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?

I don’t see a knowledge economy. I see a knowledge industry.

The term “knowledge economy” gets thrown around a lot. When you combine the term with other terms such as “artificial intelligence” and “machine learning”, you can be left with the impression that unless you have an engineering degree or know how to code, then you will be left to wonder the streets of dystopia, meandering through blithe in search of value or meaning. The knowledge economy, based on how it is presented, sounds like a place carved out for the information elite. I don’t take the dreaded scenario seriously because the knowledge economy does not exist. This acknowledgment is important because embracing this position provides a platform for creating social policy that effectively distributes knowledge as what it is: a capital input.

The United States has gone from an agrarian economy to an industrial economy to a services economy. The labels imply that for some type of output, crops, that there are rules for the extraction, packaging, and distribution of capital necessary for producing an end product, food, and for packaging and distributing to its final destination, the end-user. Once it is consumed, it is either gone immediately or depreciating to zero value over some period of time. There is some range of exclusivity involved in its consumption. We cannot say that for knowledge.

Knowledge results from a combination of information and experience. It is about “knowing how” to do something. It is an awareness of a process behind creating some result. While the “know how” could be protected by the laws of intellectual property, acquiring information, “the noise” and human experience garnered from deciphering through the noise to find a valuable nugget of information, cannot be constrained. The rules of economy are designed to bring society closer to some certainty over how resources will be extracted and distributed, but the open environment around knowledge makes strict rules useless.

Public policy can craft rules that make packaged knowledge exclusive to the creator and owner i.e, copyrights for artistic work or patents protecting applied scientific processes, but there are different paths to creating knowledge resulting sometimes in creating similar but not same packages. Knowledge protection is limited.

For this reason, knowledge can be built upon, expand. There is really no final consumption. Knowledge is reused, modified, improved over time. Rules of economics are not as applicable as they were in agrarian or industrial society.

Knowledge is more input than it is final product. This is why, to me, the term “knowledge economy” is weak. Knowledge has been an input during each of America’s economic phases. America’s increased reliance on information and communications technology over the past fifty years doesn’t mean that “knowledge” gets to claim its own economy.

Markets can be made for knowledge. A consultant takes her insights, advice, and publications into the knowledge market where she hopes she receives an offer that compensates her for the time spent creating the knowledge product and/or presenting the knowledge product.

As for the consumer of the knowledge product, he is taking a gamble that any action plan, output or final product generated by the knowledge creates positive value or profit. The more information the consultant and the purchaser have on the forecasted value of returns on the knowledge, the more accurate the market price for the knowledge.

If anything, we may be in a “learning economy” where consumers are also becoming producers either of their own content or more durable products. The knowledge industry is one of its platforms where knowledge as input is bought and sold.

When Bitcoin becomes a transmitter of valuable information

Bitcoin is not for speculation. Bitcoin is about the transmission and exchange of valuable information attached to a digital currency that measures the value of the information. The volatility we are seeing in the market for Bitcoin is based on the fear of missing out on a pop in value.

I think in the near future what will eventually drive the value of Bitcoin is the underlying value of the information that the individual sovereign either possesses or can produce. It is likely that person A holding Bitcoin may look at person B who allegedly has some information, x, and determine that the person B’s information or ability to generate useful information has no value. Think of someone in London approached by someone from Somalia who wishes to trade in Somalian currency. The Londoner wouldn’t touch it.

You may argue that scenario already occurs in the real world, that trader A is not required to transact with trader B. In a centralized world, trader B would bring a discrimination grievance against trader A for refusing to trade. In a decentralized, voluntaryist cyber world, no matter how much cryptocurrency you hold, the value of your true currency, the information that you possess or can produce, will determine your digital currency’s value.

As for the speculators, the error they make is using valuation methods created in a centralized, coercive political economy to assess the value of a currency designed for a decentralized cyber society. A speculators are enjoying the upside of Bitcoin’s market appreciation, but as the currency becomes more expensive and reaches its 21 million digital currency cap, will these speculators be able to purchase any more of the currency? Or, will they be able to ride out the inflationary characteristic the coin takes on should it become a matter of two few Bitcoin chasing too many goods? Will lower income individuals who may have made their first purchases with their credit cards be able to recover the dollar value of the coin in order to pay off increasing interest rates?

Not to mention the competing currencies that will eventually knock off Bitcoin from its perch. As technology improves such that “information rich” individuals create their own cryptocurrency, individual sovereignty will be complete. Just like western nations trade with each other based primarily on similar values and culture, the information rich will do the same. As the value of their currency increases so to will the demand from vendors who will likely prefer hold in reserve the currency of the information rich versus the “information poor.”

I believe that the information poor or “information losers” who were lucky to get a few pieces of a coin in the early days will not be able to participate on either side of a cyber trade in the future. Their focus should be on building their information gathering tools versus pursuing a quick fix, get rich path.

Cyber space will remain decentralized by the silos created by the information rich will prove daunting for the information poor.

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.

Senator Markey conflates net neutrality and artificial intelligence

The U.S. Senate’s commerce committee held a hearing on how artificial intelligence and machine learning could impact economic growth and American consumers. The panel did their best to assure the committee that Kristanna Loken would not be busting through walls terminating humans on her way to activating Skynet.

Senator Brian Schatz, Democrat of Hawaii, made the audience aware that he was sponsoring a bill that would create a commission that would ask the tough questions about AI (excluding Texas senator Ted Cruz‘s reference to the aforementioned Skynet.)

The committee’s walk through geek and nerd park was pretty much uneventful. From a regulatory perspective, the panelists did not seem gung-ho about the introduction of burdensome regulations at this stage of AI’s development. While the concept of AI has been around since the mid 1950s, the advent of machine learning has raised the level of awareness and in some cases concern about AI. Instead of new rules, it was suggested that current rules we adjusted to address concerns about AI. Also, government could afford to do some learning on its own, gathering the expertise necessary for how best to integrate AI into society.

Also, the panel seemed to downplay concerns about AI displacing workers. It was argued that the technology would create other jobs directly needed by the technology sector, and work spawned by the demand the newly employed in the technology industry would create.

One panelist also tried to mitigate the “Skynet” concern by informing the committee about where actual AI work was being focused. AI is not concerned at this time with creating a general intelligence, that super, global brain depicted in movies. Rather, AI currently has a narrow focus on developing something more akin to an alien intelligence, creating a need for humans to communicate with AI-based technology on another level.

Unfortunately for my eardrums I had to suffer through Senator Ed Markey’s near enthusiastic willingness to conflate net neutrality and artificial intelligence. The Massachusetts Democrat asked one of the panelist, Dr Edward Felten, whether the expected vote by the Republican membership of the Federal Communications Commission to repeal net neutrality rules would negatively impact the development of artificial intelligence. To summarize Dr Felten’s answer: No, repeal of the rules would not.

How Markey or any of his net neutrality posse could confuse equal and transparent exchange of data between networks with the ability of computers to perform tasks usually performed by humans is a leap. Besides, given the billions of dollars invested in AI, would you really want any data generated by machines using artificial intelligence to have its traffic exchanged at an equal or lower priority than a cat video that took two hours and a couple hundred dollars to make?