Tag Archives: America 3.0

Optionality and Economic Change

The book America 3.0 (available for purchase from Amazon and Barnes & Noble) describes three long economic periods, based on agriculture, industry, and information, as driving profound social change.

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When we fought the Revolution against Britain, America’s economy was based on agriculture and the hydrological cycle. Along with the constants of soil and sun, water (where it fell, how it needed to be diverted, where it ran) determined American economic life. Know a man’s relationship to water, and you knew his realtionship to wealth.

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Around the time of the Civil War against the southern rebels, sun, soil, and water were surprased by coal and rail as the foundation of power and privilege. The great rail network, centered around Chicago, enabled greater economies of scale than had ever been seen before in history. The story of the next century, from the racial strife of the 1860s to the racial strife of the 1960s, was the story of industrialization, scale, and how the benefits of coal would be shared.

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We’re now changing again. “Information” appears to be valuable, and the economic giants of the day are information racketeers such as Google, Apple, Amazon, and Facebook. The world is becoming much less heavy, and manufacturing on demand (from computer-driven milling to 3D printing) may accelerate the acceleration the eclipse of coal by data.

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We do not know what is next. The industrial age seemed to come to an apogee in the late 1940s, as economies around the world (the US, the UK, France, Germany, the USSR, China, Taiwan, both Koreas, and Japan) established bureaucratic-industrial welfare states managed by experts, with only quixotic variations based on national culture and ideology. But that was a false sunlight, as phony as the widespread popularity of the concentration camps (brought to the US by Franklin Delano Roosevelt) of the 1930s.

We know the world is changing. We know now what comes next.

In this environment, we should focus on giving learners many low cost opportunities and few high-cost high-risk paths. In other words, we should give students “optionality,” where they have many opportunities and few long-term costs. We’re not in an industrial age where we know economies of scale will rule the day, nor even in the long hydraulic age where water was the great idol. Students will have to find their own ways. We should help them.

To do this we should (except for core majors that are needed for national security — say science, technology, engineering, and mathematics) make much of the curriculum optional, and allow students “low-risk” trials in different career paths.

As Tren Griffen and Nassim Taleb posted:

If you ‘have optionality,’ you don’t have much need for what is commonly called intelligence, knowledge, insight, skills, and these complicated things that take place in our brain cells. For you don’t have to be right that often. All you need is the wisdom to not do unintelligent things to hurt yourself (some acts of omission) and recognize favorable outcomes when they occur. (The key is that your assessment doesn’t need to be made beforehand, only after the outcome.)” Being able to make decisions which do not require correctly forecasting the future is a wonderful thing. Not one of the great value investors identified in the series of posts in this blog relies on macro forecasts of the future. Instead, value investors use the optionality of cash to buy after the outcome exists (i.e., a significant drop in intrinsic value). Regarding venture capital, Warren Buffett believes: “If significant risk exists in a single transaction, overall risk should be reduced by making that purchase one of many mutually- independent commitments. Thus, you may consciously purchase a risky investment – one that indeed has a significant possibility of causing loss or injury – if you believe that your gain, weighted for probabilities, considerably exceeds your loss, comparably weighted, and if you can commit to a number of similar, but unrelated opportunities. Most venture capitalists employ this strategy.

It is certainly evil to trick an 18 year old into non-bankruptable loans of tens of thousands of dollars on a worthless major. A 16 year old would be better off learning a trade than learning Shakespeare, especially if that student could learn Shakespeare later. An 18 year old would surely be better off selling drugs (say from a pharmacy, an alcohol ball, a tobacconist shop, or so on) and learning that part of the economy than borrowing money to study political science.

Help our students prepare for an uncertain future, for America’s next stage of economic development. Give them low-cost opportunity and easy failures. Not non-bankruptable student loans.

Breitbart’s Reviewer of “America 3.0” didn’t read the book!

America 3.0, which I previously reviewed, is something of a hit. The authors have appeared on the radio (Mark Bernier, Bob Dutko, Chuck Morse, Nick Reed, Mike Rosen, Bruce Wolf), public speaking (University of Chicago, Western Conservative Summit), and TV (Lou Dobbs).

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The book had good pre-publication publicity too, with an impressive list of folks willing to lend their credibility to it (the foreword was by Glen Reynolds, with Jonah Goldberg and John O’Sullivan providing “blurbs”) for the book.

And reviews have been good — everything from my post to Michael Barone‘s review in the Washington Examiner to the 16 5-star Amazon reviews.

All of which makes Brietbart’s “review” inexplicable. Not just that it was a negative review — someone is free to dislike a book of course — but the Breitbart reviewer did not read the book. I can’t be too shocked at Breitbart — after all CNN’s Fareed Zakaria used a ghost-writer who was also a plagiarist — but it’s deeply disappointing.

Boo for Breitbart. Raise your standard. Actually read the books you review.

Co-authors James C. Bennet and Michael Lotus have issued a statement on this. Breitbart should take down the fake “reiew” and issue an apology.

Review of “America 3.0: Rebooting American Prosperity in the 21st Century-Why America’s Greatest Days Are Yet to Come ,” by James Bennett and Michael Lotus

America 3.0, by James C. Bennett and Michael Lotus, is a description of the current problems facing America, the origin of those problems, and solutions for them. But it’s more than that. With only two references to President Obama in the work, America 3.0 focuses on the structural causes for the emergence of our current system of government, along with the cultural context in which those structural causes work.

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The Structural Causes

The “3.0” in the title refers to an emerging system of government, but the implication of the work is that the system of government is a funciton of the economy. Unstated, the system of government appears to be a function of the material basis for the organization of the commanding heights of the economy.

The three stages that Bennett and Lotus describe, as I understand them, are:

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    • “America 1.0.” Politically, organized around the original intent of the Constitution, with power highly distributed. This was structurally encouraged by the distributed nature of production, which was centered around many farms and small towns with a few small cities acting as trade ports. The major power source was water — rivers, rain, and the sea. While parts of the America 1.0 culture survive, America’s transition figure was Abraham Lincoln: born in a rural and isolated community, his professional life centered around doing professional work for railroads.

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    • “America 2.0.” Politically, organized around militaristic police forces, professional bureaucracy, with power highly concentrated. This was structurally encouraged by the nature of steam power and the massive economies of scale that it enables. The America 2.0 political-economic, which is visibly failing in many ways, itself was the solution to the breakdown of the America 1.0 system in the face of the initial problems created by concentration and economies of scale.

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  • “America 3.0.” An emerging political-economy system that is itself a response to economics shift, primarily (though unstated) the decrease relative importance of steam power as the ratio of GDP (as measured in pounds) to GDP (as measured in dollars) decreases through miniaturization and electronics Tom Friedman’s work The World is Flat is uncited, but this trend (“how heavy is your economy”) was, I believe, prominently noted there several years ago. The source of power is information.

The Cultural Context

What keeps America 3.0 from being simply an economic-determinist, however, is Jim Bennett’s focus on the Anglosphere, and particularly Lotus’ and Bennett’s theory of what makes English-speaking countries nearly unique in the world: the “Absolute Nuclear Family” and the Common Law. According to America 3.0, this style of family is shared between English speaking countries, and some areas of Denmark and the Netherlands where the Anglo-Saxon-Jute peoples were active fifteen centuries ago. The Common Law, a result of the eradication of Roman Law and subsequent British hostility to the re-imposition of the Roman-based Laws latter (partially as a result for how Roman Law conflicts with the Absolute Nuclear Family type), also creates a difference.

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The Absolute Nuclear Family and the Common Law acts as a superstructure, but not a superfluous one, in the Lotus-Bennett model. A transactional view of government, a focus on individual liberty, individual independence, and family mobility are all seen as effects of the Absolute Nuclear Family and the Common Law, apart from the structural causes of farm-, steam-, or information- power.

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Analysis

There’s three big questions that come to mind after reading America 3.0:

  • First, does the economic foundation of the economy actually matter?
  • Second, do the Absolute Nuclear Family and the Common Law actually matter?
  • If so, to what extents?

The standard economic-determinist answer to the important of economic foundation is “a whole lot.” This makes sense to me. We’re still a way from a scientific study of history — a cliodynamical analysis of the role of steam, say, in American history — but all-in-all I found this part of the book to be insightful and non-controversial. Theodore Roosevelt, Woodrow Wilson, Franklin Roosevelt, John Kennedy all differed on many things, but all agreed on the importance of economies of scale, which were themselves clearly enabled by steam.

The portions about the Common Law and the Absolute Nuclear Family, though, are less clear. What is the relative impact of the Common Law against, say, the influence of Christianity, of of being an England being an island, or of north-west European weather systems, or of other things? It makes sense that the Common Law and the Absolute Nuclear Family are not entirely superfluous, but it also makes sense that other things may matter as well. How might these be discovered? Or tested?

Final Thoughts

America 3.0 is an eye opening book, for explaining the rise of the bureaucratic-military state in the United States, and also for its description of the Common Law and the Absolute Nuclear Family. The former strikes me as more explanatory than the latter, but all was interesting.

I read America 3.0 in the Nook Edition.