There is more to a dynamic economy than antitrust policy

Lately, there have been more calls to break up big companies through antitrust policy. One argument is that these companies hold too much power, charging a toll to participate in the economy. Some experts argue that many of the persistent ills in the economy are linked to monopoly power. I wrote about some of these arguments here. Critics of these arguments say that big companies often are more efficient.

There is a lot of debate about these arguments, and quite a lot of disagreement, which I won't delve into here. Overall, I worry that policymakers may be too focused on antitrust policy at the expense of other policies that will support entrepreneurship and dynamic markets.

Ultimately, when large companies are no longer doing a good job, the formation of charismatic new companies is a very good way to displace them. AOL, Yahoo, and cab companies are less powerful now not because the government broke them up, but because they didn't innovate quickly enough, and other companies displaced them. Breaking up big companies doesn't do much good if there's no one out there who can offer something better.

Most would-be entrepreneurs would not tell you that Facebook, JPMorgan Chase, or the local big hospital system is holding them back. By the time you've gotten the attention of a big company, you've already done well. Many people who would like to start a company, or are trying to start one, are prohibited by entry barriers. They don't have the money to go without a job for a while, or they don't have access to capital, or they don't have a deep enough network to hire from and learn from, or they don't have the subject matter expertise or time to spend on R&D to develop a substantial improvement over the status quo.

Access to capital is a particularly important issue. Most Americans don't have a lot of savings; they also don't have enough collateral to take out a large business loan. Venture capital is mainly interested in funding companies with the potential to become massive, quickly. Most people are legally barred from investing in private companies because they don't meet the required income/wealth threshold. And raising money from public markets is expensive and comes with a lot of regulations, and your company needs to prove itself first before it has an IPO.

This is part of why there aren't more Elon Musks. Elon Musk already had made enough money from PayPal--over $100 million--to start Tesla and SpaceX, capital-intensive businesses that most people can't just start from a garage. It should be easier for more people with less than $100 million to build ambitious new companies.

No matter where you stand on antitrust policy, I think it is important to focus more on reducing barriers to entry to entrepreneurship. If more people could start businesses, that would unleash a more dynamic and innovative economy than we can imagine.

It's Important To Have a Vision

"I think 'fail fast' is catastrophic if it is applied to strategy and goals... It's incredibly important to have a really vivid, clear idea of where to get in the long run that you stick to and are very sold on and that everyone agrees to--then be very, very flexible on tactics." -Marc Andreessen

"Think a lot harder about the future...try to think concretely what you want to do...there's always a question, where is the frontier, where are some pockets of innovation where you can do some new things and not be in a crazed competition." -Peter Thiel

"The future is something that always has to be thought of in relatively concrete terms, and it has to be different from the present. And only something that's different from the present and very concrete can have any sort of charismatic force." -Peter Thiel

"I don't believe in hypothesis testing. I believe in path dependency." -Keith Rabois

"Path dependency means that you employ heroic efforts to achieve your vision. This multiplied the odds of success vs. those who explore or test hypothesis. You literally will yourself to winning." -Keith Rabois

"The main difference between those who go far and those who do not is some people have a vision and the others do not and therefore can only react to the current events as they happen... No vision, not much of a future." -Richard Hamming

Ancient Persian Values, from Herodotus

Here are a few excerpts about the values of the ancient Persian Empire from Herodotus’ Histories.

"Their sons are carefully instructed from their fifth to their twentieth year, in three things alone, - to ride, to draw the bow, and to speak the truth."

"To my mind it is a wise rule, as also is the following - that the king shall not put any one to death for a single fault, and that none of the Persians shall visit a single fault in a slave with any extreme penalty; but in every case the services of the offender shall be set against his misdoings; and, if the latter be found to outweigh the former, the aggrieved party shall then proceed to punishment."

"They hold it unlawful to talk to anything which it is unlawful to do. The most disgraceful thing in the world, they think, is to tell a lie; the next worst, to owe a debt: because, among other reasons, the debtor is obliged to tell lies."

My critique of Twitter

In January 2018, I quit Twitter for about a month. Here is the manifesto that I posted at the time for why I was quitting.

Don't worry, I'm staying on Twitter. Twitter is enormously helpful for learning new things, getting to know new people, bonding with existing friends, and sharing my thoughts and writing. But I'm planning to use it a bit less.

Today, my biggest critique of Twitter is that it takes up more of your time than you think, and time is the world's most finite resource. Twitter is great for bonding with people with similar interests, but it's important to devote enough time to truly pursuing those interests.

The best things in life come from internal motivation, and you aren't going to find that on Twitter.

Why I’m taking a break from Twitter (January 2018)

Twitter was stealing time away from my life. Being away from Twitter adds hours to my day and years to my life.

Thinking too much in terms of tweets was turning my brain into mashed potatoes. Being away from Twitter gives me mental clarity and focus. Being away from Twitter has freed my mind.

There are more productive things I can be doing with my time: reading books, writing books, exercising, talking to friends, and so much more. The opportunity cost was so massive, I could not let it continue.

It’s better to be a producer than to be a consumer.

It’s better to do the hard things.

It’s better to deliberately shape your personal environment than to passively follow what others are posting.

It’s better to be deliberate than to be reactive.

Twitter was making me think too much about current events—things that I have little to no control over—at the expense of my own life, which I have a lot of control over.

Twitter is the young, hip version of an old person yelling at their TV—except it’s more addictive and destructive to people’s lives.

Twitter gives you the illusion of influencing current events, when you aren’t.

It’s better to be the master of your own life than to watch helplessly as current events unfold.

It’s better to be the hero of your own life than to follow your heroes online.

It’s better to live in the real world than to live online.

People on Twitter often don’t know what’s going on in current events any more than you do. If something in the news is really bothering you, it’s better to do your own research and figure things out for yourself.

On Twitter, everyone is trying to tell you what to think. It’s better to think for yourself.

It’s better to confide in a few close friends than to broadcast your thoughts to everyone.

It’s better to be guided by internal motivation than to depend on external validation.

Being away from Twitter has given me a richer inner life.

Twitter shouldn’t be easier to reach than a good book.

Twitter is an imitation machine. It forces you to self-censor your thoughts before you’ve even fully formed them, or to tailor them a certain way, because everyone is watching.

People may choose to use Twitter, but that doesn’t make it any less of a panopticon.

If you like to have friends with a variety of different political views, then it’s hard not to say something that’s going to offend someone. This causes subconscious self-censorship, and becoming too bland to offend anyone.

Sometimes it's better to bond over differences, and accepting them, than to bond over perceived similarities.

Twitter is like fast food for reading, thinking, and meaningful social interaction. It's fast food for the soul.

Twitter is a popularity contest with no winners.

To be truly original, I need to develop my thoughts and actions away from the judgment of others.

I can only be truly, fully myself when I don’t have to worry about what other people think.

Exit, Voice, and Loyalty in the 2016 Election

(I originally published this on my blog in September 2016 and am reposting it.)

Donald Trump is a very unusual candidate for president, and as of today, he has a 30 percent chance of winning the White House, according to PredictWise. Why has he garnered so much support?

A lot of ink has been spilled on this question, and I won’t revisit other arguments that are very valid. Instead, I want to focus on one hypothesis: The U.S. is experiencing some signs of institutional decline, at least relative to the severity of its problems. And since voice and loyalty have not proven to be powerful enough to fix institutional decay, exit has become much more appealing. So our political system needs to empower voice and loyalty again in order to address its problems and prevent exit.

I’m referring to Exit, Voice, and Loyalty because of a brilliant 1970 book by the same name by the late Harvard economist Albert Hirschman. He presents exit, voice, and loyalty as the three options available to people in the face of institutional decline.

Empowering Voice and Loyalty

In the context of the election, fully supporting Hillary Clinton represents loyalty for the current political system. Loyalty could even involve developing new policy ideas or organizing for your favorite causes on the local and state level, to show what else is possible. But in general it involves loyal support. Supporting Hillary Clinton (or a right-leaning third-party candidate, since that's still a vote against Trump) but also criticizing her and national policies would represent the exercise of voice, to try to improve the system. And supporting Donald Trump—an unusual candidate promising to upend the status quo—represents exit.

It’s not an exaggeration to say that electing Donald Trump would represent a radical departure from politics as usual. And as forces for change, voice and loyalty are not as strong in America as they need to be.

If you’re just one ordinary person who has a lot of concerns about policy, can you get the government to change course? What if you organize or convince a lot of people—can you still make change happen? A lot of people would say, often not, since the government is too powerful and indifferent to the concerns of the people. This isn’t necessarily a bad thing—the government needs to represent the broad interests of the people rather than just the interests of activists. But it still needs to be responsive to people’s concerns, and instead it arguably pays a lot more attention to special interests, and is prone to inertia and complacency. Government is the ultimate monopoly. So to a large extent, it doesn’t really need to listen.

And so many people have chosen exit instead, since at least broad exit can create the possibility of new policies and institutions. The credible threat of exit can also force institutions to make voice and loyalty more powerful again. In fact, voice and loyalty don’t have nearly as much weight without the possibility of exit. Without the option of exit, loyalty is ultimately by force and not by choice. But when someone is willing to stick with a system and try to change it for the better—even when they can leave, and have very good reason for leaving—that shows a true commitment to making things better.

So I hope that the government can do a lot more to try to give people more of a say in what the government does. We need to empower voice and loyalty to keep the current system going and improve it. People need to feel like they're really being heard. The status quo has a lot of positives we often forget about, and it has mechanisms for internal reform that I hope can be strengthened—especially given that exit is a very real option.

On Exit

Peter Thiel, one of Trump’s most prominent supporters, seems to be a good example of someone who understands the power of exit. As an entrepreneur and investor, he’s rejected the status quo in favor of putting his own ideas, and other people's relatively new ideas, into practice. As a supporter of seasteading, he wants to make it feasible for people to exit government as it’s currently practiced. By creating the Thiel Fellowship for young people who want to start businesses instead of going to college, he wants to create the possibility of exit from higher education. And by supporting Trump, he’s exiting politics as usual.

I’m not weighing in here on these initiatives—I’m only observing that they’re examples of exit. And as controversial as these initiatives are, asserting the right to exit can empower new ideas and projects that are outside the box, and it can help make voice and loyalty more powerful for others. You need to have the freedom to exit in order for voice and loyalty to represent an authentic choice, instead of just something that’s taken for granted and then ignored. In America, we’re so used to using loyalty and voice (hi, Twitter and Facebook) that we can forget how important it is to have exit as an option.

[Update (9/18/16): A reader has sent me a video of this excellent talk by the entrepreneur and investor Balaji Srinivasan, where he delves into the importance of exit, as it's described in Exit, Voice, and Loyalty. He argues that "exit amplifies voice," that exit is going to become more important in the years to come, and that both the U.S. and Silicon Valley are "shaped by exit."]

In Exit, Voice, and Loyalty, Hirschman wrote that exit by “alert” consumers can force companies to change by giving them enough of a heads up that there’s a threat, while they take the time to improve quality while continuing to sell to “inert” customers. However, he wrote that too much exit at once can prove to be devastating, and not give companies enough time to fix their problems. “It is important that other customers remain unaware of, or unperturbed by, quality decline,” he wrote, so that companies still have enough time and money to reform themselves.

Hirschman also wrote that there aren’t enough exit options for government. In particular, he wrote: “The decision to exit from the government of the most powerful country is particularly and deplorably infrequent” (that is, emigrating from the U.S.), since “exit has an essential role to play in restoring quality performance of government.” He similarly criticized how public officials were no longer willing to resign out of principle, because of the lack of a meaningful exit option.

He's right. That said, I think exit from government is different from exit from a consumer-facing business, since laws need to apply to everyone in order to have full force. Laws are the common rules that enable countries to function. And countries are now having trouble asserting their sovereignty in a number of ways, including as big companies choose exit when it comes to paying their taxes. So even as we seek better policies and institutions, we need to be cautious when it comes to competition in government. People should be free to immigrate or emigrate as they'd like, and businesses deserve that freedom too -- the freedom to exit is important. You just want to make sure that the privileges of citizenship go hand in hand with its responsibilities.

Hirschman also noted that America is what it is today because millions of immigrants chose to exit their home countries for something new. “The United States owes its very existence and growth to millions of decisions favoring exit over voice,” he wrote. Exit is part of the American dream. Exit within the U.S. (for instance, through entrepreneurship) has helped drive American innovation, and the freedom to exit is a crucial component of liberty.

However, our ancestors’ choice to exit meant that they could not exit again—they had made so many sacrifices to come to America that they couldn’t leave again. So then they were forced to use voice to the best of their ability, and that’s a big reason why America thrived, according to Hirschman.

But that also means that when you choose to exit, what you’re choosing in favor of what you’re leaving behind better be pretty good, because you may never be able to go back.

As Hirschman wrote in Exit, Voice, and Loyalty:

“Yet, as love may suddenly turn into hate, so can the national infatuation with exit give way in certain crucial areas to its utter proscription. To some extent, exit is itself responsible for the emergence of its opposite. In leaving his country the emigrant makes a difficult decision and usually pays a high price in severing many strong affective ties. Additional payment is extracted as he is being initiated into a new environment and adjusting to it. The result is a strong psychological compulsion to like that for which so large a payment has been made. In retrospect, the ‘old country’ will appear more abominable than ever while the new country will be declared to be the greatest, ‘the last best hope of mankind,’ and all manner of other superlatives. And one must be happy.”

So whenever you choose to exit, make sure it’s to a place where you think you can be truly happy, or at least happier than before. Also make sure it's somewhere where voice and loyalty will still count. Because you may not be able to exit again.