Curt Doolittle

Theme: Productivity

  • The Nonsense Alternative Called “Solidarity.” Throwing The Peasants A Bone.

    This bit of ridiculously regressive Luddism was posted on a left leaning blog. It touts “A Solidarity Economy”. Which is a nice name for voluntary organizations that circumvent the pricing system. Yet another example of enduring marxist silliness.

    There is no alternative to free-market capitalism, Margaret Thatcher used to say, and about this, like so many things, she was wrong. … What is the Solidarity Economy? It’s a movement that has brought hope to a world disillusioned by capitalism and too often unaware that economic activity can be conducted with respect for human decency and the planet on which we live. Its five key principles are solidarity, sustainability, equity in all dimensions, participatory democracy and pluralism. … The role of these initiatives is certainly up for debate. Consumer cooperatives are vulnerable to criticism as being somewhat exclusive. Some models of cooperative housing are not particularly sustainable. But the wide variety of Solidarity Economy practices ensures that successful models are emerging, with success based not just on economic viability, but on social and ecological responsibility. … The transformative power of the Solidarity Economy is that it can grow within the current economic system, eventually replacing it with a more human way of providing for society’s needs. …

    You can use meaningless terms yet conveniently rely on a lack of detail to gloss over yet another permutation of communal sentiments. But no matter how many times you rephrase the same tired fantasies, you will not alter the hard reality that will face any participants in this fanciful silly Marxist doctrine: 1) A lack of incentives. 2) a lack of competitiveness 3) human limits to consensus on means and methods 4) human tendency towards bureaucratic corruption 5) the natural slowness of the system. Essentially you would doom everyone involved to perpetual poverty.

    [callout]But make no mistake that such fantastic extra-market lifestyles are luxuries provided BY THE MARKET, not alternatives to it.[/callout]

    These are good models for knitting circles, volunteer organizations, the uncompetitive, and the dull and ignorant, for whom market signals in the form of prices are too abstract to synthesize, and who do not have to manage scarce resources. In other words they are good for small networks within a capitalist system for the purpose of organizing members of a permanent submissive underclass. Any system capable of the current productive diversity must be of necessity incomprehensible. The market exists to handle incomprehensibility. And it functions despite incomprehensibility, anonymity, compassion or care. Within the wealth that is generated by capitalism, it is certainly possible to carry vast numbers of people who consume the benefits of the market without participating in it. But make no mistake that such fantastic extra-market lifestyles are luxuries provided BY THE MARKET, not alternatives to it. But if you want to throw the poor kiddies a bone so that the can lie to themselves that they’re special and principled rather than impotent and subsidized i suppose amidst the political discourse its no more harmless or harmful than any other drivel.

  • Understanding Greece And Germany In Terms Of The Economics Of Human Action Rather Than Moral Sentiments And Class Envy

    Over on Economists View, where the left seems to hang on like dirty ruffians intent on downgrading the local bar, Mark Thoma posts a misleading article: “About That Mediterranean Work Ethic” Do Greeks work less than Germans?, which states that Greeks work a lot of hours, perhaps more than germans. Which is a pointless and false because it is intentionally misleading, because it assumes individuals are equally productive and the societies  are collectively equally productive, when in fact, the term ‘productive’ means ‘the market price of stuff produced per human hour’. One of the people who leaves a comment sees through the veil and says: “These kind of statistics are not enough….”. Which is correct. They don’t tell us anything. Another who lives in Italy says “The problems here are political and cultural. It’s very frustrating to see…”. Which again is correct. Work is an individual expression. [callout] Productivity is an INSTITUTIONAL problem: people lack the institutions and habits by which to create productivity by forming capital alliances in GROUPS[/callout] Productivity is an INSTITUTIONAL problem: people lack the institutions and habits by which to create productivity by forming capital alliances in GROUPS. In Italy (like in southern california) business stay artificially small because of tax and benefit predation by the government, rather than encouraging competitive business, and taxing the very large corporations with whom the state must do business and support. Another says “Greece has crazy early retirement ages and a tax collection system that is pathetic?” Which is true. These are institutional problems. Largely political problems. But people in democracies CHOOSE their governments, now, don’t they. And Another (by a leftist sycophant who goes by the pseudonym of Paine) attempts to avoid the cultural and institutional predicament, as well as the problem of the productivity of the greek people, as well as the culture of corruption, by saying it’s all a problem of insufficient TAXATION. But WHAT KIND of taxation? Let’s look at this a bit. Yes, the chart is misleading (and so are Paine’s arguments, and in so many dimensions, per usual, that refutation is the process of tedious swatting of gnats who by virtue of their simplistic reproductive capacity put a drain on one’s energy simply by their volume.) First, the Greek problem is productivity not work hours: the market competitiveness of one’s goods and services in relation to one’s trading partners, divided by the number of human work hours necessary to produce the goods and services. The Greeks work longer hours to produce goods of lower value than that of their neighbors.

    [callout]the Greek problem is productivity not work hours: the market competitiveness of one’s goods and services in relation to one’s trading partners, divided by the number of human work hours necessary to produce the goods and services. The Greeks work longer hours to produce goods of lower value than that of their neighbors.[/callout]

    Second, the institutional reasons within the system that either encourage or enforce that behavior: lack of return on efforts due to a) silly cultural ideas, b) lack of education in productive information, c) lack of advanced institutions, d) private and political corruption and political impediment, e) political predation on the productivity is out of proportion to the marginal effort and risk needed to produce increases in productivity, f) cultural regression due to status impact of success on group cohesion (the urban african american versus the eastern orthodox ethos versus the jewish or protestant ethos. Third, the cooperative and competitive relationship between groups of different cultures: groups ‘fund’ shared objectives by forgoing opportunities. Forgone opportunities are a cost. Taking advantage of opportunities is a theft from those who forgo them. Since different cultures have different ambitions embedded in their habits, there is a forgone opportunity competition that permanently divides people with dissimilar interests. This is WHY people of different grope dimensions compete with one another: differences in forgone opportunity costs.

    [callout]groups ‘fund’ shared objectives by forgoing opportunities. Forgone opportunities are a cost. Taking advantage of opportunities is a theft from those who forgo them. Since different cultures have different ambitions embedded in their habits, there is a forgone opportunity competition that permanently divides people with dissimilar interests. This is WHY people of different grope dimensions compete with one another: differences in forgone opportunity costs.[/callout]

    Fourth, the status economy is material to people because they ACT as though it is material to them. Just as the race-preference is material to people because they ACT as thought it is material to them. Just as the creed-preference is material to people because they ACT as though it is material to them. And, precisely because of the forgone opportunity costs associated with those preferences. Most cultural differences have to do with the impact on social status of different forgone opportunity costs. People do not want to give upon their investments. Biases are NOT fanciful or meaningless: most often they directly impact mating choices, social status and therefore group-economic status.  Ie: people stay in-group often because they are given better status signals in-group than extra-group.  They transact across group, but they status-seek within group. Argument by emphasizing the material economy alone is a convenient way of distracting the argument from the forgone opportunity economy (discipline), and the opportunities, resources, financial, and labor costs that are required to create those institutions.

    [callout]Argument by emphasizing the material economy alone is a convenient way of distracting the argument from the forgone opportunity economy (discipline), and the opportunities, resources, financial, and labor costs that are required to create those institutions.[/callout]

    In the cast of Greece, it is a poor and corrupt culture that cannot create hard-working low-friction institutions that allow people to increase productivity by the process of constant creative destruction. It appears that Greek IQ is declining slightly probably due to poor urban education. And this has material impact on a society: assuming a broad enough population, people with IQ’s above 122 design machines, people with IQ above 105 repair machines, and people with IQ’s below 105 are limited to using machines. IQ distribution matters because it affects the general set of institutions that a body of people can develop. Education differences can depress IQ means by as much as twenty points. (Exactness of this is disputed but it’s certainly ten points). This mean limits the productivity of any nation, and in turn the appropriate institutions for any body of people. We are not equal in ability to comprehend abstractions, nor in our group ability to produce abstraction-producers and consumers in sufficient numbers to lather the group’s competitive advantage.

    [callout]assuming a broad enough population, people with IQ’s above 122 design machines, people with IQ above 105 repair machines, and people with IQ’s below 105 are limited to using machines. IQ distribution matters because it affects the general set of institutions that a body of people can develop.[/callout]

    Germany is a nearly land locked, oceanic temperate and continental temperate country of rivers and friction-able land transport that despite constant attempts of external containment has remained productively competitive for two millennia. This is accomplished by the discipline of forgone opportunity in order to create institutions that accumulate competitive advantage at a material cost to the citizens as individuals, but which is a cumulative investment of high returns for the group. Greece is a geographically advantaged, climate advantaged, port-rich country with limited agrarian potential, and a large urbanized population with few choices but to increase productivity. Institutional development costs are the HIGHEST productive cost paid by any civilization. That is why the non-corruption habits are so rarely developed in the world. (We do not yet know why some cultures have such a difficult time forgoing opportunities for gratification and developing longer (lower) time preferences. There are both biological and cultural and environmental hypothesis.)

    [callout]Institutional development costs are the HIGHEST productive cost paid by any civilization. That is why the non-corruption habits are so rarely developed in the world.[/callout]

    After forgone opportunity costs. The second highest cost is human capital: literacy, education and training. The third highest cost is the political institutions. The fourth highest cost is economic institutions (credit, banking, contract) And lastly comes the material cost of resources. These costs, when combined with the realities of group IQ differences, when combined with the realities of territorial resource availability, are the primary reason for development differences between cultures. We do know that Greece and spain were more productive cultures before Spain experienced new world gold, and before Greece was administered by the ottomans. So it would appear that these are not biological problems, but institutional (cultural and habitual, and political) problems. Greece is less productive because it’s institutions are poorly paid for by forgone opportunity, because their government is corrupt and bloated, because their people work in unproductive efforts, and because they have no group incentive to work otherwise – and so Greece is poorer because of its instutions. And since germans pay the forgone opportunity cost as well as the monetary cost, they are (rightfully) resentful of it. And the convenient myopia of quants is that they disregard REAL costs of action in preference for visible monetary costs simply because of the ease in which the data can be collected. A convent way of perpetuating leftist ideas – ignoring the majority set of costs in preference of the confirmation bias permitted by the data that’s easier to collect. As the right always says “we are not against taxes we are against bureaucracy”. The problem is not taxation. It’s the USE of taxes to steal the productive result of forgone opportunity costs : double taxation on the productive which only serves to limit the investment by the non-productive in the bank of forgone opportunity costs, which are, in reality, the primary cost any civilization must pay : behavioral costs. Property itself is a forgone opportunity cost. The more granular and abstract we make our definitions of property the more opportunity that people have to steal it. Objective truth telling is a forgone opportunity cost. Each forgone opportunity for deception and fraud is a high cost. One does not need to be materially wealthy to pay that cost. One simply needs to forgo opportunities to profit from deception. One does not need to be deprived of good pay as a bureaucrat, one needs only to forgo opportunities to charge for one’s services rather than render them at the lowest cost to the beneficiary.

    [callout]This is the moral argument for redistribution of wealth: if you conform to forgone opportunity costs, you may receive redistribution from the results of productive ends. But ONLY if you pay your ‘taxes’ in forgone opportunity costs.[/callout]

    Or put another way: the secret to the success of the pacifist monotheistic scriptural religions is that they undermine the forgone-opportunity-cost economy via redirection of opportunity costs toward the group-persistence costs of a new social institutions, and away from materially productive institutions. In other words, they are a non-participation rebellious movement, a form of economic tax evasion. (In case this isn’t clear, there are two forms of tax evasion: monetary and forgone opportunity, with the productive classes seeking to evade monetary taxation and the unproductive classes seeking to evade forgone opportunity costs.) This is the moral argument for redistribution of wealth: if you conform to forgone opportunity costs, you may receive redistribution from the results of productive ends. But ONLY if you pay your ‘taxes’ in forgone opportunity costs. In other words: conform or no redistribution. This effectively is the german argument against Greece. Or more precisely, monotheistic religions are resistance movements and they are what people like Paine advocate: the adoption of a lower cost forgone opportunity strategy that undermines the productivity of the more productive classes, making them subservient to the resistance movement. Greece needs an austerity program. It needs freedoms to compete disruptively internally, it needs to concentrate its capital on goods that are competitively productive, it needs to improve its infrastructure. It needs a broken window policy of zero tolerance (the place is a dump), it needs regulations on quality (which are underrated as a social institution), it needs better education. But most of all it needs the elimination of a predatory state whose members see their positions as personal property to be exploited rather than a public service to be rendered at the lowest cost to the population. Leftism is predation on the productive classes. Rightism is too often predation on the non-productive classes. (Productivity being different from labor hours). The issue for any culture is to reduce predation in favor of cooperation, maximizing the productivity of the group in response to other groups. Acknowledging inequality is only acknowledging rarity. we are vastly unequal in our abilities. Therefore we are vastly unequal in our productive capacities. However, we are equally productive in our ability to forgo opportunity from theft or fraud, especially theft by over breeding one’s self into permanent poverty. If you conform to these institutions, then you are PAYING for these institutions, and therefore you are EARNING some amount of redistribution. But if you are not willing to work regardless of the job (as are the Japanese and chinese) and if you are not willing to forgo drugs and violence and theft, and if you are not wiling to forgo the effort of manners and ethics and morals, then you are not worthy of redistribution of the productive gains because you have not PAID for the effort needed to create the institutions that make such productive gains POSSIBLE. We can all equally forgo opportunity. In this context, Universal egalitarianism is simply another means of predation on the productive classes. Which means predation on the society itself. Greece needs to pay it’s taxes. It needs to pay it’s forgone opportunity tax. It needs to pay it’s monetary tax on the result of productive efforts. The most important feature of taxes on productivity, is that it incentivizes the government to enforce forgone opportunity costs, for the purpose of increasing productivity. This creates cultural unity, class unity, and competitive advantage for the group.

    [callout]And “it is not taxes that are paid, but unpaid” is true. It is the unpaid tax of forgone opportunity cost which is the very ‘charge’ for entering the civilized market, and becoming a citizen rather than a barbarian.[/callout]

    Ie: Paine is advocating thievery, economic and social destruction here on a daily basis, by simply replacing the absurd moral arguments of monotheistic scriptural religion with the one-sided absurd argument of economics and egalitarian redistribution of productive gains in order to fund his predation on the productive classes, so that he, and others, do not have to pay the forgone opportunity costs needed to create institutions that permit productivity. Yet another silly religion that is simply a rebellion movement that justifies tax evasion. And “it is not taxes that are paid, but unpaid” is true. It is the unpaid tax of forgone opportunity cost which is the very ‘charge’ for entering the civilized market, and becoming a citizen rather than a barbarian. Hayekian knowledge is economic knowledge: it’s an institution. And it’s the most expensive institution we have to pay for.

  • The Keynesian Conversion Of The Responsibility Of The State

    Think of how much easier the job of government is, when instead of seeking competitive increases in production, it seeks redistribution and reduced unemployment. The first requires that you have some comprehension of your economy. The second requires that you have little to none.

    [callout title=The Net Effect Of Keynes]The net effect of the Keynesian revolution was to change the purpose of the government from one of concentrating capital such that the population would derive benefits from increases in competitiveness and production, to one of consumerism, whereby the citizenry is discouraged from saving in order to create consumer velocity.[/callout]

    The net effect of the Keynesian revolution was to change the purpose of the government from one of concentrating capital such that the population would derive benefits from increases in competitiveness and production, to one of consumerism, whereby the citizenry is discouraged from saving in order to create consumer velocity. We have accomplished that objective. We have converted to the consumer society and shipped the productivity of our lower classes offshore, and made the upper classes dependent upon the lower classes consumption. We have destroyed the cultural habit of saving. And with it, the culture of individual responsibility. Our whole country lives under the myth of prosperity without applying a discount to the increased risk we are exposed to by our hubris. The responsibility of the state is capitalization which reduces risk. Not consumption which increases it.

    [callout title=Callout Title]Think of how much easier the job of government is, when instead of seeking competitive increases in production, it seeks redistribution and reduced unemployment. The first requires that you have some comprehension of your economy. The second requires that you have little to none.[/callout]

    I am not against redistribution or the insurance-state. I am against the destructive state. And our state has become destructive. It has become destructive because it has become consumptive. And it justifies that consumption by leaving competitive increases to the private sector, despite the market’s incapacity for extraordinary investments. We need 200 nuclear power plants. We need a new power grid. We need to convert to electric cars. We need to rebuild the voting system and reform the houses of government. We need to increase research funding for hard sciences and decrease it for humanities and social so called sciences. We need to change the structure of the tax code. We need to change accounting procedures that allow causal laundering of money. We need to restructure corporate law so that we can de-corporialize the corporation so that it must serve customers or fail. We need to reform the banking industry. We need to privatize the administration of social insurance. We need to do a hundred other things that will create institutional improvements for the population to compete against other nations who have cheaper labor costs. Yet we consistently fall under the Keynesian spell, and distract ourselves from the meaningful work of building a competitive society.

  • IEA Blog: UK Lib Dem’s and ‘Ten Years Of Substantial Unemployment’

    I love reading the UK press, because by and large, the quality of discourse is far beyond that of what occurs in the US. I posted on the IEA Blog, this response to the statement that, coarsely written and paraphrased here as ” Yes the Lib Dem’s may achieve power, but anything is better than ten years of substantial unemployment.” I’m a little cautious about sounding like a critic when I actually think that the IEA produces great thought. But it is far less work to criticize a good idea, than it is to refute an ocean of fantasy and ignorance. Hence I apologize if I come off a critic rather than an advocate.

    Unemployment results from the government’s confusion between consumption and production in that they assume that consumption is equal to production. Their policy of general liquidity that diverted capital from production to consumption and created both recursive asset inflation, and a reduction in competitiveness. This is the broken joint in Keynesian logic. It assumes that increasing liquidity can be put to increases in production. Production means that an activity increases output while decreasing man hours, and costs. The problem for any state is to put captial, not behind consumption, but behind increases in production that cannot be achieved by the private sector. … This concentration of capital will create new jobs, and ongoing competitiveness, from which redistributive capital can be siphoned. Private sector production increases will lead to some unemployment. Uncontrolled breeding and immigration will lead to unemployment, and particularly disadvantage second quintile workers. (A step above the bottom). So the state can divert this process by participating in funding international (export) competitiveness. The state must adopt a policy of investment, not liquidity or redistribution. Because only investment allows redistribution. (And the government, which consumes such a vast amount of GDP is simply a redistributive system.) A free market is a bounded market, because there are LIMITS to private investment. Since all borrowing is, under fiat money, borrowing from the middle and lower classes, and they (as we have just demonstrated) carry the risk of borrowing, then the reward for that investment should be returned to them. As such the state should borrow to create productivity increases (power, transportation, technical innovation, resource exploitation, and education) and return a portion of the profits to the citizenry as redistribution. Laissez faire both puts the citizenry at risk without reward, concntrates capital in the hands of a state sponsored class, and deprives the citizenry of opportunities. That is how to prevent ‘ten years of very substantial unemployment’. The party that accomplishes it is meaningless. THe party that ignores it is meaningless.

  • Conservatism Is Not A Longing For The Past – It’s A Capitalization Strategy.

    Being a conservative simply means taking a gradual approach to social change and particularly with respect to the financial, family and military traditions that affect status and political power, which they are skeptical of. Conservatism means being skeptical that our visions of the future will come true, and looking at the world as what people ACTUALLY DO not what we WISH they would do. In that sense, conservatism is historically scientific even if linguistically archaic. Conversely, while liberalism is linguistically modern, it is utopian, idealistic, contra-observation, contra-history, and therefore anything but scientific. The differences between these two philosophies are vast and numerous, but the one that is most important, is the difference between the reliance abstractions from experience in conservatism, and the reliance on abstracting experiences in liberalism. This may seem a complex idea, but liberals try to extrapolate the daily experience into the extended order of human cooperation. THis is called ‘induction’. Conservatives synthesize the actual experience of aggregate human activity from history. This is called ‘deduction’. Induction is a process that we are not sure, despite the vast effort of philosophers, exists. In other words liberalism if faulty on scientific grounds. It is a religion. This language problem has always been an issue for conservatives. Liberal dictums may sound scientifically sound if one induces from experience. Conservative (dictums) are sensible when one deduces from abstractions of history. And everyone must use these shortcuts, because too few of us possess the knowledge to make rational judgements and therefore must rely upon basic principles when making decisions. In fact, rational thought is applied to the vast minority of choices. Most decisions are made by habit. The rest according to shortcuts. For the vast majority of people from either conservative or liberal, neither induction or deduction is a rational process of choice, but instead, a process of identifying analogistic sentiments: it’s the act of pattern recognition rather than reason. Pareto called this process of pattern recognition “residues and derivations”, others called them “Metaphysical Judgements” or “Sentiments”. Contemporary thinkers and public intellectuals call them “beliefs” or “biases”, or “science or religion”. And our language incorporates these different sentiments. Our arguments do as well. Our narratives, myths, popular fiction, entertainment, status aspirations do. But so do your political rhetoric, which, because reason would be a technique unavailable to the masses, rely entirely on a complex web of constantly warring sentiments wherein the citizenry seeks confirmation bias, rather than a simple argument consisting of reason, where the citizenry seeks both consensus and falsification of their biases. In other words, where people are skeptical – conservative and rational. Utopianism is a technology that people use during periods of prosperity. Because we have been artificially prosperous due to the discovery and exploitation of a continent, we as a nation are notorious for predicting an optimistic future that cannot or has not occurred. The public dialog over the causes of our prosperity is often inaccurate and self-congratualtory rather than factual. We have transformed our culture of evangelical christianity into one of evangelical democratic secular humanism. Conservatives are skeptics. They may speak in antiquated language, because antiquity is their source of their language. They may fail to articulate their position effectively in contemporary terms because of that language, but regardless of the source of their language, the content of their language is strategic, intelligible and rational. And it is not just a language, but a methodology that represents their strategy for social order. They ACT conservatively, think conservatively, and treat the world conservatively. This conservative strategy and conservative activities are why conservatives are, in general, more prosperous – and frankly, happy. And the sacrifices that they make in order to be prosperous are material to them. They remember them. And therefore they resent those sacrifices being ’spent’ by others who do not make the same sacrifices. Monetarists and capitalists are not conservatives. They may hide under conservatism. But they are not conservatives. The conservative class is a military, middle and craftsman class and it always has been and always will be. It is the ‘residue’ of the european fraternal order of soldiers at the bottom, and at the top, it’s a ‘residue’ of the middle class movement that revised and adopted civic republicanism during the enlightenment as a way of transferring power from the kings and church to the middle class. it is an alliance of the military and middle class. Liberalism (socialism, communism) is a ‘residue’ of a union of the priestly cast and the peasantry. Academia is simply an outgrowth of the church. The peasantry has always allied with the church, and the church has always had power because of it’s support by the peasantry. And that said, we do not have a separation of church and state. Our state religion is now democratic secular humanism. We are now a state-run-religion using the myth of division of church and state to oppress (or reform) religions so that we can have a state sponsored church. That’s it. That’s the articulated conservative position. The republican party collects conservative coalitions. The republican party is not a conservative party. conservatives join the republicans because they have no choice. They see the party as corrupt. People are complex and only join parties because of limited choice mandated by our ‘winner takes all’ form of government, which fosters class warfare. In fact, all political decisions exist on a spectrum or bell curve. There are a myriad of political decisions to be made. There are a myriad of people with different abilities to understand each political opinion. Each person is interested in a myriad of decisions. Parties are collections of people with opinions. Very skilled people tend to be highly unsatisfied with party choices. Very unskilled people tend to simply support their party of nearest interest. Parties therefore pick platforms that make enough people happy that they can get into power. Arguing that conservatives want to keep things asa they are, is a silly argument. The objection is simply illogical. The question instead, is whether liberals propose a solution that conservatives can live with, and wether conservatives can propose a solution that liberals can live with. The difference between social classes are differences in Time Preferences (between “consume” or “capitalize”, or gratification now versus gratification later). Longer (lower) time preferences are only possible if you have the ability to comprehend long term time preferences. This is another reason why social classes are organized by intelligence, and why a market economy tends to organize us into economic classes according to our application of intelligence to the satisfaction of OTHER PEOPLES WANTS, instead of our own. Time preference affects not only a dimension covering an individual’s perception of gratification. It’s a second dimension that describes whether his gratification now or later is served by providing solutions to himself or to others. This is the moral lesson of Adam Smith – that capitalism creates a virtuous cycle. If we had listened to the liberals in the last century we would have ended up like either Russia or China. If we had listened to conservatives we would not have had our progressive social changes, but we would not have corrupted our financial system using Kenesnian inflation. It’s the competition of ideas that gives us the choice as a body politic. It is the combination of LIBERAL OBJECTIVES and CONSERVATIVE METHODS that provides the means of achieving shared goals. Lets say that again. Liberal objectives are moral desires. Conservatives methods are moral means. It requires both these tools to achieve moral ends. The problem is, conservative methods take time because they require the learning and adaptation of people to calculative processes. These processes have nothing to do with religion. Christianity is largely a religion of the poor. Protestantism is perhaps the most important religion for generating wealth in the west as it is a class religion. Secular humanism is a feminine religion just as Aryanism (expansionist civic republican tradition of the initiatic fraternal order of city-defending soldiers) is a masculine religion. We do not need all to believe one thing, share one goal, work according to the same rules. If we did, we’d break the principle of the division of knowledge, labor, time, and intelligence. WHat people really want when they seek universal agreement is to concentrate labor, knowledge, time and intelligence on their goals at the expense of other people’s goals. Since people are unequal in their ability, in their class goals, in their cultural goals, in their age and experience, in their knowledge and in their intelligence, then we must divide up our actions into bits and pieces which we cooperate with each other to achieve. Democracy as we have implemented it is a winner-take-all political order. It foments class warfare. It does not foment class cooperation. We need a government that is a return to the division of labor and division of classes and time preferences. Democracy is a failure as we have implemented it. Because we confuse the value of the transformation of power inherent in democracy with the universal aspiration of classes, cultures, ages, generations, and abilities.

  • People ‘Earn’ Redistribution By Controlling Their Breeding

    Another Empathic Appeal for the poor on NewsJunkiePost.com, entitled, Poverty: Half The World Lives On Less Than $2.50 A Day Unfortunately, the first prerequisite for prosperity is to control your population’s breeding. The worlds problems are not ‘density’ or ‘pollution’ or ‘capitalism’ but the transfer of life-extending technology to peoples who do not the cultural ability to control their breeding without the limits set on life by agrarian food production. For thousands of years, food production and disease gradients have limited population for people who lack the personal and social technology to control their birth rates so that they may stay within their productive means. Then we in the west, in our compassion, and in our lust to profit, sell these people life extending technologies without demanding that they control their birth rates. Were we to distribute all the wealth of the west to these people they would simply consume it and would match their reproduction to all increases in production, impoverishing the west as well. The division of knowledge and labor, the resulting increases in production, and the virtuous cycle of lowering prices because of this increased production are only one half of the equation. The control of breeding in the (protestant) countries is the other half of the social problem. More countries need a one-child policy, and the infrastructure to support that policy. Unfortunately, corruption is so rampant in these breeding-centers. Thankfully the rate of capitalism’s transformation of the world from agrarianism where children are a productive asset, to industrialization where children are a very high cost, is slowing the overbreeding problem in the ’second world’ of organized states. Incorporation of women into the workforce further controls breeding, and often too much (Japan and Russia). The reason we need women’s participation in the work force, especially in poorer countries, is so that they do not breed their civilizations into permanent poverty. The problem isn’t money. It’s cultural discipline. If we are going to even discuss mobilizing states to correct poverty then we should mobilize states to control breeding. Otherwise, along with our technology of life extension we are simply handing a murder weapon to a madman. “In other words, in 2004 about 0.13 percent of the world’s population controlled 25 percent of the world’s wealth. If we consider the global spending priorities of 1998, the trends were already extremely alarming.” Most people who read have heard of the 80/20 principle. Which means that 20% of the people control resources. This principle was developed by Vilfredo Pareto, for whom it’s named the “Pareto Principle.” He used quite a bit of data to show that in England in particular, 20% of people controlled about everything, and that income was rewarded accordingly. This also supports the value added by people. Despite our rhetoric of egalitarianism and equality, the top third of people are more productive than the bottom two thirds combined. And, at least it appears, that the top twenty percent are more productive (have more impact on generating goods and reducing prices) than the rest combined. The problem for any society is allowing the most productive people to concentrate sufficient capital that they may raise the population into prosperity. After which it’s possible to implement programs of redistribution. you can’t share what you don’t have. Unfortunately, the only value most citizens have in an economy is to provide menial labor and to consume goods and therefore create demand for goods and sevices. Imbalances in assets are needed to allow the creative and productive members of society to concentrate capital (which is the ability to influence others in an organized fashion) so that productivity can be increased. There is no record in history of this system of wealth concentration being abated. If it IS changed, then the vast majority of people on this earth will rapidly die. The problem is instead, to control reproduction and to increase production and continue the ‘virtuous cycle’ while we live within our means, so that we can redistribute something on the order of 20% of our wealth to those who have EARNED that right by the cost of forgoing further reproduction. In other words, you EARN redistribution by controlling your breeding.

  • You Do Not Engineer A Company. You Grow It.

    This is a response to an article posted on An Entrepreneurial Mind. In that post the author, Dr Cornwall recommneds writeing a business plan. And the steps for doing so. And I’m of the opinion that that’s just silly. A plan is a tool for managing weak leaders. A plan is what oyu write when you have given control to investors. A plan is what you write so that a leader who lacks knowelgde, understanding and vision can give his consent. A plan is the myth that teachers instill in students as a substitute for the act of critical analysis. I write a plan every six months. It’s detailed deep and critical. From it I extract goals, an ignore the plan. Goals are just longer term opportunities that we work to exploit. They are rarely and end unto themselves. There is no end of history. And there is no end of business.

    You can’t engineer your company any longer. The reasons are complex, but they have a lot to do with the availability of capital. There is more of it. Raising money today, even in this environment, is very different from the 1980’s. Because of this, no one writes a business plan any longer. At least, It’s a sign of naivety in the business community. They are an artifact of the era of post war engineering. A myth held by the young and inexperienced. A device used to provide false confidence to failing management. A plan is what you write when you think you know something but don’t, and often cant. The truth is, that the reason young people don’t like to write business plans is because they don’t have the knowledge to. A business plan is a contract among participants, and it is the wrong type of contract for the wrong type of processes and goals. And entrepreneur who authors a contract does so in order to hand over his sovereignty to someone else. Or he uses it because he lacks the sovereignty to act as an entrepreneur. As such, a business plan is a sign of weakness. Of immaturity. Of lack of sovereignty. It is a contract for a false good. When instead, he should have a list of MBO’s, and a financial model – a set of tools that maintain his sovereignty – his ability to adapt to circumstances. The problem isn’t a plan it’s the research. It’s the knowledge. The problem with planning is that it does not reflect business, and hasn’t in half a century. Napoleon didn’t plan. Napoleon mastered his environment. He read everything he could. He hired spies. Read shipping records. Red mail. Read ship manifests. Read intercepted letters. He collected just about all the information that he could. Then he mobilized his forces to take advantage of opportunities that presented themselves. This is a very different way of looking at business strategy. (See Duggan and Keegan) Collect the information that you need to run your business. all of it. Take advantage of every opportunity. Build an INTELLIGENCE NETWORK first. Intelligence networks allow you to identify and exploit opportunities. How do you build your intelligence network? How will information get to you? What kind of non-quantitative intelligence can you and your people gather. The best sales teams meet weekly and review what they have LEARNED about their target accounts. THis process teaches everyone. The CEO should collect that information. But this is also true of marketing, of vendors, of distributors of partners, of the government. It is a vast information problem. I tend to ignore what competitors are doing except when directly competing with them. It is far easier for your staff to pay attention to competitors than it is for them to pay attention to consumers. But systematically collecting customer and consumer information is priceless. The best opportunities are those where someone larger than you are needs something that they cannot achieve for bureaucratic reasons. In those cases you build a company to sell to someone larger. I always start a company with a list of companies I would like to sell it to. The next best opportunities are those where the existing people in an industry are enamored of their value chain, and you can innovate and take their business because of it. THe next best opportunities are those where you can collect either better talent, or better capital than competitors. In most cases, it is easier to steal talent from a bigger and stronger competitor if you have ‘seats at the table’ in your company available. The next best opportunities are those where you have a technological innovation that you can put to practice and patent. This is far harder than it would seem. The next best is where you arbitrage rather than create value: where you have lower costs. This is almost always a bridge strategy. Lower costs are not a sustainable market position. They simply assist in some other market position. Many people are trapped in being small because their only advantage is low cost. Low cost usually means low talent, and talent is what makes your business competitive. It is better to look for increased value and higher cost that people are willing to pay for. Write short definition of a one-year success criteria. If you made these things happen your first year, then would you be successful? Do this every year. I do mine every six months. I hang them on the wall behind my office door. Plans that are longer than that are questionable. Goals may be valuable. Plans are not. Largely, size, number of employees, number of customers, amount of revenue is all good. The rest is just self aggrandizement. Write a one page description of your product, products, or services. If you cannot sell it in one page, then you cannot sell it. Get market research on every competitor, large and small. Take greater interest in why people failed than in why people succeeded in your industry. Most of the time it’s simply tactical. Make a list of all your customers that you can think of. try to understand why they make a purchasing decision. It is very often not intuitive. It is often counter to the reasons you think your product or service has value. One man tried to sell a software system to a bank. But it would have eliminated the department. The VP would ave no one to manage. He poisoned the sale. People in bureaucracies are not entrepreneurs. You have to create a value proposition that appeals to them. Map our your supply chain. Who will you need things from? Why will they give you attention? What will it cost to maintain them? Map out your distribution chain. Who will you distribute your goods and services through? will you rely on yourself alone? a large sales org? channel partners? Alliances are almost universally meaningless. they are a waste of time. Create a very complex, detailed operational spreadsheet. It should be as close to an accurate version of your chart of accounts, balance sheet, income statement, and all costs and cash flows as is possible. Be paranoid and conservative. Mine are usually good enough to run the business on, and I mandate that accounting systems and management reports mimic them. Usually 10-15 pages of spreadsheets. Create a list of the people you know of or think that you can recruit into your organization who will put extraordinary effort into the business. I have started eight companies and I care more about my people than I do about any other factor. good people make a business. Start recruiting them. If you cannot interest them, then you are not going to interest a customer, banker or investor. It takes nine months to do anything. Make a baby. Forget a bad memory. Lose confidence in a market. Develop new relationships where trust is involved. Work for 9 months testing your theory and trying to prove out your ideas. To do that you need nine months of money. During this time take advantage of every opportunity that you can as long as it either gives you cash to fund your business, or it advances your relationships, customers and employees. Write a ‘Book’, for investors on how you expect to use your business to make them money. They do not care about your idea. They care wether you sound like you know what you’re talking about, whether you and your team have experience, and whether you have any ‘advantages’ that they can understand. WHile investors claim knowledge, most of them are in their jobs not because of business experience but because of relationships and luck. Your job is to make them feel comfortable that you are going to make them money. Emphasize that you have an ‘in’, like a major customer, a larger company that you provide a service for or an off-book-r&D effort you’re going to speculate on. And be willing to fail. It is far harder to be an entrepreneur than to work for someone else. You work far harder for less money but more joy and more control over your life. Entrepreneurship is a lottery. You can win. But you have to understand that luck is a very important factor in your success, because you cannot know enough going in to be sure you will succeed. In general, plans are silly. Goals and models are not. Make a model. Revise it constantly based on new knowledge. Stick to nothing. The purpose of goals is simply to provide yourself with decision making criteria when there are many decisions to be made and most of them seem ambiguous. A plan commits you to something and forces you to organize your business rigidly. A business does not execute a plan. It is a large number of people who identify create and exploit opportunities. Your job is to fund an intelligence network that will give you the largest number of opportunities that you can continuously reorganize your company to exploit. And continuous reorganization is far harder than most people think. but it is far more durable. GIve your people six month MBO’s. Even quarterly. Yearly for very top people. Realize that you must learn and that the only way to know anything is by experience. Entrepreneurship cannot be taught. It can only be learned. Because you must learn to run a business in real time. Education can simply give you the tools. But you can sit and ponder things during your education that must be made at risk and peril in real life. If you are craftsman, you ply your trade. You seek opportunities. You learn your skill well enough to compete. If you get to be an entrepreneur, you will have sacrificed all your time, all your thoughts, and devoted more of your life than common people to your job and will become effectively a machine that takes in information compares it against a model and decides if it can be used to achieve goals. The more information you have, the earlier, the more opportunity you can wring for your business. If successful, at some point you will hand over this duty to someone else, who will, not as well as you, do the same opportunity sifting. You will instead, move to longer term opportunities, like relationship and capital management. This is when you get to take your rewards. Whether you get there or not depends on whether you are enough of a mentor and teacher so that your job can be done well enough by others while still paying you well enough that you can afford to compensate someone talented enough. There are a lot of hard working ceo’s that can’t grow their companies. The reason is that they are not paternal enough. They are working a job rather than raising a family. They try to add value by doing something themselves – which is a convenient distraction from building your business. Execution is a staff function, not an entrepreneurial one. Instead, if you’re doing hard work, you should only do it long enough to understand it well enough so that you can intelligently hire someone to do that job, so that you can move onto the next opportunity that needs creating or exploiting. Working hard is good as long as you’re working on the right things. People need different kinds of fitness. Physical fitness is obvious. Scientific fitness is something else. Oratory fitness something else again. An entrepreneur’s fitness is his ability to create an organization that identifies and exploits opportunities. It’s a knowledge problem. FItness is your ability to process information. To judge people. To make decisions in real time. To make them faster and better than your competitors. Evolve your company. Don’t plan it. Parent and Grow it. Don’t engineer it. If what you mean by planning is modeling then that’s a useful tool that gives you understanding. But if planning is the act of mandating self ignorance so that you do not invest in the act of building an intelligence network that you can exploit for opportunities, then planning is just an excuse to bury your head in the sand, or an admission that you lack the intellect to process the information needed to act as an entrepreneur. Very little than men produce today other than biological research is complex. Almost all business problems are not those of production, but those of opportunity identification and exploitation given the fact that resources and production, like technology itself, a temporary and limited advantage. An entrepreneur is a maker, identifier, calculator and exploiter of opportunities. Everyone else is just a clerk. Curt

  • Schiller Takes A Step Toward Capitalism 3.0

    From an article in the NY Times. A Way To Share In The Nation’s Growth Robert Schiller, who I greatly admire, recommends one step toward Capitalism v3.0. Why? Because investment in the productivity of a nation does not privatize wins and socialize losses, as does debt. It is gambling, but gambling by people who know what they’re doing, rather than simply impoverishing citizens for government’s incompetence. I have worked on this particular theory quite extensively, and it appears that the worldwide impact would be positive and durable. The argument against it, is that it makes governments accountable. And the entire purpose of government seems, at least from the historical record, to be one of avoiding political accountability at all costs. Which is precisely why we need this particular solution.

    Shiller: Sell Shares in the U.S., Not Just Its Debt Thursday, 31 Dec 2009 09:09 AM Article Font Size By: Julie Crawshaw Yale economics professor Robert Shiller says a new kind of government security is needed, one based on equity instead of debt. “Corporations raise money by issuing both debt and equity, the latter giving investors an implicit share in future profits,” Shiller writes in The New York Times. “Governments should do something like this, too, and not just rely on debt,” he says. “We would sell shares in America instead of just debt of the American government.” Shiller even suggests a name for the new security, which would be based on Gross Domestic Product: a “trill,” because it would represent one-trillionth of annual GDP. Though GDP numbers still are subject to periodic revisions, “the basic problem has been largely solved,” Shiller says. “Such securities might help assuage doubts that governments can sustain the deficit spending required to keep sagging economies stimulated and protected from the threat of a truly serious recession.” If substantial markets could be established for them, Shiller notes, trills would be a major new source of government funding, issued with the full faith and credit of the respective governments — which means investors could trust that governments would pay out shares as promised, or buy back the trills at market prices. “What the average citizen doesn’t explicitly understand is that a significant part of the government’s plan to repair the financial system and the economy is to pay savers nothing and allow damaged financial institutions to earn a nice, guaranteed spread,” Bill Gross, co-CIO of Pimco, told The New York Times. “It’s capitalism, I guess, but it’s not to be applauded.” © Newsmax. All rights reserved.

    When governments no longer can justify violence, they resort to fraud. Debt at this level is either ignorance, stupidity, the replacement of wisdom with ‘hope’ which is a secular version of trust a divinity, or simple outright fraud. And it is not a question of political parties. The left destroys through it’s kind of policy debt, and the right though it’s kind of monetary debt. The only difference is that the right’s method can be corrected through a recession, depression, price adjustments and fiscal collapse. The left’s will require a bloody revolution, and destruction of the civilization itself. Between those two ‘bads’, perhaps, the ‘bad’ of the left is worse, but it is only marginally worse. It would simply be better for all of us if government could not commit fraud on such a scale, ever, under any circumstances. To prevent policial fraud we need methods and processes that are measurable, and to measurable they need to be calculable. Calculability is an extension of perception, and an extension that is necessary because our innate human perception is unable to make judgements without the aids that calculation provides for us. (Numbers represent consistent immutable categories.) Accountability requires calculability. Capitalism 3.0 creates political accountability through plain old fashion calculability. Curt

  • Losses Are Losses Regardless Of Size: Tiger Woods, Losses and Celebrity Endorsements

    December 29th, 2009 § 0 Comments

    Over on The Sports Economist, I found a posting about a UC Davis Press Release on the Tiger Woods scandal and the losses incurred by companies that had sponsored him.

    And Felix Salmon editorializes that the number is an example of specious academic research (in other words, like most academic research that has popular appeal, it’s nonsense.) I’m not a big fan of Felix for historical reasons, but his criticism is spot on.

    Now, how am I going to spin this as another example of a strategic marketing error that is the fault of executive management?

    It’s easy. Because what makes the estimated $12B (or 1b, or whatever number of millions) in losses from the Tiger Woods scandal more interesting, is that celebrity endorsements have very little positive impact on brands, and advertising agencies have known this for decades.

    Celebrity sponsorships improve the public’s awareness of the celebrity outside of his or her own field. But that awareness does not translate to the products themselves. In general, Tiger made more people (especially minorities) interested in golf. But he did not necessarily advance the revenue of the “non-golf” brands he was associated with. (I do not have data on Tiger, I’m using comparisons of past celebrities – although I would honestly love to be proven wrong on this).

    For example, some of the models and actresses do fairly well with brand development, and have impact on the brand, but they manufacture that value – they don’t bring it to the table. Wilford Brimley’s commercials for grape nuts were a positive example, but he created that value as a character actor, rather than brought it to the table in the form of external legitimacy.

    So given the data on losses to shareholder value from the Tiger Woods scandal, it at least appears to confirm what most of us already know: celebrities increase awareness of the celebrity, but have little or no impact on the bottom line, but celebrity exposure once engaged in a brand, has a serious downside that is logarithmically more negative than any possible gain can warrant risking.

    And if you pick a reasonably attractive high performance high stress male athlete that marries a woman clearly outside his social class, and who travels extensively among fans (especially homogamous status-seeking females) that you helped create through increasing his exposure, you are simply asking for trouble. You get the same problem if you bring in a young female olympic medalist from a small town, and give her unfettered access to the media – she will speak honestly, and pragmatically, from her heart, and that is not the job of politicians or brand representatives whose job it is, is to perpetuate myths. (Yes, that’s a politicians duty: to perpetuate a myth, because political decisions in large groups are decided according to mythos.)

    Now, part of the problem is his own agency’s fault. They positioned the poor guy as a saint. Nike never does this kind of thing that I’m aware of. THey leave room for human frailty. If you don’t you just create a vehicle for necessary failure. They did. He stepped in it. It cost a lot of money – specious self promoting academic research or not.

    Celebrities cannot legitimize brands by bringing external legitimacy to them. Characters that symbolize brands, rendered by talented actors bring acting talent to the process of creating brand value. (Mr Whipple – played by Dick Wilson, Wilford Brimley – for Grape Nuts, and Catherine Zeta Jones for T-Mobile, for example, all created brand value.)

    In other words, blame the CEO and CMO, and agency for the lost $X-Billion, because it wasn’t Tiger’s fault for being Tiger, it was their fault for using a celebrity as a means of promotin when celebrities have near-zero positive impact on the business.

    Advertising should not be comprehensible to executive management. Sales data that is the result of advertising should be comprehensible to executive management. But that’s not how it works. A very smart guy, Larry Ellison, CEO of Oracle personally knows the agency and who is representing his company. And while I, he id due his how personal criticisms at times, as a CEO he should be respected for his depth and flexibility and accountability – he demands accountability and is involved in how his company is marketed.

    So it’s CEO’s and CMO’s that lost billions by manufacturing a celebrity that they can talk about with their friends, when the data is clearly that celebrities have very little positive impact on brands, and very high negative impact on brands, and they were betting on the chastity of a guy (probably with a lot of legal nonsense that assumes far more of a human animal that is possible) who has about zero chance of holding to those achievements – not because of a character flaw, but because any person under duress for a long enough period will seek human comforts and rationalize them.

    We worry about CEO corruption as if it’s an intentional malice rather than the foibles of being a human being in the midst of disconnected, fragmentary, and often erroneous data, in a rapidly changing market, under considerable time pressure, with credit money distorting all financial data worldwide, when CEO’s appear to be, at least from the data, some of the most ethical people in the world – especially given that they must fight the daily battle of tax, banking, investment, regulatory, journalism and political leader’s desire to attribute predictive value to temporal noise in data as if it is a trend, without resorting to calling the leadership of each of these categories ignorant fools, or giving away their current strategy. That’s a task that makes a centrist politician’s duties look tame by comparison. Yet we do not hold CEO’s accountable for malinvestment that was made despite being clearly contrary to all existing evidence.

    Except for Nike, who is in this kind of business with full knowledge of the consequences, (and employs some of the smartest people in marketing today) and EA, which of course, is directly profiting from Tiger’s name, (and is an exceptionally well run organization with deep knowledge of it’s customers) and Golf Digest who again profits directly from his participation and legitimacy in expanding the sport of golf, we should blame the CMO’s of the companies that invested in Tiger Woods. (Accenture, Amex, ATT, Gatorade, TLC, Gillette ) because it’s their decision to invest in a risky strategy (most likely because it’s easy to get through the bureaucracy) instead of developing a character or characters that represents their brand. (Geiko, and Progressive insurance are the current popular winners.)

    Tiger’s downfall was a foregone conclusion, and certainly, in the trade, the topic of a barstool raffle on his time-to-failure. He’s a human being, and no matter how many layers of paper indemnification we wrap a human in, he is still a human living in a world of other humans.

    But while the contract clauses can stop you from paying out your sponsorship fees, and some well spent money will help consumers forget the negative association with your brand, it cannot so easily recover lost shareholder value, despite the fickle memories of investors. Billions are BFN’s to lose. And they are lost by executives who buy into celebrity endorsements instead of building brand value around characters that they actually own, and in particular, fictional characters that can’t get caught in infidelity in hotel rooms with waitresses.

    from: www.puretheoryofmarketing.com (offline)

  • What will be the biggest opportunities for agencies in the next 5 years? Displacement.

    December 12th, 2009 § 0 Comments

    We see opportunities for all categories of agencies. Large traditional agencies will continue to dominate the world of the large multi-national, brand portfolio–based clients because they are the only ones who can scale to the needs of those clients in the production of large volume, broad reach traditional media like broadcast and print.

    Small agencies will thrive because they are the outlets of anarchistic creative talent. Small agencies also represent where the most specialization will occur. For every new technology, new media, and new channel, it will be the small specialized agencies that will blaze the trail for the rest to follow because they are the least risk averse and are not motivated by the same business drivers as their larger counterparts. These specialized agencies will be able to displace other agencies whose institutional mindsets, business organization, and cost structure reduce their ability to deliver creative value and niche expertise.

    The greatest opportunity over the next five years will be in the midsize agencies like Ascentium though. The most successful of these will evolve out of the current digital agency world, although they will be complemented by the best of the midsize agency typified by Crispin Porter + Bogusky. These agencies will excel because of three distinct advantages: they will be freed of the financial handicaps placed on both the large and the small agencies, they will be able to build their reputations around demonstrated leadership in their particular area of specialization, and they will be able to execute their ideas based on deep technology skills.

    Independent midsize agencies are not saddled with the high overhead, executive compensation, holding company taxes, and other built-in financial impediments that make large agencies more risk averse and less able to deliver services cost effectively. And midsize agencies hold a distinct advantage over small shops whose restricted access to capital can limit their ability to grow, scale, and, more importantly, attract top talent (especially business-oriented management).

    While expertise in communicating using digital and emerging media is what is most often associated with the recent generation of high-growth, successful agencies, it is really their specialized expertise that makes them successful. Take Crispin Porter + Bogusky, for example. Whether it is their work for VW, Burger King, or Best Buy, they repeatedly demonstrate adeptness at connecting with a defined audience (young males, 18-34). In the same way, clients flock to Ideo whose tagline proclaims that they “create impact through design.” And we at Ascentium are very proud of our work with clients like Microsoft and T-Mobile, bringing their brand experiences to life for unequalled customer satisfaction and measurable results.

    Deep experience, expertise, and thought leadership in technology are what wins us business and what every successful agency will need to achieve success in the coming years. Traditional agencies will find this hard to excel at because of their focus on delivering volume creative across vast, though not complex, distribution media. And it requires a sophistication of delivery resources that go well beyond what small agencies can muster. So, in the end, technology expertise will belong primarily to midsize firms that we associate with what have become known as digital agencies.

    Technology is not a “nice to have” or a gimmick; it is the means for delivering meaningful customer experiences, with rich content, relevant to each micro segment of the audience through an inexpensive distribution channel with higher production costs.

    We have had four generations now where the cost of distribution into major media has been artificially constricted by a highly distributed media selling to large numbers of similar consumers through a narrow distribution channel. This circumstance occurred in parallel with limited differences in the properties of major consumer products. We now live in a world of extraordinary diversity of choice, tribal micro communities, and complex dissimilar associations. It’s a world where people take the time to look for their information and find advertising entertaining or curiosity invoking but not necessarily actionable.

    The information that consumers seek out on digital media, and the structure of that information and the trust they put in it, will increasingly require technology and media customized for that technology—where the brand imagery is simplistic and constant, but the content varies dramatically from channel to channel. In the past, we spent more money on distribution and less on creative. Over time, this trend will continue to reverse itself, requiring that we spend more on creative and less on distribution. Agencies that can implement diverse technologies and campaigns will continue to capture increasing amounts of the same revenue from clients.