Word, Action, and Entrepreneurship

The Mengerian-Misesian tradition in economics is also known as the causal-realist approach – in other words, it studies the causal structure of economic phenomena conceived of as outgrowths of real human actions. Thus, it finds verbal descriptions and declarations economically meaningful only insofar as they can be linked with demonstrated preferences and their causal interactions. In this paper, I investigate how the approach in question bears on topics such as the economic calculation debate, deliberative democracy, and the provision of public goods. In particular, in the context of discussing the above topics I focus on market entrepreneurship understood as a crucial instance of “practicing what one preaches” in the ambit of large-scale social cooperation. In sum, I attempt to demonstrate that the Mengerian-Misesian tradition offers unique insights into the logic of communicative rationality by emphasizing and exploring its indispensable associations with the logic of action.

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The Entrepreneur Who Became a Billionaire After Being Rejected by Facebook

Jan Koum had a rough upbringing. At 16, he immigrated from Europe to the United States with his mother and grandmother, who were fleeing political unrest and religious persecution. Jan’s mother got a job as a babysitter in California while Jan went to school and worked at a grocery store cleaning floors.

His father planned to join Jan and his mother once they were settled, but he got sick and died five years later, unable to be reunited with his family. Jan’s mother was diagnosed with cancer, to which she would succumb just three years after Jan’s father passed away.

Jan Overcame Adversity

Perhaps not surprisingly given the adversity in his life, Jan acted out in school and got into trouble. He disliked school and what he found to be the shallow relationships of high school students. He barely graduated, but during his teen years in the US, Jan began to teach himself. He became interested in computers and networks and bought books and manuals on these topics at a nearby used bookstore, returning them when finished to get his money back.

He taught himself network engineering and eventually enrolled at San Jose University to study computer science and mathematics while getting involved in online network groups and hacker communities. Like high school, college also wasn’t appealing to Jan. “I hated school,” he told Forbes.

During college, Jan took a part-time job with the large accounting firm Ernst & Young, helping with computer security audits. One of E&Y’s clients with which Jan worked was Yahoo! and he was offered a job with the tech company while still studying at San Jose University. He quit college soon after to work full-time at Yahoo!.

Jan got bored with Yahoo!. At 31, he quit and took some time off to travel the world with a friend who also left Yahoo!. The duo applied for work at Facebook, but both were turned down. Two years later Jan bought an iPhone. He saw the potential of the App Store world and began working on code to create a new application that would streamline communication and conversation. Frustrated by his inability to get it working, Jan Koun almost gave up.

American Success Story

He stuck with his invention a bit longer and in 2009, at age 33, Jan Koum founded the text messaging platform WhatsApp with his former Yahoo! colleague Brian Acton. In 2014, it had 400 million users worldwide, and the pair sold the company to Facebook for $19 billion.

They might not have gotten that job offer at Facebook, but the offer they eventually got was something far better. By 2017, WhatsApp had 1.3 billion monthly users and billionaire Koum, who spent his childhood in communist Ukraine, became an American success story, showing the transformative power of freedom, entrepreneurship, and self-education.

Koum told WIRED Magazine:

I grew up in a society where everything you did was eavesdropped on, recorded, snitched on…Nobody should have the right to eavesdrop, or you become a totalitarian state – the kind of state I escaped as a kid to come to this country where you have democracy and freedom of speech. Our goal is to protect it.

Koum’s teenage self-education took place in the 1990s, before knowledge and information were so widely available and easily accessible, often at our fingertips. Today, a kid like Koum wouldn’t have a used bookstore as his only resource. He would be able to learn network engineering or any topic that interested him through free, online information portals and connect easily with people from around the world, finding mentors and like-minded peers—thanks in large part to inventions like WhatsApp.

Technology increasingly facilitates self-education, leading to new opportunities to pursue passions and uncover talents. Unlike formal education, that to many people like Koum can be stifling, self-education can be liberating. With self-education, you can become the agent of your own life and livelihood, setting your own path. As the author and entrepreneur Jim Rohn wrote: “Formal education will make you a living; self-education will make you a fortune.”

For Koum, that fortune was big, but the rest of us gained too. Freedom and entrepreneurship lead to the innovations that improve our lives and give our own dreams a boost, and self-education is the pathway to get there.

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“Socialism”: The Provocative Equivocation

The socialists are back, but is it a big deal?  It’s tempting to say that it’s purely rhetorical.  Modern socialists don’t want to emulate the Soviet Union.  To them, socialism just means “Sweden,” right?  Even if their admiration for Sweden is unjustified, we’ve long known that the Western world contains millions of people who want their countries to be like Sweden.  Why should we care if Sweden-fans rebrand themselves as “socialists”?

My instinctive objection is that even using the term “socialism” is an affront to the many millions of living victims of Soviet-style totalitarian regimes.  Talking about “socialism” understandably horrifies them.  Since there are plenty of palatable synonyms for Swedish-type policies (starting even “Swedenism”!), selecting this particular label seems a breach of civility.

If this seems paranoid, what would you say about a new movement of self-styled “national socialists”?  Even if their policy positions were moderate, this brand needlessly terrifies lots of folks who have already suffered enough.

On reflection, however, this is a weak objection.  Yes, if a label’s connotations are – like “national socialism” – almost entirely horrible, then loudly embracing the label is uncivil.  “Socialism,” however, has long had a wide range of meanings.  Even during the height of Stalinism, plenty of self-styled “socialists” were avowedly anti-Communist.  The upshot: Even if you were a victim of Soviet oppression, assuming the worst when you hear the word “socialism” is hypersensitive.  And hypersensitivity is bad.

Yet there’s a much stronger reason to object to the socialist revival.  Namely: It’s far from clear that the latter-day socialists do mean Sweden.  While some (like John Marsh) plainly say so, others (like Elizabeth Bruenig) are coy indeed.  Which raises deeply troubling questions, starting with:

1. Are latter-day socialists unaware of the history of the totalitarian movement that shares their name?  Given widespread historical ignorance and the youth of the new socialists, we can hardly rule this out.  A troubling thought; isn’t it negligent to champion a radical idea without investigating its history first?

2. Are latter-day socialists ambivalent about the totalitarian movement that shares their name?  Do they look on the Soviet Union as a noble experiment with unfortunate shortcomings?  How about Chavez’s Venezuela?

3. Do latter-day socialists think of Sweden as a starting point, and something more radical as the ultimate goal?  Are there outright crypto-communists among them?  If so, do their comrades know?  Care?

4. Do latter-day socialists realize that being coy raises the preceding concerns?  Do they care?  Or is the raising of these concerns a “feature, not a bug”?  I.e., they enjoy making people wonder if they’re secret Leninists?

What’s the truth?  While I don’t personally know any latter-day socialists well, I do read a lot of articles in The Nation, which publishes a wide range of modern socialists.  So here are my best guesses about the preceding possibilities.

1. Older socialists (age 50+) know a lot about the actual history of socialism.  The younger ones (age 40 and under), however, know little and care less.  They’re negligent romantics.

2. Most historically-literate socialists are indeed ambivalent about the totalitarian movement that shares their name.  Very few will defend Stalin, but they just can’t stay mad at Lenin, Castro, or Ho Chi Minh.  Even the historically-naive socialists feel pretty good about Cuba today and Venezuela in 2015.

3. Yes, most avowed socialists have a more radical ultimate goal than Sweden.  In our Capitalism-Socialism debate, even the reasonable John Marsh mused about a future that realized radical socialist dreams without degenerating into a typical socialist nightmare.  How extreme, then, are ultimate goals of the unreasonable socialists?  While I really don’t know, videos like this make me strongly suspect that Bernie Sanders is literally a crypto-communist.  Even if I’m wrong, how many latter-day socialists would care if Sanders was a crypto-communist?

4. Latter-day socialists really do enjoy making people wonder about their ultimate agenda.  When you read The Nation, for example, authors almost never specify exactly what policy should be.  Instead, they focus on radical movement in a desired direction, with minimal discussion of their ultimate objective.  In particular, they almost never say what would be “too far.”  Of course, this describes most political movements; they want to rally the troops, not provide blueprints of an ideal world.  But when you cultivate a “radical” image but withhold specifics, you should expect critics’ minds to go to dark places.  Rather than try to calm the critics, the latter-day socialists court their disapproval.  In fact, most seem to positively enjoy the imagined intellectual trauma they’re inflicting on the unbeliever.

On reflection, then, the return of the self-styled socialist is indeed a travesty.  The reason, though, is not that the word is offensive, but that it is deliberately confusing.  If you really thought Sweden was a model society, you would just praise Sweden.  The “socialist” label, in contrast, is a provocative equivocation.  Latter-day socialists adopt it because they would rather insinuate their possible support for totalitarian horrors than earnestly promote an intellectually defensible position.

To what end?  In modern parlance, the latter-day socialists could just be trolling.  This is bad enough, but some socialists probably sincerely believe what they’re insinuating.  Or worse.  If all you want is Swedish social democracy, making common cause with such socialists is a grave mistake.

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A US War on Iran would be Evil, Stupid, and Self-Damaging

“If Iran wants to fight,” US president Donald Trump tweeted on May 19, “that will be the official end of Iran. Never threaten the United States again.”

The “threat” Trump appears to be responding to is a statement from Iranian foreign minister Mohammad Javad Zarif that “[w]e are certain … there will not be a war since neither we want a war nor does anyone have the illusion that they can confront Iran in the region.”

Some “threat,” huh? Let’s seek a little clarity as to just who’s threatening whom here:

In 1953, US and British intelligence operatives orchestrated a coup d’etat, overthrowing Iran’s democratically elected government and promoting Shah Mohammed Reza Pahlavi from constitutional monarch to (increasingly absolutist) dictator.

Twenty-six years later, the Iranian people rose up and toppled the Shah. Over the next few years, Islamists led by Ayatollah Ruhollah Khomeini defeated rival factions and consolidated their power over the country, replacing the monarchy with an “Islamic Republic” — more of a democracy than western propagandists acknowledge, with a representative parliament, but with extensive power residing in a Shiite “Supreme Leader” and associated clerical councils.

The US government never forgave the Iranian people for overthrowing its puppet regime. For decades, US foreign policy toward Iran consisted entirely of demonization, sanctions, and calls for “regime change.”  US atrocities of the period include the murder of 290 Iranians (including 66 children) aboard Iran Air flight 655, shot down by the USS Vincennes in 1988.

It wasn’t until 2015 that US president Barack Obama began slightly warming relations between the two countries, offering to lift the worst sanctions and return some frozen Iranian funds in return for Iran ending a nuclear weapons program that, according to the Iranians, the International Atomic Energy Agency, US intelligence, and Israel intelligence, didn’t even exist.

Enter Trump, claiming during his 2016 presidential campaign that the Joint Comprehensive Plan of Action was a “bad deal,” and as president ultimately deciding to violate it (not “withdraw” from it — it’s codified as UN Security Council Resolution, so the only way to “withdraw” from it is to withdraw from the United Nations). Now Trump is escalating yet again because the Iranians finally said “okay, if you’re not going to abide by the deal, we won’t either.”

Perhaps the most serious fiction at play here is the claim that the US seeks “regime change” in Iran because Iran is a brutal Islamic theocracy. If that was the point, the US would also seek “regime change” in, for example, the Kingdom of Saudi Arabia, which is at least as brutal, just as Islamic, and more of a theocracy.

The US seeks “regime change” in Iran because Iran goes its own way and refuses to take marching orders from the US.

Iran is three times as populous and has a more modern and motivated military than Iraq and Afghanistan, neither of which the US has successfully brought to heel.

A US war on Iran would take top prize in the “evil,” “stupid,” and “self-damaging” categories when it comes to recent American wars.

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Education Entrepreneurs Are the Only Ones Who Can Disrupt the Status Quo

Transforming entrenched systems and industries comes through disruptive innovation and entrepreneurship. Coined by Harvard Business School professor Clayton Christensen, disruptive innovation is the process by which new ideas and inventions create value and ultimately topple existing competitors. A visionary individual or group spots opportunity and develops new solutions that meet consumer demand faster, better, and more cheaply. This innovation improves our lives through efficiency and cost-effectiveness, allowing us to keep more of our hard-earned money with better service and satisfaction.

Independent and Innovative Education

It shouldn’t come as a surprise that most of the organizations I highlight in Unschooled are independently run. Disruptive innovation may originate with individual ingenuity, but it is fueled by consumer demand and value creation within the private sector. Not that the public sector hasn’t tried. Back in the 1960s and early 1970s, there was a surge of interest in reforming mass schooling from within. The Open Classroom movement emerged, encouraging less restrictive classrooms and more choice and freedom for students.

In Philadelphia, Pennsylvania, in 1967, the city’s public school system launched its Parkway Program, sometimes known as the “school without walls,” in which young people were able to select their own classes and learn throughout various spots across the city, including private businesses, museums, local universities, and public spaces. In 1970, the New York Times called the Parkway Program “one of the nation’s boldest experiments in public education,” noting that over ten thousand students applied for only five hundred available slots.

Any meaningful and lasting transformation in American education must come from the private sector.

Within a decade, though, momentum for programs like Parkway waned. New public education fads appeared and old ones faded. Ultimately, Parkway was reabsorbed into the larger school district, becoming indistinguishable from Philadelphia’s other public schools.

More recently, a fully self-directed district high school that I also write about in Unschooled was set to open this fall in Somerville, Massachusetts, a city just outside of Boston. Powderhouse Studios had everything going for it, including relief from onerous public schooling requirements under the state’s Innovative Schools legislation and a $10 million grant from XQ Super School, an organization co-founded by Laurene Powell Jobs, wife of the late Steve Jobs of Apple, Inc. After seven years of concessions and compromise by the school’s leaders, the city’s school committee ultimately voted unanimously this spring not to approve Powderhouse’s opening.

Private Sector Reforms

As much as many parents and educators would like to believe that meaningful reforms can occur within the mass compulsory schooling model, real education innovation occurs most successfully and enduringly through the private sector. Free from state curriculum requirements, standardized testing mandates, and restrictions on hiring and firing, private educational organizations are able to experiment and innovate, with parents as the key stakeholders to ensure accountability.

Many of these schools and organizations are tiny non-profit enterprises that serve a small group of children and are often financially inaccessible to many families. But disruptive innovation in education has the capacity to bring real change to the masses—if educators embrace an entrepreneurial, free-market mindset.

In his book, Conscious Capitalism: Liberating the Heroic Spirit of Business, Whole Foods co-founder John Mackey writes about his early days immersed in the left countercultural movement of the late-1960s and 1970s. He lived on a commune in Texas for two years and became active in the local food co-op movement.

Entrepreneurship and Capitalism

Mackey writes in the book’s introduction:

Politically, I drifted into progressivism (or liberalism or social democracy) and embraced the ideology that business and corporations were essentially evil because they selfishly sought only profits. In contrast to evil corporations, I believed that nonprofit organizations and government were “good,” because they altruistically worked for the public interest, not for profit.

The longer Mackey was part of the non-profit food co-op movement, the more disenchanted he became with its ideology. He writes:

I ultimately became disillusioned with the co-op movement because there seemed to be little room for entrepreneurial creativity; virtually every decision was politicized.

Discovering the power of free-market capitalism, Mackey was able to scale his vision for healthy food and a healthier planet in ways that small, local, non-profit food co-ops were unable to, leading many more people to have access to organic food and many more jobs created to provide that food.

Mackey writes about his path from progressive anti-capitalist to proud entrepreneur:

I learned that free enterprise, when combined with property rights, innovation, the rule of law, and constitutionally limited democratic government, results in societies that maximize social prosperity and establish conditions that promote human happiness and well-being—not just for the rich, but for the larger society, including the poor. I had become a businessperson and a capitalist, and I had discovered that business and capitalism, while not perfect, were both fundamentally good and ethical.

Education needs its own Whole Foods moment. It needs entrepreneurial innovators to move small, non-profit organizations into larger-scale, profitable enterprises that serve more families and students with better outcomes and lower costs. Now with Amazon’s acquisition of Whole Foods, the potential for greater accessibility at lower costs increases.

Seeds of an enterprising moment in education are beginning to sprout. Acton Academy is a low-cost, self-directed network of private schools, often operating on a hybrid homeschool model, that is expanding across the country by educators committed to entrepreneurship and educational creativity. In an article for Forbes, Bill Frezza describes Acton Academy’s potential to remake the educational landscape. He writes:

With the right program as a model, anyone who home schools his kids can operate an Acton Academy. And not just for his or her own children, but for a schoolhouse full of them. Run the numbers and you can even make a lucrative living while charging tuition well below than that of most conventional private schools.

Standardized Equals Restrictive

Similarly, the Academy of Thought and Industry is a for-profit network of schools that could trigger necessary disruption in education. Founder Michael Strong acknowledges the power of profit-driven free enterprise to create lasting educational change that is higher-quality, lower-cost, and ultimately scalable. He says:

Any time something is profitable, that is what makes it able to go to scale. The reason we have low-cost groceries now (compared to 100 years ago) is because it’s profitable to bring food to millions and millions of people.

Any meaningful and lasting transformation in American education must come from the private sector. Public schools have tried to innovate; yet compulsory mass schooling has become more restrictive, standardized, and all-consuming of American childhood than at any other time in our history. To enact real, scalable change in education—just as Whole Foods did with the organic food movement—entrepreneurial parents and educators will need to imagine and implement new models of learning. These models must be rooted in the time-tested principles of free-market capitalism, or what Mackey describes as

the heroic nature of business, its essential virtues, and its extraordinary potential to do more good for more people in a sustained manner than any other social or economic system ever invented by humankind.

Entrepreneurs can help to replace an obsolete schooling model of education with a new learning one fit for the innovation era. In fact, they may be the only ones who can move us from where we are to where we could be.

Listen to Kerry McDonald discuss unschooling with FEE president emeritus Lawrence Reed (12:00 mark):

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Underwear in a Wad

Nobody asked but …

I don’t even want to hear my opinion on the outcome of the Kentucky Derby, but here it is anyway.  There are rules for voluntary participation.  And sometimes the rules may be misapplied.  But the basic rules of voluntary behavior are 1) end it, and 2) move on.  Nobody wants to recontend the Derby, except those who have direct skin in the game.

There was a bump, apparently, and the lead horse was involved.  Why have a voluntary rule prohibiting bumps, but then disregard it based on the feelings of the majority?  Why have replay, if you can’t review it, and rely on the officials to interpret the rules to make the call in a reasonable time (it might be noted that the time involved may have been unreasonably stretched)?

We are in a newer world where detailed, multiple angled replays are available, in most sports.  Some people think this means that the findings are open to debate and determination by clamorous democracy.  What is it that they don’t understand about their explicit and implicit risk of not liking the outcome?

— Kilgore Forelle

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