Since we’re in the midst of election season, with promises of cures for our economic woes being thrown around, this seems like a particularly appropriate time to explore what can and can’t be achieved within the laws of economics. Those laws might not work 100% of the time the way physical laws do, but they generally tend to define the range of outcomes. It’s my goal here to point out how some of the things that central banks and governments try to do – and election candidates promise to do – fly in the face of those laws. ... Let’s start with central banks’ attempts to achieve monetary stimulus. When central banks want to help economies grow, they take actions such as reducing the interest rates they charge on loans to banks or, more recently, buying assets (“quantitative easing”). In theory, both of these will add to the funds in circulation and encourage economic activity. The lower rates are, and the more money there is in circulation, the more likely people and businesses will be to borrow, spend and invest. These things will make the economy more vibrant. ... But there’s a catch. Central bankers can’t create economic progress they can only stimulate activity temporarily. ... In the long term, these things are independent of the amount of money in circulation or the rate of interest. The level of economic activity is determined by the nation’s productiveness. ... Much of what central banks do consists of making things happen today that otherwise would happen sometime in the future. ... the truth is, this “tyranny of the majority” is an unhealthy development. First, society does better when able members have strong incentive to contribute. Second, upward aspiration and mobility will be constrained when taxes become confiscatory. Finally, taxpayers aren’t necessarily powerless in the face of rising tax rates.
The New Normal is when plain logic no longer applies; when common sense takes the back seat. I have for a long time been defending the Federal Reserve Bank, and have not at all agreed with all those hawks who thought the Fed was sitting on its hands. Until recently, I felt very comfortable taking that view, but I am no longer so sure. Common sense suggests to me that the Fed ought to tighten a great deal more than they have already done, but does common sense apply? That is what this month’s Absolute Return Letter is about. ... something is not quite right, but what is it? Before I answer that question, let me share one more observation with you. Because the Fed is so inactive, there are signs of moral hazard growing in magnitude. Complacency appears to be sneaking in through the back door yet again. We humans never learn, do we? ... As GDP growth slows, more debt needs to be established in order to service existing debt, which will cause GDP growth to slow even further. I therefore think that, unless it suddenly becomes fashionable to default, debt will continue to rise and GDP growth will continue to slow in the years to come. ... I have changed my view in one important aspect. As debt levels continue to rise (short of any massive debt restructuring), governments will bend over backwards to keep interest rates at very low levels, as the only realistic alternative to low interest rates is default. ... Historically, when central banks have sat on their hands for too long, the end result has almost always been a bout of unpleasantly high inflation, and that has nothing whatsoever to do with the changing demographics.
All we know at this point in time is that Brexit will (probably) happen at some point over the next 2-3 years, but we still have no idea what the actual implications will be. ... In that context I note that it has taken Canada ten years to negotiate their free trade agreement with the EU, and that was prioritised by the EU negotiators. The EU have already declared that the UK will not be prioritised. On top of that, the UK will now have to negotiate trade agreements with pretty much every country around the world that it does business with – a monumental task, and the legal resources to do that job do not exist, according to a government official. ... As events unfolded, it would probably be fair to say that the vote wasn’t really about what it was supposed to be about; that got lost along the way. No, it turned into a referendum for or against immigration and a protest vote against Brussels and London. The amount of bitterness in large parts of the country – and in particular in the North – is such that many saw the referendum as an opportunity to give Brussels and London (or at least the elite in those cities) a slap in the face. ... Now, a couple of weeks after the referendum, we are admittedly in a bit of a dilemma – almost akin to a prisoner’s dilemma. The more financial markets puke over the next few months, the more likely lawmakers on both sides are to forget past disagreements and insults, and work on a solution that would keep the UK in the EU. On the other hand, if financial markets get a whiff of something about to happen - a possible compromise solution – financial markets will perform better, and thus make it less likely to happen.
Wisdom of crowds is an old concept. It goes back to Ancient Greek and, later, Enlightenment thinkers who argued that democracy is not just a nice idea, but a mathematically proven way to make good decisions. Even a citizenry of knaves collectively outperforms the shrewdest monarch, according to this proposition. What the knaves lack in personal knowledge, they make up for in diversity. In the 1990s, crowd wisdom became a pop-culture obsession, providing a rationale for wikis, crowdsourcing, prediction markets and popularity-based search algorithms. ... That endorsement came with a big caveat, however: even proponents admitted that crowds are as apt to be witless as well as wise. The good democrats of Athens marched into a ruinous war with Sparta. French Revolutionary mobs killed the Enlightenment. In the years leading up to 2008, the herd of Wall Street forgot the most basic principles of risk management. Then there was my little Skittles contest. It was precisely the type of problem that crowds are supposed to do well on: a quiet pooling of diverse and independent assessments, without any group discussion that a single person might dominate. Nevertheless, my crowd failed.
All we know at this point in time is that Brexit will (probably) happen at some point over the next 2-3 years, but we still have no idea what the actual implications will be. It all depends on the forthcoming negotiations between the UK and the EU (and the rest of the world), and David Cameron and Boris Johnson probably both did the wise thing and chickened out, because that isn’t going to be much fun. ... In that context I note that it has taken Canada ten years to negotiate their free trade agreement with the EU, and that was prioritised by the EU negotiators. The EU have already declared that the UK will not be prioritised. On top of that, the UK will now have to negotiate trade agreements with pretty much every country around the world that it does business with – a monumental task, and the legal resources to do that job do not exist, according to a government official. ... As events unfolded, it would probably be fair to say that the vote wasn’t really about what it was supposed to be about; that got lost along the way. No, it turned into a referendum for or against immigration and a protest vote against Brussels and London. The amount of bitterness in large parts of the country – and in particular in the North – is such that many saw the referendum as an opportunity to give Brussels and London (or at least the elite in those cities) a slap in the face.
How much will people work in the future? The rise of automation and, more generally, IT-driven structural change in the labour market have made policymakers and researchers worry about ‘disappearing jobs’ and a dire future for employment. In this column, we argue that to the extent productivity improvements continue, hours worked in the marketplace will indeed likely fall. However, the argument is not that jobs will disappear. ... Is the pattern representing a gradual disappearance of jobs since the early 19th century, perhaps as a result of technological change? No. The reason, we argue, is rather that technological change has raised labour productivity. People have then acted on this opportunity – they have chosen to work less hard as a result of technological change. Structural change makes some jobs disappear, but new ones emerge. Working hours are an outcome of not just demand but also of supply.
Increasingly over the past half century, the Olympics have been seen as an opportunity for host cities to instigate large-scale urban improvement programs, from infrastructure building to the regeneration of entire segments of the city. The hard deadlines associated with the event can provide extra momentum to pursue wishlist projects, like new airports and transit lines, as well as the incentive to make big investments that might otherwise be politically challenging. ... The International Olympic Committee and local organizers are now trying to avoid these kinds of planning missteps and bad investments; leaving behind a positive "legacy" is the new Olympic imperative. London, which spent roughly $15 billion hosting the 2012 Summer Olympics, has been the most proactive in thinking about its Olympic planning as a way to generate long-term benefits for the city, focusing its investments on redeveloping an economically struggling part of the city. Rio de Janeiro, days away from the opening ceremonies of the 2016 Olympics, is hoping to parlay its hosting duties into improved housing and transportation infrastructure—though there are many signs organizers are falling short.
Financial crises pose challenges for macroeconomists. Schularick and Taylor (2012) show that credit booms precede crises. Mendoza and Terrones (2008) claim that not all credit booms end in crises. Herrera et al. (2014) argue that crises are not necessarily the result of large negative shocks, but also of political considerations. There is a need for models displaying financial crises that are preceded by credit booms and that are not necessarily the result of large negative shocks. ... In a recent paper (Gorton and Ordonez 2016), we show that credit booms are indeed not rare, that some end in crises (bad booms) but others do not (good booms). Are these two types of booms intrinsically different in their evolution, or do they just differ in how they end? We show that all credit booms start with a positive shock to productivity on average ten years before the end of the boom, but that in bad booms this increase dies off rather quickly while this is not the case for good booms. This suggests that a crisis is the result of an exhausted credit boom. We then develop a simple framework that rationalises these empirical findings and highlight several shortcomings of standard macroeconomic models that tend to neglect the interplay between macroeconomic and financial variables.
Is there a workable business model for products that are built to last, rather than to fall apart? This is an idea that I explored here in July, in a story about the L.E.D. quandary. That quandary, in short: companies are making a good thing—light-emitting-diode bulbs that conserve energy and last for years—but they can’t make money in the long run from products that rarely need replacing. As global light sockets fill with L.E.D.s, century-old corporate titans are getting out of the bulb business even before “socket saturation” tips sales into a decline. The question remains whether any company has an incentive to make a product that is not designed to fall apart or become obsolete.
With greater oil reserves than Saudi Arabia, Venezuela should be at least moderately prosperous. Instead, it has the world’s fastest contracting economy, the second highest murder rate, inflation heading towards 1,000% and shortages of food and medicine that have pushed the poorest members of its 30 million population to the edge of a humanitarian abyss. ... It takes just five minutes to cross from the porous border at Pacaraima. Locals say the government in Caracas lifted food import tariffs from Brazil two months ago in a sign both of its desperation to ease shortages and its weakening control over the economy. There is now a steady stream of traders buying sacks of rice, sugar, wheat and spaghetti for resale in Venezuela. ... Life could be made easier if the authorities printed notes with higher denominations than 100 Bolivars, which is worth less than 8p, or 10 cents. But the central bank appears reluctant to make a move that would confirm a level of hyperinflation not seen in Latin America since the crises in Brazil and Argentina in the 1980s and 1990s. As a result, locals have to pay for everything in the equivalent of dimes. Even when made of paper, that can be cumbersome and heavy. ... The government’s tendency to subsidise many products below the cost of production is a major reason why the economy is in such a mess. ... Even in the midst of crisis, the government still hands out free or massively discounted homes, cars, DVD players and microwave ovens.
Rising macroeconomic and geopolitical tensions are creating both opportunities and risks for global investors across the entire global capital markets. We continue to emphasize our five key macro themes, many of which we think can perform against a variety of economic backdrops. First, we believe that assets with Yield and Growth will continue to outperform. Second, we would avoid exposures linked to China’s structural slowing, though we do finally see some emerging investment opportunities in China’s ‘new’ export strategy. Third, we see the opportunity for a significant and potentially sustained upward revaluation in the securities of large domestically-oriented economies. Fourth, the dismantling of the traditional financial services industry has emerged as both a blessing and a curse for investors; we outline our approach for navigating this complicated segment of the global economy. Finally, given the bifurcation across markets that we are now seeing, we believe folks should consider increasing exposure to complex stories, including earnings misses, restructurings, and/or corporate repositionings; at the same time we would be selling simplicity in instances where future earnings streams appear over-priced.
It’s the year 2120. You feel no hunger, no cold, no heat, no pain. There’s no need to eat or to take medicine, though you can if you like. You are beautiful, intelligent, and charismatic, as are your friends, co-workers, lovers. Though the economy is fiercely competitive, retirement is not far off. You do not fear death. Look out your office window and you see sunlit spires towering over tree-lined boulevards. ... At least this is what you think you see. In fact, you live and work in virtual reality. Your city amounts to racks of computer hardware and the pipes that cool them. And you are not "you" in the traditional sense: You are an "em," a robotic brain emulation created by scanning a particular human brain and uploading it to a computer. On the upside, you process information 1,000 times faster than a human. On the downside, you inhabit a robotic body, and you stand roughly two millimeters tall. ... This is the world Robin Hanson is sketching out to a room of baffled undergraduates at George Mason University on a bright April morning. To illustrate his point, he projects an image of an enormous futuristic city alongside clip art of a human castaway cowering on a tiny desert island. His message is clear: The future belongs to "ems." ... This may sound more like science fiction than scholarship, but that’s part of the point. Hanson is an economist with a background in physics and engineering; a Silicon Valley veteran determined to promote his theories in an academy he finds deeply flawed; a doggedly rational thinker prone to intentionally provocative ideas that test the limits of what typically passes as scholarship. Those ideas have been mocked, memed, and marveled at — often all at once. ... Hanson, deeply skeptical of conventional intellectual discourse, argues that academics have abdicated their societal responsibilities by ignoring more speculative work.
At some point towards the middle of the decade, shortly before the cult of the expert smashed into the populist backlash, the shocking power of central banks came to feel normal. Nobody blinked an eye when Haruhiko Kuroda, the head of Japan’s central bank, created money at a rate that made his western counterparts seem timid. Nobody thought it strange when Britain’s government, perhaps emulating the style of the national football team, conducted a worldwide talent search for the new Bank of England chief. ... nobody missed a beat when India’s breathless journalists described Raghuram Rajan, the new head of the Reserve Bank of India, as a “rock star”, or when he was pictured as James Bond in the country’s biggest business newspaper. ... The key to the power of the central bankers – and the envy of all the other experts – lay precisely in their ability to escape political interference. ... The call to empower experts, and to keep politics to a minimum, failed to trigger a clear shift in how Washington did business. But it did crystallise the assumptions of the late 1990s and early 2000s – a time when sharp criticisms of gridlock and lobbying were broadly accepted, and technocratic work-arounds to political paralysis were frequently proposed, even if seldom adopted. ... If the clashes of abstractions – communism, socialism, capitalism and so on –were finished, all that remained were practical questions, which were less subjects of political choice and more objects of expert analysis. ... Greenspan’s genius was to combine high-calibre expert analysis with raw political methods. He had more muscle than a mere expert and more influence than a mere politician. The combination was especially potent because the first could be a cover for the second: his political influence depended on the perception that he was an expert, and therefore above the fray, and therefore not really political.
Scientists are beginning to understand why these ‘mini Wall Streets’ work so well at forecasting election results — and how they sometimes fail. ... Experiments such as this are a testament to the power of prediction markets to turn individuals’ guesses into forecasts of sometimes startling accuracy. That uncanny ability ensures that during every US presidential election, voters avidly follow the standings for their favoured candidates on exchanges such as Betfair and the Iowa Electronic Markets (IEM). But prediction markets are increasingly being used to make forecasts of all kinds, on everything from the outcomes of sporting events to the results of business decisions. Advocates maintain that they allow people to aggregate information without the biases that plague traditional forecasting methods, such as polls or expert analysis. ... sceptics point out that prediction markets are far from infallible. ... prediction-market supporters argue that even imperfect forecasts can be helpful. ... People have been betting on future events for as long as they have played sports and raced horses. But in the latter half of the nineteenth century, US efforts to set betting odds through marketplace supply and demand became centralized on Wall Street, where wealthy New York City businessmen and entertainers were using informal markets to bet on US elections as far back as 1868. ... Friedrich Hayek. He argued that markets in general could be viewed as mechanisms for collecting vast amounts of information held by individuals and synthesizing it into a useful data point — namely the price that people are willing to pay for goods or services.
A dual education system that incorporates vocational training and classroom learning could provide young people with more options in their transition into the working world. We think that engaging employers in the design and delivery of apprenticeship frameworks is the key to preventing skill mismatches. ... Changing employers’ perceptions of youth and encouraging early engagement in schools could increase youth employability and information around career options. This could include work experience, career advice, mentoring, and youth-led social action. ... Reducing informal recruitment methods and use of qualifications as filters could reduce work barriers to engage with youth from low socio-economic backgrounds who may be at risk of anti-social behavior.
If water is not managed better, today’s crisis will become a catastrophe. By the middle of the century more than half of the planet will live in areas of “water stress”, where supplies cannot sustainably meet demand. ... Where water is available, when and in what condition matters hugely. About 97% of the water on earth is salty; the rest is replenished through seasonal rainfall or is stored in underground wells known as aquifers. Humans, who once settled where water was plentiful, are now inclined to shift around to places that are less well endowed, pulled by other economic forces. ... As people get richer, they use more water. They also “consume” more of it, which means using it in such a way that it is not quickly returned to the source from which it was extracted. ... To make matters worse, few places price water properly. Usually, it is artificially cheap, because politicians are scared to charge much for something essential that falls from the sky. This means that consumers have little incentive to conserve it and investors have little incentive to build pipes and other infrastructure to bring it to where it is needed most. ... around a fifth of the world’s aquifers are over-exploited. This jeopardises future use by causing contamination. It also damages the layers of sand and clay that make up aquifers, thereby reducing their capacity to be replenished. ... People do not drink much water—only a few litres a day. But putting food on their tables requires floods of the stuff. Growing 1kg of wheat takes 1,250 litres of water; fattening a cow to produce the same weight of beef involves 12 times more. Overall, agriculture accounts for more than 70% of global freshwater withdrawals. ... estimated that agricultural production will have to rise by 60% to fill the world’s bellies. This will put water supplies under huge strain. ... Hydrologists expect that a warming climate will see the cycle of evaporation, condensation and precipitation speed up. ... There is no single solution for the world’s water crisis. But cutting back on use, improving the efficiency of that use and sharing out water more effectively would all help.
The medical student told me to use his name. He said he didn’t care. “Maduro is a donkey,” he said. “An a**hole.” He meant Nicolás Maduro, the President of Venezuela. We were passing through the wards of a large public hospital in Valencia, a city of roughly a million people, a hundred miles west of Caracas. The hallways were dim and stifling, thick with a frightening stench. ... Why were hospitals so heavily guarded? Nobody threatened to invade them. The guards had orders, it was said, to keep out journalists. Exposés had embarrassed the government. ... For decades, the country had been ruled by two centrist parties that took turns winning elections but were increasingly out of touch with voters. A move to impose fiscal austerity was rejected, in 1989, with a mass revolt and countrywide looting—a paroxysm known as the Caracazo—which was put down by the Army at a cost of hundreds, perhaps thousands, of lives. Chávez was an Army lieutenant colonel, from a humble background—his parents were village schoolteachers. He crashed the national stage in 1992, by leading a military-coup attempt. The coup failed, and Chávez went to jail, but his televised declarations of noble intent caught the imaginations of many Venezuelans. He offered a charismatic alternative to the corrupt, sclerotic status quo. After his release, he headed a small leftist party and easily won the Presidency. ... He soon rewrote the constitution, concentrating power in the executive. ... After Chávez barely survived a 2002 coup attempt, the Cubans also sent teams of military and intelligence advisers who taught their Venezuelan counterparts how to surveil and disrupt the political opposition Cuban-style, with close monitoring, harassment, and strategic arrests. ... Polar employs about thirty thousand workers (it is the country’s largest private employer) and is responsible for more than three per cent of Venezuela’s non-oil gross domestic product. Besides corn flour and the country’s top-selling beer, Polar produces pasta, rice, tuna fish, wine, ice cream, yogurt, margarine, ketchup, mayonnaise, and detergent. Yet it operates in an atmosphere of continual uncertainty, its planners and logistics mavens never sure what roadblock or subterfuge the government will toss up next. ... The crisis has a small but crucial constituency, starting with the generals and other high government officials who are thriving financially, mainly through smuggling, graft, and import fraud.
Well, the word “behavioral” refers to the introduction of other social sciences into economics: psychology, sociology, and political science. It’s a revolution in economics that has taken place over the past 20 years or so. It’s bringing economics into a broader appreciation of reality. Economics was more behavioral 50 or 100 years ago. At Yale University, where I work, 1931 was the year when the department of economics, sociology, and government was split into three separate departments. ... There are both advantages and disadvantages of this structure. The advantage is that we develop mathematical economics and mathematical finance to a very advanced level — and that’s useful: We have option pricing theory that is very subtle and allows complex calculations that have some relevance to understanding these markets. But it loses perspective on why we have these options anyway. It offers a justification typically that involves rational behavior. ... We tend to look for patterns in the data that we think are representative of history. ... in the economics profession of 20 years or so ago, there were no bubbles. Now people freely say “bubbles,” but it was one of those words that was considered unprofessional by economists because markets are smarter than any of us and anything that happens in the market has a rational explanation.
Sustainable value creation has two dimensions: the magnitude of the spread between a company’s return on invested capital and the cost of capital and how long it can maintain a positive spread. Both dimensions are of prime interest to investors and corporate executives. ... Sustainable value creation as the result solely of managerial skill is rare. Competitive forces and endogenous variance drive returns toward the cost of capital. Investors should be careful about how much they pay for future value creation. ... Economic moats are almost never stable. Because of competition, they are getting a little bit wider or narrower every day. This report develops a systematic framework to determine the size of a company’s moat.
I’m sure some of the criticism of people who claim to be using data to find knowledge, and to exploit inefficiencies in their industries, has some truth to it. But whatever it is in the human psyche that the Oakland A’s exploited for profit—this hunger for an expert who knows things with certainty, even when certainty is not possible—has a talent for hanging around. ... How did this pair of Israeli psychologists come to have so much to say about these matters of the human mind that they more or less anticipated a book about American baseball written decades in the future? What possessed two guys in the Middle East to sit down and figure out what the mind was doing when it tried to judge a baseball player, or an investment, or a presidential candidate? And how on earth does a psychologist win a Nobel Prize in economics? ... Amos was now what people referred to, a bit confusingly, as a “mathematical psychologist.” Non-mathematical psychologists, like Danny, quietly viewed much of mathematical psychology as a series of pointless exercises conducted by people who were using their ability to do math as camouflage for how little of psychological interest they had to say. ... students who once wondered why the two brightest stars of Hebrew University kept their distance from each other now wondered how two so radically different personalities could find common ground, much less become soulmates. ... Danny was always sure he was wrong. Amos was always sure he was right. Amos was the life of every party; Danny didn’t go to the parties. ... Both were grandsons of Eastern European rabbis, for a start. Both were explicitly interested in how people functioned when they were in a “normal” unemotional state. Both wanted to do science. Both wanted to search for simple, powerful truths.
Instead the question is whether something basic has changed in the direction of China’s evolution, and whether the United States needs to reconsider its China policy. For the more than 40 years since the historic Nixon-Mao meetings of the early 1970s, that policy has been surprisingly stable. From one administration to the next, it has been built on these same elements: ever greater engagement with China; steady encouragement of its modernization and growth; forthright disagreement where the two countries’ economic interests or political values clash; and a calculation that Cold War–style hostility would be far more damaging than the difficult, imperfect partnership the two countries have maintained. ... The China of 2016 is much more controlled and repressive than the China of five years ago, or even 10. ... Dealing with China is inescapable. It is becoming more difficult, and might get harder still. ... the assumption was that year by year, the distance between practices in China and those in other developed countries would shrink, and China would become easier rather than harder to deal with.
While the United States may be outperforming other advanced economies, it is underperforming relative to its own potential. Slower growth has been feeding on itself in a vicious cycle of weak demand, low investment, and slowing productivity growth. In real terms, the median US household income is back at its level of two decades ago. Meanwhile, the vast majority of income gains have gone to households in the top quintile, which do not have the same propensity to spend. This in turn hobbles aggregate demand in the short term—and when businesses do not see the need to invest, it reinforces the cycle. US productivity growth recently turned negative for the first time in 30 years. ... A new briefing paper from the McKinsey Global Institute, The US economy: An agenda for inclusive growth, suggests that the United States can regain its dynamism and restore the sense that everyone is advancing together. This effort can take many forms: reengaging more workers in the labor force, enabling them to move to more productive jobs and locations, creating an environment that fosters new business formation and healthy competition, and helping declining cities reinvent themselves. When the economy is firing on all cylinders, income gains tend to be more broad-based and less easily concentrated.
- Globalization and trade
- America’s cities
- A resource revolution
It was in an earlier work, 1759’s The Theory of Moral Sentiments, that Smith put his finger on the social and psychological impulses that push people to accumulate objects and gadgets. People, he observed, were stuffing their pockets with “little conveniences,” and then buying coats with more pockets to carry even more. By themselves, tweezer cases, elaborate snuff boxes, and other “baubles” might not have much use. But, Smith pointed out, what mattered was that people looked at them as “means of happiness." It was in people’s imagination that these objects became part of a harmonious system and made the pleasures of wealth “grand and beautiful and noble." ... This moral assessment was a giant step towards a more sophisticated understanding of consumption, for it challenged the dominant negative mindset that went back to the ancients. ... Rather than being passive, the consumer is now celebrated for actively adding value and meaning to media and products. ... there have been many prophecies and headlines that predict “peak stuff” and the end of consumerism. ... Such forecasts sound nice but they fail to stand up to the evidence. After all, a lot of consumption in the past was also driven by experiences, such as the delights of pleasure gardens, bazaars, and amusement parks. In the world economy today, services might be growing faster than goods, but that does not mean the number of containers is declining—far from it.
In the industries where there’s rapid productivity growth, everybody is freaked out, because what are people going to do after everything gets automated? In the other part of the economy, that second part, health care and education, people are freaked out about, "Oh my God, it’s going to eat the entire budget! It’s going to eat my personal budget. Health care and education is going to be every dollar I make as income, and it’s going to eat the national budget and drive the United States bankrupt!" And everybody in the economy is going to become either a nurse or teacher. It’s really funny, both sides of the economy get polar opposite emotional reactions. ... We are very much not present, in what we would consider to be a healthy way, in education, health care, construction, childcare, senior care. The great twist on that is that second category — that’s most of the GDP. Most of the spending is most of the GDP, and these are the areas where we have not yet been able to crack the code. ... How audacious or insane is it to think that you could bring tech to health care or education? It’s probably 50/50. ... What’s interesting is there are probably more new computer companies in the valley today than there were probably since 1982 — it’s just that the products are all these different shapes, sizes, and descriptions. ... Basically, the entire way we live today is a consequence of the invention of the automobile. Because, before that, people just never went anywhere. Therefore, everything that you travel to is a consequence of the automobile.
Imperial Viennese society could not survive. But the ideas and art brought forth during the fecund period of Viennese history from the late 1880s to the 1920s endured—from Loos’s modernist architecture to Gustav Klimt’s symbolist canvasses, from Schoenberg’s atonal music and Mahler’s Sturm und Drang to Ludwig Wittgenstein’s philosophy. Those Viennese who escaped Nazism went on to sustain the West during the cold war, and to restore the traditions of empiricism and liberal democracy. ... This ferment was part of a generational revolution that swept Europe at the end of the 19th century, from Berlin to London. But the Viennese rebellion was more intense, and more wide-ranging. And it provoked a more extreme reaction. Hitler arrived in Vienna from the Austrian provinces in 1908 and developed his theories of race and power there. Vienna was thus the cradle of modernism and fascism, liberalism and totalitarianism: the currents that have shaped much of Western thought and politics since Vienna itself started to implode in 1916 until the present day. It has been the Viennese century. ... Amid a babble of peoples and languages—one in which, as elsewhere at the time, gender roles were being redefined—Viennese thinking was driven by an urge to find universal forms of communication. ... Often the Viennese intellectuals leapt ahead by transferring knowledge gained in one discipline to others, gloriously indifferent to the mind-forged manacles that have come to stifle modern academia and research. ... Von Mises and Hayek, one of his students, saw earlier than most that by the interwar years the liberal era in Europe was being overwhelmed by the collectivism and totalitarianism of the right and the left. They subsequently devoted their lives to reversing the tide. ... The Viennese school placed the lived experience of individuals—rather than the abstractions of class, race and nationalism favoured by their opponents—at the heart of their intellectual enterprises.