Posted 10 September, 2011 in:

The Art of the Comeback

This is not a review of the Donald Trump book The Art of the Comeback. Rather, it is a look at the ways to foster economic growth and prosperity.

This is not a review of the Donald Trump book The Art of the Comeback. Rather, it is a look at the ways to foster economic growth and prosperity. There are three broad areas this post focuses on:

Lowering/Removing Barriers to Entry
Creating/Rearranging Markets
Sitting Back and Watching [1] and [2] Kick Ass*

* This is actually part of the path, as you will see, and not merely a filler item to make this post longer.

Barriers to Entry

Let’s suppose you are pretty good at painting, maybe good enough to get some major commercial work, but you live in a city where all of the artists must attend a special art school prior to being licensed. And the school costs ten times what you might make in a year. And it’s booked solid for five years. So much for plan B, because plan B was Blocked by a Barrier to entry. Barriers to entry are impediments to participation. They are obstacles to ingress. Ahem. They represent lost economic activity, when people that otherwise would have taken the risk find it either unnaturally high or are otherwise prevented (eg, the cost and intricacy-of-work needed for the average person to launch a satellite effectively bars their entry into the space-courier market). Removing barriers often means simply lowering the built-in costs of hiring. Those include things like taxes and healthcare. The problem there comes in the form of imbalance and uncertainty. If the system doesn’t know how much revenue it has, or if a large portion of the population are not participating in healthcare, you get other irregularities. It is much like wanting your lawn to be free of snow, and shoveling it onto your roof. Then the roof collapses, but at least your lawn looks nice. Those barriers are much more effectively cleared not by simply shrugging them off, but treating them as universal. That’s no different than is already done with things like drinking water. Nobody supposes that a large number of businesses will opt-out of hydration. Even on separated plumbing systems, some of the costs are shared, such as the R&D for the equipment used and the development of hygienic standards. The alternative actually just shifts the barrier and harms certain business models (eg, endeavors that cannot support paying for workers’ healthcare directly could not be created). Other barriers are created by poor choices by government, such as contracting for equipment that cannot be reused and which do not offer residual benefits to the citizens. That is, if our government spends a billion dollars on accounting systems, but businesses and individuals still pay full price for that same software, that’s a barrier that could be reduced significantly. Google, for example, was able to exist and grow in large part thanks to the existence of free software which they could modify and build on to suit their needs at only the cost of programming (ie, no license fees). If the government were to procure with an eye on the citizen’s right to use the non-physical public resources, it could lower a lot of technological barriers while also improving the quality of the technology the government uses (via contributions back to the software). But the single biggest barrier to entry is education. Historically, lack of education was literally used to bar the masses from participation in religion, but it’s also been used to bar people from voting (poll tests), and it is a prerequisite for effective participation in business and commerce. Information is the lifeblood of the economy, and all major businesses started with the revelation of a need that could be met in a new way.

Shifting Markets

There used to be horse and buggy. Then there were streetcars and trains, then cars and planes, and now the Internet and web. With each shift in technology, there are shifts in the market structures that compose the overall economic system. Used to be, liquids like beer went to market in wooden kegs. Then glass bottles. Today we have aluminum bottles. Point being that technology can and will drive market shifts and therefore consumption patterns. Building for cars as the primary means of movement has the consequence that it’s less likely for people to have chance interactions as they travel (ahem, without those interactions proving expensive, if not fatal). It also makes it less likely they will visit a given establishment. Consider the term flyover states. Coasters (folks that live on coasts in the USA) call the rest of the land the “flyover states” because they don’t visit them (except maybe to gamble, ski, or hock their wares). With trains you get an entirely different category of interaction, as people filter on and off throughout the journey. With trains you get more buildup along the route. No one is building a hotel in the middle of the country to accommodate the people that pass over it, ten kilometers up and moving at 500 km/h. Now, we don’t need people to build a sprawling mass. Trains help there, too. If we have a comprehensive system in place, population density will be roughly in inverse proportion to the distance from the train lines. But, other important technological market shifts remain to be seen. Real security and monetary abstraction are two big changes that will foster economic growth. In short, they will make it simpler and safer to engage in transactions online, which has been shown to be a boon to revenue. There is the famous case of the $300 million button (User Interface Engineering: The $300 Million Button), but that’s something in the control of the website. Many larger impediments to commerce require industry collaboration with banks, the government, and citizens. Another market shift is the inevitable (yet ever postponed) US Metrication, which would increase its competitiveness across borders and simplify many supply chains. Copyright reform, allowing the public domain to flood with thousands of disused creative works from decades and decades ago, would serve both for content creation and for inspiring design and invention. Literally untapped ideas of generations past. But, again, education is the biggest market shifter. The more people know, the better they function as instruments of the larger economic system. Nobody buys lead paint anymore, because they know better, not merely because it is illegal. It is essential that people be educated on the issues of the economy, because they will be able to avoid bubbles in favor of real investments. They will choose economic activities that have compounded results, choosing to purchase better products and services that support long-term growth over short-term fulfillment.

Sit Back

Given low barriers to entry and a system that allows for resources to be readily shifted, the result is a self-maintaining system. It lowers the costs for all, while maintaining incomes. It precludes messy government intervention that gives corruption an inroad. It precludes market bubbles that lead to sluggish corners of the economy that produce drag. If you ride a bicycle with rust on the chain, low air pressure in the tires, and a wobbly seat, you wont’ go as far as a well-maintained bike would let you. If the roads constantly jostle you, if they have puddles and speeding cars and blind spots and traffic, you’ll find the journey more difficult. A smooth road, solid bike, you let the momentum carry you. You just sit back and cruise for miles at a time. You get to your destination with much less effort. Hell, you even have the time to think about something or just enjoy the scenery. And that gives even more opportunity for further improvement. You arrive calm and rested, rather than jumpy, irritable. And that’s the biggest change that’s needed, as we have a society that’s overcomplicated itself and forced itself into a masochistic pattern of herculean tears of effort followed by inadequate recuperation. But changing that requires the elimination of barriers, it requires shifting the markets. It’s the most important, but it can’t come without the other changes, just like you can’t grow the flowers until you’ve tilled and weeded the soil.

Barriers to Entry

Shifting Markets

Sit Back

Please Deposit Two Cents: Cancel reply