Categories
Explainer

Intro to 21st century economics

Go beyond the money

The usual discussion of economics would have you believe it is the study of money. While money is surely essential to any economic conversation, it’s just an abstraction on top of the true interest of economics:

Energy scarcity.

Economics is the study of how scarce resources are allocated to keep us alive. The most scarce resource we know of is energy.

It begins out there

The universe is trying to kill you.

It’s just not trying all that hard.

A basic truth of physics is that any concentration of energy will, eventually, diffuse away. Your mug of hot cocoa will lose steam, the sun will burn itself out, and the universe will one day go cold.

You needn’t worry about the sun or the heat death of the universe. We’ll be long dead before those problems arrive. But the hot cocoa is a lot closer to home. It’s an object lesson. Just like the cocoa, one day soon you, too, will go cold.

The only question is when. You can push that date off further and further by adding and preserving energy within the biological system you call your body.

Spend too long in the cold, the energy in your body leaches out and you’re dead. Go too long without food, your body spends all its stored energy and you’re dead. Leave a disease unmanaged, your body expends all its energy managing a broken system and, eventually, you’re dead.

You get the point.

I don’t mean to be morbid. I only point this out to underscore the importance of economics — that is, our study and management of scarce energy. While economics is steeped in obscure terminology and inaccessible, complex theory, it’s just about as important as your own heartbeat.

Basics of energy economics

We live on a planet positioned around 93 million miles from a ball of hot plasma we call Sol. The sun accounts for 99.86% of the mass in our solar system. Most of that is hydrogen, which the sun converts into energy by a process called fusion.

Sol outputs so much energy, you and I don’t have a meaningful frame of reference for it. After all, this energy is enough to warm up a ball of water and dirt 93 million miles away.

For as long as humans have been alive, and much longer than that, this basic setup has powered economics on planet earth.

It works like this:

  1. Unimaginable quantities of energy leave Sol
  2. Plants on earth absorb part of that energy in the form of light. Light energy sustains the plants and allows them to grow
  3. Animals come along and eat the plants. Chemical energy sustains the animals and allows them to grow
  4. We eat the plants and animals

Simple, right? Plants and animals are self-sustaining energy storage devices. Ecosystems are biological power plants, fueled by the sun.

Unique among other life on earth, humans are able to make plans and share them with others. Humans have been harvesting energy from ecosystems for over a hundred thousand years. Most of this time was spent in a process of hunting and foraging inside of existing systems.

Bands of humans would roam the Earth’s fertile countrysides in search of tasty ecosystems, moving from place to place as circumstances and scarcity demanded.

But ten thousand years ago, something changed.

Imposing order

Over time, humans discovered that they could build their own simple ecosystems. This event is often called the agricultural revolution. It fundamentally changed human society — and thus, economics.

Under agriculture, land was seeded with valuable plants and animals. This stock was carefully tended by humans. Instead of roaming, humans found the land that was most productive for farming and stayed there year after year.

This led to the first permanent settlements — villages, towns and cities.

Through farming, predictable energy could be harnessed from the sun, leading to the growth of populations who build agricultural settlements. Farming also allowed for free time to enjoy leisure and perform experiments. It necessitated tools for working the fields and tracking inventories.

Newly abundant energy opened the doors to technological and cultural advancement. Math and writing emerged as critical early systems for managing the agricultural revolution, forming the foundation of everything we think of as civilization even thousands of years later.

Resulting chaos

While human-accesible energy in the agricultural age was much more abundant than in the past, scarcity still reigned. For one thing, the earth’s surface is 75% water. Of the 25% that’s land, only a fraction is actually usable for agriculture. Factors like elevation, access to water, soil fertility, and overall climate make a huge difference in the agricultural value of any given scrap of land.

While conflict afflicts all animals, agriculture pushed humanity to perfect war and politics.

Farming laid the foundation for accomplishing all other work, from mining to pottery to painting. Without a strong agricultural base to feed your population, nothing else was possible.

While always dressed in various flavors of principle and ideology, war has always been about settling beefs with force. Those beefs are invariably rooted in who gets access to what scarce resource, and under what terms. Ideology was, and remains, a useful means of a creating an other, whose destruction and resource plunder was justified by strangeness of values and culture.

Because agriculture was so essential to power, it also became the first center of labor injustices. The prosperity of farming was not always shared fairly with those who tended the fields. Indeed, in the United States alone, trillions of dollars in value was created through the forced labor of African slaves. These individuals had no individual liberty. These humans were held as property because they had no political power and their service to agriculture had the potential to create extraordinary wealth.

Colonialism was also rooted in agricultural exploitation. Colonies were founded on land that was especially fertile, with no consideration paid to indigenous peoples whose use of that land went back generations.

Even gendered oppression, still rife in the 21st century, has an agricultural basis. Humans were labor power, and women were the source of all humans. Thus, controlling women’s lives through laws, culture and social taboos was essential to controlling the production of agricultural labor power.

Next episode

Tending to our energy needs has completely shaped human culture.

And that was even before the steam engine. With that invention, humanity discovered an extraordinary new direction of converting energy into work. To serve this innovation, we started pulling more and more fossil fuels out of the ground.

With the coupling of an old energy source to a new tool to harness it, technological innovation exploded. We call this the industrial revolution.

But was this really a new fuel source? Whether coal, petroleum or natural gas, fossil fuels are the result of ancient plant and animal life. They’re the sun again, stored and concentrated beneath the earth’s surface.

Just like agriculture, fossil fuels are rooted in scarcity. They’re not evenly distributed. They’re not always easy to discover or extract. And unlike plants, once we use up fossil fuels, they’re gone. One day, we’ll run out.

Still, the energy multiplier of engines and fuels sent humanity hurtling to all new frontiers. While humans can’t directly consume fossil fuels, they’ve nonetheless completely altered agriculture. Machines have automated much of the hard labor necessary to farming. In 1900, 41% of US labor was dedicated to farms. By 2000, that had dropped to just 2%.

US labor, freed from the yoke of the farm, expanded into myriad other industries, from manufacturing finished goods to entertainment to finance. Still, this labor surplus hasn’t been without its downsides. Black communities, disenfranchised by hundreds of years of economic theft, find their young men disproportionately incarcerated. As the need for labor shrinks, populations turn to more and more desperate means of survival.

Money == survival credits

Money is an abstraction on top of the chain of energy conversion between the sun and you. Because that chain is filled with inefficiencies, risk and adverse politics, there’s not always enough money — enough survival — to go around.

Which makes survival a struggle. We use money to access the basics necessary to maintain our own energy supply. Food, shelter and clothing are all essential to keeping our systems running. They all cost money.

It gets complex, too, because there are so many systems layered between ourselves and our means of survival in the 21st century. For example: it’s not just that clothes keep energy from leaching out of our bodies. They also signal to others whether or not we should be allowed to participate in the systems of survival themselves.

Thus, it’s a lot easier to get more money if you already have some. If you don’t, breaking the cycle of resource scarcity is a lot more challenging. It’s expensive to be poor.

An energy efficiency revolution

100 years after the agricultural revolution, humanity sped up even more.

In the 1970’s, the microprocessor changed everything about how work could be done. Packed with systems of logic, computer chips made information processing a completely automatic affair. Chips could sort data, communicate between systems, and even direct the efforts of robotic manufacturing.

Chips allowed energy to be converted into work in a way we’d never seen before. Look what happened.

via EPI

With this incredible automation of labor, it became possible for a small number of people to keep and hold a vast chunk of economic output. While later policies further contributed to wage stagnation, it is the microprocessor that’s the longest lever in creating 21st century wealth inequality. With more and more industrial processes reducible to something that can be handled by a computer — that is, an object whose entire output can owned — the need to share in wealth creation with other humans continues to shrink.

Indeed, the most reliably lucrative career direction in the 2010’s has been the work of directing microprocessors to do the bidding of humans. Scarce access to the skills necessary for computer programming has limited the pool of people able to participate in that industry. With scarce labor on one side and enormous riches on the other, many software developers enjoy a uniquely powerful negotiating position that leads to generous pay and often favorable working conditions.

For now.

Surviving until the greatest revolution

Exiting energy poverty will be the greatest revolution humanity has ever seen. As more of the sun is harnessed, as new physics is pioneered, we will find energy abundant enough to meet the survival needs of more and more people.

With energy abundance will come, far down the road, the opportunity for a shared prosperity, safety and global peace like we have never known.

Until that door is opened, though, we still have to get by. In a life of energy scarcity, the most important strategy is continually building processes for yourself that multiply finite resources to keep you alive.

While making money through selling labor as a software developer is often provided as an ideal means of economic mobility, that strategy doesn’t go far enough. The most powerful survival tool today is owning a business that’s run with microprocessors.

Successful digital businesses efficiently convert ideas into software that solves problems. In exchange for solving people’s problems, people exchange some of their survival credits. If you can give customers a better use of their finite energy by freeing up some of their time and effort, they’ll gladly cut you in on some of the resulting survival surplus.

That’s not a bad deal. It’s a deal that lets you build wealth as you sleep.

So if you want to get by in the 21st century, don’t stop at being a software engineer. Be a digital business engineer. Build a system that blends software and understanding people’s needs into a machine that helps you and your customers win. That’s the play. That’s how you build the most bulletproof protection against an uncertain future.

That’s what I’d do, anyway.


Learn more:

Sapiens: A Brief History of Humankind
This book is a cheat guide for the basic workings of our civilization.www.amazon.com

Labor and Monopoly Capital: The Degradation of Work in the Twentieth Century
Everything that ever bothered you about the workplace, explained.www.amazon.com

The Role Cotton Played in the 1800s Economy
By the 1860’s, the value of the slaves was “roughly three times greater than the total amount invested in banks.” www.pbs.org


Credits:

Iconography courtesy The Noun Project.

Polymer by Chameleon Design

Leaf by Yi Chen

Man by Lisa Staudinger

Bison by Jeff Cont

Microbes by Sergey Demushkin

Categories
Explainer

Everything I wish I’d known at 17 about social mobility

Hey. I’ve got some important stuff I want to talk to you about.

It’s presumptuous as hell for me to claim any authority at all here. I haven’t won anything yet.

I’m pretty excited, though, to be in a position at last to pursue my dreams and goals. No knowledge is ever perfect, and if I hoard it much longer it may reach you too late to be useful. Or worse, I might be hit by a bus and then it just ends inside me.

So contained here is everything that I, at the age of 17, wish someone could have told me about winning the game.

Which game?

The game.

The one we’re all playing.

I’m going to define winning as you closing the gap between what you are and what you want to be. You get to define the goalposts. You’ll know it when you’ve got it.

But you may be very worried. Worried that the goalpost you’ve chosen for yourself is a little (or a lot) out of range from your current position.

You may be worried that navigating the path is beyond your abilities.

You may be worried that even if you arrived, you would not belong.

If those anxieties are familiar, then we have things in common. I’m going to open the vault for you on everything I know about addressing those concerns.

Spoiler alert: it’s going to lean heavily on the internet.

If you’re rolling your eyes as though this is obvious, we’re cool: you know everything you need to know. You’re good to go; skip the rest.

But I need to make the case to anyone who was like me at 17 that this perspective is relevant.

Here’s what I’ve got.

Life is risk

To advance from one position on the board to a more favorable one, the player must venture.

Some ventures are straightforward:

Buying a slice of pizza requires a small amount of capital and minimal risk. You need to survive traffic and have four bucks in your pocket. There’s risk but it’s small and if everything goes as well as you hope, you get pizza.

Other ventures carry more risk:

You need to learn a skill in order to compete for a job. This used to be nearly as risk-free as the pizza example. But in the last 10 years, this deal got broken. “Learn a skill” got defined as “go to college” and then going to college lost a lot of value.

The costs for this sort of venture can vary dramatically. And what happens if the job hunt fails? You’re still on the hook for the education bills.

The more ventures you can undertake, the more spaces you can advance around the game board.

Risk requires resources

Resources determine how many ventures you can safely undertake within any given period.

Since each venture has risk, sane pursuit of them has certain costs. Some costs are immutable: you only have so much time and energy.

Other costs can be mitigated through investment, or infusion of resources.

If the only pizza in walking distance was in a neighborhood that made you feel unsafe, you might not undertake the venture. But if someone came along and offered you a free ride across town to another pizza shop, of course you’d go.

And you’d pick something up for them, if they wanted, too. It’s only fair.

So on this game board, resources equal game moves. The more you’ve got, the further you can go. You can cooperate with others for access to their resources.

Money is not the only resource

A resource is anything that has value. Your resources can be used for your ventures. They can also be used to trade for other resources.

Money is a pretty great resource, don’t get me wrong. It’s accepted almost universally. It is very well quantified. It can be transmitted instantly and electronically. Money’s efficiency makes it very easy to convert into almost any other specific resource.

Another pivotal resource is information. The more information you have, the easier your transactions will be. Persuading your counterpart often requires information. Information protects you when your counterpart is dishonest. Information illuminates opportunity, and often unlocks other resources.

Information, when applied as a skill, is often traded directly for money. Economics apply here: if your skills are uncommon, they may command a higher value. Governments often try to give this resource away through public education and college subsidies.

Companionship is a critical resource that impacts your ability to survive. Everybody needs other people. The people who care about you give of their time and flexibility to share in the joy of companionship. Neglecting your responsibilities to this resource can have devastating consequences.

Imagination can be a transformative resource, but trading in it can be challenging. When combined with sufficient skill, imagination commands substantial value.

Time and energy, or sweat: the work you’re able to do. You’ve got finite time between now and when you fall asleep tonight. You’ve got a finite number of nights. Sweat is scarce and irreplaceable, so it should be traded carefully.

Resourcefulness is your ability to identify and use resources, even when they’re less than obvious.

There are other resources. Even if you don’t have money, you’ve still got other tools to work with to advance your ventures.

Resources are allocated inefficiently

Okay.

So you want to move across the board. But you feel like your resources are lacking. I understand that.

I was conceived as the bastard son of a 51-year-old philanderer and a 20-year-old girl haunted by addiction. There were not resources, of any kind, in abundance.

I wasn’t there, but as I understand it, prevailing opinion in those days was that my mom should’ve terminated the pregnancy. I hasten to say the world is best when women have first and final authority on decisions regarding their reproductive future.

But for my case, it seems to have worked out that my mother chose to ignore our family’s advice and buy me a ticket to the game. The cost was pregnancy, a brutal delivery, and diverting resources toward me for over two decades.

All starting at age 20.

That’s not an easy deal for anyone at that age, much less someone who is resource-constrained.

My mom would kill me, at this point, if I didn’t mention this: she never took foodstamps, or welfare. She was too proud for that. She preferred to convert her sweat into resources, rather than accepting them as a gift from the government.

And I never starved. There was always food, there was always a safe place to sleep. I don’t know how she pulled it off, because I know it wasn’t easy. But that stuff was always solid. Many things, indeed, were solid.

Other things were less solid.

Domestic violence was a feature of my home for several years. At one point I slept through a robbery: I had grown so used to the sound of commotion, I thought my mom and her then-partner were just fighting again.

My mom had never had the time or resources for college. This limited my access to people who could give me meaningful advice about education decisions.

I had no mentorship on the development of my skills and talents broadly, either. I didn’t know anyone who could help me grow or give me advice on my passion for computing devices.

And sometimes money was just fucked. I was registered to start high school. I was looking forward to seeing all of my friends again.

Suddenly, my family and I were moving across the country, fleeing bills that had stacked too high. Living in a house filled with roaches. Cigarette ash piled anywhere that remotely resembled a bowl.

Eventually we dug out of that one. Eventually I didn’t feel a searing shame when I thought about anyone knowing where I lived.

But all this stuff piled up.

Then I chose a college. A college that cost me over $85,000 in debt. Nine years after I finished, I’ve barely made a hole in this.

By 22, I’d given up on getting anywhere close to my dreams. I didn’t know how to find them. Even if I did find them, it felt like I had started too far behind to do anything meaningful with them. The weight of debt took so many options off the table. The dysfunctions of childhood made me feel like such an irredeemable fuckup.

The transition of someone with dreams to someone with a listless acceptance of whatever was painful.

I felt like a failure. I didn’t know what I had failed at — but when I stopped dreaming, I stopped feeling like me.

Punishing student loan bills demanded I work a job. I did. But my heart wasn’t in it. I was treading water.

But other forces would intercede.

Network effects

The most precious resource of all is your network.

You will hear network used in many slimy ways, often as a verb, especially as applied to business.

But in the great game of competing/cooperating apes that is humanity, network has a specific meaning. Here I describe the series of connections you have to other people willing to trade their resources with you.

The more people connected to your network, the more valuable it is.

If I have garnish and you have meat, big deal. If we’re both also friends with Jordan and she has a loaf of bread, the three of us have a sandwich to split. Neither of us know Danny but Jordan does and he has mustard.

Upgrade.

If you’re behind on other resources, you may be behind on the breadth of your network as well. Of all resources, the network returns the highest yields in the long term because it is renewable. Uniquely, a network can potentially provide literally any other resource you need.

You can expand your network by doing things that connect you to more people. But it’s not enough just to meet them. You must invest in them. You have to develop deep relationships. Life is miserable without companionship.

People trust you based on the personal connection you make with them. The more trust, the more opportunities your network will deliver.

But not all nodes are created equal. Your goals may require cooperation with very specific individuals. How do you find them? How can you build a connection with them?

Well. What if there were a way you could move around the game board instantaneously? This teleporter has limitations: only your mind can go. Your body must stay put.

But so much of what we are is our mind. So this advantage is better than nothing, right?

That teleporter is the internet. With the internet you can reach nearly anyone else on the planet. Instantly.

On the internet you will find other disembodied minds. They’re tweeting each other. They’re murmuring around discussion forums. They’re writing essays to each other.

There are piles of communities according to every interest you can imagine.

So. Connect.

And in doing so, you will find friends who’ve been waiting forever to talk to you. You’ll find new ways of seeing the world. You’ll find recommendations for all the stuff your brain just needs to put inside itself. Everything from classes to take to music to hear to shows to watch.

These minds also want help. They have projects they’re working on. Maybe you can pitch in.

This teleporter allows you to invest yourself in people based on your shared values, rather than your geographic proximity. This is a great way to come up from behind in the network department.

To market, to market

The internet is also a collection of markets.

There are uncountable numbers of places to buy, sell or trade resources. Resources of every stripe, from game currencies to computer components to Beanie Babies.

There are also markets for ideas. Places where your voice can cooperate or compete with others.

The internet has global reach built in as a default parameter. Every single one of us who can connect to it is a potential player in the global economy.

Producing any sort of online content, from funny jokes to awesome cat photos to apps, puts your name into a stream that can flow to anyone. What if it flows exactly past a future friend? A future boss? A future spouse?

You won’t know if you don’t play.

Reputation aside, if you create stuff that’s good enough, markets can make you money. By 19 years old, I was selling my ideas for money in Second Life. I made enough to pay my real-life rent.

But you don’t have to take my word for it.

Dem Broads

Broad City is a refreshing, hilarious, filthy show.

Broad City began as a startlingly funny series on YouTube. Two comedian friends recording tales of being young and broke in New York.

Today Broad City is on Comedy Central. Somewhere out there, a fan base was craving stories only these two could tell. The internet provided an audition that made a whole TV show seem like an obvious choice. The folks with money noticed. The rest is history.

All Mine

Then there was that time a guy from Sweden made a side project that turned into a profitable, global business.

Cycle of progress

Okay, fine. So if we buy that the internet is a valuable tool, how is it leveraged?

It’s going to be different for everyone. Different based on goals and values. Different based on passions.

But in general, the cycle seems to have three stages:

Learn

Use the vast data and connections afforded you by the internet to learn new ways of being creative. New tools, new techniques, new communities to share with. The hunt is up to you.

Try

Then you have to try to apply the combination of your passion and your learning. Maybe you participate in photoshop contests. Maybe you build websites. Maybe you make photo collages of cats being funny. Maybe you write essays with sweeping advice.

Hell, maybe you record yourself in front of a camera. Anything that you can create is fair game.

The most important thing to remember: you do not need anyone’s permission to try. You can try whatever you want, whenever you want. It’s in your hands.

Share

Once you’ve tried, you need to tell people. You need their feedback so you can be better. But you also need them to know you exist. Sharing is a discovery strategy.

Your output will let other people understand your values. If they find them resonant, you may find yourself with new friends and opportunities.

But even if, at first, no one cares…

Repeat

You have to keep learning, trying and sharing. The more times you go through this cycle, the more your talents grow, the more your connections strengthen.

Not every cycle bears fruit. Not every venture pays off.

But I believe that sustained application of effort this way is the most reliable means of developing the skills and network to overcome whatever deficits you feel you were born with.

It’s not cheap, it’s not fast. But the last ten years have taught me its incredible power. I couldn’t be in the position I am without this approach.

While I didn’t have much in the way of resources at the beginning, the internet allowed me to make leapfrog progress at many stages.

Even if it all comes tumbling down and I’m begging in the streets next year, I can’t believe coming this far was possible.

What about college?

As in, should you go?

Maybe.

Schools are a great way to recover from a network deficit. But they cost money and results vary. The better the school you attend, the better your network upgrade.

Schools are also a great way to develop knowledge and skills.

But you have to choose school very early in your path. You may have limited resources. You may not know quite yet what you should do with your talents.

Attending school in that position can leave you with debt so painful, it cancels out any other resource benefits. Choose carefully. Evaluate the resource trade closely. Don’t let inertia carry you into the decision.

No guarantees

All this to say: life is risk.

Nothing is guaranteed.

But what’s essential is understanding the problem space. Understand just how much is under your control, even if it feels like you’re behind.

Understand that the game is winnable. Social mobility has stagnated in the United States. This is not an easy challenge. But you have a tool at your disposal that is unprecedented in human history. You have a means to reach everyone.

Starting from anywhere.

The tl;dr

We live in an information age.

This is a tedious cliche but it’s the foundation of my argument.

The part of you that you think of as you?

That’s information. Everything it sucks in, everything it knows, everything it spews back out: all information. You’re compatible with the teleporter.

As of the 21st century, there are teleporters all over the game board. You can use these to exchange resources and bring them to you in a way that’s unprecedented in human history.

This is it: this is the whole opportunity. Whatever it is you think a path to your success has to look like, throw it out. Those blueprints were written in a different age.

As of right now, everything is up in the air. Grab a handful of it.

Categories
Media

Interview: Tech Crunch Inside Jobs

It’s fun when I get to run my mouth about my own work and passions. Big thanks to Colleen Taylor for hanging out and conducting this Tech Crunch interview.