Brian Gongol Show on WHO Radio - June 30, 2013
Brian Gongol

The President's proposal on global warming came out this week, and as we discussed last week, it's going to be expensive.

Presidents have a peculiar mandate: They're empowered, to the extent that law and public support will allow, to build their legacies at public expense.

Ultimately, we all leave behind some kind of legacy. Whether it's good or bad, constructive or destructive, temporary or enduring, is all up to us.

Several things will make those legacies considerably more important in the future:

- the Internet and digital archives will cause them to become much more permanent than in the past
- as we live longer, we will have more time to leave behind a footprint -- and will spend more time experiencing the repercussions of what we've done
- as families trend smaller, what we leave behind (or don't) is concentrated on a smaller group of heirs
- as technology increases in power, many of our actions are leveraged far more than in previous ages

So we are challenged to think more deeply about legacies:

- there is a financial legacy, of course: leaving wealth behind for our descendants
- there is also a less-material legacy: the ideas and philosophies we leave behind

Regrettably, there's a lot of destruction taking place. Dismantling the system of entrepreneurship and business development through both regulation and cronyism is doubly destructive: It's a bad legacy on its own, and it diminishes people's ability to leave behind something of value. That's especially bad at a time when trends favor capital investment over labor -- meaning, the best we can be doing is ensuring people have a fair shot at building businesses they can pass on to their heirs, made of machines and ideas, rather than hoping they can "find a job" somewhere.

You know where we're seeing this live and up-close? The protests over the rise in Federally-subsidized student-loan rates. New Stafford loan rates will go from 3.4% to 6.8% tomorrow. Maybe Congress will reverse the increase; maybe not. But listen to the words of the protests: They talk about how it's going to be hard to pay back the loans in the context of the job market.

Now, credit should be given where it is due: In a departure from other policies, the Obama administration proposed having those Federal loan rates track the government's overall borrowing rate. That makes sense. And, it's only realistic to see that most people aren't wired to want to run their own businesses; for most people, a paycheck is the comfortable option.

But we need to get to a place where a 3.4% interest rate (or a 6.8% interest rate) is seen as the cost of investing in your personal "human capital" -- that is, what you bring to the productive economy. And if the difference between what you paid and what you're getting paid to use it isn't enough to make that interest expense one that you can hurdle right over, then we need to do better at channeling people in to higher-return areas of work (and, probably, lowering the cost of distributing education in the first place). That's because an economy that rewards capital investments more generously than labor investments isn't going to be kind to low-value labor investments (that is, low-paying college majors). The economy is a force of nature, whether or not we tell ourselves stories about how powerful the President and the Federal Reserve chair can be. Certain things have to be done to keep the world's seven billion people fed, clothed, and housed, and anything we do in the name of "the economy" or "the markets" is ultimately a reflection of what it takes to do that. Over time, we're always going to see efforts to invest in things that automate and mechanize our lives. I went to the hardware store the other day and used the self-checkout lane because it was faster than the lane with human checkers. The store didn't put those automated lanes in place to make me happy; they did it because they have to pay for the machinery once, and then those scanners work day in and day out with minimal human supervision. The machines take the place of human workers, period. So when we're educating people, we need them to learn things that make them permanently better investments than machines. And then we need those people to save some of their earnings and invest them in owning the machines.

Think of it as a sliding scale, just like a mortgage payment: When you first get a mortgage, most of your payment goes to interest, and only a little bit to principal. By the end, most of the payment pays down the principal balance, and only a little goes to interest. Over the course of a normal person's life, you start out earning most of what you have from wages and salaries, and not very much from investments. But over time, if you're thrifty, you'll save and invest, so that later on in life, much more of your income comes from investments than from your daily labors. That's what makes retirement possible.

As things become more powerful (mainly by improvements in computing power, but also due to other advancements), the returns to those investments ought to be better than ever. If the computer you can buy for $500 today is ten times better than the one you could have bought ten years ago for a much higher price, then there should be a much higher return to an investment in that technology today. Farmers see this when they buy GPS-enabled tractors today that beat the pants off older machines and when they plant seed hybrids and use fertilizers and herbicides that deliver much higher yields than the ones they used 20 years ago. Why should they waste time and money trying to hire new day-laborers when they could get much better returns by investing in those technologies? The same forces apply to many other businesses, too. Labor still matters, of course, but capital investments are where the real bang for the buck is found.

So we need to be smart about our policies. Do they push against the tidal forces of the economy by making life tougher for capital investors? Do they make it harder for ordinary people to make those investments? Or, do they nudge people into high returns on their education and encourage investments that will pay off over time?

We entered this as a legacy conversation, so let's return to it: We have a chance to get our government policies right, to enhance (or at least, not to interfere with) the efforts of families and individuals to position themselves to invest wisely for the future. It could be simple non-interference, or it could be deliberate work to make sure that people have a way to cooperate within small groups dedicated to running their own businesses (even as they keep their regular jobs). But if we don't get those policies right, people will struggle needlessly against red tape and taxes and regulations, and we'll just leave more people more susceptible to bad things happening in the job market.


Netflix and Pandora are very good, for now. But they will appear profoundly rudimentary when they are eclipsed by what follows: Acutely accurate personal assistants tailored to our individual tastes and interests. Like C3PO.


The problem many frazzled people have today is not so much that they have too much to do, but that they don't reserve adequate amounts of mental and emotional capacity to make decisions. Use the internet to write, a lot. Use printed material to read. Editing saves mental time and energy.