARRIAGE, IN ALL ITS GLORY 4. IM, CELL PHONES, AND FACEBOOK 5. THE BUDDHA AS SAVIOR AND THE PROFESSOR AS SHAMAN 6. THE NEW ECONOMY OF STORIES 7. HEROES 8. BEAUTY ISN’T WHAT YOU THINK IT IS 9. AUTISTIC POLITICS 10. THE FUTURE OF THE UNIVERSE FURTHER READING AND REFERENCES ACKNOWLEDGMENTS INDEX PREFACE When the economy is doing poorly, people “cocoon” and turn to less expensive pleasures. During the Great Depression of the 1930s, people cut back on the expensive evening out and looked to board games, radio, and family entertainment at home.

Or to go back to my original contention, education is using social influences to encourage autistic cognitive skills. Of course non-autistics experience so much educational failure, in part, because many people can increase their focus only so much. That’s yet another bias and it is a bias that so many of us suffer under. The lesson is this: No matter what your neurology, be careful whom you criticize. It may just be someone you should be trying to emulate. 6 THE NEW ECONOMY OF STORIES There has been a fundamental shift in the balance of power between consumers and salesmen over the last generation and it points in the direction of consumers. The quantity and quality of “interior” pleasures is higher than ever before, so many people shift more toward these very cheap entertainments. Because of this rise of interiority, we’re saving money on our learning and entertainment and we’re also telling ourselves more stories.

For a discussion of this issue, see Dermot Bowler, Autism Spectrum Disorders: Psychological Theory and Research (cited above), 115–17. In any case, one can think of neurotypicals as trying, through education, to attain the non-distracted maximum focus found in many autistics. For the Department of Education figure, see www.ed.gov/about/overview/budget/budget03/summary/app1/edlite-index.html. CHAPTER 6: THE NEW ECONOMY OF STORIES You’ll find Schelling’s essay in his Choice and Consequence: Perspectives of an Errant Economist (Cambridge, MA: Harvard University Press, 1984). On stories I am also much influenced by Pascal Boyer’s Religion Explained (New York: Basic Books, 2002) and William Flesch’s Comeuppance: Costly Signaling, Altruistic Punishment, and Other Biological Components of Fiction (Cambridge, MA: Harvard University Press, 2008).


pages: 309 words: 78,361

Plenitude: The New Economics of True Wealth by Juliet B. Schor

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Asian financial crisis, big-box store, business climate, carbon footprint, cleantech, Community Supported Agriculture, creative destruction, credit crunch, Daniel Kahneman / Amos Tversky, decarbonisation, dematerialisation, demographic transition, deskilling, Edward Glaeser, en.wikipedia.org, Gini coefficient, global village, income inequality, income per capita, Intergovernmental Panel on Climate Change (IPCC), Isaac Newton, Joseph Schumpeter, Kenneth Arrow, knowledge economy, life extension, McMansion, new economy, peak oil, pink-collar, post-industrial society, prediction markets, purchasing power parity, ride hailing / ride sharing, Robert Shiller, Robert Shiller, sharing economy, Simon Kuznets, single-payer health, smart grid, The Chicago School, Thomas L Friedman, Thomas Malthus, too big to fail, transaction costs, Zipcar

Won’t it be expanding quickly in this scenario, and doesn’t it provide an alternative to the diversification strategy? There’s no question it’s the direction we must go. It will provide real, not fictitious, opportunity. We’ll be designing a whole new way to produce and consume based on ingenuity rather than on using up materials. In large part, plenitude is a way to allow individuals to participate in building this new economy. But we’re in the early stages of the transition. The experience so far is that companies have been surprisingly slow to embrace sustainable production methods. And no single sector can compensate for the much larger trends from the whole economy. Green businesses will provide only a limited number of jobs, especially right now. If you’re lucky enough to land a good-paying job with a thriving green company, you may want to dive in headfirst.

As we travel along the planet’s shutdown path, food, energy, transport, and consumer goods will become more expensive. Jobs and incomes will be less available, and the usual way out—a debt-financed consumer boom—is unaffordable for households and the planet. With familiar opportunities deteriorating, we’ll be ham-strung if we limit ourselves to past practice. It’s time to leapfrog over the unpalatable trade-offs currently on offer and embrace a new economy. Diversifying out of the BAU market makes it possible to tap into neglected assets. True wealth can be attained by mobilizing and transforming the economies of time, creativity, community, and consumption. A Caveat: One Life Living One innovative effort within the sustainability movement is called one planet living. It’s based on the ecological footprint, and attempts to shift individuals and communities to lifestyles that use only as many resources as are currently available if biocapacity were equally allocated across the globe.

The role of values, mindfulness, and lifestyle. Social Indicators Research 74: 349-68. Burgoon, Brian, and Phineas Baxandall. 2004. Three worlds of working time: Policy and politics in work-time patterns of industrialized countries. Politics and Society 32 (December): 439-73. Business Alliance for Local Living Economies (BALLE). The Business Alliance for Local Living Economies: 20,000 entrepreneurs building the new economy. Available from http://www.livingeconomies.org (accessed September 7, 2009). Caballero, Ricardo J., and Adam B. Jaffe. 1993. How high are the giants’ shoulders: An empirical assessment of knowledge spillovers and creative destruction in a model of economic growth. NBER Macroeconomics Annual 8: 15-74. Cavanagh, John, and Jerry Mander. 2004. Alternatives to economic globalization: A better world is possible.


pages: 285 words: 81,743

Start-Up Nation: The Story of Israel's Economic Miracle by Dan Senor; Saul Singer

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agricultural Revolution, Albert Einstein, back-to-the-land, banking crisis, Boycotts of Israel, call centre, Celtic Tiger, cleantech, Dissolution of the Soviet Union, friendly fire, immigration reform, labor-force participation, mass immigration, new economy, pez dispenser, post scarcity, profit motive, Silicon Valley, smart grid, social graph, sovereign wealth fund, Steve Ballmer, web application, women in the workforce, Yom Kippur War

The connection between the young Israeli backpackers dispersed around the globe and Israeli technology entrepreneurs’ penetration of foreign markets is clear. By the time they are out of their twenties, not only are most Israelis tested in discovering exotic opportunities abroad, but they aren’t afraid to enter unfamiliar environments and engage with cultures very different from their own. Indeed, military historian Edward Luttwak estimates that many postarmy Israelis have visited over a dozen countries by age thirty-five.8 Israelis thrive in new economies and uncharted territory in part because they have been out in the world, often in pursuit of the Book. One example of this avid internationalism is Netafim, an Israeli company that has become the largest provider of drip irrigation systems in the world. Founded in 1965, Netafim is a rare example of a company that bridges Israel’s low-tech, agricultural past to the current boom in cleantech.

Since 2006, his gatherings have alternated between Geneva, Switzerland, and Jeju, Korea. We asked Haug why there were not more start-ups in Korea, despite the great affinity Koreans have for technology. “The fear of losing face, and the bursting of the Internet bubble in 2000,” he told us. “In Korea, one should not be exposed while failing. Yet in early 2000, many entrepreneurs jumped on the bandwagon of the new economy. When the bubble burst, their public failure left a scar on entrepreneurship.” Haug was surprised to hear from the director of a technology incubator in Korea that a call for projects received only fifty submissions, “a low figure when you know how innovative and forward-thinking Korea really is.” To Haug, who has also explored the Israeli tech scene, “Israelis seem to be on the other side of the spectrum.

The dawn of Israel’s tech boom coincided not only with a global surge in information technology but with the American tech-stock bubble, the jump-starting of Israel’s venture capital industry through the Yozma program, the massive wave of immigration from the former Soviet Union, and the 1993 Oslo peace accords, bringing what seemed to be the prospect of peace and stability. What if Israel’s economic miracle were simply built on a rare confluence of events and would disappear under less favorable circumstances? Even if Israel’s new economy is not just the product of happenstance, what are the real threats to Israel’s long-term economic success? One need not speculate about what would happen if the positive factors that launched Israel’s tech boom in the late 1990s were to disappear. Most of them have. In 2000, the tech-stock bubble burst. In 2001, the Oslo peace process crumbled, as a wave of suicide bombings in Israel’s cities temporarily wiped out the tourism industry and contributed to an economic recession.

The Economic Singularity: Artificial intelligence and the death of capitalism by Calum Chace

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3D printing, additive manufacturing, agricultural Revolution, AI winter, Airbnb, artificial general intelligence, augmented reality, autonomous vehicles, banking crisis, basic income, Baxter: Rethink Robotics, Berlin Wall, Bernie Sanders, bitcoin, blockchain, call centre, Chris Urmson, congestion charging, credit crunch, David Ricardo: comparative advantage, Douglas Engelbart, Elon Musk, en.wikipedia.org, Erik Brynjolfsson, Flynn Effect, full employment, future of work, gender pay gap, gig economy, Google Glasses, Google X / Alphabet X, ImageNet competition, income inequality, industrial robot, Internet of things, invention of the telephone, invisible hand, James Watt: steam engine, Jaron Lanier, Jeff Bezos, job automation, John Markoff, John Maynard Keynes: technological unemployment, John von Neumann, Kevin Kelly, knowledge worker, lifelogging, lump of labour, Lyft, Marc Andreessen, Mark Zuckerberg, Martin Wolf, McJob, means of production, Milgram experiment, Narrative Science, natural language processing, new economy, Occupy movement, Oculus Rift, PageRank, pattern recognition, post scarcity, post-industrial society, precariat, prediction markets, QWERTY keyboard, railway mania, RAND corporation, Ray Kurzweil, RFID, Rodney Brooks, Satoshi Nakamoto, Second Machine Age, self-driving car, sharing economy, Silicon Valley, Skype, software is eating the world, speech recognition, Stephen Hawking, Steve Jobs, TaskRabbit, technological singularity, The Future of Employment, Thomas Malthus, transaction costs, Tyler Cowen: Great Stagnation, Uber for X, universal basic income, Vernor Vinge, working-age population, Y Combinator, young professional

Furthermore, if the richest billionaires gave their wealth to the poorest half of the world, it would amount to a one-off payment of few hundred dollars each.[cccxxiv] Nevertheless, if you are one of the lucky minority with substantial net assets, you might be wondering how you will be affected if and when technological unemployment takes hold. Will your house be worth more or less in the new economy? How about your vintage Aston Martin, or your collection of fine wines? Until and unless we move to a completely different kind of economy, it is likely that some of the wealthy people – especially those who control the artificial intelligence which creates most of the added value – will remain wealthy, and perhaps become even more wealthy. Perhaps the prices for Stradivarius violins and prime real estate will continue to rise – for some time at least.

It is not impossible to imagine a benign technocracy in which the majority of people really don’t care who owns what, because they are wholly satisfied with their abundant supply of material and digital goods and services. Unfortunately, every time I try to envisage this world, the picture degrades into a variation on the theme of “Brave New World” – or worse. Perhaps this is simply a failure of my imagination. I hope so. If it is true that we need to move away from capitalism, we have two major jobs on our hands. First, we need to determine what that new economy should look like. Second, we need to work out how to transition from the economy we have to the economy we need. This will not be easy. Humans dislike change, and as always, there will be winners and losers. The losers may not take their losses calmly. The scenario of the gods and the useless is not the only possible outcome of technological unemployment. The next chapter explores half a dozen of the most plausible scenarios.

Chapter 6.1 presented and dismissed the idea that technological progress has slowed almost to a halt, and there is nothing to worry about. Chapter 6.2 rehearsed the hope that we can race with the machines by becoming centaurs and enjoying the icebergs of new work. Chapter 6.3 offered the idea that unemployment will grow, but can be accommodated by UBI. Chapter 6.4 reprised the scenario of the gods and the useless, and chapter 6.5 reminded us that civilisation is fragile, and that a poorly-planned transition towards a new economy could be hazardous. Chapter 6.6 adopted Kevin Kelly’s term Protopia for a successful transition, and suggested that the blockchain might turn out to be the mechanism to administer society’s collectively owned assets, notably its artificial intelligence. 7.2 – The two singularities In my previous book, “Surviving AI”, I wrote at length about the challenge and the opportunity presented by the technological singularity, the moment when (and if) we create an artificial general intelligence which continues to improve its cognitive performance and becomes a superintelligence.


pages: 260 words: 77,007

Are You Smart Enough to Work at Google?: Trick Questions, Zen-Like Riddles, Insanely Difficult Puzzles, and Other Devious Interviewing Techniques You ... Know to Get a Job Anywhere in the New Economy by William Poundstone

affirmative action, Albert Einstein, big-box store, Buckminster Fuller, car-free, cloud computing, creative destruction, en.wikipedia.org, full text search, hiring and firing, index card, Isaac Newton, John von Neumann, loss aversion, mental accounting, new economy, Paul Erdős, RAND corporation, random walk, Richard Feynman, Richard Feynman, rolodex, Rubik’s Cube, Silicon Valley, Silicon Valley startup, sorting algorithm, Steve Ballmer, Steve Jobs, The Spirit Level, Tony Hsieh, why are manhole covers round?, William Shockley: the traitorous eight

“Ice arrows? “Why?” “Because the Prince of Darkness is a creature made of fire?” She liked that. “So what do you do next?” “I shoot him?” “No, what do you do?” Silence. “You waste him! You WASTE the Prince of Darkness!” By this point, the applicant had a question of his own: “Holy crap, what have I gotten myself into?” He had gotten himself into a not entirely atypical interview in the new economy. In many industries, offbeat interview questions are a badge of coolness. They show how “creative” the workforce is. These questions are a feature of companies where non-HR employees do the interviewing. In highly specialized and creative fields particularly, it’s thought that employees better know what questions to ask than human resources people do. This sounds fine in theory. In practice, a largish minority of citizen-interviewers take this as license to go rogue.

Bass wrote, The personnel interview continues to be the most widely used method for selecting employees, despite the fact that it is a costly, inefficient, and usually invalid procedure. A dozen years later, the recruiter Robert Martin said, Most of the corporate recruiters with whom I’ve had contact are decent, well-intentioned people. But I’ve yet to meet anyone, including myself, who knows what he (or she) is doing. The new economy has taken notice. “In an interview you can tell if a person is a pleasant conversationalist, and you can give some technical questions to rule out the truly inept, but beyond that you might as well be rolling dice,” wrote the founder of BitTorrent, Bram Cohen. Google’s human resources head, Laszlo Bock, said it even more succinctly: “Interviews are a terrible predictor of performance.” What’s so bad about an interview?

The answers to “dead beef” and “latency problem” are here.) “You’re supposed to ask open-ended questions that test problem solving and general knowledge, then get into specifics,” explained one former Google interviewer. Google’s most characteristic, and most emulated, interview questions are short questions that spark conversations. On January 26, 2008, senator and presidential hopeful Barack Obama attempted to establish his new-economy credentials. He visited the Googleplex for a public chat with Eric Schmidt. Schmidt commented that it was hard to get a job as president—and hard to get a job at Google. In order to test Obama’s qualifications, Schmidt asked him, “What’s the most efficient way to sort a million 32-bit integers?” Obama’s reply was, “The bubble sort would be the wrong way to go.” It was scripted shtick, of course, and it got a big laugh.


pages: 559 words: 169,094

The Unwinding: An Inner History of the New America by George Packer

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Affordable Care Act / Obamacare, Apple's 1984 Super Bowl advert, bank run, big-box store, citizen journalism, cleantech, collateralized debt obligation, collective bargaining, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, deindustrialization, diversified portfolio, East Village, El Camino Real, Elon Musk, family office, financial independence, financial innovation, fixed income, Flash crash, Henry Ford's grandson gave labor union leader Walter Reuther a tour of the company’s new, automated factory…, housing crisis, income inequality, informal economy, Jane Jacobs, life extension, Long Term Capital Management, low skilled workers, Marc Andreessen, margin call, Mark Zuckerberg, market bubble, market fundamentalism, Maui Hawaii, Menlo Park, Neil Kinnock, new economy, New Journalism, obamacare, Occupy movement, oil shock, peak oil, Peter Thiel, Ponzi scheme, Richard Florida, Robert Bork, Ronald Reagan, Ronald Reagan: Tear down this wall, shareholder value, side project, Silicon Valley, Silicon Valley startup, single-payer health, smart grid, Steve Jobs, strikebreaker, The Death and Life of Great American Cities, the scientific method, too big to fail, union organizing, urban planning, We are the 99%, We wanted flying cars, instead we got 140 characters, white flight, white picket fence, zero-sum game

He fervently believed that out of this collapse would come a new birth—a whole new way of life would emerge, right here in Rockingham County, and around the country. In a decade or so, the whole landscape would be different. There might be no more Wal-Marts. Exxon and Archer Daniels Midland would be moribund, brainless, obsolete. With gas up to six or seven dollars a gallon, instead of centralization and long-distance transportation and everything on a huge scale, the new economy would be decentralized, local, and small-scale. Rural areas like the Piedmont were on the cusp of revival, and everything they needed was right at hand, riches in the fallow fields. In the age of riverboat travel there had been a gristmill every fifty miles or so, where people produced flour using water power. In the coming years, small fuel refineries and meat processors would spring up every fifty miles on Route 220.

“If this is a one-hundred-fifty-year anomaly,” Dean said, “where we took all the cheap, affordable oil out of the ground, and used it to get us to where we are today—when that starts to unwind, we will go back to where we were before, but yet we will have learned so much in the process of all this new technology that we take with us.” And the key, he believed, was biofuel. “This is the model that will go forward, this green new economy. Unless they come up with something that will run these vehicles on air, or something that is infinite in availability, this will rule for a thousand years. It will be an agrarian economy, but locally. Who’s to say what the future holds, but when these farmers can grow their own crops and power their own diesel tractors and not be subjected to anybody and be their own boss, that’s a big change.

For during the same months of 2008 when Red Birch Energy was starting up, housing prices were dropping all over the country, and in the Piedmont, where the economy had been depressed for a decade, the crisis was forcing people to choose between paying their mortgages and putting gas in the car—at a moment when gas prices were at an all-time high—to drive to work. Foreclosure signs started appearing on properties that had never been worth very much. Dean saw the crisis as a ripple effect of the rising cost of fuel—a consequence of peak oil. But what was good for the new economy was bad for the old. And like a line of dominoes, his overleveraged businesses began to fail, one after another. The first to go was the Back Yard Burgers in Danville. Almost immediately, weekly sales dropped 30 percent, from $17,000 to $12,000. In fast food, the break-even was around $12,500. As his customers’ disposable income dried up, they decided that they couldn’t afford $5.50 for a cheeseburger and fries and went across the mall to pay $4.50 at McDonald’s.


pages: 700 words: 201,953

The Social Life of Money by Nigel Dodd

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accounting loophole / creative accounting, bank run, banking crisis, banks create money, Bernie Madoff, bitcoin, blockchain, borderless world, Bretton Woods, BRICs, capital controls, cashless society, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, commoditize, computer age, conceptual framework, credit crunch, cross-subsidies, David Graeber, debt deflation, dematerialisation, disintermediation, eurozone crisis, fiat currency, financial exclusion, financial innovation, Financial Instability Hypothesis, financial repression, floating exchange rates, Fractional reserve banking, German hyperinflation, Goldman Sachs: Vampire Squid, Hyman Minsky, illegal immigration, informal economy, interest rate swap, Isaac Newton, John Maynard Keynes: Economic Possibilities for our Grandchildren, joint-stock company, Joseph Schumpeter, Kula ring, laissez-faire capitalism, land reform, late capitalism, liberal capitalism, liquidity trap, litecoin, London Interbank Offered Rate, M-Pesa, Marshall McLuhan, means of production, mental accounting, microcredit, mobile money, money market fund, money: store of value / unit of account / medium of exchange, mortgage debt, negative equity, new economy, Nixon shock, Occupy movement, offshore financial centre, paradox of thrift, payday loans, Peace of Westphalia, peer-to-peer, peer-to-peer lending, Ponzi scheme, post scarcity, postnationalism / post nation state, predatory finance, price mechanism, price stability, quantitative easing, quantitative trading / quantitative finance, remote working, rent-seeking, reserve currency, Richard Thaler, Robert Shiller, Robert Shiller, Satoshi Nakamoto, Scientific racism, seigniorage, Skype, Slavoj Žižek, South Sea Bubble, sovereign wealth fund, special drawing rights, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, transaction costs, Veblen good, Wave and Pay, Westphalian system, WikiLeaks, Wolfgang Streeck, yield curve, zero-coupon bond

Germane to this view, the mimetic character of financial panics is indicative of the uneasy alliance of individualism and collectivism that financial capitalism demands: “everyone returns to his own property and, simultaneously, he finds himself closer to the others because of effects of mimesis, because of the contagion and the reactions it provokes” (Marazzi 2008: 129).36 In place of a rational subject, Marazzi substitutes Spinoza’s idea of the multitude as the collective nonsubject that resides in the new economy. The multitude is an effigy of money, the very form of its sovereignty: “After having killed the god Pan, the multitude has to learn to protect itself from those momentary gods who, like little gremlins, haunt accidental events” (Marazzi 2008: 135). Like the new economy itself, the post-Fordist panic is characterized not by atomism and alienation but by its opposite, what Paolo Virno called “the magnetic adherence of the individual to the general intellect” (Marazzi 2008: 130). Financial panic is a mass escape to a formless world, a world in which the referentiality of language itself has broken down.

This state of emergency was a breakdown in the capacity of the state to use money and credit to mediate class relations and thereby maintain its own power. In his recent analyses of post-Fordism and cognitive capitalism, Marazzi has subsequently reconfigured Marx’s distinction between the real economy (where material and immaterial goods are produced and sold) and the monetary–financial economy (where investment and speculation take place). Cognitive capitalism (or the cognitive–cultural economy) refers to the New Economy: high-technology industry, business and financial services, personal services, the media, and e-cultural industries. Digital technologies have a key role to play, and as a result, cognitive (or cultural) labor is in high demand. In essence, this fact means that work increasingly consists of the exercise of linguistic, interpersonal emotional and intellectual skills, using “raw materials” that are by their nature intangible and difficult to quantify.

Both the “real” and the “financial” dimensions of contemporary capitalism are now characterized by a reliance on intellectual labor (Marazzi 2008: 93–94). Whereas the monetary and financial problems that shaped the immediate post-Bretton Woods era were based on the contradictory relationship between the real and financial economies, i.e., the ability of money to recuperate itself as capital, financialization has spread across the entire business cycle (Marazzi 2010: 27–29, 49). The new economy is driven by excessive levels of financial activity (lending and speculation), with no brake or threshold within the real economy to slow things down. This situation is financial saturation. Moreover, whereas Harvey continues to see the state as key to reestablishing money’s underlying value in the aftermath of credit crisis, Marazzi brings the argument he began with Bretton Woods to its logical conclusion: this is a post-Keynesian system in which the old internal and external solutions for restoring capital’s value—effective demand management and colonialism, respectively—have been exhausted.


pages: 349 words: 134,041

Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives by Satyajit Das

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accounting loophole / creative accounting, Albert Einstein, Asian financial crisis, asset-backed security, beat the dealer, Black Swan, Black-Scholes formula, Bretton Woods, BRICs, Brownian motion, business process, buy low sell high, call centre, capital asset pricing model, collateralized debt obligation, commoditize, complexity theory, computerized trading, corporate governance, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, cuban missile crisis, currency peg, disintermediation, diversification, diversified portfolio, Edward Thorp, Eugene Fama: efficient market hypothesis, Everything should be made as simple as possible, financial innovation, fixed income, Haight Ashbury, high net worth, implied volatility, index arbitrage, index card, index fund, interest rate derivative, interest rate swap, Isaac Newton, job satisfaction, John Meriwether, locking in a profit, Long Term Capital Management, mandelbrot fractal, margin call, market bubble, Marshall McLuhan, mass affluent, mega-rich, merger arbitrage, Mexican peso crisis / tequila crisis, money market fund, moral hazard, mutually assured destruction, Myron Scholes, new economy, New Journalism, Nick Leeson, offshore financial centre, oil shock, Parkinson's law, placebo effect, Ponzi scheme, purchasing power parity, quantitative trading / quantitative finance, random walk, regulatory arbitrage, Right to Buy, risk-adjusted returns, risk/return, Satyajit Das, shareholder value, short selling, South Sea Bubble, statistical model, technology bubble, the medium is the message, the new new thing, time value of money, too big to fail, transaction costs, value at risk, Vanguard fund, volatility smile, yield curve, Yogi Berra, zero-coupon bond

The unsustainable inflation in value was incomprehensible to the few that believed in rationality and efficiency. Trend chasers, ‘mo’ (momentum) buyers, kept buying because they kept making money; nobody could explain the overvaluation; the doomsayer’s position became untenable and, puzzled by the duration of overvaluation, even intelligent and honest analysts eventually succumbed, evolving complex theories of why it was different this time. The overvaluation was sustainable after all. Theories of the ‘new economy’ and the good returns allowed suspension of reality for a little longer but eventually, the Ponzi scheme collapsed.3 Every rising market is driven by a new paradigm, every crash is the same as the last crash. In 2001, the Internet bubble burst. The NASDAQ index fell 80%. Eliot Spitzer and the SEC (Securities and Exchange Commission) belatedly took up the issue of the analysts and some were banned from the securities industry.

Following the collapse of the ‘bubble’ economy, Japanese was experiencing deflation. Interest rates were 0%, the share market was down over 80 % from its dizzying heights, property prices had collapsed. Even the cost of golf club memberships, the real barometer of Japanese economic health, was plunging. There was no way that investment returns were near the required 3–4%. Tony Blair held forth about ‘Cool Britannia’; Clinton and Greenspan jammed on sax and talked up the New Economy; Japan was mired in endless gloom. A succession of leaders with contrasting hair styles tried unsuccessfully to revive the economy. For the investors, the only option was structured products like reverse dual currency bonds. There was the risk, but the insurance companies were trapped between a rock (do nothing and die) and a hard place (do something and probably die but with a small chance of survival).

Any growth was better than the negative growth experienced through the dark 1990s, and there was even inflation, a little anyway. The growth was good for Japan but a disaster for the PRDC business. Japanese interest rates went up quickly: ten year rates climbed from a microscopic 0.45% to a staggering 1.7% (a fourfold interest), 30 year rates doubled from 1.1% to 2.2%. The yen appreciated strongly against the dollar. The US dollar was plunging as the New Economy fell to earth with a thud as old gravity got hold of it. PRDC bonds were not called: the promised one or two year trade rapidly became a 30-year trade. The stronger yen meant that the high interest rates fell to 0%. The deals were deep under water. Under their antiquated accounting investors in Japan did not have to recognize the unrealized losses. Mark-to-market rules were subject to import restrictions in Japan.


pages: 482 words: 122,497

The Wrecking Crew: How Conservatives Rule by Thomas Frank

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affirmative action, anti-communist, barriers to entry, Berlin Wall, Bernie Madoff, British Empire, collective bargaining, corporate governance, Credit Default Swap, David Brooks, edge city, financial deregulation, full employment, George Gilder, guest worker program, income inequality, invisible hand, job satisfaction, Mikhail Gorbachev, Mont Pelerin Society, mortgage debt, Naomi Klein, new economy, P = NP, Plutocrats, plutocrats, Ponzi scheme, Ralph Nader, rent control, Richard Florida, road to serfdom, rolodex, Ronald Reagan, school vouchers, shareholder value, Silicon Valley, stem cell, Telecommunications Act of 1996, the scientific method, too big to fail, union organizing, War on Poverty

Even the culture wars seemed to recede, as the new capitalists made their pronouncements to an Iggy Pop beat and the offices of America went “business casual.” The crew-cut factory owner in Akron was joined in his denunciations of big government by the hipsters at Wired—and, mirabile dictu, by a Democratic president. All across the land wingers changed their plumage. Onetime red-baiter Dinesh D’Souza became an authority on Silicon Valley, the site of the deregulated New Economy’s greatest achievements. Jack Wheeler, erstwhile leader of the cult of the freedom fighter, discovered that the Internet was the weapon that would destroy the liberal state here at home.1 Leadership of the conservative movement passed from Pat Buchanan, warning darkly about the coming “New World Order,” to Newt Gingrich, extolling the coming Information Age and referring reporters to the glorious free-market future as revealed in The Third Wave.

This was the place where first world met third, the Afrikaners used to say; the land where a civilization of Mercedes-driving suburbanites came face-to-face with people who lived in huts made of sticks and plastic bags.56 Today, this idea of “first world meets third” is no longer such an exotic concept. In some ways that’s us. That’s Europe, too. That’s Ireland and France and Brazil and India and Malaysia and Mexico. It is now such a common feature of the “New Economy” that business gurus frankly insist on this mix: you can’t have a properly profitable system unless you have plenty of surplus third worlders around to work their magic—that is, to work for pennies. Apartheid was a costly and murderous way of managing this situation. But South Africa pioneered other models as well, half-remembered schemes in which low-tax zones and union-free labor forces were delivered and disciplined not by brutal white cops but by indigenous leaders bubbling over with ethnic pride.

Proclaiming in 1997 that the CNMI—as part of its well-known devotion to free-market principle—was about to approve a vouchers program, Abramoff’s team brought various CNMI officials to the mainland and hooked them up with leading conservative voucher advocates and inner-city education activists in Cleveland, Milwaukee, and Washington, D.C. What the superlobbyist seems to have understood was that any consideration of labor abuses in Saipan could be stopped cold by a fusillade of righteous ethnic authenticity. Abramoff was not the first to figure this out, of course. Applying the “racist” label to critics of outsourcing, offshoring, and even business generally is a familiar reflex of the “New Economy” mind. Surely you know the litany by now: the new, exuberant capitalism is leveling the barriers between peoples, flattening the world, and bringing us all closer together; to resist or even to criticize this new capitalism is to align yourself somehow with the forces of racist “protectionism.” Entire books have been written to push this rattlebrained notion. It is the stuff from which D.C. think-tank careers are made.


pages: 320 words: 87,853

The Black Box Society: The Secret Algorithms That Control Money and Information by Frank Pasquale

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Affordable Care Act / Obamacare, algorithmic trading, Amazon Mechanical Turk, American Legislative Exchange Council, asset-backed security, Atul Gawande, bank run, barriers to entry, basic income, Berlin Wall, Bernie Madoff, Black Swan, bonus culture, Brian Krebs, call centre, Capital in the Twenty-First Century by Thomas Piketty, Chelsea Manning, Chuck Templeton: OpenTable, cloud computing, collateralized debt obligation, computerized markets, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, crowdsourcing, cryptocurrency, Debian, don't be evil, drone strike, Edward Snowden, en.wikipedia.org, Fall of the Berlin Wall, Filter Bubble, financial innovation, financial thriller, fixed income, Flash crash, full employment, Goldman Sachs: Vampire Squid, Google Earth, Hernando de Soto, High speed trading, hiring and firing, housing crisis, informal economy, information asymmetry, information retrieval, interest rate swap, Internet of things, invisible hand, Jaron Lanier, Jeff Bezos, job automation, Julian Assange, Kevin Kelly, knowledge worker, Kodak vs Instagram, kremlinology, late fees, London Interbank Offered Rate, London Whale, Marc Andreessen, Mark Zuckerberg, mobile money, moral hazard, new economy, Nicholas Carr, offshore financial centre, PageRank, pattern recognition, Philip Mirowski, precariat, profit maximization, profit motive, quantitative easing, race to the bottom, recommendation engine, regulatory arbitrage, risk-adjusted returns, Satyajit Das, search engine result page, shareholder value, Silicon Valley, Snapchat, Spread Networks laid a new fibre optics cable between New York and Chicago, statistical arbitrage, statistical model, Steven Levy, the scientific method, too big to fail, transaction costs, two-sided market, universal basic income, Upton Sinclair, value at risk, WikiLeaks, zero-sum game

Profiling may begin with the original collectors of the information, but it can be elaborated by numerous data brokers, including credit bureaus, analytics firms, catalog co-ops, direct marketers, list brokers, affiliates, and others.78 Brokers combine, swap, and recombine the data they acquire into new profiles, which they can then sell back to the original collectors or to other firms. It’s a complicated picture, and even experts have a tough time keeping on top of exactly how data flows in the new economy. A Thousand Eyes. Most of us have enough trouble keeping tabs on our credit history at the three major credit bureaus. But the Internet has supercharged the world of data exchange and profi ling, and Experian, TransUnion, and Equifax are no longer the sole, or even the main, keepers of our online reputations. What will hap- D I G I TA L R E P U TAT I O N I N A N E R A O F R U N AW AY D ATA 33 pen when we’ve got dozens, or hundreds, of entities to keep our eyes on?

Once someone has been convicted of a crime (or pleaded guilty), that stigma will often preclude him from many opportunities— a job, housing, public assistance, and so on—long after he has “paid his debt to society.”122 A similar dynamic is becoming apparent in fi nance. As they dole out opportunities for “prime” and “subprime” credit, automated systems may be silently resegregating racial groups in ways that would be clearly illegal if pursued consciously by an individual.123 “Data-driven” lending practices have hit minority communities hard. One attorney at the Neighborhood Economic Development Advocacy Project (now the New Economy Project) called subprime lending a systematic “equity stripping” targeted at minorities— even if they were longtime homeowners.124 Subtle but persistent racism, arising out of implicit bias or other factors, may have influenced past terms of credit, and it’s much harder to keep up on a loan at 15 percent interest than one at 5 percent.125 Late payments will be more likely, and then will be fed into present credit scoring models as neutral, objective, nonracial indicia of reliability and creditworthiness.126 Far from liberating individuals to be judged on their character rather than their color, credit scores in scenarios like these launder past practices of discrimination into a black-boxed score, immune from scrutiny.127 Continuing unease about black box scoring reflects long-standing anxiety about misapplications of natural science methods to the social realm.128 A civil engineer might use data from a thousand bridges to estimate which one might next collapse; now fi nancial engineers scrutinize millions of transactions to predict consumer defaults.

That statement is true in the sense that but for the paint, there would be no Mona Lisa. But it is false if it suggests that da Vinci wasn’t responsible for the great value the Mona Lisa is.”160 This is a provocative but very puzzling metaphor. Is Lessig really implying that Google’s organization of the web by query does for it what da Vinci did for some pots of paint? That it is not the content, but the index, that gives the web meaning? After all, the new economy preaches that “information” is just another commodity. From Google’s perspective, content, data, and information are basically 1’s and 0’s and the ad payouts they generate. But to most of us, the value of a website lies in its meaning, not its salience. And real careers, real incomes, and real achievements are won and lost in the struggle for salience that platforms host daily. This brings us back to our equestrienne presenter, to the lords of the cloud, and to the question that is really the theme of this chapter.


pages: 538 words: 147,612

All the Money in the World by Peter W. Bernstein

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Albert Einstein, anti-communist, Berlin Wall, Bill Gates: Altair 8800, call centre, corporate governance, corporate raider, creative destruction, currency peg, David Brooks, Donald Trump, estate planning, family office, financial innovation, George Gilder, high net worth, invisible hand, Irwin Jacobs: Qualcomm, Jeff Bezos, job automation, job-hopping, John Markoff, Long Term Capital Management, Marc Andreessen, Martin Wolf, Maui Hawaii, means of production, mega-rich, Menlo Park, Mikhail Gorbachev, new economy, Norman Mailer, PageRank, Peter Singer: altruism, pez dispenser, popular electronics, Renaissance Technologies, Rod Stewart played at Stephen Schwarzman birthday party, Ronald Reagan, Sand Hill Road, school vouchers, Search for Extraterrestrial Intelligence, shareholder value, Silicon Valley, Silicon Valley startup, stem cell, Stephen Hawking, Steve Ballmer, Steve Jobs, Steve Wozniak, the new new thing, Thorstein Veblen, too big to fail, traveling salesman, urban planning, wealth creators, William Shockley: the traitorous eight, women in the workforce

Instead, there are views of the mountains and the Horse Park at Woodside, an enormous facility devoted to a variety of equestrian events. Many of the companies are based in anonymous office parks, where the low-rise buildings have oversize picture windows to take in the dramatic vistas. Instead of paying their dues with years of hard labor at established companies, many members of the West Coast Forbes 400 fraternity were the original pioneers in key New Economy industries and financial services in the Valley, such as high-tech, biotech, discount brokerage, and venture capital. New Economy billionaires often make their fortunes very quickly and at a relatively young age. One of the youngest people16 ever to make the list was Steve Jobs (number 49 on the 2006 Forbes 400 list), who at age twenty-seven boasted a $100 million fortune, thanks to his success with Apple Computer. Bill Gates was also one of the youngest; in 1986 he joined the list at age thirty, with $315 million.

Venture capitalist John Doerr (2006 net worth: $1 billion) describes the Valley as the site responsible for the “greatest legal accumulation of wealth in the history of the planet.” Aside from its stunning scenery, the Valley does not advertise its riches. With the country’s top venture-capital firms and its thriving high-tech companies, Sand Hill Road, the Valley’s main strip, is a sort of New Economy version of Wall Street. The four-lane highway runs through a hilly landscape from the town of Menlo Park past the mission-style buildings of Stanford University’s campus to the edge of Palo Alto. There are no iconic financial towers dominating the surrounding landscape; nor are there legions of briefcase-toting workers rushing by. Instead, there are views of the mountains and the Horse Park at Woodside, an enormous facility devoted to a variety of equestrian events.

The trader returned convinced the shortage was real, and Robertson’s fund maintained its position through several years of losses. “He had a high tolerance70 for pain,” a former trader remembers. When palladium soared from $180 to $800 an ounce between January 1995 and April 2000, Tiger reaped a windfall. But after a twenty-year magic-carpet ride, Robertson, like Soros, crashed in the 2000 tech carnage. Shorting the new economy during the Internet boom was a “recipe for bankruptcy, because the worst stocks were rising,” he has said ruefully. “I should have stopped earlier.” He started closing his funds in 2000. “Some investors probably got71 1,000 to 1. Others got a loss,” he says. Even so, he ended up with plenty in his own bank account. In 2007, in his mid-seventies, he manages only his own money, an estimated $1 billion.


pages: 454 words: 122,612

In-N-Out Burger by Stacy Perman

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anti-communist, British Empire, commoditize, corporate raider, El Camino Real, estate planning, forensic accounting, Haight Ashbury, Maui Hawaii, McJob, McMansion, new economy, Ronald Reagan, Silicon Valley, Upton Sinclair

The new owners hoped to expand the chain further and build smaller, cheaper Johnny Rockets in places like airport terminals. Sell-offs and franchising had been central elements of the fast-food game since the 1950s. More than forty years later, a new twist emerged, and all of the standard norms of business were being broken. The week that Guy Snyder died, the Los Angeles Times was dominated by news of the “new economy” propelled by technology. The newspaper proclaimed that the Internet was a “gold mine,” and headlines trumpeted “Rally Heard Round the World, Dow Jones Industrial Average Skyrockets as Bull Market Continues,” and “Strong Job, Pay Figures Fuel Stock Market Rise.” The game had changed. Up in Silicon Valley, a five-and-a-half-hour drive north of Baldwin Park, new paper millionaires were being minted by the busload.

“But in 1995, with about sixty shops, Teitelbaum sold”: Amy Spector and Richard Martin, “Ronn Teitelbaum, Johnny Rockets Founder; Dies at 61,” Nation’s Restaurant News, September 25, 2000. “Twelve years later Red Zone Capital Fund II”: David Cho, “Snyder Buys Johnny Rockets Diner Chain,” Washington Post, February 10, 2007. “By then there were 213 stores across the United States”: “Johnny Rockets Names Lee Sanders New President and CEO,” Johnny Rockets press release, May 24, 2007, http://www.johnnyrockets.com/aboutus/press.php?id=160. “news of the ‘new economy’ propelled by technology.”: The newspaper proclaimed that the Internet was a “gold mine,” and headlines trumpeted “Rally Heard Round the World, Dow Jones Industrial Average Skyrockets as Bull Market Continues,” and “Strong Job, Pay Figures Fuel Stock Market Rise.” All headlines from the Los Angeles Times, week of December 4, 1999. “We have a team of people out in our stores that are all similarly committed,”: Greg Hernandez, “Family-Owned In-N-Out at a Crossroads,” Los Angeles Times, July 2, 2000.

McJobs, 140 cost-effectiveness and high volume, 47 as cultural institution, 13–14 fortieth anniversary, 165, 166 mystique of, 92, 146–48, 168–69, 287 In-N-Out Burger Foundation, 205 In-N-Out Burger logo, 2, 13, 121, 288 as advertising, 149 on store in Westwood, 224–25 In-N-Out Burger University, 133–36, 172 In-N-Out Urge, 150 innovation, 40–42 double drive-through, 62–63 open kitchen, 45 Insta-Burger-King. See Burger King instant iced tea, 86 Internet, new economy and, 84, 232 Interstate Highway Act of 1956, 61–62 Intruder in the Dust, 61 IPO. See Initial Public Offering (IPO) Iriart, Ken, 131, 143 Irish potato famine, 22 Irvine, California, new headquarters, 184, 185 Irwindale, 78 Irwindale Raceway, 76, 80–82 closing of, 83 In-N-Out snack stands at, 78–79 Jack in the Box, 41, 91, 99, 102 Jackson, Reuben W., 39 “Jesus Freaks,” 155 “Jesus Movement,” 155 jewel of Downey, 50–51 Johnie’s Broiler.


pages: 509 words: 132,327

Rise of the Machines: A Cybernetic History by Thomas Rid

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1960s counterculture, A Declaration of the Independence of Cyberspace, agricultural Revolution, Albert Einstein, Alistair Cooke, Apple II, Apple's 1984 Super Bowl advert, back-to-the-land, Berlin Wall, British Empire, Brownian motion, Buckminster Fuller, business intelligence, Claude Shannon: information theory, conceptual framework, connected car, domain-specific language, Douglas Engelbart, Douglas Engelbart, dumpster diving, Extropian, full employment, game design, global village, Haight Ashbury, Howard Rheingold, Jaron Lanier, job automation, John Markoff, John von Neumann, Kevin Kelly, Marshall McLuhan, Menlo Park, Mother of all demos, new economy, New Journalism, Norbert Wiener, offshore financial centre, oil shale / tar sands, pattern recognition, RAND corporation, Silicon Valley, Simon Singh, speech recognition, Steve Jobs, Steve Wozniak, Steven Levy, Stewart Brand, technoutopianism, Telecommunications Act of 1996, telepresence, V2 rocket, Vernor Vinge, Whole Earth Catalog, Whole Earth Review, Y2K, Yom Kippur War, Zimmermann PGP

Washington debated the “end of history,” with liberal market economies coming out triumphant. In the Persian Gulf War of 1991, perhaps America’s shortest and most successful ground war operation to date, the Pentagon overcame the mighty Iraqi army—and with it the lingering Vietnam hangover. Silicon Valley and America’s technology start-up scene, still bathing in the crisp utopian afterglow of the 1980s, watched the rise of the New Economy, with vertigo-inducing growth rates. Entrepreneurs rubbed their hands in anticipation. Intellectuals were inebriated by the simultaneous emergence of two revolutionary forces: personal computers and the internet. More and more PC owners connected their machines to the fast-growing global computer network, first with clunky, screeching modems, then with faster and faster broadband connections.

And although the two authors never referred to crypto anarchy or the c-punks, the publication gave wider currency to an emerging political philosophy. But the book’s success was short-lived—sharing this fate with the utopian ideology from which it sprang. Inspired by Vinge’s story and the cypherpunk list, a few entrepreneurs took the idea of the sovereign individual rather literally in those enthusiastic years before the crash of the New Economy. One of them was Ryan Lackey. Digital cash had fascinated Lackey since he was fifteen years old. He had already started an e-money start-up on Anguilla, a loosely regulated island, but he had run into trouble with the ruling family. An avid c-punk, he had hosted the list archives on an MIT server when he was a student in Boston. Lackey even looked like a textbook cypherpunk: head shaved bald, pale skin from spending too much time in front of screens, rimmed glasses with a dark black frame, and usually dressed all in black.

“It really didn’t matter too much,” Lackey says. He was living in the Other Plane.95 The rough life reflected HavenCo’s business situation. The company had five sturdy gray relay racks with blue plugs at the top, with space for forty-five servers. But it managed to put in and rent out only a dozen machines. The company never successfully raised sufficient seed money, not even in the bullish market of the New Economy before the crash. And the budget quickly ran thin. One of HavenCo’s main investors, Avi Friedman, was worried about the Y2K problem, so he withdrew about $2 million in cash, in $100 bills, and kept the cash at home. He doled out $1,500 at a time, to make minimum payments. Lackey started using his own credit cards, spending ever more money that he didn’t have. Businesses did not flock to the data haven as expected.

The Future of Technology by Tom Standage

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air freight, barriers to entry, business process, business process outsourcing, call centre, Clayton Christensen, computer vision, connected car, corporate governance, creative destruction, disintermediation, distributed generation, double helix, experimental economics, full employment, hydrogen economy, industrial robot, informal economy, information asymmetry, interchangeable parts, job satisfaction, labour market flexibility, Marc Andreessen, market design, Menlo Park, millennium bug, moral hazard, natural language processing, Network effects, new economy, Nicholas Carr, optical character recognition, railway mania, rent-seeking, RFID, Silicon Valley, Silicon Valley ideology, Silicon Valley startup, six sigma, Skype, smart grid, software as a service, spectrum auction, speech recognition, stem cell, Steve Ballmer, technology bubble, telemarketer, transcontinental railway, Y2K

This is the “gilded age” of any given technology, “a great surge of development”, as Ms Perez calls technological revolutions. 5 THE FUTURE OF TECHNOLOGY 1.2 2.1 The life and times of a technology Recurring phases of each great surge INSTALLATION PERIOD Turning point DEPLOYMENT PERIOD Degree of diffusion of the technological revolution Previous great surge MATURITY SYNERGY (Golden age) FRENZY (gilded age) Next great surge IRRUPTION Big bang Crash Institutional adjustment Next big bang Time Source: Carlota Perez The second, or “deployment”, period is a much more boring affair. All the quick bucks have been made, so investors prefer to put their money into the real economy. The leading firms of the new economy become bigger and slower. The emphasis is no longer on raw technology, but on how to make it easy to use, reliable and secure. Yet this period is also the “golden age” of a technology, which now penetrates all parts of society. These two periods of a technological revolution are separated by what Ms Perez calls a “turning point” – a crucial time for making the choices that determine whether a technological revolution will deliver on its promises.

The buyer of the finished television might use a credit card administered from Kuala Lumpur, Malaysia. After-sales service might be provided by a polite young Indian call-centre agent, trained in stress management and taught how to aspirate her Ps the American way. A few years ago, the combination of technology and management know-how that makes this global network of relationships possible would have been celebrated as a wonder of the new economy. Today, the reaction tends to be less exuberant. The same forces of globalisation that pushed Flextronics into China and its share price into the stratosphere in the 1990s are now blamed for the relentless export of manufacturing jobs from rich to poorer countries. Brillian’s use of Indian engineers is no longer seen as a sign of the admirable flexibility of a fastgrowing tech firm, but as a depressing commentary on the West’s declining competitiveness in engineering skills.

The fibre-optic cable running between America and India that used to be hailed as futuristic transport for the digital economy is now seen as a giant pipe down which jobs are disappearing as fast as America’s greedy and unpatriotic bosses can shovel them. These anxieties have crystallised into a perceived threat called “outsourcing”, a shorthand for the process by which good jobs in America, Britain or Germany become much lower-paying jobs in India, China or O 112 A WORLD OF WORK Mexico. Politicians decry outsourcing and the bosses they blame for perpetrating it. The same media that greeted the rise of the new economy in the 1990s now mourn the jobs that supposedly migrate from rich countries to less developed ones. Forrester, an American research firm, has estimated these future casualties down to the last poor soul. By 2015, America is expected to have lost 74,642 legal jobs to poorer countries, and Europe will have 118,712 fewer computer professionals. As Amar Bhide of Columbia University comments drily, “Graphs from a few years ago that used to predict explosive growth in e-commerce have apparently been relabelled to show hyperbolic increases in the migration of professional jobs.”


pages: 403 words: 132,736

In Spite of the Gods: The Rise of Modern India by Edward Luce

affirmative action, Albert Einstein, Bretton Woods, call centre, centre right, clean water, colonial rule, crony capitalism, cuban missile crisis, demographic dividend, energy security, financial independence, friendly fire, Gini coefficient, Haight Ashbury, informal economy, job-hopping, land reform, Mahatma Gandhi, Martin Wolf, megacity, new economy, Plutocrats, plutocrats, profit motive, purchasing power parity, Silicon Valley, trade liberalization, upwardly mobile, uranium enrichment, urban planning, women in the workforce, working-age population, Y2K

For some, the expressways have heralded a modern era of speed, punctuality, and hygienic roadside bathrooms. For others, they represent a brash intrusion on the more lackadaisical world they cut through. To me, the new expressways provide an intriguing juxtaposition of India’s multispeed economics. Curiosity—and an instinct of self-preservation—means I occasionally move into the slow lane. One of the best ways of observing India’s galloping new economy is to count the number of car brands that whir past you in the fast lane. You tend to lose count at thirty or forty. In the early 1990s, as India was starting to relax import and investment restrictions on foreign manufacturers, you would at best have counted six or seven makes of car. More than 90 percent of them would have been Ambassadors, the stately but desperately uncomfortable colonial-era vehicles that are still used by VIPs, and Marutis, the cramped family passenger car, still manufactured under a joint venture between Suzuki of Japan and the Indian government.

Coming from a traditional business family that makes socks, called Hindustan Hosieries Ltd., Alok did not attend an IIT. But Alok found sock making and dealing with unionized shop-floor workers too predictable. So, to the horror and deep skepticism of his father, he struck out alone. Bathed in primary colors and adorned by retro-posters of early Bollywood films, the cheerful walls of Alok’s company offices radiate the signature décor of India’s new economy. Situated in midtown Mumbai in a district that was formerly dominated by textile mills, most of which went bankrupt in the 1980s, Alok’s surroundings reminded me of Clerkenwell in London, or Haight-Ashbury in San Francisco. The décor is what some people call postmodern. I spent a lot of time talking to Alok and some of his sixty employees at C2W.com—contest-to-win.com—an outfit that markets brands through the Internet, mobile phones, interactive TV shows, and other new technology.

There is another side to the Indian IT story that is in some ways even more revolutionary than the money. The sector is meritocratic. If a Martian had dropped in on India’s top companies in the early 1990s and done a quick census of their white-collar management, it would have found people of male urban upper-caste background and few others. The Martian would get a more variegated picture today (upper castes are still preponderant in IT and other new economy businesses, but much less so than in the more established industries). In its strange way, India is coming to terms with modernity. The practice of meritocracy is not yet entrenched. But it is now at least getting generous lip service. In much of the business world, there are genuine changes taking place. A large chunk of India’s top thirty companies are in IT. Until a few years ago, most people had not heard of them.


pages: 254 words: 14,795

Poorly Made in China: An Insider's Account of the Tactics Behind China's Production Game by Paul Midler

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barriers to entry, corporate social responsibility, currency peg, Deng Xiaoping, disintermediation, full employment, illegal immigration, new economy, out of africa, price discrimination, unpaid internship, urban planning

Paul Midler was sought out by a number of “Paul Midler takes us for a ride through the fastest-growing economy in the world, foreign companies—from American importers of PAUL MIDLER graduated from college in 1992 revealing what can—and sometimes does—go wrong when U.S. companies shift discount soap and shampoo to Belgian diamond with a concentration in Chinese history and production to China. Working in the heart of China’s export hub, in the country’s merchants to New York waste paper recyclers— language. After working for a number of years southern region, he has the advantage of a front-row seat to the no-holds-barred all looking for help in the new economy. The in China, he returned to the United States to games played between manufacturers and importers. He introduces us to a cast of adventures came fast, as did the business and complete a master’s in business administration real-life characters and tells his story with a mix of affection and skepticism for at the Wharton School of the University of what is taking place in China today. Midler delivers a revealing and often funny Pennsylvania.

I had worked there for a number of years, and I even spoke the language. While my background should have prepared me for what was happening in export manufacturing, my first real glimpse of the sector, though, suggested that I was in uncharted territory. Exports contributed significantly to the Chinese economic miracle, and yet, none of the courses in business school or informal discussions had been about this interesting and important part of the new economy. My classmates had gone off to pursue traditional careers in investment banking, management consulting, or private equity. Coming from a finance background, I had nearly gone down a similar road myself. 8 P1: OTA/XYZ P2: ABC c02 JWBT075/Midler March 29, 2009 14:16 Printer Name: Courier Westford, Westford, MA Trouble Is My Business I wanted to settle in South China, where manufacturing was concentrated, and I was looking for any excuse to get involved.

Paul Midler was sought out by a number of “Paul Midler takes us for a ride through the fastest-growing economy in the world, foreign companies—from American importers of PAUL MIDLER graduated from college in 1992 revealing what can—and sometimes does—go wrong when U.S. companies shift discount soap and shampoo to Belgian diamond with a concentration in Chinese history and production to China. Working in the heart of China’s export hub, in the country’s merchants to New York waste paper recyclers— language. After working for a number of years southern region, he has the advantage of a front-row seat to the no-holds-barred all looking for help in the new economy. The in China, he returned to the United States to games played between manufacturers and importers. He introduces us to a cast of adventures came fast, as did the business and complete a master’s in business administration real-life characters and tells his story with a mix of affection and skepticism for at the Wharton School of the University of what is taking place in China today. Midler delivers a revealing and often funny Pennsylvania.


pages: 223 words: 10,010

The Cost of Inequality: Why Economic Equality Is Essential for Recovery by Stewart Lansley

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banking crisis, Basel III, Big bang: deregulation of the City of London, Bonfire of the Vanities, borderless world, Branko Milanovic, Bretton Woods, British Empire, business process, call centre, capital controls, collective bargaining, corporate governance, corporate raider, correlation does not imply causation, creative destruction, credit crunch, Credit Default Swap, crony capitalism, David Ricardo: comparative advantage, deindustrialization, Edward Glaeser, falling living standards, financial deregulation, financial innovation, Financial Instability Hypothesis, floating exchange rates, full employment, Goldman Sachs: Vampire Squid, high net worth, hiring and firing, Hyman Minsky, income inequality, James Dyson, Jeff Bezos, job automation, John Meriwether, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, laissez-faire capitalism, light touch regulation, Long Term Capital Management, low skilled workers, manufacturing employment, market bubble, Martin Wolf, mittelstand, mobile money, Mont Pelerin Society, Myron Scholes, new economy, Nick Leeson, North Sea oil, Northern Rock, offshore financial centre, oil shock, Plutocrats, plutocrats, Plutonomy: Buying Luxury, Explaining Global Imbalances, Right to Buy, rising living standards, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, shareholder value, The Great Moderation,