Sunday, November 23, 2008

Governance, rulesets, and 21st century politics

Since this year's election loss there has been a lot of thinking by Republicans about why they lost and what they can do to correct their situation. Most of this thinking has been focused on retooling and updated campaign strategy and techniques. But this is not where Republicans have a problem. Republicans have not had a problem over the past 28 years winning elections and winning the White House and Congress. The problem has been with governance, that once they win elections they don't govern as conservatives. People can point their fingers at the Republican establishment, and corrupt, cynical, and hypocritical politicians, and not without cause. But it misses something very important which is that given the current organization of government it is just not possible to govern as a conservative or a libertarian. And here's why: Let's say the Libertarian Party actually got one of its candidates into the White House. Would he be able to govern as a libertarian? No. Presidents don't have the power to eliminate departments and reduce budgets he can't just go in an do anything he wants to do. A libertarian sitting the Oval Office would still have to find people to run the National Endowment for the Arts, HHS, the Social Security Administration, the Department of Labor and so on. His administration would have to formulate policy for running these organizations. He would be a libertarian running a New Deal/Great Society government.

It comes down to this: Ideological Hegemony --> Rulesets --> Governance. Let's go backwards with that. You can't govern as a conservative (or libertarian or whatever) because government operates by the New Deal/Great Society rulesets; and you can't change the rulesets unless you achieve ideological hegemony. A political movement that organizes itself around winning elections may indeed win elections but fail to actually govern in a way compatible with its ideology. Therefore, a political movement that wants to govern according to its ideology should develop its strategy towards achieving ideological hegemony rather than winning elections. Achieve ideological hegemony then you can initiate a ruleset reset and then governance will be aligned with your ideas regardless of whether the individual or party in office is an adherent of those ideas.

In the half century prior to the New Deal there was an open competition among a variety of ideas over what the rulesets would be for an industrializing America. That competition came to an end in the 1930s. An industrial age managerial liberalism achieved hegemony and instituted rulesets that would govern America for the next seven decades. In the 1950s conservatism emerged as an insurgent political movement that would temper many of the excesses and flaws of the New Deal/Great Society liberalism, but would never achieve ideological hegemony or initiate a ruleset reset. In the past 28 years Americans have shown that they prefer their New Deal/Great Society rulesets governed with a conservative sensibility, but they have no interest in replacing them with conservative rulesets.

So where does that put us now? As we transition out of the industrial age, the New Deal/Great Society liberalism vs. conservatism competition becomes irrelevant. After all what's the point of fighting over industrial age rulesets when we are transitioning into an information-service-entrepreneurial age? The period we are entering will be akin to that prior to the New Deal, it will be an open competition to determine which rulesets will govern the new era. In participating in that competition we need to focus our efforts toward winning ideological hegemony rather than winning elections. There will still be liberals and conservatives clinging to their industrial age ideologies and competition, but they will be like those in the Pentagon who are still trapped in the Cold War paradigm and don't get that the situation we are in is completely different.

We don't know what the new rulesets will be or what ideology will be invented to make sense of 21st century realities. The types of mental skills that we need are rooted around an eagerness and enthusiasm for open-ended imagining. A tolerance for uncertainty. A willingness to walk away from the conventional wisdom and seek out new ways of thinking and interpreting. We need to embrace the improvisational spirit of the jazz musician, the frontiersman, the entrepreneur. We also need to stop fighting the old fights and channel our energies and resources into the new competitions that really matter. The results of those competitions will determine how government and society will be organized over the next century.

Thursday, November 20, 2008

"More Americans own their own companies than belong to trade unions"

An entrepreneurial age requires an Entrepreneurial Deal:

The New Deal was introduced into a world of giant organisations—of big businesses and big trade unions that were capable of striking deals with big government. But today’s economy is much more fluid. America’s most successful companies are entrepreneurial outfits like Apple and Google, which thrive on flexibility; even giant companies such as General Electric are breaking themselves up into entrepreneurial divisions. More Americans own their own companies (15%) than belong to trade unions (12%).

via The Economist

So what will be the long-term political implications of this economic transformation? How do we need to reform our government so that it can function appropriately in the new age? How do we persuade people that their long-held beliefs are outdated and irrelevant to our current realities?

Wednesday, November 19, 2008

Obama's Grand Strategy

So how will a President Obama approach grand strategy? It's too soon to say, of course, but we might be able to get a glimpse of what is to come. The Small Wars Journal links to a story about Obama tapping several people from the Center for a New American Security to serve on his transition team. In the summer I was googling around looking for interesting papers on grand strategy. Many of the papers and articles I found were by several center-left thinkers who I suspect are going to have an influence on Obama's grand strategy (Michele Flournoy, Shawn Brimley, Anne-Marie Slaughter, John Ikenberry) Below are links to those posts with excerpts from various papers. Several of the papers were part of CNAS's Solarium Project and are no longer available online [UPDATE:Available online (PDF) here], but they have been collected into a book which you can buy at Amazon: Finding Our Way: Debating American Grand Strategy At the bottom are direct links to three papers on grand strategy (pdf). Hopefully these posts and papers will give some insight into what we can expect from an Obama national security strategy:

On Michele Flournoy and the Solarium Project

Grand Strategy as Liberal Order Building

Four Basic Options for Grand Strategy

Key Tenets of American Grand Strategy

An Interesting Grand Strategy Discussion...

You have to embrace the complexity

American power did not destabilize world order; it helped create it

Three papers:

Strategic Leadership: Framework for a 21st Century National Security Strategy

Forging a World of Liberty Under Law: US National Security Strategy in the 21st Century

An Agenda for Liberal International Renewal

Finding Our Way: Debating American Grand Strategy

Sunday, November 16, 2008

"Building the next economy and a new republic"

Richard Florida offers his take on our era of transformation and what it will take to build a new system for a 21st century America.

Today is much more like the mid-19th century and the time of Lincoln - the rise of a wholly new economic system and the large-scale class divides it produced. It is very difficult to even imagine the broad infrastructure or system architecture required to propel this emergent system of idea-driven, creative capitalism.

One thing is for certain: The old era will have to give way before the new era can take shape. The rise of industrial capitalism required a revolution in agricultural productivity and the mass shrinkage of farm-based employment. Remember Herbert Hoover’s mantra - “a chicken in every pot and a car in every garage.” Food had to become cheap to free up consumption and demand for cars and industrial products. The revolution in agriculture freed up capital and labor that could be redeployed in then expanding industrial economy.  The rise of single-family home ownership and the auto-oriented suburb then closed the consumption circuit of Fordism.

Building the next economy and a new republic will require a similarly fundamental transformation of the core sectors of Fordism. This is more than creating new technology and building a new green infrastructure. We will need to massively shrink the cost for consumption of houses and cars.

The new system will be unable to emerge if people are spending the overwhelming amount of their incomes on housing (mortgages plus maintenance, utilities, taxes) and auto-expenses. To do so, we will need to make the housing system much more flexible, massively increase the productivity and efficiency of housing production (I’ll be writing more on this soon), and enable people to become far less dependent on cars. Only this kind of massive shift in the underlying architecture of society will free up sufficient income and demand for the next new things and enable us to begin to build the new infrastructure which can set innovation and economic growth on a new trajectory. Who in the Obama administration is even thinking along these lines?

The clock of history is always ticking. Eventually, the place or places that can set in motion this shift will accure first-mover advantages similar to those that the U.S. gained in the late 19th and 20th centuries. Can this happen in the U.S.? Can Obama help catalyze this broad shift, or are we still too early in the historical process? What about entrenched U.S. interests - the insitutional rigidities the late Mancur Olson wrote about - can they be overcome and recast? Washington remains locked in a conversation which entails propping up the Fordist economy - a housing finance bailout, an auto bailout, a homewner bailout - when instead what is needed is to free up capital from these sectors and massively redeploy it into others. And if not the U.S., where and when might this happen? How long will it take?

Friday, November 14, 2008

Higher Ed-preneurship

All of our institutions are being challenged today by changing circumstances and will need to creatively adapt or die out. GM is the archetypal industrial age institution and it is failing because for whatever reasons its management and unions will not adapt to the new environent. Our system of higher education is in the same boat. We take the way colleges are organized and the way higher education is delivered for granted, but it is a recent development of the past 50-60 years. We need to think creatively about what it means to be educated in our time and how to train people for economic success. This is really a great opportunity for creative thinking. It may seem disrupting to some people, but these times only come now and again and we should be grateful that we live in an era that offers us the opportunity to invent the next era's institutions.

Like so many of our great industries and social sectors, higher education has grown huge, bureaucratic, and in many cases bloated (think 24-hour coffee shops in dorms). The ongoing trends of globalization, technology, and innovation continue to pressure societies and economies and America’s world leading system of higher education is going to have to respond just like other great institutions. There will not be enough ‘bailout’ money for everyone getting in line.

The campus as a vibrant market has always been one of the reasons that campus entrepreneurs exist. As our system of higher education undergoes these massive transformations, entrepreneurs of all sorts will push the change with new models, services, and firms. The best will reap incredible rewards.

"Entrepreneurs will lead us out of this mess"

I'm glad to see this being said, although it is not in itself remarkable, in fact it should be a no brainer. But what is remarkable is where it is posted: HuffPo. Getting Democrats to recognize that while an active government may be appropriate in some circumstances, it will be the entrepreneurs who create the way out of the current situation, and so it is essential to have policies implemented to foster entrepreneurship--and to avoid policies that stifle entrepreneurship. Mark Cuban:

Its great to see President-elect Obama aggressively taking on the economy prior to his taking office. Unfortunately, the economic advisory team that he has put together looks more like a semester's worth of great guest speakers for an MBA class than an economic advisory team that can truly help him.
There are a lot of great minds on the list:
Robert Rubin, Larry Summers, Laura Tyson, who served as Clinton's top economic adviser; former Fed Vice Chairman Roger Ferguson; Time Warner Inc. Chairman Richard Parsons; former Securities and Exchange Commission chairman William Donaldson and Xerox Corp. Chief Executive Officer Anne Mulcahy.

Google Inc. CEO Eric Schmidt, Michigan Governor Jennifer Granholm and Roel Campos, an ex-SEC commissioner, and Warren Buffett are also on the advisory board.

Notice anything missing?
Not a single entrepreneur. Yes Warren Buffett started a business, but he will be the first to tell you that he "doesn't do start ups". Which means there isn't a single person advising PE Obama that we know of that knows what it's like to start and run a business in this or any economic climate.That's a huge problem.
If we are going to solve our current economic problems, our president needs to get first hand information on the impact his proposed policies will have on real Joe the Plumbers. People who are 1-person companies living job to job, hoping they get paid on time. We need to know what the impact of his policies will be on the individually owned Chrysler Dealership in Iowa. The bodega in Manhattan. The mobile phone software startup out of Carnegie Mellon. The event planner in Dallas. The barbershop in L.A. The restaurant in Boston.
Entrepreneurs that start and run small businesses will be the propellant in this economy. PE Obama needs to have the counsel of those who will take the real risk inherent in creating companies and jobs. Those who put their money and lives on the line with their business.
PE Obama, I'm always available to help, but my recommendation would be to randomly go through the new incorporation filings and ask for volunteers to give feedback. Ask the people who are actually starting new businesses what they need.
Entrepreneurs will lead us out of this mess. Talk to them.

Tuesday, November 11, 2008

"It's a state of mind, and they don't get it"

Innovations in technology, organizational models, and logistics will at some point inevitably be applied to government, changing how government is organized, how it operates and its role within society. The big government that we got in the 20th century was the inevitable result of the application of the innovations in technology, organizational models and logistics of industrialization. This was going to happen regardless of the outcome of the ideological competition that was taking place between the Civil War and WW2. The ideological competition determined the specific form the application of these innovations would take and the rulesets that would govern them, not whether they would be applied. Today we are again in an era where a variety of innovations have been emerging that will inevitably be applied to government:

Mayor Newsom was first the raise the issue of governing in this new era. He said that the Internet and social networks, create "a connection that is more useful." But, "most politicians are not there yet. It's a state of mind, and they don't get it. It's not about old or young, it's a new kind of politics."

But the panel seemed very hopeful that a citizenry connected over the Internet could help the government function. Newsom said, "Government can't solve our problems exclusively." The panel discussed using the Web for not just fund raising but to encourage citizen involvement in thorny issues, such as health care reform.

The ideological competition is about the larger vision that guides the application of the innovations, about the various conceptions of society, government, and the citizen that are in play. Updating classical liberal ideas for the 21st century means understanding the variety of changes that are taking place and crafting a vision and conceptual framework that can appeal to people in our time, embody our aspirations, guide the application of these innovations, and inform practical governance. This is the role that the New Deal/Great Society liberalism has been playing for decades. The conservative movement was never able to replace that version of liberalism, rather it served as an opposition movement that was successful in implementing various reforms. But time has moved on and both those ideologies are outdated relics of another era: most politicians are not there yet. It's a state of mind, and they don't get it.

Sunday, November 2, 2008

A Few Good Books

The General's War: The Inside Story of the Conflict in the Gulf by Michael Gordon and Bernard Trainor

I read this book in the summer and could not put it down. A great account of the higher level decision-making in the Gulf War. Two things stood out for me while reading this: the extent to which the ghost of Vietnam influenced decisions and the chaotic nature of the planning.

The Birth of Plenty: How the Prosperity of the Modern World was Created by William Bernstein

I read this a few years ago. This book is an excellent exploration of a subject that I'm very much interested in: the transition from the pre-modern world to modernity and the development of mass prosperity.

The Conservative Intellectual Movement in America by George Nash

I'm working my way through this book now and it is excellent. Anyone interested in politics and American history needs to read this book.

The Cattle Towns: A Social History of the Kansas Cattle Trading Centers Abilene, Ellsworth, Wichita, Dodge City and Caldwell, 1867-1885 by Robert Dykstra

What fascinates me here is that these classic Wild West towns were entrepreneurial ventures. With cattle being brought up from Texas and the railroads moving west, the town builders were trying to find profitable locations to bring the two together and foster commerce.

Free Soil, Free Labor, Free Men: The Ideology of the Republican Party before the Civil War by Eric Foner

An excellent account of the different factions that formed the Republican Party in the 1850s and the ideas that motivated them. I'm particularly intrigued by the Free Labor ideology which seems to be an 1850s version of an entrepreneurial liberalism. Unfortunately only one chapter is devoted to it. I would like to find a more extensive study of the Free Labor ideology.

Starting a business, changing the world

One of the key tactics in the effort to disseminate ideas is to associate your ideas with something that people find appealing or that happens to be in vogue at the moment. Social entrepreneurship has been coming into vogue over the past several years. The idea of creating a for-profit enterprise for the purpose of solving a problem or meeting a need in society is catching on as a legitimate career path. This is exactly the kind of thing that proponents of market/civil society solutions to social problems should be getting into and championing. And yet whenever I read an article on social entrepreneurship it invariably is being pursued from a leftish perspective. Where are the classical liberals? Probably wasting time discussing the minutia of the economic theory of how the market can solve problems instead of actually creating the businesses that will solve these problems in the real world. Social entrepreneurship combines entrepreneurship with activism and is the perfect vehicle for championing the ideals of an entrepreneurial liberalism.

"I think many in my generation have lived their entire adult lives with a feeling of helplessness to change the world around them," says David R. Anderson, 25, founder of San Francisco-based Green Options Media, a network of sustainability blogs, and Renewzle, a lead-generation service for clean-energy installers. "The decreasing barriers to starting a business, especially online, have opened up a new world of social change, while at the same time providing an escape from the drudgery of a boring, corporate or otherwise ineffectual job."
Lara Galinsky, vice president of strategy at Echoing Green, a seed funding organization for social entrepreneurs, points to the prevalence of social entrepreneurship programs at colleges (Each of the top 10 business schools in the U.S. has at least one faculty member teaching the subject.) media attention, and philanthropic business leaders like Bill Gates and Pierre Omidyar.
"Because of their tremendous wealth and exciting philanthropic strategies, they've helped social entrepreneurship take the fast road," Galinsky says.
"The concept has gotten traction because of the popularity and knowledge about entrepreneurship in general, coupled with a growing interest among young people and others to make a real difference in the world," says Elizabeth Gatewood, Ph.D., director of the Office of Entrepreneurship and Liberal Arts at Wake Forest University in Winston-Salem, N.C. "People are more globally focused, have a growing concern about the environment and sustainability, and realize that there is more to life and finding satisfaction than just making money."
Echoing Green has provided seed grants and technical support to more than 450 social entrepreneurs over the past 20 years. Most of the organizations have been nonprofits, but "this year, we've definitely seen a surge of just straight for-profit, socially focused companies," Galinsky says. "That's a really interesting trend." She says that four of the 20 grants provided in 2008 will go to for-profits.
Galinsky says for-profit social entrepreneurs choose that structure because it makes the most sense for the business--not because they're trying to get rich.
"It's because it's a better model to realize their social mission. I would be hard-pressed to think they were doing it with the motivation of having high infusions of cash for themselves," Galinsky says.
They look at the laws where they're doing business, or if they're better positioned to receive investment dollars rather than philanthropic donations.
Anderson sees the for-profit model of social entrepreneurship as a mainstreaming effort--making "doing good" an everyday reality.
"I like to say it's a movement. It's not like this is a typical company or brand," Lewis says. "Everybody feels invested. We have retailers who feel like it's their product. Distributors feel like it's their product. Everyone takes ownership in it all the way down to the consumer, which is what I think makes it work."
"Making money is a necessity that often seems to get lost in companies with socially responsible missions, and I'd be lying if I said striking the balance between making money and creating a values-driven company culture was easy," Anderson says. "But it's not a zero-sum game. Just love what you do, don't be evil and focus on creating the conditions to carry out your company's mission in a sustainable manner. The rest will fall into place."

"If you have fire in the belly, you go to the U.S."

"The American entrepreneur has a passion for the market,” says Keith Blakely, founder and CEO of Nanodynamics, a pioneer in the revolutionary field of nanotechnology. While European fundamental research can sometimes be superior, American innovation is usually first to market. In the American vision, an idea is good only when the market buys it. Again, it’s a democratic view of the purpose of innovation. This explains the unique relationship in the United States between universities and business. In Western Europe, professors and entrepreneurs seldom talk to one another; in fact, to do so is often regarded as a breach of etiquette. In America, Nanodynamics uses university equipment, consults university professors, and shares its discoveries with universities.

Beyond the democratic principle, another engine is at work within these companies, one that existed on a much smaller scale in the early nineteenth century: what Harvard economist Joseph Schumpeter dubbed “creative destruction” in 1942. Schumpeter meant that the new constantly replaces the old and that the market reallocates resources accordingly. Nanodynamics has offices in a former Ford plant in Buffalo, in the heart of the Rust Belt: low-skill jobs have been replaced with high-skill, better-paying ones. In Yorktown Heights, IBM survived several waves of creative destruction and now prospers by following Schumpeter’s principle internally: the company has sold its personal-computer division to a Chinese firm and now focuses on customer service and developing sophisticated systems.

Finally, there is American cultural diversity (which was not a factor in Jacksonian or Tocquevillian America). Wherever you come from, if you have fire in the belly, you go to the U.S., says Ajay Royyuru, who left India and eventually became manager of IBM’s computational biology center. Does Suvankar Sengupta of Nanodynamics feel nostalgic about Bengal? “As a land of opportunities,” he says, “the U.S. remains unchallenged, while you are never criticized for taking risks. Moreover, when you are good at what you do, nobody in America asks you where you come from.”

“A German company is ahead of us in the market,” admits Caine Finnerty, the Nanodynamics fuel-cell expert and a former Englishman. “But we’ll eventually take over while we tackle the subject from all cultural angles with our cosmopolitan team.”

As Milton Friedman loved to say: only in America.

There are people with fire in the belly all over the world, in every country, culture, race, ethnicity and religion but whose culture and country may not value and encourage the drive and energy of the entrepreneur and innovator. America is a country founded and built by and for people with fire in the belly so it is not a surprise that the US is a destination for those whose entrepreneurial spirit cannot be fully actualized in their countries of origin. Our challenge is to craft a concept of what it means to be an American and a vision of the American Experiment that is upgraded for our 21st century realities that can inspire these immigrants who have the fire in the belly and their children and get them to buy in to this vision and identify with it. Conservatism is incapable of doing this. What we need is a fire in the belly ideology, an entrepreneurial liberalism to counter the collectivist left. If we do this then it will provide the cultural and political context within which the entrepreneurialism expressed in the quoted paragraphs above can thrive in a complex, adaptive, self-organizing society.