Economics and Shoes

By Knight Albert

Progress creates decadence, decadence creates progress.

Why is economic growth exponential?

This is a good question: there is after all, no innate feature of the world which would create this. If my land grows a ton of corn this year, there is no reason it should grow 1.05 tons the next.

Of course, I can buy fertilisers and machinery, and they will increase my harvests. But only to a point. There is a theoretical limit to how much corn my land could produce.

So why the exponential curve? It should be noted that this curve only exists over a limited timeframe. It’s not forever. But why does it sometimes occur? The curve is not a natural phenomenon, it is a human one.

When there is potential for development, someone invests.

When he succeeds, his story spurs others to invest in more development. (And he has more money to invest himself) and so on. So when there is growth, it is often exponential. For this to happen-there has to be potential for development. What does this look like?

Imagine Shoeland, a country of bare-foot people. The country also has a lot of unemployed, and a vast leather industry with no buyers.

Here we have an unserved market, as well as abundant manpower and materials. An investor can start a shoe company; he hires the cheap unemployed, buys the cheap leather, and sells shoes to a vast market. Costs are low, revenues are high.

His success will spur him, and others to invest more. Of course, with fewer unemployed people and more competition for leather, these new businesses will have higher costs than the old ones. On the other side, the people now have a selection of shoemakers to choose from-though no more feet to wear them, or money to buy, so along with rising expenses, each new shoemaker has to face falling revenues.

The story of success however spreads exponentially-success stories cause people to take risks which creates more success stories-for as long as, and only for as long as there is still potential for development.

One day, a new shoemaker will realise it costs more to buy materials and hire labour than his shoes can be sold for. The competition for resources between shoemakers and the excessive choice for consumers will create a market where new shoemakers can’t survive.

And then the system goes into reverse. Stories of failure lower investment, which creates fewer success stories, which lowers investment.

This is why there is no long-term exponential growth-it is a temporary phenomena.

What interests us today however is not how much the economy grows, but what its growth does to the people living in it.

What is the mood and mindset of a boom generation as opposed to a no-growth one?

Ultimately, I believe that growth and the progress it brings creates better people.

In such an environment-people are thinking about how they can create wealth. How their efforts can make everybody richer.

The success of others is nothing to fear. They are your market, your investors, and partners. It is an overall positive and vital mindset. Managers in a growing company will always seek the best talent-because more good people means more growth and opportunities.

What scares me is the other period. What happens when there is no potential for growth-or-no one believes there is potential for growth? A world where wealth appears finite.

The mindset in such a world is an unpleasant one. A view of wealth as zero-sum creates nasty, selfish people.

If you don’t believe you can create wealth, then the only way to gain it is to take it from someone else.

And this is what I have seen.

I was horrified at college to find that no one believed they could create wealth-they were all takers.

The only entrepreneurs I met wanted to sell cryptocurrency at exorbitant commissions to clueless people-takers, not makers.

I met a socialist girl protesting for more grants and hiring quotas for her demographic. I bumped into her the next day, only for her to tell me she was planning to sleep with a suspected bitcoin millionaire for money. Whatever language she dressed it in, she was cynically trying to pull other people’s wealth to herself, while doing nothing to make the world richer.

They were so lost in their nasty views; they couldn’t even recognise a positive and progressive endeavour.

I felt that the Uni-mag (just socialist rants) did not serve the entire school. I set up, with my own time and money, a philosophy/satire magazine. Written by and aimed at completely different people, something which undeniably made the world richer. An entertaining product whose success would cost no one. But the hostility I faced!

The prevailing and unshakable attitude people had was that I was trying to replace THE Uni magazine. The idea that I could be creating progress-that I was making life richer for all-was completely alien to them.

The mindset, the un-progressive one, has many manifestations, none of them positive.

People who think this way can’t work for the common good: They are cynical, suspicious and zero-sum in their thinking.

They are also innately corrupt.

In a growing company, a manager hires the best talent, because better people=more growth and opportunity.

In a stagnant or declining business wealth becomes finite in people’s minds. They become afraid of hiring the best talent because this rising star might replace them! They also come to see wealth as a matter of allocation, not creation. If you don’t think hiring the best talent can make the company richer, if you think there is a limited amount of wealth and that it is only a question of WHO it goes to, then you will in short order be corrupted. Of course, you will hire friends and relatives first. You have to make sure the wealth is allocated properly.

You also need support. If a business is a struggle of different factions trying to have wealth allocated to them-you will want to have as many of your people in power as possible.

As sad as this sounds-it gets worse. Once you view wealth as a question of allocation: New ideas, risk or investment become pointless.

There is no way for your company to get better-it is just a cow to be milked by you and your friends.

Is it a surprise then, that we live in a society of seemingly arbitrary divisions?

We want money and power for our people-what’s the point of trying to work with others?

To be clear: This effect can happen anywhere: In business, in government, in academia. It is as likely to happen in a communist state or a dictatorship as in a capitalist democracy.

But do not despair. There is hope. Let’s go back to Shoeland.

It has been fifteen years since the great shoe bust. A generation has lived in the belief that investment is futile and there has been bitter competition for the few remaining shoemaking jobs.

But without anyone taking note of it, the world has slowly changed. The climate had gotten colder, and the slippers and sandals people are wearing aren’t doing the trick.

There are also new technologies to better make shoes which everyone has ignored.

There is also now, an epidemic of people’s fingers freezing off in the cold. No one has had the idea for gloves.

Basically, just as a progressive generation will burn through all the potential growth, and so create the conditions for a corrupt generation-a corrupt generation will leave opportunities to build up, since they don’t believe in progress, which lays the foundations for a new age of progress.

One day, a crazy man will cut holes in a pair of old shoes and wear them on his hands against the cold, and fun new things will start happening again.

In our own world, we can look back on an age of progress which ended in ’08, and an era of corruption which has lasted since then.

While there was progress, there was a belief that things could get better in all areas of life. People took risks and improved things. Not only in business, but also in science, art and culture.

During the age of corruption, a generation has fought for control of what is already there: Jobs in companies, the rights to remake old movies, academic postings like priestly appointments.

And what have they created? Astoundingly little. Really, what has the last generation achieved? What great new ideas in business, art or science have been had by the people who came of age after ’08?

They have used all their energy fighting for what was already there. They have created nothing.

What are cryptocurrencies if not a way for people to juggle existing wealth between them? They generate nothing and so are the perfect emblem of the last age.

But slowly this dreary era shall too pass. The longer there is stagnation in business, art and science, the more opportunities there are for a fresh, new generation to do something new.

Generation Zed, the world is yours! The millennials have given you vast, virgin fields of opportunity to make your own.

I know many of the younger set have the corrupted mindset-but these are mainly the better off. They, guided by their neurotic elders have been primed to struggle for what is.

Everyone I know above lower-middle class has been schooled in a courtly and corrupt form of self-advancement. Drunk, aristocratic women at parties would tell me that ‘you must drop names, daarling!’. My parents insisted I get a degree “at least to get a job in the civil service.” All others are surrounded by this mindset, and frankly, the richer part of my generation have become utterly despondent because of it.

The new life, vigour and hope for the future, I see in the moderately poor. Of course, plenty of them are lazy and shiftless-I’m not here to idolise poverty. But those I have met who are hopeful strong and capable: Those with plans to create and improve-they are those who have faced poverty and deprivation.

The first of these was a sharply dressed Dutchman. He had fought to build his own life.

When I met him, he had taken to sitting in on lectures in astrophysics (though he wasn’t enrolled-he just wanted to know). Listing to his raw optimism and energy, I am sure that he is one of the new set who will get our world turning again.

Just as progress creates the conditions for corruption, so too does corruption provide potential for progress.

The world as it has been is not the world which is to be. Whatever else might happen, this new generation will be a creative one.

Be brave! In all fields of life, the stage is set for regeneration. New businesses will compete with and dethrone the corrupt old ones. Regeneration throughout the world! Finally: new cinema! At last, daring publications. Ideas in science and philosophy surpassing the old and leading to a new world.

This is no time to be afraid.

Though many will fail, more will succeed than expect to. And the only ones who are guaranteed not to succeed are those who do not try.

There is nothing like the experience of progress. Once you’ve felt the thrill of it, everything, politics, the past, all previous pains-fall aside for the sheer fun of it.

I don’t blame the millennials for the way they are. They came of age just as the previous generation had exhausted most of the opportunities.

But they are what they are. Though some might yet join the crusade for a new world, the great many are hopeless and corrupt.

Competition and pressure cure corruption. Only when there is no pressure can people afford to become lazy and selfish.

Consider South Africa. While the white minority were in charge, they were in constant anxiety about a civil war. They were at war with several of their neighbours and faced massive international pressure.

Yet the country worked. It had fantastic infrastructure, a functioning society, even a nuclear program.

Far from weakening it-the sanctions, unrest and wars may have strengthened the apartheid state. When stealing, not doing your job and lazing around might lead to your family being murdered by revolutionaries: You do your damn job!

Compare that with the South Africa of today: Friends with its neighbours, no political revolt, aid from the international community. And yet: It’s falling apart. The infrastructure is in decay, poverty is rising, corruption is rampant, while there are multiple factors at play, a major one is that the new ruling class is too secure. Without pressure, they can afford to do a bad job.

The same is true in business. While a company faces no competition, it can afford to have corruption and internal division. It is the cleansing flames of an outside attack which keeps an enterprise vital.

Thus, I see the cure for the general stagnation of our society in competition of every form. Go forth! Create businesses, political parties, art and research. Make them fight for their place. The new organisations which succeed will not yet have committed the sins of their elders.

The legacy enterprises which survive-will do so by ridding themselves of corruption. Though it will require risk and sacrifice on the part of brave, new adventurers; a wave of competition will bring our world to new life.

And to those who succeed: Don’t forget the other fighter. Ignore the courtly classes, with their degrees and lessons in social climbing: Much better to have those who fought like lions to build, but failed due to bad luck.

And remember that the world is not only Europe, the US and China. There are vast territories, most ignore, harbouring untold riches for those ready to seek them.

Happy hunting!