Category: Pure Pro Commerce

I was trained as an economist but have never practiced as one.  

I’ve observed three unexpected economic phenomena from the Covid lockdown. 

First, about 50% of the labor force works for businesses with 50 or less employees.  These businesses, 50 and under, were the most hard hit by the Covid restrictions. These include sole proprietors, grooming, exercise, yoga-type classes and much retail such as flower stores and restaurants.  Total employment in the U.S. in 2019 was 163 million people. For the whole Covid year of 2020 that dropped by 2 million to an average of 161 million.  

The GDP for 2019 was $21.4 trillion and the total for 2020 was $21 trillion. 

Lesson: The 2 million people who worked in 2019 but not in 2020, due to Covid restrictions, produced 1.9% of America’s GDP.  Nearly all of them were in businesses with under 50 employees and were considered ‘non-essential’ by the Covid definition.

Large businesses with economies of scale turn out to be the main source of U.S. productive wealth.

The U.S. economy is very robust and barely affected by a pandemic.

Second, the U.S. economy generates net income from overseas. This is regardless of the domestic economic output.  Roughly 2.4% of our GDP comes from our net foreign dealings.  This net income from overseas was constant in 2020, which explains why areas receiving income from the global Internet in places like California, particularly San Francisco and the S.F. Peninsula saw tax revenues and home prices rise.

Third, the Trump deregulation was a long-term power in stimulating the economy.  There is no convincing evidence of this. I have only two weak pieces of confirmation.

• One is my thirty years of consulting to over 1,500 small businesses and roughly 500 larger companies.  It is clear to me that regulatory restrictions are a significant  burden on business growth and innovation. 
• Another is my knowledge of business cycles dating back to the Civil War.  The current recovery is 132 months long, so far. The longest American recovery, indisputably.  The longest previous recovery was 120 months from 1991 to 2001. That previous recovery was generated by the end of the Cold War that released vast resources from the U.S. military. 

There have been several bursts of American commerce over the past 170 years.

Four factors have caused this: Escape from the elites in the U.S., Innovation, the End of the U.S. Elite and Market size.

As I have pointed for several decades, the elites of the world have repressed innovation. Elites are the prime beneficiaries of the status quo.  They have preferred, everywhere, to maintain their elite status by passing on wealth and power in commerce to their eldest sons.  

The Great Western opening in the U.S. from 1830 to 1940 allowed the second sibling and other siblings of the East Coast elite to move West.  In Europe the vast new British, Dutch and French empires allowed the escape of the elite offspring to success in the far flung colonies.  This was most important in India.  In the colonies new channels of commerce were opened by entrepreneurial offspring which created vigorous companies and brought new commodities and new markets to Europe. The most important singular example was Hong Kong. 

The 19th century saw the first great expansion of commerce. With global economic growth in orders of magnitude.  The same was especially true for the U.S. with its unbridled free population.

The extraordinary growth of global commerce stimulated innovation in the application of non-human power to textile manufacturing, transportation and farming. Retailing saw the invention of department stores, new foods and new materials on a vast scale.  The ‘corporation’ was created based on new extraordinary economies of scale along with an associated whole range of new financial instruments.  

Europe saw the exodus of millions of people, non-elites, to create new wealth of the U.S. 

Historically unprecedented new wealth exploded in the U.S. and much of Europe for the new railroad owners, the new financiers and many of the old elite families.  A colossal global middle class was created for the first time in the U.S. and much of Europe.

The combination of fresh markets and innovation created a distinct unique new world of commerce. Automobile, steel and oil industries exploded at the beginning of the 20th century.  Much of the great new commercial wealth brought the U.S. to global preeminence. The demands of World War I expanded commerce even further within the global trading system.

The innovations in sanitation that began in the U.S. in the 1840s spread around the globe and with new drugs in the 1940s and 1950s led to a population explosion from a billion people to many billions.

World War II left much of Europe destroyed and the newly positioned American suzerainty to standardize trade norms and trading rules across the globe.  The best example is the American airline industry and global use of English in the airport world. The same was true for telephone, media and accounting standards.

The greatest historical commercial explosion arrived in the early 1950s with the rise of non-elite business leaders and the subsequent, 1960s, fall of the American elite. The resulting expansion of American technological rules of trade and a new meritocratic business class led to a detonation of global commerce with America as the commanding power.

The adoption of American technology brought Japan into world-class levels of commerce with further expansion of global commerce.

From the 1960s to 2000 the entire shape of American commerce changed with the top 50 corporations becoming a wholly new top 500 corporations and a steady growth of finance in the American stock markets.  Fortunes were made in the new markets for Walmart, transport companies, computer software and a thousand other businesses.

The American innovations in computers and the associated global Internet, by the 21st century, brought a novel world market to the fore.  The global market that is reached by the Internet created a fresh commercial boom in the new century with still more fortunes.  Billionaires emerged by the thousands.

By the end of the 20th century, a commercial revolution in China brought a fresh global trading force to the market with Japanese technology and a whole new Chinese domestic leviathan.

That is where we stand today.  

I was eight years old at the end of World War II.  I have lived in the happiest era in human history. My life has been bountiful.  I’ve travelled the world for seven decades in the modern world of global airlines and lived many years abroad. The whole planetary adventure was at a cost of one or two earlier transAtlantic steamship trips.

I’ve owned homes, raised successful and happy children who have raised spectacular children of their own.  We have all had medical confrontations that would have maimed or killed us in the era before I was born. Our health has thrived.

I’ve lived fully in the era and enjoyed telecommunications, computers, private airplanes, a wide range of technologies, the abundance of food and the most exquisite culinary joys ever known to mankind.

I have created many new businesses, including creating Mastercard the basis for the first global currency. Which I used to travel from the old villages of Indian untouchables to open markets with European goods in the most remote inner towns of Cameroon.

I lived in San Francisco, the capital of the hippie world, as a healthy male, during the twenty year sexual freedom experiment.

I uniquely enjoyed the prosperous world around me.  I got to wallow in the abundance. I earned my own living from age 17.   My only financial inheritance was under $40,000 when I was 37 years old. I supported my parents in their old age.  For most of my life I was self employed and did what I wanted everyday and every hour. I had many hundreds of beloved friends (and still have many) and an abundance of fascinating lovers.

Nothing I did has been secret.  I’ve written more than a dozen books based on my experiences and over five thousand blogs.

This has been possible for only one reason: I have lived in America during the most successful commercial period in world history.  The Cold War kept the Marxist anti-American Left out of power in America during those decades.

I believe anyone, with an adventurous nature, born during my lifetime could have enjoyed what I have. My last book was an homage to the sources of America’s commercial triumph. The Most Important Book in Human History.  It explains for all who are willing to listen; the sources of American innovation and greatness. Our meritocracy.

Blessed is he who appreciates what we have, understands it’s exceptional nature, its fragility and fights to protect it for our children.

This is the beginning of November and a horde of more than 10,000 people are travelling from Central America to the U.S.

Some people have suggested that these people should turn around, overthrow their own governments and create their own decent economic society like ours.

This is where my analysis in The Most Important Book in Human History comes into play.  Few people understand why this horde can not go back and re-create the U.S. The U.S. was an anomaly.

A modern commercial society requires widespread meritocracy.  All Latin American countries have extensive hereditary elites that blocks meritocracy.  I have seen this in Guatemala where the elite all live in one neighborhood.  Nobody knows how to get rid of an hereditary elite. Communists in
Russia, China, Cuba and Cambodia have tried by murdering them.  That seems to have failed.

America was an accident of a large continent and  World War II that promoted meritocracy. England had the far reaches of an empire, where the meritocratic sons were sent to be administrators.  Israel has a unique military that is hi-tech and needs meritocracy.

We have no answers.  Chile may be an example of open commercial markets bringing jobs and modernity to an otherwise traditional ‘patron’ society. Chileans get modernity but no innovation.

No one has an answer, that I know of.

The real problem in the world is that modernity was an accident.  

We don’t appreciate that.  So comments like ‘the arc of justice bends towards…’ reflects all the forces of government, tribalism, hereditary status and status quo that kept the modern world from happening for the past 2,000 years.

Tribalism and hereditary elites have been and still are the powerful forces in the world that have maintained the status quo all this time.  Science and its real driver, technology, will not change the world enough to create or maintain the atmosphere of modernity and modern commerce.

Note that a brilliant computer was built by the Greeks nearly 2500 years ago (antikythera) and that didn’t bring about modernity or modern commerce.  The same is true for moveable type, paper, gunpower, number theory, decimal fractions, modern math, diabetes treatment, modern geology and astronomy that date back hundreds and thousands of years in China with no sign of modernity or modern commerce.

Science and technology don’t have their own momentum in a society that is tribal like most of the human groups on the planet.  It certainly has no chance in well developed societies with hereditary elites like most of the rest of the world; where the elites maintain the status quo like Paris.

It requires that humans be free from tribalism and hereditary elites.

England provided the first escape with the management of their commercial empire which sent talented men outside of the hereditary elite off to faraway places where their talent emerged.  Then America did the same with its rebellion and the great freedom of moving Westward to an open continent. Hereditary elites were thwarted and modernity had a chance to thrive.   None of that can be duplicated again.  America, the stepchild of England, and its commercial empire, will not happen again.  It can not happen in a settled static world.

Israel is the closest modern similarity to America and It may have a problem escaping an hereditary elite in such a small territory. Israeli's coming to America's West Coast may be a source of survival.

Nowhere in the world can you create a start-up culture like America. Nowhere like the San Francisco Bay area, the West, where there is no hereditary elite, where the Westward escaping hippies brought optimism and a love of commerce and innovation.

The 'arc of history' is filled with (1) the death culture of Marxism (tribalism converted to government tyranny), government regulation and (2) social climbing that is almost biological and perpetuates hereditary elites.

The accident of America can be destroyed by government regulation which the ancient forces of tribalism and the modern Left seem to carry in their genes.  Modern commerce can come to an end.  The human desire for status quo can do it.  Envy helps too.

I’ve done business consulting with several thousands business, many start-ups.  Every day businesses struggle with government regulation and entrepreneurs typically quit from exhaustion.  Not from new technology and new competition but from the exhaustion of coping with endlessly stifling government regulation.

Donald Trump the first real businessman to become president explained the black death of government regulation in his speech in Poland in 2017. 

That is why I worry about the survival of modern commerce.  The greatest and most beneficent accident to befall the human species.

One of the standard complaints about modern commerce is that it creates large differences in the living conditions of the ‘haves and have not's.  Between the successful middle class nearly everywhere and the persistent poor found in  almost all prosperous nations.

This is a serious confusion of two separate and independent factors.

Modern commerce rewards some disproportionately more than others.  The distribution of wealth and income is a steep curve with a tiny percent of any nation's people at the top and the majority at the bottom.  Much like the natural world where there are billions, maybe trillions of insects and only millions of  creatures larger than humans.  Where there are billions of dandelions and only millions of large trees.

But this observation leads to confusion.  What modern commerce creates is the divergent distribution of wealth and income, it is government that determines the number of any nation’s population that lives in poverty.    The best example is Singapore, an island like nation, with five and a half million citizens in a super-successful modern commercial world with no poverty. No poverty because the government decrees that there is to be ‘no poverty’.

Some Scandinavian countries have little measurable poverty and virtually no visible poverty while being successful modern commercial nations.

Poverty is the responsibility of government, not modern commerce which generates abundance but does not determine its final distribution.

I have explained that the modern world is the by-product of modern commerce.  Not science, technology, medicine, economic growth, government, capital or religion…. It is only the by-product of  modern commerce.

I have shown that modern commerce is made up of three distinct types of business; trade, clientry and industry.  Only industry has created and been an integral part of modernity.

The distinct attributes of modernity and the sources of vigor for modern commerce are meritocracy, diversity and openness.  These developed in nations with institutions of law and finance that made trust pervasively available with their structural openness (courts and banks). That modernity was able to thrive in the world of aggressive colonial trade and the expansion of the American West where the meritocratic sons of fortune could escape their hereditary elite families.  Lastly, the mixture of institutions that favored openness among strangers (Free Masonry) that promoted meritocratic values and generated life in truly diverse urban communities were the fertilizer for the thriving of modern commerce.

All of this is new to most people.  It is also fairly obvious to most people when they reflect on it.

There is a less visible reason that modern commerce is a stunningly successful human creation which has brought us such extraordinary benefits in such a short time (two hundred years). That reason is that modern commerce is driven by evolution of the Darwinian type.

Darwinian evolution is composed of two elements: change in the existing conditions and selection of the desirable changes.  That is a perfect description of modern commerce. Business is constantly in flux and constantly moving in the direction that favors individual needs, tastes and desires.

Everything in modern commerce evolves.  The 1,000 square foot local food outlet in 1860 with barrels of goods and a proprietor has evolved into a vast chain of supermarkets with hundreds of thousands of square feet each, tens of thousands of packaged goods and hundreds of thousands of employees.  The airplane has evolved from a one person kite using a one cylinder gasoline engine with wing and tail controls to a 400 person behemoth that flies thousands of miles at hundreds of miles per hour in all weather as part of a global corporation transporting millions of strangers every month.

Businesses evolve.  They are born in the flux of market changes, sometimes infinitely small like a river changing its course.  They grow then they appeal to customers and they die when they become part of a bigger consumer driven corporation or they shut their door.  In the United States at the beginning of the 21st Century there were over half a million new businesses started and only one-third of them survived ten years. Evolution gives new life to the world of commerce and continually improves the lives of its beneficiaries.

Commerce in the modern world thrives on evolution and creates a wonderful variety of products, services and livelihoods.  Just as evolution creates a nearly infinite variety of species in the natural world from which we all enjoy the benefits and some distresses; it does the same in the modern commercial world.

There were many elements that went into the first successful trading nation.  Holland in the 1600’s was the first major global trading nation.  Trading posts had been developed on sea lanes by the Phoenicians, the Vikings, the Chinese, the Viennese and specifically in the North Sea region by the Frisians (the main source of the English language).  Bookkeeping, a vital element came from Milan.

Holland, focused on Amsterdam, in the 1600’s was the source of government bonds markets, international shipping insurance, the stock market and other open bidding markets and importantly salaried tax collectors (source of trustworthy tax collection).  The Dutch were a unique people on the planet.  They had created a representative democracy with elections of many offices; the Dutch Republic united the Netherlands with seven provinces.  It was founded in 1581.  

The Dutch were noted by all visitors in the 1600’s as the most egalitarian people on the planet.  They were also the most tolerant.  They had absorbed the Jewish exiles of the Spanish Inquisition of Spain and Portugal.  Amsterdam in the 1600’s was the center of technology, the center of the Enlightenment and the center of publishing in all of Europe.  (See Jonathan I Israel's, The Dutch Republic) 

The Dutch military conquered England in 1688 and transferred all the major financial institutions to England where the Dutch Head of State, William of Orange and his wife, became the King and Queen of England, William III and Mary.  With the English Parliament that welcomed them, they create the Bill of Rights of 1689 the major source of modern English law.

Holland was prosperous in the 1600’s as was its settlement in the American colonies, New Amsterdam later New York.  New York became the source of most American financial institutions and with the creation of the United States and the American Constitution it became a central financial force.  New York’s representative Alexander Hamilton played a major role in building modern financial ideas into the structure of the united 13 colonies.

England with a much larger population, with the Dutch financial tools, became the largest global trading nation from 1700 until 1945.

In the history of commerce these two giant international commonwealth’s, England and Holland, generated an entire future generation of entrepreneurs and giant trading businesses.  The Dutch and British colonies were gigantic new markets and training stations for homeland officials.  The colonies created entrepots were the second and third sons of the hereditary elites could find important positions of power.  The beginnings of meritocracy.  The colonial cities also provided great ‘diversity’ in the commercial meaning of that term.  Colonial networks were the origins of modern commerce.  Colonies created markets for Dutch, British and other local goods and the navies to transport them.

England is considered the original home of the Industrial Revolution as water power and steam power were introduced to accelerate wool, cotton and ceramic production lines. The revolution soon moved to the rapidly expanding United States in the 1850’s with the expansion of the West that allowed the meritocratic offspring of the Colonial States hereditary elites to open the vast new reaches of America along with the commercial settlements created by the soaring number of immigrants from the entire world.

Three other ingredients played a role in this historic development of industry.   

The original Free Mason Grand Lodge was founded in London about 1720 and spread around the world by the end of the 1700’s.  Free Masonary became the home of diverse men who could trust each other.  It became the backbone of trust and finance for the Industrial Revolution and its expansion in the 1800’s provided finance for the American frontier.  

The second was the application of the new technologies of animal husbandry and horticulture to farming in the mid-to-late 1700’s in England and Holland which increased production dramatically creating free labor to supply the emerging Industrial Revolution factories.

Third and last was the widespread publication of Adam Smith’s Wealth of Nations which helped leaders and thinkers understand the nature of the explosion of industrial production and trade that surrounded them.

The industrial revolution, in retrospect was the convergence of many small but critical elements to the three major elements I have identified.  Meritocracy had to emerge from within societies ruled by hereditary elites.  The Dutch and British colonial system made this possible.  In America, the vast Western expansion made this possible even more so.

The diversity necessary for commercial creativity and technological innovation was also a by-product of this international mingling of people and cultures in the many urban cities of the colonies.

Lastly, the emergence of safe spaces for open and tolerant men of diverse backgrounds and the institutions of modern commerce that they fostered  was essential.  Democracy was vital as were the Free Masons and similar institutions that the Dutch, English and Americans promoted.

A synonym for openness is honesty.  I have always preferred to talk in terms of openness because ‘honesty’ is the absence of deceit.   Openness is a condition where deceit can not even take root.  A small difference but I prefer the open environment to one that depends on ‘honest’ people being honest all the time.

Why would modern commerce need and promote openness?

The true underlying requirement for modern commerce is trust.  Openness is the way to create trust over a broad array of circumstances.  Commerce is carried out over vast distances and between untrusting people.  

The original form of trade appears to have been one tribe putting its goods on a river bank and another tribe putting its goods on the opposite river bank.  No trust was needed.  The buyers on each side of the river were allowed to return to their side when the trade was considered acceptable by both sides.

Currency was a way to make trade easier by exchanging a universal coin, gold, for the goods and services.  Little trust was needed.  Stories about drug gangs selling merchandise for money then keeping both the drugs and the money are common fare in the world of fiction.  Mostly fiction. Currency works fine,  for most transactions, in lieu of trust, but more complex transactions such as shipping require more.

This is why some tribes with strong internal trust were able to carry on trade over long distances for several millennium.  Phoenicians, Jews, Chinese families and the West African Fulani tribe became long distance intermediaries. A tribal member was present at each end of the transaction to verify the transaction.  

More complex transactions over time required legal documents and courts.  Both these elements required openness.  The lawyers had to follow established published legal standards and the court records had to be public as well.  The same became true of insurance contracts, stock exchanges and entire legal systems.  All of these institutions required openness to be the basis for trust in commercial transactions.

The early days of modern commerce were built on all these open institutions, bond markets, stock markets, legal systems, contracts and trade treaties. As corporations emerged in commerce in the 1850’s laws and public filings became the form of openness.  Today, openness in securities filings and banking transactions are vital for the survival and expansion of modern commerce.

It is hard for us to remember that every commercial institution plays a role in keeping the level of trust high for modern commerce.  Banks guarantee the safety of their checks, credit cards and bank accounts.  So does everyone else we give credit cards and checks to.   These businesses are subject to openness at some level of audit, government examination and reputation.

The most important role of openness is inside of businesses.  No one could run a business if they can’t fully trust every other person in the business, and expect openness about all management relations.  If a manager gives directions to a peer or subordinate who fails to carry out the directions or report back accurately, then that person is forced out of the business and/or are other people who fail to report the breach.  New people are not hired in the first place if the aura of deceptive behavior hangs over them.

Openness is a core value that is generated in modern commercial markets and is necessary inside modern commercial business.

I am the person who made international currency possible with the development of multi-bank issued credit cards that allow modern people to travel the world and buy and sell goods and services.  That whole system is based on the long history of interbank trust which in turn is built on interbank openness.  For the first few decades of bank credit cards, they all used an 'Interbank' symbol.

Trust is the core value of modern commerce that allows a tribes-woman in the back woods of Cameroon to sell her goods in Charleston South Carolina.  Trust is based on a vast series of institutions that rely on openness.

A number of people have asked me to comment on President Trump’s inaugural address.  It has a great deal to do with modern commerce in America.  Everything to do with the future of modern commerce in the world.

The picture on the right comes from my wonderful friend Ann who gestured like this while watching the Trump inaugural: “this man has balls this big.”

He began with “We, the citizens of America, are now joined in a great national effort to rebuild our country and to restore its promise for all of our people.

"Together, we will determine the course of America and the world for years to come.”

He is serious having said this every day for a year during the election campaign.  

Of course he put himself in the tradition of Andrew Jackson with his bold attack on the dias: “today we are not merely transferring power from one administration to another, or from one party to another — but we are transferring power from Washington, D.C. and giving it back to you, the American People.”

What is true about this inaugural is that the core of America and modern commerce is the desire and ability to get things done.  We are a building, strong and determined people.  At least half of us are.

A true American, Trump, is unique in his ability to say: “America will start winning again, winning like never before.

"We will bring back our jobs. We will bring back our borders. We will bring back our wealth. And we will bring back our dreams.

"We will build new roads, and highways, and bridges, and airports, and tunnels, and railways all across our wonderful nation.”

Nothing is more American, the land of modern commerce, than the determination to dream, build and act.  The Golden Gate Bridge, 2 miles long, took less than 3 years to build in 1938.  The newly built Eastern span of the Bay Bridge is also 2 miles long and took 11 years to build in 2013.  

America has lost its dreams, perverted its competence, disappeared in a quagmire of hopeless Climate Armageddon.  We have become a nation of wimps, cowards, environmental reviews and pathetic pussys.

In his inaugural address, President Trump has called for a renewal of the America that created world prosperity and he offers our way of life as a light that will “shine as an example for everyone to follow.”

Great speech, and Donald Trump clearly wrote it himself like Lincoln at a similar time when American values were nearly lost.