Everyone I know In Real Life, and many I don’t, has told me my essays are far too long. Allow me to apologize: if I was smarter and had more time, I’d have written a shorter essay. As a compromise of sorts, I’ve broken this essay into 6 self-contained pieces, which can be easily read in 10-15mins. If you’d prefer to read this all on a single webpage, you can read it here: The Full Stack of Society. For just Part I, keep reading below!
Can You Make A Whole Society Wealthier?
This essay is my attempt to explore that question, and when I find an answer that looks like “Yes!”, to answer the obvious follow up: “How?!” I look at the ways people have been successful in the past, where their societies invested, who actually got to keep the Wealth, and who is trying to copy each strategy today. In many cases, as in real life, the distinction between individual, corporation, and nation blurs. I touch on Politics, Economics, History, Culture, and Technology — a few of my favourite things — and all play a part in building Wealth.
When it comes to Wealth, analysis and advocacy are almost inseparable — in the audience’s mind, if not the author’s. The uncomfortable truth I’ve come to realize is: radically different approaches have worked before to increase the Wealth of a given people. Attempting to understand the necessary conditions & constraints for success under different approaches is made virtually impossible today because there’s a logical chain of inference from each prior system of Wealth-building (analysis) to each current major political position today in your home country (advocacy).
Acknowledging the prior success of a system your political opponents are advocating today would be debate-suicide, whether you’re at your local bar or on a CNN Town Hall. Thus the discomfort.
This is my composite ~30,000ft understanding of successful historical “modes” of Wealth building and how each of them is playing out in the present day, regardless of which team is playing. For my own coarse-grained purposes, I’ve bucketed these “modes” as: Feudalism, Mercantilism, Industrialism, Globalism, and Financialism:
Feudalism: The Bottom of the Stack, Political Solutions to Economic Problems
We start then at the bottom of the Stack: Feudalism represents the ultimate historical Zero-Growth, Zero-Sum world.
Working the land was historically the only reliable source of societal Wealth. Technologies stagnated for centuries, farming and husbandry techniques remained relatively static, and therefore the land’s value stayed constant and easily known. Population growth tracked and consumed any surplus Wealth creation (i.e. food creation) due to slow rates of technological improvement and minimal multipliers on human energy expenditure.
In this world, opportunities for investment of any surplus Wealth you generate are approximately zero: even if you could produce surplus Wealth, the main source of all societal Wealth is land, you don’t even own the land you work, and it’s not for sale, not now, not ever, don’t you dare ask again. Get back to work, your lease is up next month and I’m raising your fee!
Thus any Wealth generated has nowhere productive to go, which means it cannot be compounded. Only consumed.
What’s more, the quantity of land is fixed and it’s been owned and actively farmed by knowledgeable locals for >1,000 years (with domain-specific knowledge in a context where failure => famine => death). Communication and coordination across distances is entirely dependent on access to horses and roads, which means the land you see around you is likely all the land you’ll ever see and all your Great-Great-Great-Grandkids will ever see.
If you’re a Feudal peasant, that’s a depressing thought. There’s no option to “work hard” and “put the kids through college” and then your grandkids will have a great life. It’s just Zero-Surplus subsistence living for ever and ever.
So how can you build Wealth in this Zero Sum world?
Zero-Sum Means Feudal Wealth is Binary: Serfdom or Violence
You take it. Conquer the locals, assert ownership, and forcibly tax any vassals you allow to stay in place. “Feudalism” shares it’s etymology with “Fee” not “Feud”, but damn, what a coincidence.
This is the fundamental reason that the elite, the noble class, in Europe right back to Ancient Sparta and beyond, has historically been the Warrior class. The source of Wealth was fixed, the means of generating it were well-known, and all known sources were already owned.
To advance in Feudal life, to provide a life beyond subsistence for yourself and your family, cost blood and metal. Lives and swords. You’re totally free to morally object to taking up the sword, #killingisbad — I agree! — but not playing the game doesn’t free you from the consequences of others playing. And they will play.
We barely respect the Geneva Conventions today (quick, nobody look at Russia), do you think “Hey! That’s not morally acceptable!” would’ve worked on Caesar? He invaded Gaul to settle his fucking personal debts — that’s not a joke btw — and while collecting revenues, his men killed “one million Gauls” and sold another million into slavery.
There were only about ~5 million Gauls to begin with: that’s 40% of a whole people who got “snapped”, Thanos-style, because of a single Italian’s bad financial management. Vae victis: “woe to the vanquished.” When everything is Zero-Sum, everyone else is a source of Wealth.
Fast-forward 1,000 years after Caesar’s death and the core rules of society are unchanged: watch as the still-Feudal Normans invade the same Wealth-generating-land as Caesar did (England — shoutout to my ancestors).
The result of their
conquest Wealth-building excursion: “the Normans owned more than ninety percent of the land.” The remaining 10% of the land was then graciously split between just 2 native Englishmen.
You think Inequality is bad today, wait til you see the Gini coefficient on that.
Nothing about these two examples is particularly distinct from the general pattern of Feudal societal ascent. You’ll find many more everywhere you look in the history books, each with their own quirks and variations and counterpoints…and the same basic structure of Violence in the name of Taxation of Fixed-Wealth-generating resources. Every Feudal Lord’s family dynasty began with a Peasant who picked up a sword and rallied the local lads together after a few beers — all the pretty gold crowns and red robes are just window dressing. Recognizing that only the willingness to pick up the sword separates him from the peasants can fill a Lord with a sense of Noblesse Oblige (“I could have been like them!”) or with disdain for his peasants and a sense of his own justified superiority (“They could have been like me!”).
Blood and iron are expensive. Any group of people — a family, a village, a town, a city, a nation, an empire — that can create a small advantage over their neighbors in combat-trained men (Blood) or tools of combat (Iron) can start to snowball that advantage by using it to Take surrounding land, Tax that land, and spend those Taxes on even more blood and iron.
Generating Wealth in a Feudal World is simple but painful: Take it and Tax it. This applies both to individuals and groups of individuals, lords and nations and serfs alike. Wealth may not be able to be created, but it can certainly be Captured.
Investing in a Feudal World is also simple: more blood and iron. You invest in the means of Taking Wealth from others. There is no other way to compound your Wealth — and for the more ethically-constrained Feudalist, ‘blood and iron’ serves a dual investment purpose as the only way to protect your Wealth from your less ethically-constrained neighbours.
Feudalism Today: Why Silicon Valley Loves Universal Basic Income
I was lucky enough to meet Segment CEO Peter Reinhardt in the fall of 2012, when he came back to MIT to guest-lecture for a (fantastic) class called The Founder’s Journey. A few years later, he wrote an essay that filtered into Silicon Valley’s collective-consciousness:
In the long run there’s always something for people to work on and improve, but the introduction of this software layer makes we worry about mid-term employment 5-20 years out. Drivers are opting into a dichotomous workforce: the worker bees below the software layer have no opportunity for on-the-job training that advances their career, and compassionate social connections don’t pierce the software layer either. The skills they develop in driving are not an investment in their future. Once you introduce the software layer between “management” (Uber’s full-time employees building the app and computer systems) and the human workers below the software layer (Uber’s drivers, Instacart’s delivery people), there’s no obvious path upwards. In fact, there’s a massive gap and no systems in place to bridge it.
As the software layer gets thicker, the gap between Below the API jobs and Above the API jobs widens…
Working “Below the API” is the terrifying dystopian endgame vision driving the support in Silicon Valley for redistributive programs like Universal Basic Income, and Sam Altman wrote a prescient essay way back in 2013 about the political tensions of a low-growth Zero-Sum environment. The optimistic take is that “API-based” software businesses provide flexible employment, cash-on-demand-in-exchange-for-elbow-grease, and a way to provide for yourself and your family that didn't exist ~10 years ago.
All true, by the way!
The pessimistic take is that working Below the API closes the path to Wealth for an entire Class of people as labor trends towards Perfect Competition, towards Zero Economic Surplus, towards a world where the
serf peasant worker can't afford to purchase the tools she uses to work and must instead rent them from her employer at an ever-increasing-margin, i.e. pay a feu/fee, to be able to feed herself.
“Software is eating the world” doesn’t have a happy ending for everyone, and my smart tech friends out here in San Francisco have not missed the fact that the immense Wealth Creation that occurs here has become oddly decoupled from the wages & bank account balances of the average San Franciscan. Some invoke the spectre of AI as the threat driving their quest for Universal Basic Income, but all progress on AI could hypothetically be halted by Tech’s God Emperor Elon Musk and we’d still be living in an economy where software has pushed the marginal cost of production towards zero.
That’s a fancy way of saying: Software-based Tech Companies don’t need to pay that many humans to build huge businesses.
And if they don’t need to pay a human being then they won’t. They better not — for my 401(k)’s sake. You don’t need much experience running a business to understand how this plays out at the scale of a whole economy and what it does to the Wealth-generating ability of labor. Spoiler: also pushed towards zero. Unless of course you can code — software is the new iron, and programmers in Silicon Valley are the new “warrior” class. #GoWarriors!
Speaking of the Wealth-generating ability of labor, people on the internet had many different responses to my Bermuda Triangle of Wealth essay on personal Wealth-building:
(Click to embiggen) A quick sampling reads, from left-to-right, that: i) government needs to regulate healthcare costs ii) government distortions are actually what caused the cost disease and iii) government needs to limit immigration. All in response to the same essay on building Wealth for yourself.
Forgive me for reducing 3 very different positions, held by very different internet strangers, to essentially the same proposition, but at a low enough resolution all 3 commenters are just advocating solutions to their personal Wealth-building problem. It’s hard to imagine all 3 of these solutions being right, and harder still to imagine these 3 humans calmly debating each other…
…but there was one other kind of response that I hesitated to include in that composite-image:
And yes, stow the pitchforks, #killingisstillbad, and yes, violence is super bad, Non-Aggression-Principle is good, and no, I definitely don’t condone any of that. But in a Feudal world, history has been pretty clear that things are Zero-Sum and there’s still only one good way to build Wealth — Take it and Tax it. Veni vidi vici etc.. If people look out the window and see nothing but Feudalism and a personal lifetime of serfdom, you can at least understand their instinctive linguistic reaching for violence (while condemning it).
Is there a non-violent solution that people living Below the API can self-effectuate, instead of having to rely on the Noblesse Oblige of
Skynet those Above the API?
Perhaps. Another preachy author provides a less bloodthirsty solution that still satisfies history’s fundamental rule of Feudalism:
“When you vote, you are exercising political authority, you're using force. And force, my friends, is violence. The supreme authority from which all other authorities are derived.”
Voting is violence (by proxy), and Democracy marks a difference between the Feudalism of old and Silicon Valley’s envisioned Feudal dystopia. Each vote you cast is an implicit claim on the full force of Uncle Sam. It’s buried beneath layers of civilization, thankfully, but US voters elect Representatives who determine Tax Rates which determine IRS policies which, if you try to fuck around on, will get you violently arrested and sent to jail.
Nowadays you can Take it and Tax it at the ballot box, with the use of force suitably restrained by process and bureaucracy. Which is precisely why so many in Silicon Valley who can see the writing on the wall (eventually all those jobs “Below the API” get replaced by a robot…) are instinctively turning to Political solutions instead of Technological ones to the Wealth-building abilities of their fellow Americans.
“It’s a shame, really, but you can’t fight (technological) progress.”
My point: As long as people who feel abandoned or impoverished or crushed Beneath the API or like they have no obvious path upwards, as long as those people feel that VOTING is a valid way to “Take it and Tax it”, they can peacefully express and effectuate what otherwise must become violence or generational poverty & stagnation.
There’s no other way to build Wealth in a Feudal world — you’re either a Lord or a Serf.
Even if this doesn’t describe you or your company/city/state/country, it’s worth thinking about which of your neighbours this does describe, how it might impact their thought process and actions, and what you can do about that…
Minimal Wealth-multiplier on labor, with “fees” to even participate in the labor market that approach the value of all the Wealth you can produce
Result: Zero Surplus Wealth generation for Workers, with all the Surplus Wealth captured by Asset Owners
Take it & Tax it policies receive strong populist support from voters who look out the window and see a mountain of education debt, auto loans, urban-slum-lord rent extortion, all laying claim to their earnings with no viable path upwards
In America today, that base of voters who look out such a bleak window turn their support to representatives like Andrew Yang, Bernie Sanders, and Alexandria Ocasio-Cortez, all of whom continue to shock the traditional mainstream prognosticators with their diagnoses and prescriptions that sound…well, Feudal.
To the extent that traditional prognosticators have their positions by virtue of achieving success in today’s America, they will continue to be surprised and offended by this worldview — afterall, if they made it, anyone can! Right?
Meaningful investment opportunities are rare & heavily-gated, and ownership of Wealth-generating Assets unlikely for those who don’t already own them
Who benefits from the immense asset inflation of the last 10 years (spoiler: people who already owned assets 10 years ago, not a ~2020 college grad who has to “buy-in” at the inflated prices)
Or which investment choices made by tax-protected college endowments are even available to the average American (spoiler: not many)
Or how easy Silicon Valley makes it to invest in hot consumer Tech Companies, one of the major sources of growth in the S&P500 and an area that average consumers might even have a comparative advantage in understanding vs. disconnected investors (spoiler: not easy, and only at the highest price)