Political intelligence that matters to markets

A business or an investment fund is simply a betting pool for people who have coin or credit. The bet represents all the information that the investor has acquired over some period and the dollar amount of her bet represents the minimum cost of the information acquired. This means that the actual cost of creating the investment fund, asset, or business means nothing to the investor.

All that matters is an outcome that recovers her cost for accumulating information that helps her determine whether her preferred outcome-a return of and on her capital-will be realized. Information on sunk costs mean nothing to her (much to the chagrin of the run-of-the-mill economist).

For information traders entering information markets what should matter is providing information that addresses existential threats to profits and revenues. The information trader must have awareness of the outcome the investor is interested in.

Investors watching political markets are interested in whether a decision poses an existential threat to a firm or a firm’s profits or revenues. Existential threats posed by government come in the form of a revocation of a license, denial of access to natural resources, or denial of access to financial capital. The investor wants to know the likelihood of the occurrence of these events.

In hind sight this is why the Trump Effect became vacuous. The expectations surrounding the Trump administration’s impact on investment never took into account government’s prime operational mandate which is to exploit the natural environment of a physical area. It does this by managing the extraction of resources from that physical area. In the case of American government, it has determined that extraction would best be carried out by a private sector driven by a profit motive.

Businesses provide efficient methods for extracting resources and converting the resources into “taxable events” i.e. goods and services for sale. Businesses convert human resources into taxable events by employing labor thus making humans available for taxation by government.

The subsequent uncertainty experienced by the financial markets post Mr Trump’s inauguration was the result of investors listening to the “emotional marketing” of the 2016 campaign. Rhetoric regarding bringing back manufacturing jobs into a political economy that favors information as its primary resource or building more bridges to nowhere via infrastructure knowing that the multiplier effect is limited by a project’s termination date was baseless but pulled on enough heartstrings of investors that they forgot or were forced to overlook even further government’s prime mission.

Also, the financial markets can’t risk forgetting that the U.S. is a federal system and states have to be considered when assessing the American economy. States have to be on board with any policies that address contraction or expansion of licensing or access to natural resources. For example, it is one thing for the federal government to increase access to radio frequencies by mobile telephone companies. But if the states do not put in place rights-of-way policies that allow mobile phone companies to deploy tower facilities, then having a license to transmit wireless signals is meaningless and the firm faces a scenario of less revenues.

When discerning what information matters, the focus should be on political information that threatens the continued existence of a firm or threats to its revenues and profits. Investors need to discern between the emotional or campaign marketing noise and substantive political intelligence that addresses a firm’s existence.

When local government meets high tech sovereigns

Sometimes I think city government is sleeping at the wheel when it comes to technology and capital flows. During its lucid moments, government will fall back on its 1960s playbook of economic development by announcing plans to bring back manufacturing jobs that pay better wages than the service sector jobs that replaced factory work and eviscerated wages. This narrative may have worked in a locality that was created to take advantage of proximity to a local natural resource where factories could then convert the resources into goods for local and other markets, but for a city like a 21st century Atlanta, that narrative is disingenuous.

Atlanta’s “natural resource” today is information. Workers who know how to find, extract, organize, and distribute information are going to be the one’s who obtain employment and the higher wages that come along with work in the information sector. This demand for an information-centric political economy, I believe, is being driven by the changing tastes of capital. Capital wants its goods and services delivered conveniently and its production customized.

Information technology allows capital to target funds directly to high-value driven information entrepreneurs that can deliver a product that was designed, manufactured, packaged in, and delivered from multiple jurisdictions. Capital has no love for mass appeal. Why deal with crowded banks, malls, car dealerships, or grocery stores when extra minutes of leisure can be carved out by the manufacturing and service delivery efficiencies provided by Tesla, Uber, Grubhub, and Insta-cart.

Along with these efficiencies in product manufacturing and delivery come smaller work forces or work forces outside of the jurisdiction of local governments. Local governments have been the front line defense of investor capital from disgruntled labor. They regulate labor union speech during strikes. Where there is violence they arrest the rowdy. However, in an information age where there are a greater number of tech shops employing smaller numbers of non-unionized information workers versus a handful of large factories employing thousands of unionized lower-skilled workers, there is less demand for the police powers of local government. Disgruntled employees at today’s tech shops simply take their information knowledge somewhere else or create their own firm.

Eventually government starts tossing and turning in its sleep. It sees its “labor clamp down” requests severely diminished. Higher incomes start translating into reduced need for government services from garbage removal to security. Higher income earning citizens may consider pooling resources to support campaigns of candidates who agree to reducing tax burdens are, too the extreme, support carving out or “leasing sovereignty” to higher income communities.

Question is, how will those with no capital react to the erection of this wall of individual sovereignty?

Is broadband access less about connectivity and more about individuality?

My sister recently experimented with Whole Foods‘ delivery service. As an Amazon Prime member, she could take advantage of no cost delivery to her home in the West End. This is a smart move on the part of Whole Foods to deliver to the West End, an area where the median household income is lower than the rest of Atlanta’s sectors. My observation has nothing to do with the wishful thinking that Whole Foods is practicing altruism, but the probability that Whole Foods is betting on the continued gentrification of the area; that it makes sense to plant a flag in the area so that when higher-income, cheap rent seeking young white couples move into the area, Whole Foods will be there to greet them. And while increasing the area’s investment value may not have been on the top of Whole Foods’ agenda, current property holders can at least tell their friends living in other areas of the city that they have not been left out of high-end food delivery options.

Going online and ordering your groceries is an example of what the long-term purpose of broadband connectivity is all about, especially for those with capital. If we accept the Facebook model of broadband and the internet, then we support the argument that broadband and the internet are about connecting people for the sake of creating a larger global community that leads to more democracy, peace, and understanding. This is one of the premises underlying net neutrality; the creation and maintenance of an open internet.  Two billion people connecting on Facebook may be deemed evidence that the globe is demanding this type of connectivity and community development on the world wide web, but such a view fails to account for the “politico-economic physics” of broadband and the internet. I believe the true value of broadband access lies in the empowerment that broadband access creates in the individual. The universe revolves around her and not the other way around.

The internet, at least for those with capital, is about bending the four-dimensional characteristics of space time and enhancing her sovereignty; creating a self-sufficient lifestyle for her. High value individuals don’t see the platforms upon which they move through space and time as flat or linear. The platform is geodesic; a curved line that provides the shortest distance between two points. In this case, between capital and the products and services that capital can acquire. The closer broadband technology brings her to sources of goods and services, the tighter her enclosure around her. She is not creating inclusiveness, or a bigger tent. In actuality, her tent becomes tighter, filled with other high value resources including friends and business associates. Creating a sovereignty blocks out the noise that the internet is becoming increasingly known for.

I would argue further that as her capital and value grows the more space-time bends around her. She creates a gravitational pull attracting even more resources, income, and opportunities. Those who argue for equality and democracy on the internet overlook this important value element. High value, capital holding consumers on the internet bend space-time toward them and high value content and service deliverers will point their commercial starships in the direction of high value.

How should policy react? It can either acknowledge the individual’s use of broadband to create a sovereign individual while transmitting her consumer energy into her tight commercial space or it can regulate her relationship with the points of commercial light within her internet space and risk forcing her to engage with value deficient “black holes” that threaten to reduce her incentive to engage in e-commerce or change her engagement in such a way that the value she receives and transmits is reduced. Policy should opt for protecting her choice for engaging with the value providers of her choice.

Black America’s wrong approach to STEM

Black America needs more engineers but not for the reasons we typically hear on the panel discussion stump. On the panel discussion stump, you typically find well dressed and articulate black men and women speaking on the importance of going to college and picking up degrees in science, technology, engineering, or math in order to get a job with a corporation and make six-figures. Going into six-figure debt to get a six-figure job. Where did this school of thought come from?

Black America’s approach to learning about technology favors consumption of the applications that run over broadband networks. That is what I see particularly among poor blacks here in the West End and the Old Fourth Ward. We are using broadband voice applications to share the latest gossip or evangelizing on life. We are keeping occupied reading news items, watching sports highlights, or playing video games as we pass time on MARTA heading to work. Just about everyone has a cellphone and if you don’t, worry not. If you meet income eligibility requirements, you can buy one from a vendor at the corner of York Avenue and Lee Highway.

This propensity to consume technology is not relegated to the Black American poor. According to a 2016 report released by Nielsen,  Black Millennials are expected to help drive the leveraging of $1.2 billion in Black American buying power. With a cellphone ownership penetration rate of 91%, Nielsen sees Black Americans continuing to use the technology to extend black cultural identity and, with Millennials leading the way, continue efforts at civic or institutional change in America. Black America is also expected to buy more beauty and hair care products versus their white counterparts.

Millennials are expected to take their higher incomes into supermarkets as well. Black Americans demonstrate a propensity for cooking from scratch, planning meals ahead, and using fresh ingredients.

In short, the Nielsen report paints a picture of a Black America that furthers consumer centrism. Since release from their status as chattel slaves, blacks in America have slowly become a population over-indexed on consumption. And to further fuel its $1.2 billion in buying power, Black America has embarked on a campaign to get more of its young people into STEM jobs.

STEM employment pays well, according to a report written by the U.S. Department of Education. The average STEM employee pulls in approximately $65,000 a year. Those specializing in engineering or engineering technology average $73,700 a year. Great incomes for hair and makeup and cultural expression. But what is more important, in my view, is STEM driven creation of resources placed in black communities for blacks.

We don’t hear enough about the entrepreneurial side of STEM although we have examples out there. Firms such as Logistics Systems Incorporated and ATS-Chester Engineers have been providing engineering services for decades. They are demonstrating that blacks can do more than consume technology but design technology solutions as well. Production and ownership of technology assets lie at the heart of wealth creation for blacks and if properly deployed can be the basis for the creation of real black communities in the United States.

Unfortunately for current black communities, their leadership is tainted. Legacy black civil rights organizations that have a leadership class still living in 1968 are still focusing on how best to break into corporate America, or in the case of establishing minority-owned firms, maintaining affirmative action programs that provide set asides from government contracts. To paraphrase Yuval Noah Harari, they do not even have realistic ideas of what the job market looks like in two decades because they cannot see. Black leadership is still nostalgic about the civil rights battles of the 1960s when the focus should be on the resource and capital battles of the 21st century.

One example of a leadership not understanding STEM’s practical use is the lack of solar in the West End. I have yet to see a community solar farm. I see more historic district designations on houses than I see solar panels or wind turbines. Finding low cost energy solutions by pooling more STEM talent into black owned firms is a start. Current legacy black-owned engineering firms should consider investing in new black-owned start-ups that are committed to serving distressed communities. No community should be without its own locally owned energy source and this is one approach toward developing one.

Black America’s one-prong approach to STEM needs an upgrade and new leadership.

Black Americans should think like sovereigns

Since their emancipation from physical slavery in 1865, black descendants of slaves brought to what is now known as the United States have fought for full incorporation as citizens. For blacks, incorporation meant the right to own property, vote, move freely across provincial borders, and be free from racial violence whether perpetrated by individuals or the State.

The primary reason for the incomplete incorporation process was the view of the European that blacks, based on their race, did not have equal value as humans, a view that one group must have in order to justify enslavement. Another reason closely related to race is based on the process of becoming a nation-state, a process that caught blacks in the crossfire.

By the time blacks were physically emancipated from slavery, the United States was becoming a nation-state. Having abandoned the British monarchy 89 years earlier, by 1865 America was expanding westward riding the wave of white, Anglo-Saxon manifest destiny.  During the period after 1865, the United States continued its campaign of pacifying indigenous tribes while importing and regulating the movement of Chinese. And while there was internal conflict between other European ethnic groups and Anglo-Saxons, these groups were able to be incorporated much easier than indigenous tribes, the Chinese, or former slaves of African descent.

The Chinese and other Asian groups have managed to balance maintaining their culture while incorporating to some degree into the American political economy.  While state and federally recognized indigenous tribes have limited sovereignty and ownership or use of certain lands, these groups see internal and external threats to their culture including poverty, alcoholism, encroachment on tribal lands by certain corporations, and subjugation to blood quantum tests.

The common thread, in my opinion, between Asians and indigenous tribes is that they have some land to fall back on; some physical reference point that anchors their history and existence. Blacks in the United States do not have that advantage. Besides historical records of slavery and the use of DNA testing, blacks have little connection to the African continent. America is their “soil”, their roots and some would argue that their status as descendants of involuntary migrants and slaves means a perspective significantly different from people who came to the U.S. voluntarily.

The downside of the “involuntary migrants and slave status” argument is that it falls on the deaf ears of those for whom the United States was created. If such an argument was effective, incorporation of blacks into American society would have occurred a century ago. Moral or emotion-driven arguments do not result in acquiring and distributing sufficient resources necessary for individuals in a community to sustain themselves. The current approach asks that a white-dominated government distribute temporary, sub-par benefits that act as a replacement for capital.

Sub-par public educational services do not teach children critical thinking skills that go along with the life skills provided by their households. Sub-par medical services while subsidizing drug prices thus the revenues of the drug industry do not provide the wellness information that keeps individuals truly healthy. Sub-par public safety that subsidizes police terrorism not community security does not benefit blacks either. The American political system feigns a sub-par community approach when in reality it is a temporary bandage designed to keep the barbarians from knocking down the gate.

The American political economy has been telling black Americans to “go your own way” for some time now. Maybe it is time to listen.

 

Capital, technology, social media, & fake connection

Capital uses technology to create a singularity in the individual. This process toward “self-actualization” is the wrong one because the journey to self has nothing to do with technology or capital.
 
The downside of using technology to create a singularity is that as part of validating its use, technology markets itself to the masses as a way of creating a collective consciousness, a fake singularity.
 
I call it fake because trying to create a oneness with multiple, diverse, un-self actualized minds is dangerous and only leads to narcissism on steroids. It is the mistake that liberals, for example, have been making for the last 130 years of political history in the United States. One need only look at social media and see the effects.
 
Meanwhile, the masses, believing they are creating some good through collective behavior are merely being used by the few that herd them up into single-minded, over-emotional mania.
 
Eventually this fake singularity collapses on itself with violent repercussions as all shifts in mass political behavior eventually does as this fake singularity is exposed for what it truly is; a distraction.
 
What are the masses being distracted from? The fact that progressives have learned how to hoard and leverage inside information, move to urban centers, monetize this inside information, and raise rents on the poor, forcing the poor to move to lower quality areas.
 
Meanwhile, rich, liberal urbanites become more “singular” meaning less diverse as they show their true value system, one that was never built on diversity, but where a diversity narrative was merely used as a Trojan Horse that allowed them to infiltrate minority communities and run out people that neither look, act, or think like them.
 
Atlanta, Manhattan, San Francisco. We see it, but cognitive dissonance allows us to ignore it. The fake singularity has no room for an organic collective.

What happens when the State abandons black Americans?

In their book, The Sovereign Individual: Mastering the Transition to the Information Age, James Dale Davidson and Lord William Rees-Mogg describe the demise of the welfare state with the political changes the information age will bring about. Those who can garner, manipulate, organize, distribute, and monetize information and use today’s digital technology to deploy this new capital from anywhere in the world will be able to achieve a level of individual sovereignty such that the protection services of the old nation-state will no longer be needed. The internet, cyberspace, will be their new jurisdiction, and with capital in the form of information, they will be able to carve out a minimized or tax-free environment in whatever physical jurisdiction they choose.

Information losers, according to Davidson and Rees-Mogg, won’t like this new world. This information-based economy will challenge their welfare state “employee” status. It is a welfare state employee status because in exchange for the “work” that they do at the polls i.e. their vote, information losers are awarded with transfer payments such as Medicaid, Medicare, food stamps, and low-income housing. As the hoarders of the new capital, information, choose lower tax jurisdictions, information losers are left holding the bag containing reduced benefits, the result of a lowered tax base.

The recent tax reform legislation passed by a GOP-led Congress and signed by President Donald Trump is a small indicator of the leverage the wealthy have, especially those who make their income as sole proprietors or partners in a business where they are now beneficiaries of a 20% reduction in the taxes they would normally pay on pass-through income. Congress and the President will now have to reduce or eliminate programs made infeasible by a $1.5 billion tax cut.

There is no guarantee that tax cut goody bags will be continually given out in the future. If the GOP loses both chambers of Congress in this year’s midterms, then Democrats will pursue a rewrite of the tax reform, or at least put on a good show effort.  I say a good show effort because the response by the wealthy will be, “Remember the two trillion dollars we have stashed overseas? How about we keep it there?”

Black Americans are not in the information age game even though blacks over-index on social media sites and, as a proportion of their population, own as many smartphones as whites and Latinos. Black Americans are under-indexed when it comes to employment in information technology. In an article for The Huffington Post, Jamal Simmons noted that black women may be able to scrape up $36,000 for a tech start-up, but white males scrape up on average $1.3 million in start-up funds.

And while blacks and Latinos continue to represent low single-digit proportions of actual STEM employees (technologists, mathematicians, engineers), there are plenty of black consumers of entertainment content on Facebook and Instagram. This content is low value. It differs from information which can be used as an input for production.

You may ask, “Don’t blacks have a right to consume entertainment?” My answer would be, “It’s not about rights to consumer content. It’s about channeling as much time and energy into mining and distributing information that creates knowledge that solves the deep well of problems in the black community.

Meanwhile, the State apparatus that blacks have disproportionately relied on for economic support and political protection is becoming bankrupt. Based on this recent tax reform, one would not sound too cynical in concluding that the GOP was in cahoots with the plot to blow it all up.  The information winners will not think twice about leaving information losers behind.