Fighting to the Bitter end
The excellent Mani Basharzad – why is he still only a JUNIOR research associate? – has written a great article about the opposing forces that shape economic history. As he says we have the proletariat against the plutocrats, the statists against libertarians and so on. Quite rightly he ascribes economic progress to cooperation between different groups. The problem we have at the moment is that Group A wants a bigger share of the cake and will impose whatever strictures it needs to gain this. The problem here is two-fold. It immediately makes the rest of the cake smaller for everyone else and it disincentivises the winners from making things better. Those with a fist clutching their share of the cake will for sure never want to see their share go down. What they often fail to understand is that a bigger cake benefits everyone, not least themselves. Sadly, our politicians simply don’t understand this, DESPITE telling us they are focussed on growth. No, they aren’t – they are focussed on getting as much of the cake as they can into their own hands.
Mani is involved with the LSE, my old Alma Mater, and keen to know more about how Hayek and Robbins were seen in the 1960s and ‘70s, versus John Maynard Keynes, and he very kindly asked me to send him a few lines on the subject. I should mention I was there at the time of all the student unrest in Europe in the late ‘60s and had the distinction of being there with Danny Cohn Bendit and Tariq Ali, but also Mick Jagger for a bit. Keynes famously said “When the facts change, I change my mind”, which was ground breaking and revolutionary. The one thing I may have learned in my life is that there is no point continuing to do the same thing over and over and expecting it to be different this time. One of the notorious Stock Market saws is that “It’s different this time.” No, it isn’t. It’ll be exactly the same if nothing has been changed. So you better change your ideas if you want something to work.
For reasons I have never understood, people get “bees in their bonnets” and drive those ideas to destruction. I have long believed that the world is driven by cockups and every now and again something is cocked up to such a monumental extent that it actually works. I am always reminded of how Viagra came about. About to be scrapped as a failed blood thinner (effectively) someone noticed all the men walking about with erections. Of course, someone had to have the nous to spot this was a definite win. But it was probably touch and go at the time. You never hear about what people thought until they have a good news story to tell and can inform you that it was their genius to spot whatever it was. In this case, tents at the front of men’s trousers was a bit of a giveaway.
And so it goes. Rachel from accounts continues to destroy the economy. You’ve probably seen that the present Governments policies have added nearly £30,000 to each and every new build house. I sometimes think our politicians of all persuasions should have to undertake a course in what economics IS and what it can do. They should certainly have a course on the Laffer Curve and have to answer an exam paper on it. Mani Basharzad has done a bit of a straw poll to various economics students and graduates and not one of them was taught anything about the Laffer Curve, which I found extraordinary. Politicians should probably have to study the MONIAC/Philips machine as well which I saw as an extra-curricular activity in the ‘60s. It was specifically designed to teach Keynesian principles. The thing I loved about it most was that lots of it worked perfectly – but every now and again something would throw it off (a spigot opened or closed randomly led to different outcomes in unexpected ways). But isn’t that just like the real economy? The one thing that remains with me to this day was the “cycle” that Keynes espoused. To prime the engine the Government sometimes had to spend money it did not have by borrowing and spending both for investment and consumption (the right consumption obviously). Gordon Brown in particular has suborned the idea of investment which he ranted on about when all he actually meant was spending. The second half of the equation – as the upswing took hold, the government clawed back what it had spent – has been completely forgotten about, certainly in the UK and to a lesser extent the US. Which is one of the many reasons we are in such a mess.
So maybe the whole digital and tokenisation economy is a reaction to all the mess being created by traditional methods. Without a doubt it offers huge advantages over the Tradfi system, which must by now have reached a point of no return in terms of usefulness. From being able to make cross border payments instantly and for very little to holding the truth of a situation unalterable forever should at the very least make you think that blockchain is the greatest thing ever. I know blockchain at the moment is not being regarded as the bee’s knees, but I believe that is to a large extent because it has simply taken over. People talk about tokenisation without understanding that the blockchain is what makes it possible. As a result, they dismiss it as if tokenisation stood alone.
The other thing I was reminded of the other day is that lots of people have wonderful, disruptive, ground-breaking ideas. But if they don’t make something better and nobody wants it, it will never make a profit. And despite what some people might think, turning a profit is an absolute necessity for sustainability and longevity. What is needed is validation. In case you don’t know this means taking the idea to the companies or people who you as the inventor think will use it. And more importantly PAY for it. There are always arguments about how many validations you need but you will very quickly get a feel for whether you are on the right track or not. Which is why I’m always astonished by politicians pushing their pet project and alienating their fan-base. They, of course, have not asked anyone. Plus ca change.
