Browsing Tag: economics

    China Secretly Cancels Cameroon’s Debt | Belt and Road Infrastructure | China Uncensored
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    China Secretly Cancels Cameroon’s Debt | Belt and Road Infrastructure | China Uncensored

    September 2, 2019


    China has just forgiven a chunk of Cameroon’s
    debt. Normally, that’d be something to brag about. Except China kept it a secret. Why is China keeping quiet about writing off Cameroon’s debt? Welcome back to China Uncensored. I’m Chris Chappell. Debt relief. When a country lets another country off the hook for paying back loans. As in no more debt, what a relief. If only they did that for student loans. Specifically, *my* student loans. Usually when rich creditor countries forgive the debts of poorer countries, there’s a ton of publicity to highlight
    all that generosity. Like that time twenty years ago when Bono worked with world leaders to get them to forgive more than $100 million in loans to the poorest countries. “Take your time and get your head around
    this fact. The national debt of the 18 poorest countries
    in Africa has been canceled thanks to Bono.” The point is, everyone loves publicity. Which is why it’s weird that when China recently wrote off a chunk of debt of the West African nation of Cameroon… it was all super hush hush. And then reporters asked, “Why the secrecy?” In fact, the world might not have even known China forgave a chunk of Cameroon’s debt if not for a gaffe by the Chinese language
    edition of the Wall Street Journal. It reported— based on a statement from the president of
    Cameroon— that China had agreed to write off 5 billion dollars of Cameroon’s debt. Since that’s almost all of the debt that
    Cameroon has ever borrowed from China, that news report caused a bit of controversy
    online. Last September, Chinese leader Xi Jinping pledged some $60
    billion dollars in aid, investment and loans to Africa at the Forum
    on China-Africa Cooperation. That created some backlash, including netizens asking online why China was giving money away to nearly failed states
    in Africa, when in China there are at least 30 million
    people who live on less than a dollar a day. As you can imagine, those questions were then censored. Actually, it was at that meeting in September where Cameroon’s president Paul Biya pleaded with Chinese authorities to ease his
    country’s debt burden— according to Chinese media. But it turns out, when the Wall Street Journal said China forgave 5 billion dollars in debt, well…it was kind of not quite accurate. The actual amount was 78 million dollars. That’s a big difference. It’s like reporting that “The new tower is a tall as the Empire State
    Building!” When actually it’s only one story tall, with a low ceiling. Now, Chinese media had a field day with this, with the Global Times calling it a huge blunder
    for US media: And other Chinese media accusing foreign media of planting fake news for Chinese readers. But if it weren’t for the Wall Street Journal’s
    mistake, the world might never have known of China’s
    “generosity.” See, Cameroon still owes China about 3 billion
    dollars in total debt. So the 78 million in debt forgiveness is actually
    really small. So now it should be clear why China might have wanted to keep it a secret. It’s not really a PR win. I mean, 78 million is less than what one rock star with sunglasses can do. But there’s another reason the Chinese regime may have wanted to keep news of the debt relief
    under wraps. Reporters might start to suspect that the
    Chinese regime plans to use debt relief to get something
    in return. Remember the story of how “China got Sri Lanka to cough up a port”? China lent billions to Sri Lanka, no strings attached, and when they couldn’t pay it off, China asked for Hambantota port. And China got it. Sri Lanka was forced to sign a 99-year lease in exchange for waving off about a billion
    in debt. So I guess there were strings attached. Plus the deal gave China control of territory right near its arch-rival, India, as well as a strategic foothold along a critical commercial and military waterway. Unconditional debt forgiveness— that’s for suckers. Setting up a long-term lending relationship so that you can get something in return that gives you a geostrategic advantage, now that’s the kind of lending relationship the Chinese regime likes. Xi Jinping calls it “win-win mutual cooperation.” I like to call it, “debt trap diplomacy.” For more on that, you can watch my episode “5 Countries That Have Fallen into China’s
    Debt Trap” for all the sordid details of how China leverages debt to get what it wants. Wow, I forgot there was a time when I didn’t have a beard. Anyway, why would the Chinese regime care about Cameroon? Well, for one: mineral resources. Like bauxite, iron ore, and gold. And don’t worry, Chinese gold mining operations there are totally legit and have no problems
    whatsoever. Ok, a few minor problems. But look, there’s another reason China cares
    about Cameroon. Let’s go back to that map. Cameroon sits along the Gulf of Guinea. And that’s a good place to be when doing
    trade with a dozen other countries, like Nigeria. So it should come as no surprise that China has invested 1.2 billion dollars to convert a fishing town called Kribi into the region’s biggest deep-water port. “Made up of four main parts, a deep water port with roughly 20 wharfs, a zone for industrial and logistics activity, a multi-modal transport corridor, a new city.” And Cameroon’s Kribi port is connected to a pipeline project to bring in oil from land-locked Chad. There’s also a 436 million dollar highway
    China is funding there. It ties the port with Cameroon’s resource-rich
    inland area. And there are also plans to build a railroad directly to a deposit of iron ore. And those iron mines will definitely not have
    problems. So far it doesn’t look like Cameroon has had to directly give up any of its infrastructure
    or resources for the 78 million dollars in debt forgiveness. But the Chinese Communist Party’s overall
    actions in Cameroon are clearly the same strategy it has used
    around the world: Make generous loans, get countries in debt, and forgive the debt in exchange for small
    things— like all of their resources, or strategic
    infrastructure. Win-win mutual cooperation. Which means that China-Cameroon relations should be something to keep an eye on. And before we go, it’s time for me to answer a question from one of you who supports China
    Uncensored by contributing a dollar or more though the crowdfunding website Patreon. David Schwimmer asks: “Happy Valentines Day! It seems like the recent love that Putin and
    Xi have shared, particularly in Eastern Europe and Venezuela, could be undermined by recent NBC media exposure, what do you all think OF THIS! Ah, I see you’re referring to this um, “map” from season one of NBC’s Unbreakable
    Kimmy Schmidt. There are…several…problems with this map. Among them, China has taken over all of Russia. Plus Eastern Europe, the Middle East, and
    Asia. But don’t worry, Xi and Putin can’t be
    torn apart that easily. From holding joint press conferences, to cooking delicious Chinese pancakes, to cooking delicious Russian pancakes, to putting friendship medals on each other, it is the relationship between China in Russia that is truly unbreakable. Thanks for your question, David. And as always, I hope all our supporters on Patreon will continue to leave thoughtful, interesting
    questions within each Patreon post, so I can answer them on the show. Visit Patreon.com/ChinaUncensored to see what you can do to support this show. You guys keep the lights on here at China
    Uncensored. Once again, I’m Chris Chappell. See you next time.

    Articles

    Robert Reich: Why We Need to Break Up Big Tech

    September 2, 2019


    The combined wealth of Facebook’s Mark Zuckerberg, Amazon’s Jeff Bezos, and Google’s Sergey Brin, and Larry Page is larger than the combined wealth of the bottom half of the American population. They’re the leaders of a second Gilded Age
    – ushered in by semiconductors, software, and the internet – which has spawned a handful
    of high-tech behemoths and crushed competition. Facebook, Amazon, Google, Apple, and Microsoft
    now have the highest market values of all public corporations in America. As of today, only three countries in the world
    have a GDP higher than these companies’ combined market value of approximately $4 trillion. America’s first Gilded Age began in the
    late 19th century, with a raft of innovations – railroads, steel production, oil extraction
    – that culminated in mammoth trusts run by “robber barons” like J.P. Morgan, John
    D. Rockefeller, and William Vanderbilt. The answer then was to break up the railroad,
    oil, and steel monopolies. The answer today is the same: Break Up Big
    Tech. FIRST: They have a stranglehold on the economy. Nearly 90% of all internet searches
    now go through Google. Facebook and Google together will account
    for nearly 60% of all digital ad spending in 2019 (where most ad money goes these days). They’re also the first stops for many Americans
    seeking news (93% of Americans say they receive at least some news online). Amazon is now the first stop for almost half of all American consumers seeking to buy anything online. With such size comes the power to stifle innovation. Google uses its search engine to promote its
    own products and content over those of its competitors, like Yelp. Facebook’s purchases of WhatsApp and Instagram
    killed off two potential rivals. Apple stifles competition in its App Store. Partly because of this economic concentration,
    the rate that new job-creating businesses have formed in the United States has almost halved since 2004, according to the Census Bureau. SECOND: Such size also gives these giant corporations
    political power to get whatever they want, undermining our democracy. In 2018, Google, Amazon, Facebook, Apple,
    and Microsoft spent $70.9 million on lobbying and supporting candidates. Amazon – the richest corporation in America
    – paid nothing in federal taxes last year. Meanwhile, it held a bidding war to extort billions from states and cities eager to have its second headquarters. Not to mention, these companies have tremendous
    influence over how Americans receive information. And as we’ve seen, Facebook and Google have
    enabled the manipulation of our elections. THIRD: Giant tech companies also hurt the
    environment. Many are failing to reduce greenhouse emissions,
    as they promised and are unwilling to commit fully to renewable energy. FINALLY: Their huge wealth isn’t being shared
    with most of their workers. Nine in 10 workers in Silicon Valley make
    less now than they did in 1997, adjusted for inflation. And many are part of the “working homeless”– that is, people who work full-time and yet are still homeless. The answer is to break them up. That way, information would be distributed
    through a large number of independent channels, instead of a centralized platform, and more startups could flourish. Even one of Facebook’s founders has called
    for the social media behemoth to be broken up. Senator Elizabeth Warren has introduced a
    proposal to do just that. It would force tech giants to open up their
    platforms to more competition or break up into smaller companies. Other countries are already taking on Big
    Tech. The European Union fined Google nearly $3 billion
    for antitrust violations in 2017. Let’s be clear: Monopolies aren’t good
    for anyone except for the monopolists, especially when they can influence our elections and
    control how Americans receive information. In this new Gilded Age, we need to respond to them as forcefully as we did to the monopolies of the first Gilded Age and break them up. What do you think? Should we break up big tech? Let us know in the comments. If you found this video informative, be sure to also watch our video on the monopolization of America. And, as always, be sure to subscribe to this
    channel for more videos like this one.

    🔴 What’s Wrong with Capitalism – Part Two | Real Vision Classics
    Articles, Blog

    🔴 What’s Wrong with Capitalism – Part Two | Real Vision Classics

    August 30, 2019


    When you talk about the sort of the changes that could come through You actually say that regulation is actually a barrier. So it’s not achieve regulation It’s it’s other means to try and break these down But first if we just go into regulation and antitrust and all these things in the same way that too much Competition leads to a single winner potentially which is seen to be bad too much regulation can go the other way I think in the 1960s it went to the extreme where small companies couldn’t merge How did you find that optimal level where you get sufficient? Let’s call it regulation antitrust legislation That just kept the wing so you don’t have too much competition because in very what happens we go too far that way We go too far that way we’re just caught in this never-ending Swing so one of the things that I talk about in the book is the analogy of chemotherapy there was a regulation is chemotherapy and If you think of chemotherapy People generally think that it just attacks cancer. Whereas in that it’s a selectively toxic. I Spoke to a friend of mine who is a one of the world cancer Specialists and the MD Anderson clinic one of the best clinics in the world and I asked him to sort of you know walk me through chemotherapy and you know, he pointed out that it’s actually much more interesting than Chemotherapy exclusively attacking cancers Basically, what happens is you and I have stopped growing so our cells all the energy that we have is dedicated to cell repair Cancers cancerous cells essentially are have been genetically programmed in a way to only grow that’s what they do They’re sort of like startups right like they’re in growth mode and they don’t really use their energy to repair themselves They just use it to grow. And so what chemotherapy does is it essentially attacks healthy and unhealthy cells but the healthy cells can repair themselves and the unhealthy cells when they start to replicate and divide they do so with damaged DNA and Then they they die And so if you think of regulation what it does is it’s essentially attacking large companies and small companies in terms of imposing compliance burdens Accounting and tax burdens the big companies those they stopped growing They’ve got loads of energy to spend and money to spend on compliance tax and so on Startup stone and so there’s quite a lot of studies that I cite in the book showing the the more highly regulated Sector generally the more concentrated it is and that’s one reason why the US healthcare system for example is highly concentrated in many areas Because it’s much more highly regulated the alcohol sector for example is very regulated, you know Due to sort of prohibition and post prohibition the idea that you want to make sure people aren’t getting drunk and killing themselves Driving or is the restaurant sector it’s not so you have two companies with ninety percent market share and alcohol But you it’s inconceivable that McDonald’s or Burger King could ever get to 90 percent of the restaurant market, right? And so regulation often does lead to more concentration and and it’s because it wrecks Regulatory barriers and if you think of banking for 70 years you had the glass-steagall Act. It was 35 pages Very simple, very clear principles and that worked very well Once dodd-frank came in it was 2,200 pages with a thousand pages more Delegated to rule writing committees and there have been almost no new banks that have been created since dodd-frank was passed. And so Extensive regulation essentially is tends to favor incumbents. And so I think that Increasing competition is not just about antitrust. It’s actually about having principles-based regulation more sensible regulation That favors competition and has clear principles based rules rather than extensive rule. So That I think is one of the things that I’m sure like the the left will love the argument of you know break up the big companies in the book and and the Right way some people on the right will hate that and then I think people on the Left will hate my deregulation arguments you know and No one’s gonna be happy reading the book But but I hope though that it makes people think of the problem in a more nuanced way with the the companies themselves there’s always a sort of talk and you’ve seen it in the tech sector where the tech giant’s they buy up the competition and Half the time they buy them up and then they just let them die within their own behemoth cells and so this is sort of but there’s this thought that if you get the regulation It’s going to be really bad for the tech companies But but it’s standard all that when you actually split it up the sum of the parts. The individuals was much more valuable so as it Rockefeller became richer yes not poorer effectively when so if people along all these monopolies They should just stay long because when they get broken up and they get the individual bits, but they actually be better off Where do you think there’s gonna be a big downward pressure on the market? So Ansel comes in so there’s quite a lot of research that’s been done on And generally they tend to outperform the parents I think when Greenblatt wrote that book, unfortunately, then it’s not the trend came to an end, but people started spinning off What are known as like garbage barges, you know? So you take your terrible division and spin it off? but generally spin offs have done better historically and part of that is that they can develop and so for example I was in San Francisco speaking to a friend of mine who works at Google and he was saying look unless product reaches a billion people Google has no interest and so because of that often you have companies that have like you know need massive addressable markets or they You know Google does search ads if you’re not in the ad business like forget about it right and What you find out is many of these smaller companies essentially or innovative activities within larger companies are not pursued or followed or developed because they don’t fit that central mission of the company and so Standard Oil similar 18t when it’s broken up the world and many of the parts ended up becoming worth far more And and you ended up with innovation in telecommunications so I think breaking up some of the large monopolies today would in fact be very good and would Improve competition significantly and you would probably see a lot more startups and Google itself There’s a website you can find Called Google cemetery and it has an extensive list of all the companies that Google is essentially either shut down or ended some of them Were internally generated others were bought in But that’s what tends to happen with large companies often that buy smaller companies I was seeing this death of competition in a way or reduced competition because of this as you mentioned earlier we’ve had a significant reduction in the number of listed shares since some ways would you argue and it seems that the growth of Passive investing in this of dying off of active investing is partly explained by this and actually passive investing in some way There’s a logical response to this reduction in available shares But then passive investing itself perpetuates the benefits for these large corporates because all capsule is going to them Directly indirectly. So is that is that fair to say that passive investing is the core most illogical result of this process? So the asset management industry itself has also become a highly-concentrated So if you’re looking at you know, whether it’s Blackrock State Street, what you’ve seen is some of its passive, you know They’re not taking an active role but you’ve ended up with very few people having all the assets this is pretty bad because in the old, you know, if they were let’s say for Probably there more than four airlines But eight airlines you would own an airline and you would want your airline to do well and to gain market share you didn’t want A competitor to get a dollar, right? Because that was not your dollar you wanted to capture that dollar in the market The problem happens is when you get Essentially what’s known as horizontal shareholdings where you know in the old days JP Morgan would own five railroads They might have different names, but they were all ultimately JP Morgan’s railroads, right? And so he didn’t care you know, he didn’t want a competition because you know he wanted to make sure that you know each dollar that the sure that the railroads had was ultimately his and what happens with the Current horizontal shareholdings is essentially it reduces the impetus for competition So buff it rather than buy one airline when they all merged bought them all right, and the clear message was he did not want all the airlines competing against each other right and and therefore We know when he owns one. The dollar of earnings for the other airline is also very good And he doesn’t want to any way compete for that dollar He’s happy to let them have their local hub and that’s the problem that we see right now, which is that if you look at the you know, Major banks and you look at many sectors the top ten shareholders are the same across all competitors, right? It’s not like you have boards that are actually pushing for companies to expand or take market share or invest So in the old days this is called Organizing where you’d have one main guy or own lots of companies now essentially you could argue that Blackrock State Street and others in Berkshire Hathaway have essentially Morgan Eyes de merica and within that as well when you see this, it may be a An oligopoly maybe four or five companies Although they don’t ring each other up and fix prices. There is a sort of sense almost by osmosis There will be a price leader. So prices are fixed, even though they’re not physically discussing it So once you get to a certain level is it that that the pricing power is there? even if there’s not the illegal actual physical verbal agreements Yes, so in chapter 2 in the book I go into quite a lot of detail that there’s there been Hundreds of cases of prosecution for collusion. This is you know where I would call you up and we would secretly agree You know what, you know, the price of widgets should be next year but what actually happens much more often essentially that there’s tacit collusion meaning that the the industry has Relatively few players and that’s the key. So the Oligopoly a problem. Is that once you get very few players? you end up in these repeated games where it makes sense not to compete with your competitor and And then what generally happens you have one firm? That might be the biggest they then become the price leader and no one tries to take market share, right? So you they hike prices and it’s not like the rest of them keep price is the same and try to capture some market share everyone immediately hikes prices in lockstep And if you look at for example the the market for insulin, you know It’s uncanny over the last decade basically have two companies moving prices in lockstep You know down to the day Over a long period of time but this happens in many different industries and so the the move to oligopoly the oligopoly problem itself creates essentially tacit collusion where Airline CEOs can go on the conference calls and say you know what? We don’t plan on expanding more than one percent this year, right and what they’re really doing is telling their competitors Look, we’re not going to go after you will market share. This is what we’re doing just to let you know And it really goes back to I point out the minimax theory that john von neumann Articulated which essentially is people. Don’t try to maximize their maximum gain. They try to minimize their maximum loss right and the analogy is of a mother with two kids gives them one piece of cake and says you know to one child you cut the cake and the other one chooses it right like You’re not cutting it to get the biggest piece. You’re trying to make sure that you don’t end up with the smallest one and you mentioned that regulation is an issue lobbying is an issue a share buybacks part of this problem of a Part of a problem creating the problem of another symptom so many people think that share buybacks are the problem itself. I Argue that in the book my career and I re that the share buybacks essentially are a symptom. They’re not the disease The question is why do what a company has have so much cash, why are corporate profit margins so high? And in the book I go through many of the studies why you end up with higher profits and more concentrated industries But the whether you paid out dividends or share buybacks, you know It’s just a financial engineering question. The buybacks essentially are the symptoms not the cause and if you did have More competition you would have more mean reverting profit margins. You’d have lower profit margins in many industries. You wouldn’t have these sort of abnormal Monopoly profits and therefore you wouldn’t end up with the extreme share buybacks and obviously if you have little competition you also end up with less investment and you know It’s sort of covered in other parts of the book But you know when you when you’re not investing and you sit on that cash you have to do something with it Neither you’ll dividend it or do share buybacks. So it’s the symptom not the disease And when you look at the sort of the histories Let’s see going back to the 1800 the robber barons and then the Sherman Act 1890 and so on you had this little bit decline into this what you might call the golden period of antitrust, and then that died in 1982 in that golden period Walking at you point in that period that says look he was better then Because again if I’m an investor and I’m concentrated investor I pori be a bit worried about going back to that period I’m the first antitrust laws really only focused on trade unions So there’s he’s sort of this period where you know, was it good. Was it better? Can we actually sort of say look he was better for these reasons? So good companies tend to do well and almost any environment I mean one of the reasons why stocks did poorly in the 70s I don’t think had anything to do with antitrust and had much more to do with high inflation You know that is it a killer for stock markets So I know people would say well the 70s were bad for stock the stock market therefore We can’t go back to that. You know, I think it’s very misguided view but if you’re looking at the overall economy the 60s and 70s were certainly a much more equal society in terms of looking at sort of labor share of GDP And you also had higher Real economic growth and you had higher productivity growth which has basically been on the decline And so I think that when you’re looking at some of the more macro outcomes those were certainly better in the 1960s and 70s Well 50s 60s and 70s and so those are the things that I would point to and you know, the the problem is basically once the Merger guidelines were changed in the 80s And then you had an also an explosion of patents essentially in the 1980s and 90s and then it’s continued and gotten even worse You you essentially have more and more parts of the economy or essentially Monopolies created by patents and copyright and you have essentially increasing concentration And so it’s no surprise that you know pick ADIZ book was as well received as it was because he was pointing out This is leading to essentially a much higher level of inequality but good stocks tend to do. Well, you know no matter what You know, it’s the the problem the 70s was really inflation in terms of the the actual sectors We mentioned a few you talk about the funeral sector you talked about tech in particular, which is obviously their headline but within the US Which of the industries which have really really kind of should be in the spotlight? and also there’s this difference between a lot of people look at this and say well that’s not a monopoly but you make the very Clear distinction that local monopolies do exist So you might have the four or five railroad companies which yes an oligopoly but actually lots of local monopolies So which are the ones in which the industry is in the US which have really been at this game for the longest I go Through the book monopolies do appellees and oligopolies And as you pointed out you have things that may appear competitive but actually are local monopolies So for example, like aggregates, you know or waste management, you know Generally, like if you have a contract for waste management for a town, you know There’s only one company doing it or if you have a local Aggregates pit and a cement those aren’t big transported for and you have a local monopoly a likewise Funeral Homes For example, I point out that people don’t generally shop for for funerals for obvious reasons They’re in great distress. And generally the body is going to be taken care of relatively close to the hospital and so within that you’d have essentially a local monopoly first for funerals and so service corporation, for example you know has their funerals are about 30 percent higher than independent operators, and they have actually local monopolies many parts of the US, but Hospital mark, it’s 90 percent of US hospital markets in this urban hospital markets are highly concentrated So you generally don’t have almost any competition when it comes to going to a hospital, right? And then I point out that in the book as well that if you’re looking at drug scores, right? You essentially have a duopoly Between CVS Walgreens right and if you look at a drug wholesalers There’s three drug wholesalers right there three former benefit managers So the US healthcare system is among the worst and I certainly hope that you end up with more competition the local insurance markets They basically are highly concentrated almost all our duopoly in terms of its the state level and so these are the ones I think that should be most ripe for a reformed they’re obviously vast powers of lobbying allied against it, but the insurance markets, for example have their their state a little fiefdom built through the mccarran-ferguson act and I think would take quite a lot to change that but The book goes through many many of these that you wouldn’t might not have even considered as Monopolies and I certainly hope they get broken up and changed. There was the five areas which you identified as being problems productivity She was startups your jobs lower investment Less diversity wages and inequality but what do you see as the solutions that how what are the things that we’re going to see that really changes that and and These things often take place over five to ten years the big changes that we see but how we gonna get them sooner in a meaningful way, I Don’t think that antitrust itself will solve all these problems But I certainly think that it it can contribute to an improvement and I think that antitrust is broken But I think that the loss of competition also is broader and encompasses regulations So in the last chapter the book I point out that you know, a few solutions are one of preventing future mergers, you know We shouldn’t allow industries to get down to three and two, you know Or even one player. So we have to make sure that we’re not allowing for more concentration There are many mergers that have happened that have reduced competition Those should be broken up, you know and and reversed many come to mind. Like for example Google buying double-click, right? That’s not one that should have ever been allowed or Facebook buying Instagram and whatsapp, but you could go into many other Industries, so you have breaking up past mergers, but then on the regulation side I think what we have to do is to regulate more intelligently, and so I think that for example Dodd-frank itself should be reformed and made simpler. I Do like many of the ideas behind it? You know, we should have lower levels of leverage We know we make sure that banks are safer but all this could be done in a much simpler way that you know does not create an instrumental barriers to entry and so Regulation is also a part. I think for example if you’re looking at some of the large tech platforms Interoperability, right and what when people can port their phone numbers, you know in many countries suddenly Prices started falling in telecoms, right? So allowing the customer to be locked in is another key issue So I think that it’s not just antitrust, but when you think very broadly about how do you restore competition? I think you know on the medical side Patents should not be endlessly extended through, you know reformulation of drugs They go into that and the book and so it’s a it’s a wide array of potential solutions But all of which I think would make everyone better off Obviously, they’ll be fought because people who are currently gouging consumers and enjoying these set profits are not going to want it lawyers probably in the most to gain out of this but another group that Has probably been Behind a lot of the Meuse that have created the unwanted competition is economists Particularly Chicago School, you mentioned Bork and you say that capitalism is too important to be left to economists Why is it that economists we then end up sort of being on the wrong side of this versus what sort of feels much more? Natural and kind of correct in the marketplace. So I think many economists are actually doing a wonderful job of highlighting these problems so there’s like loads of new studies coming out and it’s a very Sort of it’s a it’s a growth area to look into the promise of concentration When I say that, it’s too important to be left to the economists I think part of it is that the antitrust laws were written by Congress and were meant to be Implemented to you know to pursue the way we wanted markets in the economy to run What’s ended up happening is essentially that all these decisions on who should merge and who should not merge? These are now in the hands of bureaucrats essentially in terms of the FTC working in close collaboration with economists Right who have a vested interest in making sure that mergers get through and as you know talked about earlier Most of the merger models and simulations in terms of these price savings they’re going to happen or total bullshit and so when I say that should be allowed to the economists is ultimately the the Acts were meant to reduce concentration to avoid monopolies and effectively what’s happen is we sort of out sourced mergers to people going through the revolving door or the K Street law firms in the economist like Charles rivers dissociating compass Lexecon and others so I don’t think the problem is all economists But certainly when you end up with a very small group of people who stand to benefit greatly, you know They’ll defend their area and they want all the sort of non specialists stay out And so the irony is that you know, the the book was endorsed by Mike Spence is a Nobel Prize winner or Angus Deaton. Who’s a Nobel Prize winner Kenneth Rogoff, right? So the economists outside of the antitrust world see that there’s a very clear problem People within the antitrust world who you know are looking for what Nassim Taleb calls the retrospective bribe, right? They want to get hired by, you know, the compass and Charles River work, you know K Street law firms. They think everything’s fine, right? With the with the sort of us and you’ve been talking specifically about the u.s Firstly is this only a u.s. Male or is it global is a global issues it in the UK xored in Europe Is it in Australia and secondly? Is it likely that the US is going to break up? it’s it’s kind of monopolist because If you look at it from a kind of global perspective the US had done pretty well over the last ten years The US equity market and yes, it’s been concentrated But again, it goes back to if you come came in from the outside world And you saw as you go the US looks great, but Napoles look great because the US has outperformed almost everywhere so isn’t a good thing in some ways and Will the US authorities really want to break what looks like a relatively good system or do you need other regions to say? Hey, you know, this is a problem. So one of the reasons that I focused on the US was the u.s In a way is the the leader and the most advanced right? So for the u.s First created antitrust and exported it to the rest of the world and then the u.s Essentially had the counter-revolution and exported that to the rest of the world. So I think that whatever battle is happening in the u.s That’s going to end up playing out elsewhere the u.s Certainly is the most advanced in terms of going down. The consolidation route Europe is less consolidated in many ways than the u.s Is some emerging markets are highly concentrated and they also interestingly tend to be the most unequal in in terms of Gini coefficients. So like Chilles known as the Chicago experiment essentially where a lot of the University Chicago people went down and advised Pinochet Right, so they have very high industry concentration and extremely high inequality So when you look around the world you often do find these very interesting relationships Some countries like Australia are highly oligopolistic and monopolistic and it’s not surprising also that you end up with sort of higher degrees of profitability in some of the sectors and very large transfers of wealth from people who are outside the sector to the sector and the financial industry in particular, you know due to the the four banks, so That’s you know, one of the problems other countries like Canada Australia, which are very oligopolistic often have higher tax rates And so they don’t deal with they don’t have antitrust to increase competition what they’re doing is saying, okay You can pay people very very well in these industries We’re just gonna tax you at a pretty high rate, but my view is you know Rather than go for the very high tax route. Which Piketty argues this let’s create Let’s increase competition to make sure that you don’t have like some very fat Monopolies or dois police and so it does go go around the world the u.s Just happens to be sort of the farthest along and what is the perfect? environment do you think we’re where this kind of really works because it still goes back to put regulation or antitrust laws in place and we clip that top end of Competition, but how what what are the features that you envisage would be? Perfect competition. We know what perfect competition should look like, but real world perfect competition. How’d you get it? So I I’m not precise. I’m not in favor of a perfect competition, which is also like another textbook extreme, right? I’m very much in favor of you know, people who come up with great ideas get patents they can then you know have Very high profitability for a period I’m not against that at all if you happen to create a new market You should enjoy that, you know Until you get competitors, you know and that creates essentially monopoly type profits until competitors emerge I don’t have a problem with that. My problem is essentially with mergers that reduce competition materially so taking out competitors from the market, but what’s interesting in the book I talk about You know earlier chatting about prices going up There’s a lot of work that’s been done by John Koch at Northeastern University showing that when you get below six players in an industry you end up with price increases and a pricing power and so I Argue that we shouldn’t allow for mergers and industries below six players right now If you want to increase your market share by being better go for it You know try to become number one and you know, take everyone else’s market share But we shouldn’t have mergers between players and under six industries. Sorry six players per industry. So that that is what I wear I think you know you can draw the line in terms of mergers But it doesn’t mean that you couldn’t have one company dominating an industry if they’re doing it through best service The problem is what when I talk to people almost no one can point to industries like well They have a monopoly because they’re just the very best, right? Generally what happens is companies merge, even in the case of Google and Facebook The reason they have a duopoly in the ad market is due to purchases of direct competitors Do you have a view code? Does this have any impact on princes the bond market? Because it feels like over the last 20 years 30 years when this has been in place or if in fact have been seeing that sort of eating away at potential economic growth in order to fuel excess profits So the long equity long bond trade which has worked kind of pretty well over the last thirty years We’re just coming in for a little bit of a little bit of us a tricky patch now But if this doesn’t get broken up, does that suggest that bond yields should actually stay relatively so much you’re not saying they stay down but Relatively subdued so I’m not certain how this plays out in terms of the level of bond yields, but what’s certainly interesting? Is that the real rate of interest has an enormous impact on? Collusion, you know between market players and the ability of companies to buy each other So when debts cheap in a company a can buy Company B And so you’ve ended up with merger waves so merger waves tend to happen during bubbles people can use their stock is acquisition currency It also happens when rates are relatively low and people companies can then borrow money cheaply to buy competitors So those are two things driving merger waves and then also when real rates are low It means that the payoff period can be longer in terms of collusion When real rates are very high companies generally don’t want to clewd because you need a very high initial payoff you know to make that clusion work and so that’s the Very interesting thing. I have a chart in there on global Real rates which of course have been very low which encourages collusion, you know and allows companies to borrow to buy each other So I think to the extent that you end up with higher bond yields higher rates going forward that would Make it more difficult for companies to merge and would be a damper on on the collusion ask You’ve shown that from your own work The concentration of industries outperforms the broad index and I think it was strata gas You did the lobbyists index where those companies Lobby the most outperforms the broad index Until we see any major changes in this structure Would you recommend basically still be the wrong concentration and long the lobbyist as an investor? Would you still kind of take and you’re almost I want to be immoral here and sure in more grameen and continue with those concentrate? I think you’d have to do it on a selective basis I think there’s certainly unfortunately what we’ve seen in the last couple years is that sort of growth forces value stocks or high quality versus low quality stocks and reached extremes and you know as we’re seeing this year a lot of the tech stocks are getting beaten up people are waking up to the fact that Facebook might be broken up. Certainly. There’s a move in Congress to do that and also what you’re finding out is that you all totally can kill the goose that lays the golden eggs and Some of the pharma companies have discovered this where you know, like for example Valiant you can hike prices You know quite a lot when you have a monopoly, right? They have some chain patents on a particular drug or a monopoly on that drug Ultimately, though there’s a backlash and ultimately you can only take that so far and so I think that investors need to think very hard About what you know, what is the source of that? Sort of dominance that they’re getting is it natural. Is it unnatural and and are they? Essentially going to raise the ire of regulators or not and at the end of the book you talk about ways that we can Try and make a difference. I mean a small ways between a from a corn you get the oak tree What are the things that you think can be done? So this shift rather than going on the street to our pickaxes and our sides and all the rest of it You think there are a few things that we can do everyone can do slowly but surely to sort of just start chipping away what are those things so in some cases the consumer has no choice when it comes to like high-speed Internet in the US or you know when it comes to Insurance markets, but there are many places in the US economy where you can decide every day. It’s an election You can decide where you spend your money. I I would recommend that investors and consumers Back David’s versus Goliath, you know that you can decide we know where you spend your money That’s a choice that you can make every day in terms of search. For example, I personally use DuckDuckGo I have no interest in the surveillance capitalism of Google and Facebook, you know which basically appear free but you’re handing over very valuable person betta so there there are alternatives to you know, some of the Programs and companies that essentially are built on surveillance of the user and obviously you know people need to get politically active and let their congressman and Representatives know that this is something that they care about and I think they already are coming to that view and I think that we’re gonna hear a lot more from Congress on this bring the men to My where do you think? How long from now what’s your what’s your time frame? What you think it’s gonna all happen what and so you know if you think of World War two, for example There was the Battle of Midway was essentially the turning point, right and that was, you know, very early on in the war Essentially, but but once once that had happened it was quite clear that Japanese it couldn’t win in the Pacific and then the question was What kind of loss were they going to take and I think that if you look at antitrust right now all the money is stacked on one side of the table and you know, but I think the it’s extremely popular to Get some reform and if you’re looking at the pop culture or you look at John Oliver is running segments on antitrust, you know The show Netflix Patriot Act. Basically that pop culture is moving and ultimately the regulators and Congressmen are gonna want to get ahead and pretend that they’re leading the parade rather than be run out of town It’s the great thing is what you’re saying is that capitalism is good capitalism works It’s become a bit grotesque, but it will probably self correct rather than implode. So therefore it’s actually quite an optimistic outlook We’ve got yes the u.s in the past in other countries there been moments where things have been extreme and you’ve had People like Teddy Roosevelt and I certainly think that we’re going to see more of that, you know, we receive a reform, you know Rather than a revolution Jonathan thank you very much indeed. Well, thank you. Thank you

    Money & Debt: Crash Course World History 202
    Articles, Blog

    Money & Debt: Crash Course World History 202

    August 29, 2019


    Hi, I’m John Green. This is Crash Course World
    History and today we’re going to make it rain. We’re going to talk about money, the stuff
    that makes the world go ’round. I’m not very good at making it rain. MFTP: Mr. Green! Mr. Green. I’m sorry, but
    money doesn’t make the world go round. It’s actually conservation of angular momentum.
    It’s the same thing that allows, like, figure skaters to turn in circles. John: Look, me from the past. I know you came
    in fourth for physics, among all “C” students in the entire state of Alabama in the 1994
    state academic decathlon tournament, but that doesn’t actually make you good at science. [Intro] So, here is what economic textbooks say about
    money. In general it has three functions: medium of exchange, unit of account, and store
    of value. And its first function is by far the most important. Like, this is a quote from my actual, physical
    high school econ text book: “In primitive economies, food might be traded for clothing,
    or help in building a house might be exchanged for help in clearing a field. But exchange
    today in all economies — market as well as command — takes place through the medium
    of money.” A couple things about that quote, first off,
    primitive is a cringe-y word. Secondly, a market economy is basically all economies
    these days, and a command economy is what we called the Soviet Union’s economy back
    in the eighties. Anyway, money is very important to history–like,
    our old friend Adam Smith thought that, quote: “property money and markets not only existed
    before political institutions, but were the very foundation of human society.” Ehh, he
    was pretty into economies, so he was probably a little biased toward money, but it is important. Smith also thought that before there was money,
    there was barter, but barter could be cumbersome; like if I make cheese and you make shoes,
    and you’re lactose intolerant, then barter breaks down because I need shoes, but you
    don’t need cheese. Then I have to live like a hobbit and get this very powerful ring,
    it’s like, really stressful, I end up having to go to Mordor, it’s just very complicated. So, Smith’s ideas that rather than adapt to
    shoelessness, humans created a commodity that they would agree upon ahead of time could
    be used in exchange, and that commodity is money. Yes, these are all ones. Stan, I forgot to mention this, but you are
    buying lunch today. Now, we generally think of money as like coins,
    or later, bills, but the material of money is arbitrary. Smith wrote: “In all countries,
    however, men seem at last to have been determined by irresistible reasons to give the preference,
    for this employment, to metals above all other commodity.” A sentence that shows you why
    we didn’t teach him in Crash Course Literature. But of course, it’s really inconvenient to
    like, weigh and measure metals every time you wanna buy or sell something, so people
    hit upon the idea of making coins with a standard size and weight. Now, Smith is probably right
    that coins are much more convenient than bartering, right? Like, especially if the main store
    of value in your community is something like cattle. I mean, let’s say you still need a
    pair of shoes, well, they aren’t worth an entire cow; trading in partial cows… fairly
    messy. It’s also very bad for the cow’s health, and the cow loses a lot of its value, because,
    you know, it’s no longer living. So that all makes sense, but it’s problematic
    when Smith universalizes that observation by claiming that as a matter of convenience,
    every prudent man in every period of society must naturally have endeavored to create money. Smith — man of the enlightenment that he
    was — is positing that the creation of money is part of human nature. Like, in the second
    chapter of Wealth of Nations, Smith explicitly says that the division of labour is the, quote:
    “consequence of a certain propensity in human nature … to truck, barter, and exchange
    one thing for another.” But yet, no! Like, what made sense for eighteenth
    century city and town dwellers like Adam Smith doesn’t necessarily apply to like, all human
    beings over the course of many millennia. And if you don’t believe me, you can just
    ask anthropologists. They love to talk about this stuff. So, here’s the fascinating thing to me: when
    you look at places where the social order is not based on money, we find that people
    actually don’t barter at all. So David Graeber’s book “Debt: The First 5,000 Years” surveys
    the literature of anthropology and discovers that in societies without money, people don’t
    actually barter, but they do find ways to exchange. He quotes an anthropologist named
    Caroline Humphrey, who concluded: “No example of a barter economy, pure and simple, has
    ever been described, let alone the emergence from it of money; all available ethnography
    suggests that there has never been such a thing.” Now, that’s not to say that barter doesn’t
    exist or that it never has, I mean, I just traded Stan two copies of my book Paper Towns
    for the candy left in this pinata. Big money, no whammies. Two things of Sweet Tarts?! Stan!
    That’s not fair. Alright, let’s go to the Thought Bubble. So, according to Graeber, barter was reserved
    for trade between strangers, even enemies. For most of human history, humans lived in
    small communities, and in those small communities, most exchange took place using forms of credit.
    Basically, when people know each other well, they’re willing to trade with the future expectation
    that what one gives today will be repaid at some future date with something of roughly
    equivalent value. So in small, localized communities, everyone is in debt to everyone else, and
    there’s no real need of physical money, like coins, as a way of keeping a count, because,
    you know, you remember when someone owes you forty barrels of beer, or whatever. We see this historically in the early civilizations
    of the Fertile Crescent, where the basic monetary unit was the shekel, and one shekel’s weight
    in silver was the equivalent of a bushel of barley. Money in Ancient Sumer was actually
    created by bureaucrats in order to keep track of resources and move things back and forth
    between departments. But that doesn’t mean that silver actually circulated freely. Graeber
    writes: “While debts were calculated in silver, they didn’t have to be paid in silver.” So while some people seem to think that money
    is naturally backed by precious metals, usually gold or silver, that doesn’t seem to have
    been the case. It was enough to establish that something was worth a shekel or a fraction
    thereof, and then trade for something of equivalent value — meat, or whatever else, without actually
    having to have the shekels change hands. And this was especially helpful in economies
    where taxes and payments to workers were both in grain, rather than money. Thanks, Thought Bubble. So, first, Graeber
    blows our minds by telling us that Adam Smith was all wrong about money evolving from barter
    societies, but what about credit as the precursor to money? I mean, it’s basically saying that credit
    cards aren’t an advancement so much as they’re a return to the glorious past, except instead
    of trust, there are like, large, faceless corporations with the power to sue you. So the essence of credit is debt, and at least
    according to Graeber, that’s the glue that holds social orders together, at least, if
    you consider debt at its heart, to be about obligation. At least one of the things that
    binds us together as a community is the recognition that we owe our neighbors something and that
    they owe something to us in return. It’s like keeping your lawn mowed so that you can keep
    your neighbor’s property value high. It doesn’t make sense to have a lawn — they’re expensive
    and time consuming, and you can’t eat grass. But you take care of your lawn for the same
    reason your neighbors take care of theirs. Out of the sense of mutual obligation. But money changes our understanding of those
    obligations, right? Because once we’re able to put a price on our obligations, we can
    make them transferable, which wouldn’t be possible without money. Like, for instance,
    it allows you to hire someone to mow your lawn for you, but Graeber argues that money,
    especially in the form of coinage, also may chattel slavery, possibly. So in West African social orders before the
    arrival of Europeans, money was used, but only for weddings, funerals, and other activities
    that like, cemented human relationships. And the money largely had symbolic value. But
    when Europeans arrived, they introduced monetized trade into the system, and in the process,
    transformed that system. Money was no longer about transferring value to solidify relationships
    between individuals and families; it was about quantifying debt and also making it transferable. So, Graeber’s theory links money as we know
    it to slavery and war, like, coins began to be used in India, China, and the soon to be
    Persian province of Lydia, almost simultaneously, all around 600 BCE. And in Graeber’s view,
    this happened because this was a period of time that saw a shift from earlier forms of
    honor-based warfare, like, what is described in the Iliad, to a new, more state-based warfare. Armies started fighting over things like territory
    and resources, rather than, like, kidnapped wives. So in a– oh, it’s time for the open
    letter! But first, let’s see what’s inside my globe
    today. Oh, look, it’s a molten core of nickel and iron! Can–can you turn into coins? Oh!
    Stan! Look how rich I am! Virtually. Thought Bubble’s clearly much better at making
    it rain than I am. An open letter to honou-based warfare. Dear Honor-Based Warfare, um, I guess now
    is the time in the video that I have to tell you that I don’t entirely agree with Mr. Graeber.
    Like, with the Iliad we were telling ourselves a story about why we went to war, right? We
    went to war not for resources, but for glory. Honor. Now, I don’t want to sound cynical
    and disbelieving, but we still tell ourselves those stories. These days, the President rarely
    goes on TV and says, “You know why we’re going to go to war? We need resources.” No, we still
    say it’s about honor and ideas and standing up for the defenseless, and et cetera, which
    is all about as historically convincing as the Iliad. In short, honor-based warfare,
    I’m not entirely convinced that you, you know, exist. Best wishes, John Green. Anyway, so in all three of these governments
    in India, China, and Lydia, they were pretty small scale, especially compared to the empires
    that would soon come, but they built their power on professional armies that needed to
    be paid, and coins were a great way to pay them. It just works much better than like,
    trying to split up the plunder among everybody. The plundering method of payment is just like
    a garage sale. The people who get there early get all the good plunder, and then the rest
    of the people, they’re just left dividing up, you know, old clothes. Also, in Graeber’s view, states began to encourage
    the use of coins because of the uncertainty of war — like, violence creates uncertainty
    for merchants, and decreases the likelihood that they will accept payment in the form
    of some kind of trust-based credit arrangement. And soldiers aren’t known for accepting credit
    as payment, either, because, you know, soldiers are keenly aware that they might die soon.
    So, according to Graeber, this combination of war and state-building led to the rise
    of coinage. And then in order to keep paying soldiers, rulers, like, say, Alexander the
    Great, needed to continue their conquests. So you need an army in order to have an empire,
    and your army only likes to be paid in coins. Now, you can seize some sweet, sweet metal
    plunder and then melt it down and make coins, but with an empire-sized army, that’s not
    gonna cut it. You need more silver. Where are you gonna get new silver? Mining. Nope,
    Stan, not miming, I said “mining”, don’t ever put mimes in Crash Course again. So now you need a steady supply of miners;
    fortunately, you’ve conquered a bunch of people, so you have lots of prisoners of war, and
    now you have slavery. This military-coinage slavery complex was
    described explicitly in the Arthashastra, a political guidebook written by Minister
    Kautilya for the Mauryan dynasty, that made it clear that coins and markets sprung up,
    above all, to feed the machinery of war. He wrote: “The treasury is based upon mining,
    the army upon the treasury; he who has the army and the treasury may conquer the earth.” And Graeber says that China followed a similar
    pattern: he writes, “The same fractured political landscape, the same rise of trained, professional
    armies, and the creation of coined money largely in order to pay them.” So, if money is a creation
    of the state and its military, then it follows that when the state fails, as it did in Europe
    after the fall of the Western Roman Empire, coinage largely disappears. And that’s exactly
    what happened, actually, but of course, that doesn’t mean that transactions failed to take
    place or that trade completely disappears, but it did decline a lot. And in situations
    like that, people often revert to the virtual credit systems that we talked about earlier:
    the ones that rely more on personal connections than on like, state enforcement. So Adam Smith’s origin myth of money — that
    it derives from people’s natural desire to make barter more convenient through the creation
    of a medium of exchange — really doesn’t hold up to scrutiny. I mean, there are clearly
    examples of an alternate history where production and exchange work okay without actual coins
    or bills changing hands. It’s kind of like today, actually — money works as long as
    there is some form of trust and a way to make people meet their obligations. People used
    to feel obligated because failure to meet their obligations would hurt their standing
    in their small, localized communities, and now we meet our obligations because otherwise,
    like, people take our houses or whatever. But while we have evidence that money, as
    we conceive of it today, isn’t necessary for exchange, it IS necessary, or, at least, very
    useful, for states, and I think states are probably good. Oh, maybe not, I’m not positive. I just like
    the internet so much; I don’t think we would have the internet without states. So I wanna be clear that I don’t entirely
    buy Graeber’s version of history. I might be wrong, of course, but I’m not convinced
    that coins necessarily lead to slavery. And I don’t think that ancient slavery is really
    comparable to the chattel slavery that we saw in the Americas. But I do think that it’s
    important to look at alternative points of view when it comes to history, even when you
    don’t agree with them. It’s helpful to understand that there’s more than one well-argued point
    of view in the world. And I do think Graeber very effectively challenges the idea that
    human beings are like natural, rational, economic actors who wouldn’t be possible without money.
    And in the face of overwhelming anthropological evidence, at least this much is true: money
    is not the product of human nature; it’s the product of human actions, like the formation
    of governments and markets. In short, and I know this will disappoint
    some of the economics majors out there: ultimately, I think my mom was right. We aren’t made of
    money. Thanks for watching, I’ll see you next week. Crash Course is made with the help of all
    of these nice people. I didn’t want to do the credits without my globe. And it exists
    because of your support through Subbable.com. Subbable is a voluntary subscription service
    that allows you to support Crash Course directly. We want to thank all of our Subbable subscribers;
    thanks to everyone for watching. As we say in my hometown, don’t forget to be awesome.

    Why Trains are so Expensive
    Articles, Blog

    Why Trains are so Expensive

    August 27, 2019


    This is a Wendover Productions video made
    possible by Videoblocks. Get an exclusive 7 day free trial of Videoblocks
    with up to 140 free stock footage clips for your videos by using the link videoblocks.com/future. Before I start, I want to quickly mention
    that I started a podcast with Brian from Real Engineering called “Showmakers.” In the very first episode which is out now
    we chat with none other than Hank Green. I’d really appreciate if you give it a try
    and the link is down in the description. Trains are expensive. So expensive, in fact, that on three of the
    most travelled routes in three countries—New York to Washington in the US, Edinburgh to
    London in the UK, and Paris to Lyon in France—they’re pretty much the same price as the plane. These routes start at $49, £30, and €30
    respectively on the train and $52, £13, and €53 on the plane. On a longer route like New York to Chicago,
    the difference is even more pronounced: $59 for the plane, $108 for the train. And that’s keeping in mind that trains are
    subsidized or government run in almost every country while airlines are highly profitable
    commercial enterprises. The planes flying between DC and New York
    are $49 million dollar machines, while the trains traveling the route cost no more than
    $10 million total. The plane has to burn 1.7 gallons of fuel
    per mile flown (3.9 liters per km) while the train relies on cheap, clean electric power. All this therefore begs the question, why
    are trains so expensive? Now, I mentioned that fares between DC and
    New York start at $49, but that’s far from the average price—$73. Let’s look at the expenses that go into
    that fare. The single largest expense for Amtrak is staffing. Trains require a lot of people to operate. 85,000 passengers journey on Amtrak daily,
    but for that Amtrak employs 20,000 people meaning that, daily, Amtrak requires one employee
    for every four passengers. On top of that, the majority of those working
    for Amtrak are highly specialized, unionized workers who demand high salaries. Amtrak’s financial reports tell us that
    they spend $105,000 per employee, but that’s not to say that everyone at Amtrak is making
    six figures. Taxes and benefits typically cost an employer
    30-40% of a salary so the actual average salary for an Amtrak employee is around $75,000. These salary costs are so high that they account
    for over a third of the ticket price between DC and New York—$25.82 total. The cost of employees is so high for train
    operators largely because trains are so slow. For a flight from DC to New York, an airline
    would only have to pay employees for an hour of work while Amtrak has to pay their employees
    for three and a half hours of work. The difference is even more striking on long-haul
    routes—Chicago to Los Angeles for example. An airline would have to pay for four hours
    of work, while Amtrak pays for 44 hours of work. In addition, trains have physical infrastructure
    to maintain along the journey—the rails. Airlines also have infrastructure to pay for
    on each end—the airports—but between those they just use the sky, which is free. Amtrak only owns 730 miles of the 21,000 miles
    of track they use, but they still indirectly pay for the employees who maintain those 20,000
    miles of rented track through the fees charged by the track owners for their use. The next largest cost for train operators
    is that of the trains themselves. Trains aren’t that expensive compared to
    airplanes, but they still cost millions of dollars. The locomotive pulling the train from DC to
    New York costs $6.5 million dollars and then each one of the passenger cars costs an additional
    $400,000. With a seven car train, that works out to
    $9.4 million dollars which accounts for $9.67 on this particular ticket. The other part of infrastructure—rails—costs
    Amtrak an additional $3.66 on this ticket. Railroad tracks are extraordinarily expensive
    to build—typically more than $1 million per mile—but on routes like DC to New York,
    they’re just used so much that the per train or per ticket cost is negligible. Amtrak is a business, so it also needs to
    pay to run the business. $2.15 of this ticket goes to administrative
    costs, and then another $1.31 to advertising. Moving on, trains are extremely safe compared
    to cars, but you’re still more than 3 times as likely to be killed on or by a train than
    a plane. Trains do occasionally crash, and they also
    crash into people. When this happens, Amtrak often has to pay
    a settlement to the victims, and the fees associated with that account for $0.79 of
    the DC to New York ticket. That does mean that when traveling between
    DC and New York, in essence, you’re paying $0.79 in order for Amtrak to kill or injure
    people. Those were all the major costs to run a train,
    but there’s still another $5.91 on that ticket that just represents other minor costs. So the total expense for Amtrak to run that
    train is $50.14. The remaining $22.86 is pure profit. You see, the train from DC to New York, the
    Northeast Regional, is one of the few Amtrak routes to make a profit. The demand, speed, and frequency of the train
    helps it succeed financially where other routes failed. Per passenger per mile, Amtrak makes eight
    cents of profit on the northeast regional, the low speed train, and 29 cents per passenger
    mile on the Acela Express, the high-speed train. These profitable routes help pay for Amtrak’s
    unprofitable routes… and there are a lot of them. Some routes like the Sunset Limited between
    New Orleans and Los Angeles lose as many as 21.7 cents per passenger per mile, and when
    passengers can travel 2,000 miles on that route, that’s a lot of loss. As I mentioned, that $49 fare is not the average
    ticket price to travel between DC and New York. The $49 fare is the price at which Amtrak
    starts selling tickets, but as the date of travel nears, the price can increase to hundreds
    of dollars. That might seem like price gouging, but its
    actually a way to make sure everyone can afford a ticket. That’s not to say Amtrak and other train
    companies are these altruistic organizations trying to bring travel to the masses—it
    just makes more money. Especially with trains where it costs the
    operator roughly the same to transport 5 passengers as it does to transport 500, the operator
    always wants to have as many seats as possible filled, even if that means selling cheap tickets. In a perfect world for the operator, they
    could ask every potential passenger what the maximum amount they’d be willing to pay
    for a journey is. If they adapt the ticket price to every passengers
    maximum price then they can fill each seat with passengers paying the highest possible
    amount. However, in practice, nobody would ever answer
    the question truthfully so it would never work. Ticketing systems, however, try to ask this
    question subliminally. Going back to that route from Edinburgh to
    London, the operator, Virgin Trains East Coast, sells three types of tickets—advance, off-peak,
    and anytime. The advance tickets range anywhere from 30
    pounds to 140 pounds, the off-peak fares cost 137 pounds, and the anytime fares cost 148.50
    pounds. For the advance fares, there are a certain
    unknown number of tickets at different price levels on sale and once they’re gone, they’re
    gone. For example, there might be 15 tickets at
    30 pounds and once they’re sold, the price would increase to 35 pounds, then 40, 45,
    and so on a so forth. That encourages those who can buy early to
    buy early. Normally that means tourists. Tourists tend to plan far in advance and are
    more budget conscious since they’re paying their own costs. They’re also more likely to travel down
    to London on the often cheaper plane since they’re less attracted by the convenience
    of the train. These advance fares are only valid for the
    exact route, day, and time bought which is fine for leisure travelers, but business travelers
    typically want more flexibility. Buying advance fares often doesn’t work
    for business travelers since their plans are only made a few weeks or days in advance and,
    since they don’t personally pay for their tickets, its no problem for them to pay for
    the convenience of taking the train on a flexible ticket. That’s why they often pay £148.50 for an
    anytime ticket. With these, you can just hop on a train whenever—it
    doesn’t matter if its in 10 minute or 10 days. You just step on the train and take a seat. The middle ground between those two is the
    off-peak single which lets you take any train that arrives in London after 11:17 am or is
    on the weekend. These fares are still geared towards business
    travelers, but by restricting against the early morning trains they give a discount
    to those who can avoid the busiest morning trains.. For each of these fares there are equivalents
    in first class—the advance first fares range between 40 and 200 pounds, the off-peak fares
    are 185.50 pounds, and the anytime fares are 236.50 pounds. On top of that, young, disabled, and elderly
    people get up to 1/3 off their fares with a rail-card. This all means that there are essentially
    12 different types of tickets for sale and that one person heading to London might be
    paying 20 pounds while the person sitting right next to them is paying 200 but what
    they’re really paying for is convenience. Now, back in the US, if Amtrak only operated
    profitable lines, their route map would look like this, but the routes that don’t make
    money are the ones that really matter. Amtrak serves over 500 destinations in 46
    states—many of which are small towns with no other means of public transportation. While trains are normally the more expensive
    means of transport, they are less expensive than planes to service small communities. The small airports in the rural parts of America
    are extraordinarily expensive to operate. Even if there are just two or three flights
    a day, they still need a runway, terminal, security, and air traffic control while a
    rural train station needs barely any infrastructure or maintenance. In fact, it’s cheaper to fly from Chicago
    to London ($741) than it is to fly from Havre, Montana to Chicago ($811 May 17-22) whereas
    Amtrak brings passengers from Havre to Chicago for only a few hundred dollars—much more
    in budget for the average resident of Havre who makes only $22,000 per year. Of course this is a political issue, but a
    part of why trains are so expensive is to allow train operators to fulfill obligations
    to serve small communities who need solid transport links. Research has shown that ease of access to
    transport has a stronger influence on whether someone will earn more than their parents
    did than the level of crime in their area or whether they grew up in a two-parent household
    and so keeping trains running through rural America is incredibly important. Next time you take the train from DC to New
    York, just keep in mind that that $22.86 of profit goes to making sure that someone from
    Havre can get to Chicago for less than you can fly to Europe. So you see this number? That’s how much these last few seconds would
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    How Airlines Price Flights
    Articles, Blog

    How Airlines Price Flights

    August 27, 2019


    This video was made possible by Blue Apron. Get three free meals from Blue Apron by being
    one of the first 100 people to sign up at the link below. Airline ticket pricing probably seems like
    a crapshoot. The numbers change seemingly arbitrarily every
    week, day, or hour, but there’s some real science behind these prices. People spend their whole lives figuring out
    what to charge you to fly. Let’s take a look at one flight on one route
    by one airline to understand. American Flight 33 leaves New York’s JFK
    airport every day at 7 AM bound for Los Angeles arriving at 10:51 AM pacific time. This transcontinental route is one of the
    most competitive in the world with over 3.5 million yearly passengers and five major airlines
    connecting the country’s two largest cities. There’s nowhere where pricing strategies
    are more important for airlines than here. Looking at three months of fares for this
    flight, there are eight distinct prices for economy ranging from $129 to $472. These all get you on the exact same flight
    in the exact same seat but each and every price has a purpose and place. The lowest price, $129, is the most competitive
    price. This fare only shows up three times in our
    three month span—each time on Tuesdays. Now, Tuesdays are very often the cheapest
    days of the week to fly. Business travelers tend to make up much of
    the demand during the week and they most often want to fly out on Monday and return on Thursday
    or Friday so Mondays, Thursdays, and Fridays tend to be the most expensive travel days
    while Tuesdays and Wednesdays are often the cheapest. The average ticket price for this flight shows
    this—Tuesdays average $182 and Wednesdays $173. Even if the demand is lower American Airlines
    runs the flight anyways and they have to fill seats to break even so they sell the flight
    at rock-bottom prices. The next price, $144, actually demonstrates
    a very interesting phenomenon. Whenever American prices their flight at $144,
    they are not alone. Take March 6th for example. American, Delta, Virgin America, JetBlue,
    and United all have flights from New York to LA at around 7 in the morning selling for
    $144. They’re doing what is called price matching. Because this is one of the most competitive
    routes in the world and because the number one determinant for travelers on which airline
    they take is price, all five airlines flying this route match each others prices. This way, travelers make their decision based
    off the reputation of each airline rather than the price. The price stays at $144 because it’s in
    each airlines best interest to keep it there. In a normal market, if Delta, for example,
    dropped their price to $119 they would get more travelers since they were the cheapest,
    but in this price matched market all the other airlines would drop their prices as soon as
    Delta drops theirs so all of them would get the same amount of travelers as before while
    earning less money, but there are some cases where it can make business sense for airlines
    to drop prices to below even being profitable. Around the year 2000, WestJet and the now
    defunct CanJet airlines started flying from central Canada to Newfoundland. These routes were historically operated exclusively
    by Air Canada and they were expensive. A one-way flight from Montreal in 1999 cost
    over $600, but when the budget airlines WestJet and CanJet started flying the route, prices
    dropped dramatically and Air Canada was threatened, so they dropped their prices even lower. The $600 Air Canada fares then cost $89. Now, it wouldn’t make sense for anyone to
    fly a budget airline over Air Canada at the same price so WestJet and CanJet were almost
    driven out of business on these routes, until Canada’s Competition Bureau stepped in. They concluded that Air Canada was engaging
    in the uncompetitive action of predatory pricing since they were pricing flights below what
    it cost to operate them, so they were forced to stop. Airlines in the US, with some newly strong
    budget competitors, are engaging in similar actions nowadays. United airlines, for example, is matching
    Frontier’s $40 fares on many days from Denver to Chicago, among other routes, in order to
    maintain their market stronghold in Denver and Chicago even though their cost to operate
    the route is drastically higher than Frontier so they are almost certainly loosing money
    on those fares. But back to the New York to LA route. $159 is the lowest regular fare for this flight. The $129 and $144 price points were both basic
    economy fares—the most restrictive type with no seat selection, no carry on bags,
    and no changes or refunds. Every flight has a bunch of different booking
    classes each with a fare code. For example, the basic economy fare code for
    the $129 and $144 price is B, but the $159 price books into fare code N. These different
    booking classes are sometimes known are fare buckets. Essentially the airline decides it’s going
    to sell a certain number of tickets at the $159 price with fare code N, let’s say 10,
    then when those ten tickets are sold the airline then sells economy at fare code G for $204
    then when those are sold it sells economy at fare code V for $269 then fare code L for
    $318 and so on and so forth. There are also some cases where a ticket will
    default to a more expensive fare bucket because of reasons other than the lower fare selling
    out. Many fares, including each mentioned so far,
    have advance purchase requirements meaning that, even if a flight is not full at all,
    the price will increase closer to departure. All the fares below $204 have an advance purchase
    requirement of two weeks meaning that you can only purchase them more than two weeks
    before departure while the $269 fare, for example, has an advance purchase requirement
    of only one week. Although, the cheapest fare without an advance
    purchase requirement at all, that is, the cheapest fare that you could buy day-of for
    this flight is fare class K at $472 which happens to be the most expensive economy class
    fare. And now for some caveats. Not every fare for this flight is going to
    be priced at one of these eight prices. Airlines have mechanisms to adjust fares from
    these buckets. In the short-term, they can adjust things
    like the fuel surcharge to raise the price if other factors, like oil prices, increase. In the long term they can adjust the actual
    prices of the different fare buckets. Airline often increase the base fares for
    busy seasons like summer. American Airlines does exactly that on this
    New York to LA route where their fare class M, for example, increases from $357 to $410
    in August. But so far we’ve looked at this at a micro
    level—how prices differ on one flight—but we also have to consider the macro level. Why if you leave on Tuesday February 6th and
    fly 2,469 miles to the west to LA do you pay $129 while if you fly 3,442 miles to the east
    to London—only a thousand miles further than LA—you pay $2,772. Well, the second figure is a bit deceptive
    because that’s the price of a one-way ticket. If you switch the LA flight to a round-trip
    ticket returning a week later it will cost $257—exactly double—while if you turn
    the London flight into a round-trip returning a week later the price will drop to $602—almost
    five times less. This is understandably confusing—a one-way
    ticket that costs more than a roundtrip—but the reason this is goes back to the fare codes. Embedded within each fare code are a bunch
    of little restrictions that dictate when you can use that fare. On the New York to LA trip those restrictions
    are just things like blackout dates for the fare and advance purchase requirements, but
    the New York to London ticket has loads more restrictions and the ones that make one-ways
    more expensive than round-trips are the minimum stay requirements. These requirements dictate how soon your return
    flight can be in order to get a particular fare. The idea is to price discriminate—business
    travelers should pay more because they can pay more. Meanwhile, airlines try to give the lowest
    prices to leisure travelers since they’re the ones paying for their own tickets and
    therefore they’re the ones that are the most price sensitive. Business travelers often want to be home for
    the weekend, so many of these minimum stay requirements, like with fares Q, N, and S,
    just require a Sunday at your destination. Others, trying to accomplish the same thing,
    require seven days, a full week, which would also require a traveller to stay the weekend
    at their destination. Now as the prices go up the requirements go
    down so once you get to paying around $2000 you can stay for as few as three days, but
    the cheapest roundtrip base airfare with no stay requirement at all is $5,544 in fare
    class Y—exactly double the one way price. So that explains this—the one way ticket
    is so expensive because, since the airline doesn’t know how long the traveller will
    stay at their destination the one-way fare has to be booked into the least restrictive
    fare class without the minimum stay requirement. You’ll see this idea of price discrimination
    all over ticketing structures. It’s a genius pricing concept that allows
    different people to buy products at the prices they can afford and therefore its allows businesses
    to sell the same product to more people. Tickets increase in price closer to departure
    because leisure travelers buy tickets far-out and business travelers buy their tickets close
    to departure and flexible tickets are more expensive because that’s what business travelers
    need, but there’s another pricing difference going on that’s less fair—between routes. It’s all about competition. Different routes of the same distance cost
    different amounts generally not because they cost different amounts to operate, but because
    of how much the competitors are charging. This is part of why flights into small airports
    are so expensive—because they lack competition. You can fly the 240 miles from Detroit to
    Pellston, Michigan on a CRJ 200 for $242 or you can fly the 170 miles from Detroit to
    South Bend, Indiana on a CRJ 200 for $76. The only difference is that South Bend Airport
    has flights from United, Delta, and Allegiant while Pellston only has flights from Delta. The same phenomenon happens over the Atlantic. There’s more competition on the six hour
    flight from New York to LA than on the six hour flight from New York to Dublin so you
    can fly to LA for $250 round trip while Dublin costs $500 round trip. Of course, travelers from New York to LA can
    drive, take the bus, take the train, or take a flight connecting halfway there while travelers
    to Dublin only have one choice—to fly. In all, the truth is that prices reflect what
    people will pay and so people will pay what flights are priced. If you’re a busy person like me, you know
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    Articles

    The Third Industrial Revolution: A Radical New Sharing Economy

    August 24, 2019


    “The value of information does not survive the moment
    in which it was new. It lives only at that moment; it has to surrender to it
    completely and explain itself to it
    without losing any time.” “A story is different.
    It does not expend itself. It preserves and
    concentrates its strength and is capable of releasing it
    even after a long time.” — Walter Benjamin Vice Documentary Films
    IMPACT PRESENT THE THIRD INDUSTRIAL REVOLUTION A RADICAL NEW SHARING ECONOMY The global economy is in crisis. Economists warn that we face
    another 20 years of declining productivity,
    slow growth, steep unemployment and increasing inequality. The economic downturn is fueling
    growing discontent toward governing institutions and spawning
    extreme political movements around the world. And now, after 200 years
    of industrial activity, scientists report that
    climate change is ravaging the planet,
    taking us into the sixth mass extinction
    of life on Earth. Where do we go from here? Jeremy Rifkin is
    an economic and social theorist and the author of
    over 20 books including “The Zero Marginal Cast Society,”
    “The Third Industrial Revolution,” and “The Empathic Civilization.” He is an advisor
    to the European Union and The People’s Republic of China, and a principal architect of their
    Third Industrial Revolution plans. Let me start on a very somber note. I hope it will end up being
    a liberating reflection. You’ll have to judge. GDP is slowing
    all over the world everywhere. And the reason is productivity
    has been declining for twenty years
    all over the world. The result: Unemployment
    is very high everywhere. And nowhere is it
    more pronounced than among the Millennial Generation
    coming into the workforce. Our economists tell us
    that we can look forward to slow productivity and slow growth
    for the next 20 years. And let me do the math for you: At the end of two
    industrial revolutions in the 19th and 20th century,
    here’s the equation: We have to admit that
    half the human race is far better off today than our ancestors were before
    we began this industrial experiment. Granted? Also we need to acknowledge
    that 40% of the human race are making $2 a day or less. And arguably they are worse off than their ancestors were before
    the Industrial experiment. And the final equation: The industrial era, while
    it’s benefited half the human race in detriment to
    the other half of the human race, the well-off, the
    very wealthy have done quite well. Today, the 62 wealthiest
    human beings in the world —we could put them in this
    little section of the room. The 62 wealthiest human beings
    in the world today their combined wealth
    equals the accumulated wealth of one half the human population
    living on Earth. Three and a half billion people. There’s something
    really dysfunctional about the way
    the human family is organizing its economic relationships
    on this Earth. It’s clear we’re in a long-term
    structural economic crisis at the end of the
    2nd Industrial Revolution. But now this industrial air
    has given rise to a much more profound crisis
    —an environmental crisis. We have spewed
    massive amounts of CO₂ and methane and nitrous oxide
    into the atmosphere of this planet to create this
    industrial way of life. And now we have so much CO₂, methane and nitrous oxide
    in the atmosphere that is blocking the sun’s heat
    from getting off the Earth. We are in real time climate change. This is no longer a theory. This is no longer
    looming on the horizon. This is no longer imminent. Climate change is now
    at the house, in the door. What’s terrifying
    about climate change —and unfortunately
    it’s never explained, because if it were explained, our human family would be
    justifiably terrified and motivated and driven
    to begin to transform this planet. Climate change changes
    the water cycles of the Earth. That’s what this is all about.
    It’s never explained. We’re the watery planet. Our satellite probes
    go to other planets and what’s the first thing
    we look for? Water. No water? Not interested! Recently they discovered what
    they think is dirty water on Mars and everybody is thrilled. Our ecosystems on Earth have
    developed over millions of years based on the water cycles, the cloud cycles that
    traverse them across the Earth. For every one degree that the
    temperature of the planet goes up because of industrial induced
    CO₂ emissions— For every one degree that the
    temperature goes up on this planet, the atmosphere is
    actually sucking up 7% more precipitation
    from the ground. The heat is forcing
    the precipitation into the clouds, so we’re getting
    more concentrated precipitation, more violent water events,
    but they’re more infrequent, throwing the entire water cycle
    of the Earth off kilter. More blockbuster winter snows. Eight feet in Boston
    at last season? My gosh! More dramatic spring floods —that flood in the Carolinas,
    remember? They said this flood only will
    occur once every thousand years. It’s the new normal. More prolonged summer droughts. My wife and I were in
    British Columbia and we’re coming into Vancouver. The pilot says, “We have
    some smoke coming in.” I turned to my wife and I said,
    “You mean smog?” No, he meant smoke. Wildfires from
    British Columbia to California. Summer droughts and wildfire. We have Category 3, 4, and 5
    hurricanes now —so dramatic that
    they’re destroying infrastructure and killing people
    all over the world. That hurricane that
    hit the Philippines— This was the most
    powerful hurricane ever recorded. This is the new normal. What I’m saying here
    is that climate change is dramatically changing
    the water cycles. They’re out an exponential curve. This is absolutely frightening. It’s terrifying. And, if you are a young millennial
    about to start a family— If you’re a parent here
    or a grandparent. I want you to listen to this. Our scientists now tell us
    that we are in the sixth extinction event of life on Earth. It doesn’t even make the headlines. This is the most dramatic story
    a human family has ever faced. There have been five
    mass extinction events on Earth in 450 million years. And each time the chemistry
    of the planet shifts very quickly —there’s what we call
    a turning point— and massive die out. And after the massive die out of life, it takes upwards of 10 million years to get new life back on Earth. Our scientists now tell us we are
    in the sixth extinction event This is not a model—
    we’re chronicling it in real time. And what they’re saying is that
    over the next seven decades —and many of you will
    be around for a lot of that, and your children will
    —in the next seven decades we could lose over half
    the species of life that now inhabits this
    little oasis in the universe. As my wife says,
    we just are not grasping the enormity of this moment. We might acknowledge
    climate change, but we’re going on
    as business as usual, with a little green washing. 99.5% of all the species
    that ever been on this planet have come and gone.
    Those are not good odds. And what’s interesting is,
    human beings— We’re the actual youngest species,
    we’re the babies. Anatomically modern humans have
    only been here about 200,000 years. There’s no guarantee
    we’re gonna make this. And the new studies
    that have just come out they’re even more terrifying
    because they’re seeing the freshwater melts in the Arctic, now
    in Greenland and now in Antarctica much quicker than we expected
    changing the ocean currents. And they’re talking about storms that are beyond
    anything we can imagine, that we’ve ever seen in human history
    by the end of this century. Talking about
    the major coastal cities, where much of our
    urban population is, underwater. This is not a century from now. This is in the lifetime of
    many young people who are four and five now
    and will be my age when we’re in full steam
    into this new era, this abyss. So what do we do? We need a new
    economic vision for the world. It has to be compelling. We needed a game plan
    to deploy that vision and it needs to be quick. It needs to move as quickly
    in the developing countries as in the industrialized nations. If we have any chance of arresting
    the worst of this climate change we’re gonna have to be off carbon
    in four decades everywhere. This is beyond anything we’re
    talking about at global conferences. How do we begin to tackle
    something of this magnitude? We need to step back and reflect on how the great economic
    paradigm shifts in history occur. If we know how they occur, we’re gonna get a road map here
    in this room and around the world, and we’re gonna get a compass that
    allow us to navigate a new journey to completely transform the way
    we handle life on Earth. CHAPTER ONE: The Great
    Economic Revolutions in History There have been at least seven major economic paradigm shifts
    in history, and they’re very interesting
    anthropologically because they share a common denominator. And that is at
    a certain moment of time three technologies emerge
    and converge to create what we call
    in engineering a general-purpose
    technology platform. That’s a fancy way of saying
    “a new infrastructure.” It fundamentally changes the way we manage power
    and move economic life. What are those three technologies? First, new
    communication technologies to allow us to more efficiently
    manage our economic activity. Second, new sources of energy to allow us to more efficiently
    power our economic activity. And third, new modes of mobility
    —transportation logistics— to allow us to more efficiently
    move the economic activity. So when communication revolutions
    join with new energy regimes, and new modes of transportation it does change the way we manage
    power and move economic life. It changes
    temporal spatial orientation. It changes our habitats. It allows us to integrate
    in larger units. It actually even changes
    consciousness and governance. Let me give you two examples: First Industrial Revolution,
    19th century. Second Industrial Revolution,
    20th century. The Brits took us into
    the first Industrial Revolution. And first there was
    a communication revolution. They invented
    steam-powered printing. No more manual print presses. Steam power printing
    was a big leap forward, because it allowed us to mass
    produce very cheap print quickly. Then, in the
    second half of the 19th century, the Brits lay out a telegraph
    system across the British Isles. Steam power printing and the telegraph: those communication technologies
    then converged with a completely new source of energy
    in Britain called coal. But how are they gonna
    take that coal and harvest it? They invented the steam engine. Then this is ingenious: They figured out that they should
    put the steam engine on rails, for locomotives,
    national transport and logistics. Urban life,
    the Industrial Revolution, steam power. Second Industrial Revolution:
    the United States. Centralized electricity and especially the telephone. I know we think
    the Internet’s a big deal, but a telephone
    was a really big deal. All of a sudden,
    people could communicate at vast distances
    at the speed of light. Later, radio and television. These communication technologies converge in the United States with
    a completely new energy source. Cheap Texas oil. Then, Henry Ford
    put everybody on the road with cars, buses, and trucks. Second Industrial Revolution changed the way we manage power
    and move economic life. That second Industrial Revolution
    took us through the 20th century. It took the whole world
    through the 20th century. And it peaked in July 2008. Hi! Welcome back to the show here:
    Oil! Oil! Oil! To $147 we went— Remember that month? In that month, Brent crude oil had a record price of $147 dollars
    on world markets and, when it hit that record price, the whole global economy shut down. Silence. Completely gone. That was the economic earthquake. The collapse of the
    financial markets 60 days later was the aftershock. Mayhem, carnage, and bloodbath. Call it what you want,
    but what we saw on global stock markets today
    was ill-disguised panic. Good evening.
    This was the day after what may someday be called
    Black Monday on Wall Street because it was perhaps
    the worst financial collapse since the Great Depression. Our policy leaders are
    still dealing with the aftershock, not the Earthquake. Why was it the Earthquake? Because the entire
    Industrial Revolution that we’ve gone through is all dependent on
    the carbon deposits of a previous period in history. You know, if we look back
    let’s say that we make it through this
    next period of history. I always wonder what will
    future generations think of us, maybe in a
    hundred thousand years from now. They’ll say,
    “Oh, yes, we remember them.” “There was
    the Bronze Age, the Iron Age.” “These were
    the fossil fuel people.” “They dug up the burial grounds
    of the Carboniferous era and created a short-lived dramatic
    and very dangerous civilization.” It’s all about fossil fuels. Our fertilizers and pesticides
    are made out of fossil fuels. Our construction materials
    are made out of fossil fuels. Most of our pharmaceutical products
    are made out of fossil fuels. Our synthetic fiber, our power, our transport, our heating lights— all made out of,
    moved by fossil fuels. When the price of oil
    goes over around $95 a barrel, all the other prices go up. When we get into the zone of
    around $115 a barrel, prices become so high,
    the purchasing power slows. This is the sunset
    of a great industrial era. Now you remember in 2009
    oil went down to 50 a barrel, because the economy had shut down. There was no activity. In 2010, we tried
    to regrow inventories, so oil prices started to go up
    all the other prices go up. In 2014 we hit a new peak of
    $114 or $115 a barrel. Purchasing power slowed down again. This is a convulsion of
    growth-shutdown, growth-shutdown. And the only reason oil went down in the last few years
    to $30 a barrel is now the fossil fuel industry
    is fighting among themselves. In the sunset. OPEC said, “We’re gonna keep
    the oil spigot open.” “We’re gonna
    flood the world with oil.” “And that’s gonna take
    the price down the $30 a barrel and wipe out our new competitors,
    the more exotic fossil fuels: shale gas in the US,
    tar sands in Canada.” Guess what? They wiped them out
    —only took a year and a half. Bankruptcies across the USA
    in the shale gas industry. And now tar sands in Canada. The pipeline’s not happening. And do you hear anybody talking
    about energy independent right now? It’s over! And, as soon as the
    bankruptcies complete themselves, the oil prices are now
    starting to go back up. But now we have failed states
    where there’s oil production. We have failed States. So this is a volatile,
    convulsive sunset over the next 40 to 50 years
    —an unstable world. Where do we head from here? Let me share an anecdote. When Angela Merkel became
    Chancellor of Germany, she asked me to come to Berlin in the first couple of weeks
    of her new government to help her address
    the question of how to grow the German economy
    on her watch. Now, remember:
    In terms of per capita Germany’s the most robust capitalist
    market economy in the world. When I got to Berlin, the first question I asked
    the new chancellor— I said, “Madam Chancellor how are
    you gonna grow the German economy when your businesses are plugged in
    to a platform, an infrastructure of centralized telecommunication, fossil fuel nuclear power, internal combustion,
    road rail water, and air transport —and that infrastructure
    peaked in its productivity, in Germany, years ago? CHAPTER TWO:
    The Science of Productivity. Let me talk about productivity. This is crucial. Our economists are lamenting. They’re asking, “Why’s productivity
    been declining for 20 years?” “We have all these new killer products
    coming out of Silicon Valley.” “Why is productivity declining?” I’m gonna share with you
    a dirty little secret in economics that economists
    don’t like to talk about. We used to believe that
    there are two factors that drive productivity
    in standard economic theory: Better machines and
    better performing workers. But when Robert Solow
    won the Nobel Prize for economic growth theory
    in the mid-1980s, he actually let
    the little secret out. He said,
    “We’ve got a problem here.” When we trace every single year of
    the Industrial Revolution these two factors
    —better machines, better workers— it only accounts for about
    14% of the productivity. So Robert Solow
    asked the big question: “Where does the other
    86% of productivity come from?” Don’t know. Moses Abramowitz,
    the former head of the American Economic Association said, “This is a measure of our ignorance.” Now wouldn’t you think
    economists would know where productivity comes from, because that’s the basis
    of the discipline? Here’s why they don’t know. When classical economic theory
    was penned in the late seventeen hundreds, the Vogue was Newton’s physics. Newton was the big guy in town. Everybody wanted to use
    Newton’s metaphor so they could be more scientific because he had discovered the laws
    that run the universe—supposedly. The economists also fell in line. For example, you know Newton’s law: “For every action there’s
    an equal and opposite reaction.” Adam Smith borrowed that metaphor for his invisible hand
    of supply and demand. “For every action on the supply side there’s an equal and opposite
    reaction on the demand side.” Newton’s law: “A body in motion
    stays in motion unless disrupted.” Baptiste Say borrowed that metaphor
    —the French economist. And he suggested that,
    “Well supply will stimulate demand, which will generate supply,
    which will stimulate demand —unless disrupted.” All of our economic theory, if
    you go back and take a look at it— it’s all based on Newton’s
    metaphors in physics. There’s only one problem with this: Newton’s physics has absolutely
    nothing to do with economics. Nothing. Nothing. economics is governed by the
    same laws that govern the universe, the solar system,
    the biosphere on Earth, and every single thing you and I
    do in our economic life while we’re here on this planet. Here are the two laws that govern
    everything in the universe, including our economy. The first law of Energy says: “All the energy in the universe
    is constant.” “Since the Big Bang,
    no new energy has been created.” “No energy has been destroyed
    since the Big Bang.” That’s the conservation law. The second law of energy
    says that’s true that the energy isn’t created
    or destroyed, but it always changes form,
    but only in one direction. From concentrated—the Big Bang—
    to dispersed through the galaxies. From hot to cooled off
    through the galaxies. From order to disorder.
    From available to unavailable. Entropy is a measure of the
    energy that’s still there, but not available to do useful work. There are three systems that
    we can talk about in thermodynamics: an open system that exchanges matter
    and energy with the outside world; a closed system, which exchanges
    energy with the outside world, but does an exchange matter; and an isolated system, which
    doesn’t exchange matter or energy with the outside world. The Earth in relation to the
    solar system and Sun is B. We get plenty of energy
    from the Sun, we don’t have to worry about this
    for billions of years. But in terms of the fixed matter
    on this planet we don’t have a lot of
    additional matter coming down here. We get a few meteorites,
    a little cosmic dust, but whatever we have
    in terms of fixed matter —which is a form of energy—has been
    here since we blew off the Sun and cooled off. All of you have smartphones
    on you right now and there are little granules
    of rare Earths in those phones. They’ve been here since
    the Earth has been here. That’s a form of energy
    as a material form. So here’s what
    economics is all about: We extract low entropy,
    available energy in nature —a rare Earth, a metallic ore,
    a fossil fuel— we extract it and then,
    through our value chains, we store it, we ship it, we produce
    goods and services from it, we consume it,
    we recycle it back to nature. Those are value chains. At every step of conversion,
    —when we take nature’s resources and move it through society—
    at every step of conversion we have to embed energy
    into that good or service to get it to the next stage
    of what it becomes. But we lose some energy in the
    process of that conversion. This is called
    “aggregate efficiency” in economics. Aggregate efficiency is the ratio
    of the potential work versus the actual useful work
    you actually embed in the good or service. Let me give you an example. Nature has the same
    economic conditions that we have in our human economy. If a lion chases down
    an antelope in the wild, then kills it, about 10-20% of the total energy
    that’s in that antelope gets embedded into the lion. The rest is heat
    lost in the conversion. That’s the aggregate efficiency. What does this have to do
    with my conversation with the Chancellor of Germany? She’s a physicist, you know,
    by background. So here’s what I said to her. We started the 2nd Industrial
    Revolution in 1905 in the USA with 3% aggregate efficiency. At every conversion of nature’s
    resources through the value chain, we lost about 97%—it didn’t
    get into the product or service. By 1990, the US got up to about
    14% aggregate efficiency. That was our ceiling
    —nothing’s changed since then. And I reported to the Chancellor that
    Germany got up to about 18.5% aggregate efficiency. That was their ceiling.
    Nothing’s changed. Anybody wanna guess
    which country led the world in aggregate efficiency? —China?
    —Japan? Japan! 20% aggregate efficiency,
    1990s, reached its ceiling. What I’m saying
    to the Chancellor is this: You can have market reforms,
    labor reforms, monetary reforms. You can create incentives
    for killer new products. You can try to create
    a million Steve Jobs. It won’t make
    a damn bit of difference. If your businesses
    are still plugged in to a 2nd Industrial Revolution
    infrastructure you can’t get above the ceiling of 20% aggregate efficiency
    anywhere in the world. Why is this important? A new generation of economists
    who happen to study physics have gone back and
    looked at the industrial record and they added
    a third factor to productivity: better machines, better workers,
    aggregate efficiency. The ratio—yes, it’s so obvious!
    The ratio of potential to useful work. When they put in that third factor, it accounts for
    much of the rest of productivity. Henry Ford could have told you this. In fact every engineer
    could have told you this. Every architect
    could have told you this. Every biologist
    could have told you this. Every chemist
    could have told you this. They all have to start
    their training in school by learning these two laws
    of energy that govern the universe. I teach in the oldest
    Business School in the world. I taught the
    advanced management program at the Wharton School for 15 years. Not a single business school
    in the world today, right now,
    requires that you learn about the 1st and 2nd laws
    of thermodynamics that govern economic activity. How shameful is this? So, in that first day
    with the Chancellor we discussed
    a 3rd Industrial Revolution: a new convergence of
    communication, energy and transportation to manage power and move Germany. At the end of the day,
    in a private session, the Chancellor said, “Mr. Rifkin, we will have this
    3rd Industrial Revolution here in Germany. CHAPTER THREE:
    A New Smart Infrastructure The communication internet
    is now mature. It’s been 25 years since
    the World Wide Web. We have digitalized communication. Now this communication
    internet is converging with a nascent, digitalized,
    renewable-energy internet. And now both those Internets
    are converging with a fledgling, automated, GPS,
    and very soon driverless road, rail, water,
    and air transport internet to create three Internets: communication internet, renewable energy internet, automated
    transportation-logistic internet. One super internet to manage,
    power, and move economic life. These three internets ride on top
    of a platform called the “Internet of Things.” We’re embedding sensors
    in all of our devices, as you know, so they can monitor
    real-time activity and then talk to other machines
    and talk to us. So we have sensors now
    in the agricultural fields and they’re actually monitoring
    the growth of crops the soil salinity,
    the moisture in the crops, etc. They’re sending that data. We have sensors now
    in the factories that are monitoring
    our economic data. We have sensors in smart homes monitoring how the energy
    is used in our buildings. We have sensors in smart vehicles,
    warehouses, smart roads. All of them collecting data. But where does that big data go? It goes to communication, energy,
    and transport Internets to manage, power,
    and move economic life. As this new system comes in it’s gonna be ubiquitous by 2030, connecting everything with
    everything with everyone. We are essentially creating
    an external prosthesis —a distributed nervous system— that’s gonna allow
    everyone on this planet, at very low cost, to begin directly engaging
    each other on a global Internet of Things and bypassing a lot of the
    vertical integrated organization and middlemen that kept us
    away from each other. We can have direct engagement now. This is the revolution. This evens the playing field. There’s been a long discussion
    among the Millennials— You started this:
    Occupy movements. Saying, “What about the 1%?
    The 99%?” Now we have a new platform. The Internet of Things platform
    is of a different nature than the platforms in the
    1st and 2nd Industrial Revolution. The new platform is really radical, because this 3rd
    Industrial Revolution platform is designed to be distributed,
    not centralized. It works best
    when it’s collaborative, and open and transparent,
    rather than closed and proprietary. And the benefits come when more
    and more people join the network and each of us
    contributes our talents, which benefits the network
    and then benefits us. It’s designed to be laterally scaled,
    not vertically integrated. And this is what moves us
    from the 1% of the 99% to a vast, vast expansion
    of social entrepreneurialism and global networks. That’s the upside. On the other hand, how do we
    deal with network neutrality? How do we ensure that everyone
    has equal access to this new
    Internet of Things platform, this 3rd Industrial Revolution? How do we make sure governments
    don’t purloin this platform for political purposes
    —it’s already beginning. How do we make sure
    that giant monopoly companies, some of them on the Internet, don’t use that data for their own
    commercial purposes at our expense? How do we ensure privacy
    when everyone’s connected? How do we ensure data security
    when everyone’s connected? How do we prevent cyber crime
    and cyber terrorism that could disrupt the system
    and take it down when everyone’s connected? This is the DarkNet, and what
    I’m saying to you today is that the DarkNet is as impressive
    as the opportunity of the BrightNet. And I would say that
    the next three generations, beginning with you and
    your children and grandchildren— You’re gonna be heavily engaged
    in a new political movement. And that movement is
    going to be to ensure against the DarkNet prevailing, and making sure that we all
    have equal access, so the human family can engage
    in a distributed nervous system and begin to have a vast expansion
    of social entrepreneurialism. This is the political struggle
    that starts with the Millennials, your children and grandchildren. This is an uphill battle. This is not a cakewalk. I’m not a technological determinist
    and I’m not a utopian. Technology just enables,
    then the question is, How will that journey end? It’s a big question mark right now. But let’s assume,
    for the sake of this afternoon, that we’re gonna be able
    to deal with all the complexities of the DarkNet
    —and it’s a big challenge. Here’s what this Internet of Things
    platform provides. Let’s say here at Brooklyn
    you’re a SME —small and medium-sized enterprise,
    or cooperative, or nonprofit. You can go up on this nascent
    Internet of Things platform that’s already emerging. It’s not theoretical. And you can have
    a transparent picture of all the economic data
    flowing through the world —if it stays network neutral. The power here is enormous. We think Snowden was a big deal? Now all the economic data
    is gonna be open to everyone, not just a few government secrets. But in a network neutral world you’re gonna be able to go up
    on this platform and have a completely transparent
    picture of all the data. You can go up on the platform
    and cut your big data on your value chain
    out from the noise. Then, you can mine your big data
    with analytics. Then you can create your own
    algorithms and apps. They’ll allow you to dramatically
    increase your aggregate efficiency at every step of conversion
    on your value chain. And, as you do that, dramatically
    increase your productivity, dramatically reduce
    your ecological footprint, and dramatically
    plunge your marginal cost. Some of those marginal costs
    are gonna get so low —they head to zero marginal cost. And when they hit near
    zero marginal cost, it gives rise to a completely
    new economic system. CHAPTER FOUR: Zero Marginal Cost
    and the Rise of the Sharing Economy. In economic theory,
    the optimum market is where you sell at marginal cost. Marginal cost is after fixed costs. Once you pay for
    whatever the technology is. The marginal cost is
    what it costs to produce a unit. Classical economic theory,
    we’ve always said that the most optimum market is
    where you sell at marginal cost. Here’s the problem we
    never expected a technology revolution
    —digital revolution— that would be so powerful
    in its potential productivity that it could actually reduce
    the marginal cost for some goods and services
    to near zero. Meaning there’s no longer
    a profit margin and you can produce goods
    and services for each other beyond the market
    in the sharing economy for nearly free. This sharing economy
    didn’t come out of the blue. Capitalism gave birth
    to the sharing economy. Let me be clear: As muddy as
    the sharing economy is, it’s the first
    new economic system to enter onto the world stage since capitalism and socialism
    in the 19th century. It’s a remarkable historical event. This is already happening. Zero marginal cost phenomena
    is not theoretical. It’s been how many years since
    Napster—the file-sharing service? About 17 years? 17 years! Well, this little file-sharing
    service started a revolution. We have 3 billion people
    right now on the internet —and now the Internet of Things— who are actually producing
    and sharing virtual goods at near zero marginal cost
    beyond the market, disrupting entire industries. We have young people that are
    producing their own music. And what does it cost to have a little technology,
    a little machine that allows you studio-quality music when
    you wanna record in your home? And then,
    whether you send that music to one person on the web or a billion— It’s zero marginal costs. You just need a service provider
    to keep your power up. I was surprised when that
    Korean performance artist a couple years ago— A billion people
    went to his website! Zero marginal cost. We have millions of young people,
    any given day, who are producing their own
    YouTube videos. Take a little video,
    put it up on the web, a billion people can see it. Zero marginal cost. We have people producing their own
    news blogs and social media. Near zero marginal cost. We have millions of people
    contributing to Wikipedia and constructing the knowledge
    of the world on a non-profit website for free. This is the most improbable
    experiment I could ever imagine. I don’t know how Jimmy Wales
    came up with this. I would have said,
    “This cannot succeed!” Adam Smith said,
    “Each individual pursues their own self-interest
    and never cares about the public good.” But in pursuing their self-interest and not giving a damn
    about the public good— By pursuing their self-interest,
    the society is better off. I always thought
    it was a little dubious, but that’s how we grew up. But apparently, none of the
    Millennials have read Adam Smith. Because, for example,
    in Wikipedia you’re all freely giving your talent, putting things up on Wikipedia, constructing the knowledge
    of the world. You’ve democratized knowledge
    in less than 15 years and the accuracy is… Now: Book publishing. What’s happening? People are creating
    their own free eBooks. My new book came out
    on the Pirate Bays before we could publish
    in our languages and —God bless them—
    they were ranking it before Amazon could even touch it. We have 6 million
    college students taking massive open online college courses
    taught by the best professors at the best universities.
    They’re getting college credits. It’s free! You can’t win here.
    You Millennials have won. Unless we outlaw
    all the technology, we’ve got to find
    a way to live with it and find value with it. Entire industries
    have been disrupted in the 17 years since Napster. The music industry has shrunk. Television has declined ’cause everyone’s producing
    their own YouTube videos. You’re all producers
    sharing with each other. Newspapers and magazines
    have gone out of business with social blogs. But thousands of
    new enterprises have emerged. Not just Google, Facebook, and
    Twitter—all of these are new. But thousands of
    startup enterprises —profit and nonprofit— they’re creating the platforms, they’re creating the apps, they’re creating the connectivity, they’re using the
    analytics and the data. It’s a revolution! Well, we thought
    there’d be a firewall here. And certainly we could understand how zero marginal cost
    brought on by digitalization would affect the virtual world, but we didn’t think
    it would move over the firewall to the physical world. What I’m saying, with the zero marginal cost society is that firewall is broken now —it’s called the Internet of Things—
    completely gone. We have millions of people now producing their own
    renewable energy, right now,
    at near zero marginal cost. Free! And now,
    as we move to car sharing, and as we move to
    driverless transportation, we’re gonna see
    the marginal cost plunge toward near zero
    in transport logistics in the next 20 years. Let’s go back to Germany. What’s happened in the 10 years since that first conversation
    with the Chancellor? We are now in Germany at 32% of all the electricity power
    in Germany now is solar and wind, right now.
    In ten years. And this is a northern country
    —doesn’t have a lot of Sun. We’re gonna be 35%
    of the electricity, solar and wind, by 2020— We’re gonna be 100%
    renewable energy by 2040. Absolutely! And what’s interesting is
    the fixed cost of introducing the solar technology
    and the wind turbines and the geothermal heat pumps— Solar and wind are
    on an exponential curve, just like computers! When I was a kid
    in the 1940s and 50s, there’s only a few computers. They cost millions of dollars. And the chairman of IBM
    at the time said, “We probably will need
    a total of seven computers.” “Maybe seven!” It was just an optimistic forecast. We did not anticipate
    exponential curves in computer chips. Moore’s law. So all of a sudden,
    Intel figures out that their engineers are doubling
    the capacity on that chip every two years.
    This is still going on. So, even if you’re making
    $2 dollars a day, everyone’s going to be connected
    to the Internet of Things within less than 15 to 20 years. And the cost—the fixed costs
    are gonna be as cheap as your cell phones in 20 years. Everyone’s gonna produce
    their own green electricity. These exponential curves
    are not going away. You know how much
    a solar watt used to cost? $78 dollars to generate
    one watt solar in 1978. You know how much it costs
    to generate one watt solar today? Not $78 dollars; 50 cents. It’s gonna be 35 cents
    in 18 months from now. This is really moving quick. And this is what you’re not told
    here in the United States by the energy companies. We have power and utility companies —some of them in my group,
    Global Group— and they’re quietly, right now, buying long-term 20-year contracts for solar and wind electricity
    in Europe and America, quietly right now,
    for 4 cents a kilowatt hour. And the Berkeley National Labs, government labs just announced they’re generating
    wind and solar— I think it’s somewhere between 2.8 and 3.5 cents a kilowatt hour. It’s over actually for
    fossil fuel and nuclear. And the next big bubble
    —I will tell you now— is gonna be the 100 trillion
    dollars in stranded assets in the fossil fuel industry. This is gonna make
    the subprime mortgage look like the small-time game. Because we’re moving
    toward parity and then solar and wind
    are getting cheaper and cheaper. That’s what’s going on
    behind the scenes, right now. But what’s interesting in Germany, once you pay
    the fixed cost for your solar panel and wind turbine— The marginal cost of producing
    the energy in Germany today? It’s zero! The Sun has not sent us
    a bill in Germany. The wind hasn’t invoiced us. The geothermal heat has not
    come to us with a bill. It’s free! So what happens when
    German businesses can plug in to a communication internet
    that then converges with an energy internet and we digitalize
    the electricity grid, so everyone can produce
    their own solar and wind, and either use it off-grid
    or sell it back to the grid? What happens
    when companies plug in to an energy internet where the cost of the energy
    is near zero marginal cost. Think about when they have
    to move across their value chain, and at each step of conversion
    on their value chain, their energy cost is near zero. How does any 2nd
    Industrial Revolution country compete with that? And it’s not big Germany only —little Denmark’s done this. Anybody can do this. Who’s producing all the new energy? In Germany, there are four
    major power companies: MBW, RWE, E.On and Vattenfall —these giant, global,
    vertically integrated companies. And, frankly, we thought
    they were invincible. What’s happened to them in 10 years is what happened
    to the music industry, television, newspapers, magazine,
    and book publishing. Thousands of small players
    have come together in electricity cooperatives. Farmers, small businesses,
    neighborhood associations. All of them went to the banks
    and got loans —these electricity cooperatives— and every bank
    was completely fine about giving them the loans.
    Why? Because they knew that
    the energy they generated would get a premium price when
    they sell it back to the market. Nobody was turned down. They’re creating
    all the new energy. This is power to the people —literally and figuratively—
    power to the people. What happened to the big 4
    power companies? They’re producing less than
    7% of the new power. And they acknowledge
    they’re out of the game. Why? To their credit,
    they were the most efficient means to produce and distribute
    centralized power —fossil fuel and nuclear power,
    vertical integration. But the new energies— They require
    millions of small players connecting where they are
    in collecting. You have to collect the Sun
    everywhere in little amounts. And the wind everywhere
    where you are. And the geothermal heat
    everywhere where it is. And you—We reward cooperatives
    who laterally scale and join together in networks. Big companies can’t put
    all these players together. The players come together in their own regions of cooperation,
    and they join together. It is power to the people. Does this mean this is the end
    of the energy companies? Not necessarily. Many will go out of business.
    Some will not. About seven years ago, the EON—one of the
    giant four companies— they asked if I would debate
    their Chairman, Mr. Tyson, but in a neutral country,
    the Netherlands. We had a three-hour debate. you’re not leaving
    the 2nd Industrial Revolution And I said to him, “Look, tomorrow morning. But you also have to be
    in the 3rd Industrial Revolution tomorrow morning, because you have a
    25, 30-year transition to get from the 2nd to the 3rd
    and find new value. And I said in the new system, it operates quite differently
    than the old system. In the new
    3rd Industrial Revolution you make more money by selling
    less and less and less electricity. I said, what you do is, you set up partnerships
    with thousands of enterprises. And you help manage the energy
    flow through their value chains. You help them with their big data. You help them mine
    that big data with the analytics. You help them with their
    algorithms and apps. Dramatically increase
    their productivity. In return, those thousands
    of enterprises will share their gains back
    with the power companies. It’s called
    “performance contracts.” We’re now doing it,
    and guess what? Last year, the chairman of Eon —took him 7 years— they’re moving to
    renewable energies and they want to help manage parts of the energy internet
    with energy services. EDF, the great nuclear power,
    in France has joined our group. We’re doing
    the whole build-out of the 3rd Industrial Revolution
    in parts of Europe: in northern France,
    the Netherlands, Luxemburg… And EDF said, “We’re with you.” They’re on the ground
    helping lay this out. They’re not leaving
    nuclear tomorrow, but they see that
    the handwriting is on the wall. So the companies
    that don’t go there; we don’t need them. It’s not just Europe; now China. When President Xi came in to power
    with Premier Li— Premier Li announced that he —and I was pleased—
    he announced he’d read my book,The Third Industrial Revolution.He put out a public announcement.
    I’d never met him. I never even been to China. And he instructed
    the central government of China to begin looking at these themes
    that I’m laying out to you to move China to
    a 3rd Industrial Revolution. There mindful in China. They lost the whole
    1st Industrial Revolution. They missed almost all the
    2nd Industrial Revolution and came it in the tail
    in the last 10 years. And they said, “We’re not gonna
    lose the 3rd Industrial Revolution.” “We wanna collaborate with the
    3rd Industrial Revolution.” And they said,
    “Be among the leaders.” To show you how fast they move, I’ve been shuttling back and forth,
    but after the first visit —it was about eleven weeks later. The chairman of the state grid, which is the largest electricity grid
    in the world, announced an $82 billion dollar,
    four-year commitment to digitalize the Chinese grid so the millions of Chinese people could produce their own solar
    and wind in their local communities and share it back
    on an energy internet. That started this year, yeah. Watch Europe. Watch China. The coming together
    of the communication internet, with the renewable energy internet gives rise to the automated,
    GPS, driverless, transportation logistics internet. We built the whole global economy
    in the 2nd Industrial Revolution around car ownership. That’s what this was all about. You’ve thrown us a curve.
    You really have. Apparently you don’t wanna
    own cars anymore. This is Grandma and Grandpa. They got two cars
    sitting in the driveway cleaning and waxing them
    every few weeks, and they’re never used. Or they’re at the office 90%
    of the day never used. You don’t wanna own cars. You want access to mobility and
    car sharing networks, not ownership of
    cars in markets, correct? So there’s a problem here. The problem is
    for every car shared in car sharing
    in the sharing economy, we’re eliminating 15 cars. This is both the problem
    and the opportunity. Larry burns was the former
    Vice President of General Motors until a few years ago, now he’s a professor
    at the University of Michigan. So Larry just did a study
    —very revealing. He studied Ann Arbor, Michigan. We can eliminate 80% of vehicles
    with better mobility, cheaper. Now let’s
    extrapolate Larry’s study. We’ve got a billion cars,
    buses, and trucks choking us in traffic
    around the world. They’re the 3rd major cause
    of global warming emissions. The number 1 cause of global
    warming emissions is buildings. But in Europe, we’re now
    retrofitting those buildings, transforming into
    micro power plants and big data centers off carbon. Anybody know what the
    number 2 cause of climate change, global warming emissions are
    by industrial activity? Number 1 is buildings
    —we always talk about it. Number 3 is transport.
    What’s number 2? —Consumption of meat
    —Meat, meat, meat. We have 1.3 billion cows. They take up about 23%
    of the land mass of the Earth. I love cows,
    but the methane they produce is a major contributor
    to global warming, —much more powerful than CO₂— and then,
    when we pasture those animals, we have the fertilizers
    that emit nitrous oxide. And it goes on and on. And I should say that,
    without mentioning names, even some of the
    prophetic voices in the climate change debate
    will never mention this. Because they do not want
    to antagonize people and even suggest that
    we may wanna change our diet and move down the food chain so that we can live healthy, respect our fellow creatures, and at the same time
    mitigate climate change. So, you never hear
    this in the debate. Never! Number 3 is transport. So, if Larry’s right
    —Larry Burns— we’re gonna eliminate probably
    80% of the vehicles in the world in the next two generations because the Millennials,
    your children, and grandchildren are never going to own cars again. This I know. And the remaining
    200 million vehicles— They’re gonna be electric. They’re gonna be fuel-cell driven. They’re gonna be operated by
    near zero marginal cost renewable energy. This is already happening. They’re gonna be 3D printed, with composite recycled materials
    at low marginal cost. They’re gonna be driverless. This is already happening. This gets to the question of, “Is this the end of the world
    for transportation companies?” Not necessarily. But they have to change
    their business model while they’re still in the
    2nd Industrial Revolution, selling cars, buses, and trucks. They have to move to the
    3rd Industrial Revolution, where they help
    manage vast networks along with all the other players. This is a very cool thing that
    happened about six weeks ago. Daimler asked me to join them— Daimler invented the
    internal combustion engine. So I’m always mindful
    they’re a step ahead. And the chairman of Daimler Trucks brought together 350 journalists
    from around the world in Germany asked me to come in— I laid out the same story
    we’re talking about here. And then the chairman
    of Daimler Trucks —he’s one of the eight
    board of directors— He announced that Daimler
    is in a new business. And that is logistics,
    on the transportation internet. And he announced that Daimler
    had equipped, in the last three years,
    300,000 trucks full of sensors. —300,000 vehicles, and they’re on the roads now. These are what I call “big data,”
    “mobile big data centers.” And these trucks
    are collecting data all across the transport corridors
    of Europe, on traffic flows,
    weather conditions, availability of warehouses… All of the data you would need
    if you’re a small business, a large business,
    or just a home owner, to be able to increase
    your aggregate efficiencies and productivity,
    reduce your ecological footprint, and anytime you’re involved in
    moving shipments from A to B. Then this is
    what’s really interesting. He dimed the lights
    and they went to a helicopter feed, live on the German Expressway. And the helicopter zooms in
    on these three trucks on the German Expressway, and then they went right into
    the cab of the trucks and the drivers are waving and
    talking to everybody in the room. And the chairman of
    Daimler Trucks said, “Okay, gentlemen.
    Take your hands off the wheel. Take your feet off the pedals.” All of a sudden, the drivers
    became software analysts. No longer drivers. They were software analysts
    monitoring the data. The trucks then started
    to platoon together, automated, into a mobile data, almost a train
    going down the highways, collecting data. So they’re providing the data,
    and then the analytics, so that you will have apps, so that you can find ways to increase your
    aggregate efficiency and be a player in the system. Smart! How do we finance this?
    How do we pay for this? CHAPTER FIVE:
    Financing the Transition We are laying out a plan in Europe
    called “Digital Europe,” “Smart Europe.” And working with the
    European Commission, we’re building this out
    over the next 10 years. But the big question is, “How do we pay
    for this infrastructure, region after region,
    across all of Europe to connect us in a digital world, where we can begin
    to enjoy the new opportunities?” So the question came up in Brussels
    and I said, “We’ve got all the money we need.” Problem’s not the money; it’s
    what we’re doing with the money. I’ll give you an example—
    in America is the same situation. In Europe, we spent 741 billion equivalent US dollars
    on infrastructure in 2012. One year alone. That’s just a bad
    recession year, typical. The problem is what we spent it on. We spent the money on an old
    2nd Industrial Revolution platform. Remember what I said
    to Chancellor Merkel? and we peaked in the productivity 20 years ago at 20% ceiling, and we can’t get
    anything more out of it. We’re stalled, which stalls the economy, stalls the smart startups, stalls the entrepreneurial expansion. So I said, if we simply
    reprioritize our investments, spend some of it patching up
    the old infrastructure —we don’t want it to collapse— but we prioritize, so part of those funds each year
    go to each region, so that they can begin
    to build out and scale up a 3rd Industrial Revolution
    infrastructure. With an
    Internet of Things platform, we will be there in 30 years. This year, we reprioritized
    our funding at the EU and, beginning in January
    of next year, regions across the EU
    will secure EU funding, leverage against private equity, and each region will
    customize and build out, like Wi-Fi, their plan
    and then connect up region to region to region. We call it “Digital Europe.” We have a similar plan called
    “China Internet Plus” across the regions of China. Where’s the US here? CHAPTER SIX: TWO GENERATIONS
    OF MASS EMPLOYMENT The coming together
    of this revolution will involve every industry: telecom, cable, ICT,
    consumer electronics, transport, logistics,
    construction, and real estate —all the retrofitting— all the industries are involved. And it means work. What I’m suggesting here is that we have one last surge
    of massive employment involving semi-skilled, unskilled
    professional and conceptual labor. We have to build out
    this smart infrastructure. Robots aren’t gonna do this. We have to take the entire energy
    complex of the United States. Think of all the infrastructure and all the technology,
    all those stranded assets. We have to convert all of that infrastructure
    from fossil fuel, nuclear to distributed renewable energy. We have to retrofit
    every building in the USA. That’s what
    we’re gonna do in Europe. Because you can’t install the renewable technologies
    until the buildings are efficient. That means huge jobs
    for energy service companies and for the construction
    and real estate industry. Robots won’t put in the insulation, and the new windows, and the doors. And then we have to install all
    the renewable energy technology. Human beings have to
    install that technology, and all the smart technologies
    that monitors the equipment, and puts in the
    digital advanced meters. We have to take the entire
    electricity grid of the USA, which is dumb, servo mechanical,
    embarrassing —it’s 60 years old;
    it barely functions. And we have to transform
    the entire electricity grid to smart, digital so that we can
    manage these three internets. This is gonna require
    professional talent and unskilled and skilled labor
    for two generations. We have to take the entire
    transportation grid of the USA and turn it from dumb to smart
    road, rail, water and air. Who’s going to install
    the thousands of charging stations in all the buildings? Fuel cell outlets?
    Smart sensors? This requires human beings. This means two generations of work
    and guess what? It’s financed by the payback
    of the energy savings. You don’t have to have huge
    government involvement here. You simply have to
    have the enablement, so energy service companies
    can be set up, and we transform every building
    in the USA to a node. These nodes then connect, and they are the big data centers. They are the micro power plants. They are the transport hubs
    with electric charging stations. The nodes connect like Wi-Fi
    and all those nodes, those buildings
    —homes, offices, factory— that’s your Internet of Things. That’s a huge job
    for the construction industry and you pay back
    by the energy savings. You can’t default on the loans. But the technology
    doesn’t do it alone. We have to change consciousness. I’m only guardedly hopeful. You know, I’m not naive;
    I’m guardedly hopeful. I think that what I’ve said
    is really a tough challenge. But I’m guardedly hopeful because human beings are the most
    social creature on this planet. When we get the story right,
    we move quickly. I’m always amazed
    when I fly and I see electricity grids
    across continents, and highways and urban centers. And I think, “My God!
    That was all done in 50, 60 years?” It’s amazing! When we get the story,
    we move quick. We’re a very social creature. They’re coming together,
    these three Internet’s —communication, energy
    and transport internets on top of
    an Internet of Things platform. It changes the way
    we think about life. CHAPTER SEVEN:
    A New Consciousness for a New Era Let me give you the best example. We’ve got millennial parents now
    that are sharing toys on these millennial websites, where you go up and
    you pay a subscription fee, one time and you’re in the system. Then you can get a toy
    —any kind of toy you want— by age category,
    and give it to your child. This is creating
    the real revolution. The parent traditionally
    brings home a toy. And they say to the daughter,
    “This is not Christmas.” “Santa Claus
    didn’t get you this toy.” “We bought this toy at a store
    and we’re giving this toy to you.” “This is your property.” “This is not your brother’s toy,
    and this is not your sister’s toy.” “This is your toy.” “You need to take responsibility
    for it and take care of it.” “What did mom and dad
    just say to me?” The first thing I caught is, “This isn’t
    my brother and sister’s toy.” That’s pretty relevant. Now, status, power, negotiability. “I’ll never let
    my siblings ever use this, unless they pay the price.” They’re learning possession
    of property and markets. There’s nothing wrong with that. But now, on these
    toy-sharing websites, parents are
    bringing home these toys —and pretty soon they’re gonna
    come in a driverless drone at near zero marginal cost. Now the parents are
    giving this toy and saying, “Another little child
    played with this toy, and she had a lot of fun with it and she really took good care of it ’cause she knew one day
    you’d want to play with the toy.” “And we hope you
    take good care of it ’cause one day another child
    will wanna play with the toy.” What the child is learning now
    is this toys not a possession, it’s not status, it’s not power,
    it’s not negotiable. It’s simply access to an experience
    for a moment of time, then another child gets to use it. They’re learning how to be
    part of a circular economy, where we distribute things
    in the sharing economy over and over and over. Nothing goes to the landfill. I like a system where you have
    both opportunities. There’s nothing wrong
    with being property. There’s nothing wrong
    with having possessions and some status, but it’s also
    nice to have another option where part of her life
    is being able to access an experience in time, and
    then share it with someone else. I don’t think capitalism
    is gonna disappear, but I think it’s gonna find value
    by creating a relationship, so that it finds value with the child that gave birth
    through the sharing economy. And, right here in this room,
    you are already in two economic systems
    day to day right here in Brooklyn. Part of the day,
    you’re in the market. You’re sellers, you’re buyers, you’re owners, you’re workers, you’re producing goods
    and services for each other for a profit in the marketplace, and you have property. But part of the day
    you’re in the sharing economy. You’re sharing virtual goods,
    entertainment, news, social blogs, Wikipedia. And now energy and car sharing. And, while it has
    capitalist parts to it, it’s also a sharing economy
    where you can reduce the cost. And, by 2050, we will have
    two mature systems: part of the day, capitalist market, with a profit margin producing
    and selling to each other; part of the day
    in the sharing economy beyond the market, freely producing goods and services
    for each other. That’s already started. That is not gonna go away. Your generation is moving
    from ownership to access, from markets to networks, from consumerism to sustainability, from market capital
    to social capital. Does this all sound familiar? It’s a revolution. None of this is being taught
    in the schools, by the way. That’s why this is
    really a revolution. And there are three things
    that I’ve noticed that give me some guarded hope. There’s a basic change going on
    with you people in this room. It’s strange to older people. There’s a change in the way
    you define freedom. The way you define power. And the way you define community. And these changes really
    suggest the real revolution. For my generation,
    and generations before me, freedom was very simple,
    since the Enlightenment. To be free,
    in Enlightenment perspective, is to be an autonomous agent. To be self-sufficient.
    To be independent. To be not beholden to others. To be an island to oneself, so that one can have freedom
    as exclusivity. For the millennial generation
    that grew up on the Internet, autonomy is death. Being an island to oneself
    is death. Because for your generation you ask the question, “How can I flourish
    to the full extent of my possibilities
    here on the planet?” And it’s clear
    that your answer to that is “I flourish to the extent
    that I’m embedded in network after network, after network; community after community,
    where I can share my talents. And those talents
    can benefit the network and come back to benefit myself. I’m free because I have access.” And, for you,
    freedom is not exclusivity. It’s not being an autonomous agent. It’s inclusivity. It’s access to others in networks. Do I have this right? This is very alien to our generation. We may have to change
    all the constitutions in the world. This is a completely
    different idea about freedom. You have a different sensibility
    about power, which makes the older generation
    very nervous. We essentially believe that power
    always has to be a pyramid. It goes from the top down.
    That is power. There’s no other way
    to define power. It’s a pyramid
    —from the one to the many. But young people
    that grew up on the Internet— It’s strange because you grew up
    thinking that power has to do with the networks
    you’re engaged in. For you, power is not vertical;
    it’s lateral. For you, power is being a mesh
    in network after network where you benefit each other. Open source. This is so strange
    to our older generation. We do not have
    this notion of power. It makes no sense to us, actually. But it makes total sense to you. And, finally,
    I think most importantly, we’re seeing a change in the way a younger generation perceives
    identity to community. I grew up in a post Westphalian
    world, the nation-state. We were very clear on community. That is, each individual is born
    to be an autonomous agent and we’re each sovereign. We are each a sovereign
    to ourselves. And each of us
    as a sovereign to ourselves— We compete with
    other sovereign individuals, in the marketplace, for scarce resources,
    in a zero-sum game. Our nations represent us
    because they are sovereigns. And they represent all the
    millions of individual citizens who are sovereigns
    against other nations. And each nation then competes
    with every other nation for scarce resources in the
    marketplace of the battlefield in a zero-sum game. That’s the post Westphalia
    nation-state world. Here’s my question: Does anyone here believe that we’re gonna be able to address climate change and
    bring the human family together and take our responsibility
    for our fellow creatures in the Earth we live in
    with that worldview? Anybody? What we’re beginning to see
    with Millennials —and I don’t wanna
    overstretch this— but I’m beginning to sense a shift from geopolitics
    to biosphere consciousness. Just beginning to see it. I hope it doesn’t go away.
    I don’t think it will. The biosphere is that 19 km
    from the stratosphere to the ocean, where all life
    and all the chemicals on the planet interact to maintain
    the ecosystems, the biology of the Earth. We’re getting 14-year olds
    coming home with biosphere consciousness. They’re becoming
    the biosphere police. We got young people coming home
    and saying to their father, “Why are you using so much water
    here while you’re shaving?” “Can’t we turn it off
    once in a while?” “We’re wasting the water.” They’re saying to their parents, “Why is the little red light
    on on the TV?” “We haven’t been in that room
    for three weeks!” Wasting electricity… They’re saying to their parents, “Why are there two cars
    in the driveway?” “Why can’t we at least
    car share one?” They’re saying to their parents, And this is the one
    I’m particularly fond of. It brings a smile to me. We actually have young people
    coming home and, at dinnertime,
    they’re asking their parents where the hamburger came from
    on the table. Yes, I’m sure some of you
    have this experience. They’re saying,
    “Did that hamburger come from a rain forest?” “Did they have to destroy the trees
    for four little inches of topsoil, which only gives you
    three years of grazing, so that that cow
    could become my hamburger?” And when those trees are destroyed
    for the topsoil to graze the cow for the hamburger, the kids are
    smart enough to understand —the high school kids— that those trees harbor rare
    species of plant and animal life that only live in those canopies.
    They go extinct. And then they connect the dots. If the trees disappear for the soil to graze the cow
    for the hamburger, those trees are not there to absorb
    CO₂ from industrial emissions. And that means the
    temperature the planet goes up. So then, a mother cannot feed
    her children if she’s on the farm, because she’s getting
    spring floods, summer droughts, and wildfires
    because of the hamburger. These kids are learning
    ecological footprint. Junior high school. And they’re coming home. They’re beginning to understand
    that everything each of us does, all day long,
    even when we’re sleeping, intimately affects
    some other human being, some other creature, and the planet we live in. This is so alien to the way
    your previous generations grew up. You’re beginning to
    connect the dots and say, “We live in an indivisible
    biosphere community; there’s no escape.” “This isn’t just academic:
    our well-being depends on the well-being of the whole
    system and all the creatures in it. We have young people
    who are beginning to extend their empathic concern
    to the rest of the human family, because you’re all skyping
    on global classrooms. Heck—a billion of you on Facebook. That’s the largest fictional family
    in history! And what’s promising to me
    is that part of this generation is also beginning to
    empathize with our fellow creatures. Not just the polar bears
    and the penguins on the poles, but all of our fellow creatures.
    And I gotta tell you, my wife and I are into animal rights
    and animal protection. Our fellow creatures
    have a right to be here. We do not have a right
    to end existence for them. This is their planet,
    as well as our planet. So I think we’re beginning to see
    a shift the notion of freedom. How we perceive power,
    our sense of community. We’re heading to a biosphere frame. This is all good. Let me be clear on why
    I’ve been doing this work. I’m terrified about climate change. I began working on energy issues—
    it was in 1973. And wrote a book, “Entropy
    on Climate Change,” in 1980. I thought we had more time. I did not anticipate
    the feedback loops. We couldn’t even see them
    until they came, and then each feedback
    decreased ten more on an exponential curve.
    And we just didn’t see it. We thought linear. Now we’re really scared. I’m gonna tell you,
    we are really really scared. ‘Cause now we’re in a runaway
    exponential curve on the water cycles.
    We didn’t see it. The fortunate thing is,
    we now have a new infrastructure paradigm
    —a 3rd Industrial Revolution. That can allow us
    to move off carbon quickly, in three decades. We have the technology
    that allows us to do this, because zero marginal cost
    is the ultimate metric for reducing ecological footprint. If people equipped
    with a little technology are constantly finding
    new analytics and apps to increase
    their aggregate efficiency at whatever value chain they’re in, it means we’re using
    less of the Earth and getting more out of it. In other words, more
    of the energy and materials gets into the product,
    less is lost. Then, if what we do produce
    is shared —share the cars, share the homes
    share the toys— we’re distributing a
    circular economy over and over. Nothing needs to go
    to the landfill. Every resource is
    always there for us. If we move to the energy internet,
    there’s no reason why everyone on this planet
    shouldn’t be producing their own green electricity,
    right where they are at very low cost
    in 25 years from now, on this exponential curve, and sharing across
    continental energy Internets. And if we go to a car sharing,
    driverless transport grid, we can eliminate
    80% of those vehicles that have taken
    a big hunk of the Earth to put online. This is a plan
    and what we’ve done— a lot of businesses are working
    with us around the world on this— and we say to people,
    “If you have another plan, step forward and tell us
    what it might be to address climate change
    and move the economy.” And I always get silence. ‘Cause the only other plan
    is to stay where we are and that’s taking us
    to an economic crisis and an environmental abyss. But here’s what I’d like to do: I’m gonna turn it over to you. Let’s think about your sensibilities and find out if we can
    come to some common ground on how we can begin to move this
    from this little room out to all the larger communities
    and networks are in. Is that a deal? Who wants to start? Hello, my name is Lena. And my question will be related to
    technological unemployment. What is your take on that? We are moving to
    an automated world. There’s no doubt about it. However, as I said during the talk, we’ve got two generations of
    massive employment, that’s clear,
    to lay out this infrastructure. That’s gonna require
    millions and millions of jobs. We know this on the ground
    as we’re laying this out in Europe right now. It’s a huge amount of jobs. Robots can’t do it.
    AI can’t do it. This is infrastructure shift. However, as this smart digital
    economy and society moves in, it can be run by very small
    supervisory workforces with analytics, big data,
    algorithms and apps —that’s why we call it
    “smart world,” “smart society,” “smart economy.” Then, what do we do
    once we have the smart society in and it’s automated,
    running by analytics? We’re not gonna pay people
    just to do nothing. We already know
    where the employment is going. And that is, as we continue to automate
    the market economy, employment is shifting to
    the nonprofit social economy and the sharing economy
    —we already know that. The nonprofit sector
    is the fastest growing employment sector right now
    in the world. It’s about 9.5, 10% of the
    American employment— paid employments and nonprofit. Why is it heading there? Because, in the social economy,
    the nonprofit economy, and large sections
    of the sharing economy, social capital is as important
    as market capital. And, in this realm —the nonprofit realm,
    the social economy, the sharing economy— it requires human beings
    engaged with other human beings. Machines aren’t only supplemental. We will never have a robot raising a child and interacting
    with them in a childcare center to develop their brain.
    It’s never gonna happen. They may bring the lunch to the kid
    —the robot— but it’s gonna require human beings
    working with those children. And whether it’s
    in parts of healthcare and the knowledge industries,
    in cultural areas, humans with humans. The only other question is, how does this sector
    survive financially? Johns Hopkins University does a study of nonprofits
    in 40 countries every few years. And guess what they found: Over half the income for nonprofits which are one of the
    biggest employers now, comes with fees for services. If you’re doing health research,
    you set up a health clinic. You get fees for services and then you can continue
    to do your nonprofit research. If we get any
    of this transition right, we automate the market, we move to social capital where we can use our minds
    much more expansively, so we can learn to live
    as a human family and steward each other
    steward our fellow creatures, steward the Earth. That’s a much more noble mission. I believe that in order to
    create a better tomorrow, we also need to look at
    rehabilitating our psychology. Yeah, I’m in agreement with you. You know, and I have to say,
    our academic disciplines —I’m gonna step on more toes. The academic disciplines in
    our school systems are so moribund. It’s dysfunctional. We have an internet generation
    that lives one way of life in terms of their mind
    outside the classroom, and another inside the classroom. In the classroom, for example,
    when we think about education, the first thing we realize is the classroom looks a little bit
    like a factory. These big, giant institutions. And the kid comes in there
    in 1st grade —a little boy or girl— and they immediately realize there’s a central authority
    of the teacher, they have to be silent, if they share knowledge
    with each other it’s called cheating,
    and they’re expelled. And they learn that
    their mission is to be efficient, but only in the sense of being
    able to have the skills they need to follow orders and
    tend the machinery of the Industrial Revolution. Yet, an internet generation
    out of school— You’re all sharing knowledge. The whole point of the Internet is
    to share your talents and skills, open-source,
    no intellectual property and begin to crowdsource the
    knowledge of the world together. That is so different than
    what you’re getting in school. So let me say one thing about this. You know what we’re doing
    in northern industrial France? All 7 universities
    have come together and 200 high schools, and the universities are led by
    Catholic University of Lille. Here’s what they’ve done: all faculty now teach
    interdisciplinary so that you learn various perspectives and there’s more than one way
    to look at things and you have to
    share a common language. No silence. Secondly, all the students now
    are put into modules, in teams,
    and they work with their teams and the students have to
    teach each other. The teacher becomes
    a facilitator and a guide, but the students have to
    teach each other. If they share knowledge,
    it’s good—it’s not cheating. Then they learn that
    knowledge is not power and something one possesses
    at the expense of the other. Knowledge is the shared experience
    you have as a social being. And the learning now is clinical. What’s the good of learning if theory isn’t
    brought together with practice? So their learning is clinical. They’ve taken service-learning,
    which you all did here, and they’ve elevated to pedagogy. So whatever you’re learning, you have to apply it
    with your fellow citizens in the neighborhoods
    where these universities are. How do you like that? Catholic University of Lille. That’s the revolution. I believe in the Darwinian theory of humanity being
    more Darwinian than utopian. What would you do about
    basically corruption and fraud? Let me be very clear:
    I am an anti-utopian. If you read my books,
    I don’t believe in utopias. I don’t like utopias.
    I think utopia is are dangerous. Our human spirit,
    the empathic spirit, is designed to show compassion
    to our frailties —our precarious existence. An empathic world is
    never a utopian world. Utopias are
    worlds that are perfect. There’s no mortality, there’s no pain,
    there’s no suffering, and every moment is perfect. There’s no such world. I looked through history
    and it says that the most civilized societies are the ones that can
    move empathy to larger reigns. And there’s a history of that,
    of empathy. So I like an empathic world where we understand
    each other’s frailties, we show compassion with
    each other’s desires to flourish, we reach out to each other
    —and we do this every day. And when someone that we know
    is in joy, or pain, or suffering— We do this with our fellow
    creatures that are in trouble. It’s the empathy that runs
    day to day life, not utopias. And I think George Frederick Hegel
    got it right. He wrote a little passage
    that I read 40 years ago. He said, “Happiness are
    the blank pages of history, because they are
    the periods of harmony.” I thought, “What does that mean?” Over and over
    I kept thinking of it. Well, he’s right because,
    when you read historians and you read their view of history, you think we’re pretty
    pathological creatures. because historians always chronicle the mayhem,
    the genocides, the wars, the redress of
    social grievances because those moments
    are extraordinary, not ordinary. They imprint a stamp on us,
    they move us to fright and flight because they’re so extraordinary
    their remembered for generations. But when you then chronicle
    all of history as if it’s a series of these very very
    dysfunctional episodes in life, you get a pretty dire picture
    of the human race, correct? Happiness of the
    blank periods in history, where most of us, as we evolve our empathic concerns
    to larger social units, our day-to-day life is
    reaching out to each other in some ways to help,
    to show our concern, to provide our compassion. It’s not the few
    —we do this as the multitudes. I’ll give you an example:
    Cooperatives. You never hear about
    cooperatives in business school. There are banking cooperatives,
    and housing cooperatives, and agricultural cooperatives
    instruction cooperatives. In some countries
    they’re the largest banks. They’re the social housing. It’s never mentioned
    in business school, because it’s a different form. It’s people coming together
    and sharing their destiny. This is the true sharing economy:
    Cooperatives. And that’s why
    they’re the engine, the vehicle for the new sharing economy. But they’re never mentioned. Societies that are able to nurture
    the empathic sensitivities that are in our neural circuitry are the ones that don’t have
    to worry as much about the secondary drives, which are brutality, and corruption, and all
    the bad things that go with them. So I have a little bit
    better picture in my mind of the evolution
    of the human race. What I’m suggesting is
    the next stage is biosphere consciousness. As we begin to see climate change
    impacting our entire community, and there’s nowhere to escape, we begin to realize
    we’re part of that community. And so we’re getting
    our younger generations beginning to empathize with our fellow human beings
    and our fellow creatures in one biosphere. This is a hopeful narrative
    of the human race, with all the
    dark periods in between. So I hope you leave
    with that message— At least I believe that
    the history the human race is to overcome,
    and to transcend ourselves, and to empathize
    in larger social units until we see ourselves as part
    of one life force on the planet. I’m Tony. I think you might be
    coming up against something with these new corporate agreements
    that they want to force on us: TPP, TTIPS and so on. But they do seem to contain
    provisions that would put corporations that are
    at an advantage over governments —over elected governments. Well, let me give you
    a counter pose: There’s another kind of
    agreement emerging with very different politics. President Xi and Premier Li
    introduced an idea called “Belt One…” “Belt One Road”
    —the Belt and Road initiative. This is a very different initiative
    because here’s the US trying to isolate
    —if you will—China with its specific agreements;
    corporate led. And the belt road initiative
    is the idea of resurrecting the old Silk Road,
    from Shanghai to Rotterdam. But it requires a
    different sensibility. Originally it was designed
    just to get a railroad across the hinterlands, crossing
    the stands all the way into Europe and The Mediterranean, a route around the southern edge,
    and Italy. But then it quickly
    escalated to a conversation— Wait a minute!
    Europe’s doing “Digital Europe,” the Internet of Things platform, 3rd Industrial Revolution,
    and that— It not only will be in the EU,
    but our partnership regions in the Mediterranean. That’s a billion people market: 500 million in the Union, 500 million in
    our partnership regions in the Mediterranean
    and North Africa. China has a similar plan that
    we’ve worked with with them. It’s identical, called
    “China Internet Plus.” So the conversation quickly
    went to, “Wait a minute! Europe is China’s
    largest trading partner. China is Europe’s
    second largest trading partner. How about a belt road initiative
    from Shanghai to Rotterdam? That’s now in deep conversation, but it requires
    a different sensibility. No one can control the Internet of Things platforms
    centrally, because it’s designed
    to be distributed— that’s the resiliency
    of the system. And so that, if anyone power or any nation
    across the region, you know, is going to
    try to control it from the top, you can’t do it
    because you can go off-grid. And I think all
    the parties are aware of this. And in my dealings
    in Beijing, in Brussels, in Berlin, they’re aware that
    this is a new partnership. It requires collaboration.
    You gotta share. You gotta share best practices. You gotta share
    the science and technology. You gotta get over the suspicion— Everyone benefits in a network. That’s the—it’s not geopolitics. It isn’t, “We control. We close.
    And then we overpower you.” It doesn’t work in
    an Internet of Things world. You have to have it borderless.
    It has to be open. It has to allow you
    to have a distributed ability to go off and on
    when you want, and have block chains. So, I think this belt Road initiative
    is quite interesting because it may not just be for Eurasia. This may be a vision that would be,
    for a millennial generation, a vision that could move
    from the Americas, from Canada and the United States
    down to Chile— then you have really a distributed biosphere infrastructure revolution, not a traditional
    geopolitical revolution. And, therefore, it requires
    everyone to be involved, because everyone’s a player. My name is Denille.
    How do you see your vision and what you’ve been talking about
    affecting large food systems in industrialized countries,
    as well as developing countries? You know how much energy
    the agricultural system uses? About a third of their cost
    —our energy costs. The fertilizers;
    those are fossil fuels. The pesticides;
    those are fossil fuels. The machinery;
    it’s all run by fossil fuels. The packaging, the plastics;
    it’s made out of fossil fuels. The water that they
    have to bring in to irrigate, the electricity grids; run by
    fossil fuel and nuclear power to move the water. So, if you wanna
    take a look at agriculture, it is a huge player.
    Not only that: The fertilizers
    emit nitrous oxides, which are much more potent
    in terms of their impact than CO₂. You know that 40%—I believe it is— of the land that’s used
    for agriculture in the world today is to grow feed for animals? It takes at least 8 pounds of feed
    to create 1 pound of beef. That makes the transport industry
    look like super efficient. It’s the most inefficient system
    we know on the food chain. If you look at pure injustice, you’d have to say the shift
    to a feed grain animal culture and a chemical farming culture
    for pasturing animals is one of the great injustices
    in the history of the world. Some of us live high up
    on the food chain; the rest are denied
    access to the land. We got to turn that around so, in Europe, we are interested
    in organic agriculture. We’re interested in moving from
    pesticides and chemical agriculture to ecological agriculture, where we learn to live with
    the surrounding flora and fauna, and we find ways to encourage
    the flora and fauna to be able to be compatible
    with what we’re growing. In the old chemical world,
    if it moves, kill it. Everything surrounding your crops
    should be killed. So we live in a chemical wasteland
    across the agricultural fields with runoff poisoning our water. It sounds shameful. So we wanna move
    to organic agriculture. We had mechanical agriculture
    in the 1st Industrial Revolution. It started late
    1st Industrial Revolution. We had chemical agriculture
    in the 2nd Industrial Revolution. We need to have smart, organic,
    ecological agriculture in the 3rd Industrial Revolution, and we have to bring back
    regional and local agriculture that supports local communities. It’s absurd to ship
    a tomato around the world. Ridiculous! Hi, I’m Rochelle. I was wondering if you could talk
    a little bit about water. And how water plays into this
    decentralized vision. How the privatization of water
    plays out. I was just hoping
    you could speak to that. There’s only a small amount
    of water on this planet that’s available for human reuse. Less than 1%;
    the rest is not available. There is a deep nexus between
    energy and water that’s never, just never explained. You have to have energy
    to move water. And that is that 8% of all the
    energy we generate in the world —power—
    goes to extracting water, treating water, moving it
    through pipelines in water, and recycling the waste. But you need water
    to move energy. This isn’t well known. And, that is,
    the energy industry uses— Over half of all the water we use
    goes to the power industries. Of all industries, over half. And this will surprise you: In France,
    which is 80% nuclear power, you know how much
    of the water they use for cooling off nuclear reactors
    in France? Almost 50% of all the
    fresh water consumed in France goes to cooling
    the nuclear reactors. Yeah, and when the
    water comes back, it’s heated. So it’s dehydrating ecosystems
    that are already facing drought for their agriculture. And now, sometimes
    the water is so hot because of climate change
    in the summer, they can’t even use it
    to cool the nuclear reactors and they have to
    slow down the electricity. So what’s the nexus? We have to begin to create
    a new plan, so that people get control
    over their water in a distributed system that
    brings water together with energy. I’ll give you an example of why: If the electricity grid is disrupted
    —let’s say one of the transformers, big electricity transformers,
    either through cyber crimes, cyber terrorism,
    or natural disaster goes down and your power goes down—
    there’s no water. We’re dead in three weeks.
    That’s how vulnerable system is. That’s why we have
    to build in resilience by keeping it so distributed. So what do we do? I’m in Hauts-de-France
    a couple of weeks ago. This little startup— They’ve taken a whole
    social housing complex, huge housing complex. They took the whole roof
    and turned it into a cistern. Why did they do that? Because the water falls,
    and as it falls, it generates electricity
    in a turbine. So they’re using for electricity,
    but now we’re saying, “Use it as a cistern.” So if the power grid goes out
    and you can’t get water, you’re dead in a couple of weeks. You have the water right built-in
    to your home office and factory, on the roofs or nearby,
    you can share it in a cooperative. And then that water can be used,
    potable for fresh water. And then we’re now talking
    with companies about… With housing,
    that you can take the water, use it for your toilet water, and you will be able to recycle it
    right back on site. So you can go distributed
    and decentralized when the real power grid goes out. They key to maintaining this system
    is it’s distributed. If anything happens
    in one part of the system, you can go off. Well distributed and decentralized,
    and share your water, share your energy. So water and energy go together,
    and you’ve just hit —and I’m glad you said this— something that has really come to
    the top of the agenda for us now: How do we create a
    distributed water internet to go side-by-side
    with the energy internet? Very cool thinking. My name is Elizabeth and
    I just have a question for underdeveloped countries. How do they play a part in this
    whole 3rd Industrial Revolution? Can they sort of skip the gun, because they don’t have
    an established infrastructure? Yeah, you just answered
    the question I was about to answer. Very good!
    Well here’s what we realize, just what you said. What we finally realized is
    in the developing world, their liability is their key asset. Their liability is:
    they have no infrastructure. That’s their asset. Because, it’s easy to build
    virgin infrastructure, with new codes and regulations
    from scratch, than to take an old infrastructure with old codes and regulations
    and transform it. So what we’re learning
    in the developing world is this can move more quickly. We saw the opportunity
    that the developing world can leapfrog right past the 1st and 2nd
    Industrial Revolution into the 3rd. So the United Nations
    has now embraced the 3rd Industrial Revolution narrative that we’ve just
    talked about tonight. The biggest problem
    in the developing world: No electricity. Ban Ki-moon has made this
    his pledge: Universal electricity. We got a billion people
    that have no electricity. They’re in the dark. We have 40% of the human race
    with infrequent, not reliable electricity. And what keeps women
    enslaved in this world? It’s no electricity. And what we see
    with these big families, in these patriarchal,
    brutal conditions, and male-oriented cultures?
    No electricity. Why? Because, with no electricity,
    women are the slaves, the children of the slaves,
    more children, more hands on deck that can actually
    carry the energy load. We forget the relationship
    between electricity and freeing women in the West. Women were the slaves
    at the hearth until electricity came in. Electricity freed women
    from that slavery, if you will, to go to school
    beyond the first 5 grades, and then electricity
    created new skills that didn’t require
    upper-body strength, but up here. Electricity revolution created
    all sorts of new skills. And, when that happened, as women became more educated
    and more independent, and had the new skills
    of the 2nd Industrial Revolution? Fewer babies. You can give out
    millions of condoms; it’ll make no difference, until you bring electricity
    into the developing world, free the women,
    and you have them get educated, and have them be recognized
    as half the human race. And what’s interesting
    is the women are setting up these micro grids—a lot of it. So, you see it in rural Africa,
    they go into a village —it’s happening in India, too—
    and small startups. They come in, they lease
    a solar panel on each roof. They give you a lease, and
    then they give you a cell phone. This is happening all across rural
    India and now sub-Sahara Africa. But instead of a big centralized grid
    then you go village, to village, to village and you create micro grids
    that are laterally scaled. This is going to take off
    very, very quickly—it already is. This is the smart social entrepreneurs
    of the next generation. This is why I’m really pleased
    to see this happen. It brings confidence
    that we can do better. I’m Ray, and I’ve been thinking
    during your whole talk about how do we overcome monopoly? We have to worry about
    a new kind of monopoly. Now, I’m gonna be honest with you:
    I love Google! It is the magic box! I’m now so lazy that
    anything that comes up, especially in my age,
    I ask the magic box. It is a great research engine.
    However, when everybody needs Google,
    and it’s the only research engine, and it’s our window
    to the research we need, it starts to look like
    a global monopoly, and it starts to look like
    a public utility. What did we do
    with successful businesses that had a product line
    that was so important that everybody needed it,
    and it was a public good. What did we do in
    the 2nd Industrial Revolution with the telephone industry? We, in America—
    In other parts of the world, the government
    took over a lot of it— but in America we kept them
    in the private sphere, like AT&T, but we regulated them as utilities. And we did this across
    the electricity utilities, the many of the power utilities.
    We regulated them. I think it’s naive to believe
    that we won’t do this. The Millennials and your children—
    This is the new political movement. You’re gonna be asking the question: How do we get the best
    out of these new enterprises, but they have to be regulated
    as public goods, in the realm, so that we all we all ensure
    that we get equal access, that we have some control
    over our creative content and data, may be through block chains, and that we’re able
    to secure our privacy, etc. Facebook? Same thing. When the whole human family
    has to come together on Facebook to communicate with each other,
    it’s a great service, but it looks like a public good,
    it’s a utility. And we’re gonna have to have
    some kind of global authorities to regulate them.
    Does this make sense? This is the politics of your generation. This is the politics of the new
    3rd Industrial Revolution. Hi, I’m Carlin. In the words
    of your Wharton alumni, how do we make America great again? Let me say something
    to take us from another corner. President Obama
    wanted a green economy. He spent billions and billions
    of dollars of our tax money for a green economy,
    and we don’t have a green economy. Why did this happen? Because the mentality
    here in this country is all we need to do is
    use tax money to incentivize, ’cause we want a million Steve Jobs. So, what happened
    with President Obama is he would incentivize, give
    some money to a solar factory here, a battery factory over there…
    Incentivize. But you can’t start with that. You have to start with incentivizing
    the infrastructure itself, which requires everybody
    coming together. Now, he made
    a very famous statement during his second
    presidential campaign, which got to the heart of it. You may recall that
    he was speaking of small businesses and he made an offhanded comment
    saying, “You didn’t build that.” Remember this comment?
    It went viral: “You didn’t build that.” And they went they went nuts. He was referring to infrastructure, and he was trying to say
    the infrastructure comes first. Then you can create
    your new businesses with it. The problem is, they went viral
    because the small business said, “No, we create America!
    It’s the entrepreneurial spirit!” We’ve actually so
    dummy down our country that we actually have no idea how businesses feed off
    the infrastructure that come from public-private partnerships: government, industry,
    and civil society. Who do they think
    created the public school systems, so that we could train
    the workforces? Private businesses didn’t do that. Who laid out the interstate highways
    with tax money? You think private businesses will
    lay out an interstate highway system with no lights from coast-to-coast? Who under wrote all the pipelines
    that had to bring in the electricity, the gas and
    the telephone industry? On and on and on…
    In fact, let’s look at Steve Jobs! The fact is that most of the research
    that went into his smartphone was government-funded research;
    he marketed the product! But we’ve so dummy down that half the country or more
    doesn’t want the government to do anything—
    They don’t even want the government. This is the failure of the USA. We do not have a
    social market economy. Europe does;
    other parts of the world do. But, in America,
    we have this whole idea that it’s just
    the entrepreneurial spirit. Let the companies rule,
    let the marketplace reign. This is our death now. Because, if we can’t work together
    in each county, in each state with business, civil society,
    and academia, to lay out this platform and create the regulations codes
    and standards, then the new businesses come,
    then the new models plug in. So what I’m saying is,
    look to the infrastructure. And your millennial generation, it’s up to you now to bring this
    sense of a social market economy back into the dialogue. We need government,
    we need business, we need the civil society, we need public capital,
    we need private capital, and we need social capital. All three equal players
    at the table. So, here’s
    what I will say in closing: I know you get frustrated
    and sometimes you think, “My Gosh, it’s going too slow!” But now’s the time
    to redouble your efforts. We all have to
    really come together. We’ve got one generation
    —yours— to lay down this new consciousness,
    this biosphere for consciousness. Your responsibility to carry this on is the weight that
    no generations had in history. I don’t know of
    any period in history where one generation was
    called upon to save the species. And, if you believe
    this is really happening, and it is, this is actually the responsibility
    of the Millennials in this room. We now have, I think,
    potentially a road map and a compass. It’s gonna be up to
    the younger generations now. This is the digital revolution. You are the digital revolution.
    It’s your turn. It seems to me,
    if the millennial generation is ready to create this
    new digitally connected world, it helps us create peace between
    economy and society and the balance for the planet.
    It should be now. And what you have to do is
    you have to join together in the virtual world,
    in the physical world, on the ground, in the communities, both in the infrastructure
    and the politics, and the social engagement. You got to make this happen. I’ll give you one little mission: How long is it gonna take
    for a millennial generation to prepare a bill of particulars
    for a declaration of human responsibilities
    and stewardship of our human race, our fellow creatures
    in the planet we live in? And then you have
    a billion young people in a cohort in Facebook,
    and they’re all declaring this, then you’re at the table. You’re at the table,
    virtually and physically, and then a billion people strong, you should be able to do this
    in a very short period of time. This doesn’t take
    a lot of organizing. Then you’re at the table,
    with the new potential monopolies. You’re at the table
    with the governments who would purloined
    this for their own ends. You’re at the table
    with the special interests —they want to drag us back
    to the 2nd Industrial Revolution. Come to the table.
    Make it happen. Pass on this legacy, so when your grandchildren
    look back at you they can say you did the right thing: You helped replenish the planet, got us off carbon, helped show our proper respect
    to generations not yet here, including our fellow creatures. Thank you. Good night. Join us. —Hi.
    —Hi, I’m Kelsey. I study Design and Technology.
    What I wanted to say is that— —You’re at Parsons?
    —No, SVA. But, like,
    the real problem is that, a lot of people
    who have this passion and who, like,
    really do care about this stuff— We’re getting purchased out, and… —Yeah.
    —So, the real thing is, like, everyone doesn’t have
    the same enemies. Like, the people who really care, like, they’re going
    to be purchased, and they’re going to end up
    working for someone, somewhere, and they’re gonna feel like
    they have to compromise. Yeah, I understand…
    Well, it’s a delicate game every day. You know, as you get older
    you have to think about what is— Life goes really quickly. And, if one doesn’t have
    the commitment at 25, you’re not gonna have it at 50. And, this time,
    we need a generation that can stay close to the mission
    all the way through their life, and pass it on to the kids. And I understand how
    difficult this is. Believe me. Hi! Thanks for coming. Thank you so much for this
    —very enlightening. —My pleasure.
    —Is there any recommendations on how to get more involved
    at a local level? Brooklyn’s ideal.
    Brooklyn should be the place. Absolutely! This is where
    a lot of the startups are. I 100% agree with you. I interviewed like 30 people
    for the documentary I worked on, including Global Dryden,
    and they all are optimistic long-term. I’m only guardedly hopeful
    that demographics is on our side. It’s called “the Millennials.” Millennial generation
    is more sustainable, more ecological oriented,
    but I think it’s an uphill battle. As Thomas Paine said, “Every generation must recreate
    the world anew.” The digital generation;
    you’re there. Do it! You don’t need to look back
    at those who are our history. Look to the future of
    what you want for your children. —Hi! How are you?
    —I just wanna shake your hand. Thanks for coming. So, zero marginal cost is possible
    if the data centers are for free. —Yeah.
    —We need it! Well, you have, you know—
    it’s Wikipedia. They do nonprofit,
    they get contributions, it’s tough, but they make it
    because enough people believe in it. Or you look at Blah Blah Car Etsy. They’ve done it with
    a little bit commissions. Look at Patagonia—
    they’ve become a benefit company. And they say—
    There are eight or nine states that passed legislation now saying, “Look, if you’re a benefit company, profits don’t have to be
    a first motive; therefore you won’t risk
    hostile takeovers. So there’s a lot of stuff moving,
    but it’s difficult. So are you—
    I encourage you to do that. Take some risk.
    Don’t sell out. That’s what I’m saying.

    Why Iceland Imports Ice
    Articles, Blog

    Why Iceland Imports Ice

    August 22, 2019


    This video was made possible by Squarespace. Build your beautiful website with Squarespace
    for 10% off at squarespace.com/HAI. Chances are that somewhere on the internet
    you’ve heard the “fact” that Iceland was named Iceland by its viking settlers to
    stop their enemies from coming to the island. Well, that fact is about as wrong as pineapple
    on pizza. The truth is that the first norse settler
    of the island was feeling a little bummed out upon arrival since his daughter and livestock
    died en route so he just stayed for the winter before returning to Norway and, since the
    particular area he stayed in happened to be icy he figured all of the island was icy and
    therefore called it Iceland. Of course that’d be as absurd as, you know,
    seeing that the sidewalk was flat and deciding the whole earth must be flat, or something. Iceland is cold and has plenty of snow and
    ice during the winter but as a whole, the country is fairly green. Still, for such a northern and wintery country
    the idea that it imports ice is pretty absurd. Nonetheless that is reality but Iceland’s
    ice importation has a surprisingly rational explanation. Now, taking ice from one place and selling
    it in another is nothing new. El Chapo was great at it but as it turns out,
    centuries ago people’s refrigerators didn’t have ice dispensers. For the majority of history people just dealt
    with having warm drinks like cave-people but when the 19th century rolled around that all
    changed. An entrepreneur named Frederic Tudor started
    taking ice from cold places like Maine and selling it in hot places like Cuba. Genius, right? Only problem, ice melts. Frederic understood this and insulated his
    cargo with sawdust and, with enough ice, at least some of it would make it through the
    1,600 mile journey from Maine to Cuba. At first Frederick received a frosty reception
    from the hot place people as they were doubtful that they needed ice so Frederic channeled
    his inner drug dealer and gave them their first bit of ice for free to get them addicted. Soon, business was booming. Now, places like New York and DC get too cold
    in the winter for people to want ice but in the summer, they too get swelteringly hot
    so Frederic wanted to make a way to be able to sell ice in the mid-Atlantic summers. Really the only solution was to take a whole
    lot of ice, put it in an insulated building, and hope some of it lasts until summer and,
    crazily enough, that worked. Most of North America started to rely on ice
    so it was time for Frederick to take the ice trade intercontinental. The rest of the world also had hot places
    like India so Frederic Tudor set up a regular shipment of ice to Calcutta, India which became
    hugely popular with the rich English colonialists who were used to cooler temperatures. Amazingly, he had the process refined so well
    at that point that the ice from New England was selling in India for, adjusted for inflation,
    only $1 per pound. Soon after, ice from New England was shipped
    and sold in London, in Rio de Janeiro, in Cape Town, in Hong Kong, the New England ice
    even reached as far as Sydney, Australia where it sold for only $2 per pound. So, was it a coincidence that the climate
    starting rapidly warming only a century after the world’s elite started using ice shipped
    from the other side of the world by steamship all so they could have a chilled beverage? I’m not saying the ice trade singlehandedly
    caused climate change, but it certainly didn’t help. Of course, with time artificial refrigeration
    became cheap and widespread but not before making Frederic Tudor a very rich man. Iceland today, despite what some may think,
    is not some backwards heathen society that shuns the use of refrigerators. Its importation of ice has to do with something
    else—economics. You see, Iceland is a very expensive place. Like many isolated, northern counties, Iceland
    relies on imports for many things like oil, wood, wheat, and other food. It just doesn’t have the ability to produce
    these items domestically due to its geography but shipping to Iceland is also relatively
    cheap since its economy is export-driven. While fish is Iceland’s biggest export this
    is mostly shipped by plane but the country also has an enormous aluminum industry thanks
    to its low electricity cost. Aluminum, along with most everything else
    Iceland makes, is exported by ship which means that there’s demand for shipping from Iceland. That means that ships are already coming to
    Iceland to bring items elsewhere so its relatively inexpensive to fill those ships with other
    goods to bring to Iceland. At the same time, the average Icelander makes
    about $57,000 per year, it’s one of the highest income countries in the world, so
    that means making things in Iceland, in most cases, is expensive. If you go and check your handy dandy Icelandic
    schedule of tariffs, though, you see that water, ice, and snow have no import duty if
    imported from the European Economic Area. Therefore, Iceland imports ice from other
    less expensive countries in the EEZ such as Scotland and the only additional cost is the
    cheap shipping. While there are plenty of other countries
    that don’t charge import duties on ice, there are few that have the mix of high domestic
    labor costs and cheap inbound shipping that make it worth it for Iceland to import ice. That’s why Iceland’s grocery stores are
    stocked with this imported ice from hundreds or thousands of miles away as it ends up being
    about 40% less than Icelandic ice. If you want to sell a different kind of ice
    you definitely need a Squarespace website. You can build a fully functional online store
    within minutes using their website builder so you can put all your attention into building
    your ice cream empire. In fact, if you run any sort of business whether
    that be a brick and mortar store, a podcast, a youtube channel, or anything else you want
    to make a great first impression for your potential customers and Squarespace helps
    you do that because their beautiful designer templates make it easy to build a website
    that looks great. Best of all, you can start building your website
    for free at squarespace.com/HAI and then, when you’re ready to launch, that same link
    will get you 10% off.

    Is Raising Minimum Wage A Bad Idea?
    Articles, Blog

    Is Raising Minimum Wage A Bad Idea?

    August 22, 2019


    There’s a movement in cities across the
    country to raise the minimum wage to $15 per hour. One of the most prominent advocates
    is former labor secretary Robert Reich who thinks that $15 per
    hour should be the minimum wage for the entire country, this is a bad idea. Here are three reasons why,
    first of all, it would kill jobs. One of the basic lessons of economics is
    that when the price of something goes up, people buy less of it, so, if the price of pumpkin lattes rises you
    can expect consumers to buy fewer of them. This law of demand also
    effects the market for low-skilled workers,
    raising the minimum wage means a higher cost of employing each worker which makes
    workers less affordable than before. Our coffee shop won’t keep a worker at
    a mandated $15 per hour if that worker’s efforts only result in $7.25
    per hour in added revenue. Over the course of the year, a shop
    that keeps such a worker full-time would lose $15,500, so instead,
    it would eliminate that job and evidence shows that employers in fact do
    respond in this way to minimum wage hikes. Recent research by economists
    Jeffrey Clemens and Michael Wither finds that 1.4 million jobs
    were destroyed in the late 2000s when the minimum wage rose across all 50 states
    by an average of nearly 30%, and worse, those job losses were probably suffered
    by the people who need jobs the most. This fact brings us to reason number 2, the minimum wage actually hurts
    the people we most want to help. When the minimum wage rises, the workers
    fired first and the ones hired last are those who employers judge to be
    the least productive, the inner city teen from the lousy school district or
    the immigrant with poor English will be fired before the suburban American
    teen from the excellent school district. So those who are most disadvantaged, tend to suffer the most job losses, this
    reality is compounded by the fact that raising the minimum wage causes
    more competition for jobs. A supermarket job that once paid $8 per
    hour draws more applicants when it pays $15 per hour, applicants who include
    retirees, and people with higher education who reenter the workforce only
    because of the higher wage. Because these people often have more
    skills, they squeeze out immigrants and those from disadvantaged backgrounds who
    are likely more desperate for the jobs, and certainly more desperate
    to gain job experience. The third reason is that minimum
    wage hikes aren’t necessary to give deserving workers raises. 96% of American workers today earn wages
    higher than the current minimum wage, which proves that employers don’t just
    pay the minimum that they’re obliged to pay by law. Employers respond to the value
    that each employee adds, so they can retain the best talent. It’s expensive to train new employees and businesses don’t wanna lose good
    workers to their competitors, so they raise worker pay voluntarily as
    employees gain more skills and experience. But when government imposes such
    raises by hiking the minimum wage, some of the least experienced workers
    will not only lose their current jobs, they’ll find it incredibly
    hard to find other jobs. In essence, the minimum wage cuts off
    the first rung on the employment ladder. And it’s that first, lowest paying rung,
    that provides the skills and experience workers need to
    reach the next rung, and to continue climbing their
    way to a better life.

    Why Is China Investing Billions in Africa? | NowThis World
    Articles, Blog

    Why Is China Investing Billions in Africa? | NowThis World

    August 22, 2019


    China has invested billions of dollars into the continent of Africa to build massive infrastructure projects. Much of this infrastructure is part of China’s Belt and Road Initiative, an estimated 1 trillion dollar plan to connect the country to trade routes all over the world. African leaders like Kenya’s Uhuru Kenyatta have favorably compared China’s investments to earlier projects built by colonial powers. While the old railway was built by force and violence against the wishes of those whose land it divided, the new railway is built by consent and partnership both between ourselves and China and between the governments which will prosper and profit by it. But is China’s investment in the continent actually a “win-win” as some African and Chinese leaders have said? Or just a new form of colonialism on a continent that’s experienced so much of it? In this episode, we’re examining China’s Belt and Road Initiative and what it might mean for Africa. While China’s Belt and Road Initiative was only proposed in 2013, the country’s first infrastructure project on the African continent was built decades ago. The Tazara railway, completed in 1976, was built to connect copper mines in Zambia to Dar Es Salaam, Tanzania’s former capital. The Tazara railway was the first infrastructure project built on a pan-African scale. China’s Belt and Road projects will be designed with this scale in mind, creating new trade routes within and between African countries. In 2017, a Chinese firm opened a railway network in Kenya, connecting its capital Nairobi to the port city of Mombasa. There are already plans to extend this network into South Sudan, Uganda, Rwanda and Burundi. China, through its public and private sectors, has already loaned about $132 billion to African countries from 2006 to 2017. Many observers worry that African countries won’t be able to pay back these debts, placing them in what’s been called a quote “debt trap.” The Jubilee Debt Campaign, which campaigns for poor countries’ debts to be canceled, estimates that about 20% of debt held by African governments is owed to China, making it the single largest lending nation. For comparison, 35% of African debt is owed to multilateral, global institutions like the World Bank. Earlier waves of Chinese firms that invested in Africa made mistakes that caused problems for those countries’ governments. Starting in 2005, tens of thousands of workers from China poured into the west African country of Ghana to take advantage of a gold rush. This eventually provoked a local backlash due to accusations of illegal mining, inflaming tensions between Chinese miners and the local government. Many observers have pointed to projects like this as examples of China exploiting Africa for its natural resources through quote “neo-colonialist behavior.” However, other observers contend that the majority of investment from China has largely avoided creating the problems seen in Ghana’s gold mines, precisely because resource extraction has not been the main focus of other investments. In fact, the number one industry for Chinese investment has been the service industry, according to IMF economist Wenjie Cheng. She also points out that the countries where China’s investment has been largest include those without abundant natural resources, such as Ethiopia and Kenya, in addition to resource-rich countries like Nigeria. Ultimately, African governments may feel that the risk of accumulating debt is outweighed by the benefits of new infrastructure. The China Africa Research Initiative found that roughly 40% of China’s loans between 2000 and 2015 went towards paying for energy projects and another 30% went toward modernizing transportation on the continent. These loans were set at relatively low interest rates and with longer periods of time to pay them back. The Center for Global Development crunched the numbers on debt to China as a result of the Belt and Road Initiative, and found that eight of the 71 countries involved in the project were particularly vulnerable to getting caught in a debt trap. Of these eight countries, only one was in Africa: Djibouti, a port country that’s also become a military strategic point for China. The other seven countries are in Europe and Asia. Nevertheless, China has denied engaging in “debt trap” diplomacy. In an attempt at thisto strengthen this collaboration, China has also promised to align its goals for the Belt and Road Initiative with the African Union’s own development goals of greater interconnectivity on the continent. However, these promises have yet to be outlined. Ultimately, China’s push in Africa may be seeking to increase the country’s influence, rather than reap financial gains. Its investments are already strengthening China’s alliances with African governments, to China’s benefit. Every African country but eSwatini, formerly known as Swaziland, has cut ties with Taiwan, a prerequisite for diplomatic relations with mainland China. Some observers think that as African countries rise economically, they could actually have the upper hand by the time they negotiate payments back to China. This explains why African leaders have been so confident in calling Chinese investment a “win-win,” but only time will tell if their long game pans out. So do you think China’s investments in Africa will be a boon to the continent, or are they a form of neocolonialism? Let us know in the comments below. Thanks for watching NowThis World, don’t forget to like and subscribe.