by JR Cooks
Global Resource Hunter
Such a nasty word. Anyone who’s given it two thoughts will agree that too many people suffer from entitlement mentality. But really, it’s always the other person who is “entitled,” right?
Pretty much all of us are entitled. How we’re entitled depends on who is pointing the finger.
She thinks she is entitled to my hard-earned money.
He thinks he’s entitled to lording over me with his riches.
Unfortunately, entitlement mentality is far more pervasive than that. It can be as basic as feeling entitled to drive down the road without being inconvenienced by a “bad” driver. It can be as substantial as feeling entitled to the “right” of affordable healthcare.
Uber is the app-driven taxi service that hires independent contractors to serve as private drivers on demand.
Thus, the drivers are not considered employees and thus do not currently receive healthcare or benefits beyond the monetary compensation received for providing their services.
Reuters recently reported:
Faced with a barrage of lawsuits from workers demanding benefits and recognition as employees, some companies in the fast-growing ‘gig economy’ are looking to settle the issues through legislation.
I wonder, when these independent contractors signed on to perform services, were they promised benefits and employee recognition?
Is it not the company’s choice to provide benefits to independent contractors?
Is this not just another sad manifestation of entitlement?
Handy, ride-hailing service Uber Technologies Inc and other companies in the vanguard of the gig economy – also known as the ‘sharing’ or ‘on-demand’ economy – have ignited a national debate about how to classify and provide benefits to people who work flexible schedules and irregular hours.
And here we go.
Providing benefits increases cost. Will the company bear the additional cost … or pass it on to the consumer?
That’s the first issue here, where a very decentralized, crowd-sourced service (in the case of Uber) has taken off with tremendous success without the promise of additional benefits to its independent contractors.
Yet entitlement is forcing change.
Rising costs are an obvious consequence since anyone with half a brain understands there is no free lunch. But what about the unintended consequences?
Let’s think about the impact of employee benefits overall.
Has not the prevalence of employee healthcare plans and benefits created artificial demand for healthcare, medical care and related services?
And has that not created artificial scarcity of medicines, equipment and services?
And has that not driven up the cost of health and medical care?
And has not the unaffordability of healthcare driven up workers’ demand for employers to provide benefits?
And has that not driven up the costs for employers or customers or both?
It’s a vicious cycle.
But there is hope …
The collaborative economy that Uber has helped to put on the map is going to proliferate. Because there is no other choice.
And though it may take some time for the collaborative economy to fully evolve, transactions facilitated by new technology and stripped clean of entitlement will be the norm.
Can Technology Reunite a Culture Plagued by Separation?
Our money has moved us apart. Can technology bring us back together? I’ve been guilty of answering ‘No, absolutely not.’ But I am changing my tune.
Just as much as anyone, I’ve hammered the social media universe for creating what I consider deeply artificial relationship as well as a laundry list of unintended consequences for individuals, society and culture.
Now, I won’t say I’ve been entirely wrong about that. I think the Twitters and the Facebooks can be tragically abused just like any consumable. But I do see some light at the end of the tunnel.
The light is not emanating just from social media – it is the wave of technology and innovation that’s eliminating some of the shadows cast upon us, our communities and our economies by an unrelenting system of money and debt.
Before I go any further, let me establish two of my assumptions:
1. Our current system of money allowed for an unbelievable century of growth and prosperity in the Western world.
2. The growth phase has been exhausted and exorbitant debt levels prohibit sustained prosperity.
With that in mind, let me turn to one symptom of growth exhaustion: globalization. The strain of globalization looks something like this …
Where excess capacity burdens producers in one nation, they dump it on consumers in other nations. Where rising wages burden employers in one nation, they maintain margins by tapping into low wages in other nations.
Where domestic production is cost-prohibitive to businesses in one nation, they externalize environmental and social costs when they import from low-cost producers in other nations.
Where wage stagnation limits consumers in one nation, they favor low quality for the sake of low prices for consumables from other nations. Where workers are crowded out in one nation, they succumb to the labor and consumption trends driven by multinationals.
Where policymakers dictate the flow of capital in one nation, investors seek the preservation and accumulation of wealth in other nations.
The result is severe inequality.
And I don’t mean nations that are unequal. Nations will never be equal. And those elements of globalization can manifest within the walls of a single nation.
And that is why, when I say inequality, I mean among classes of people – those getting rich off debt versus those getting poor off debt.
And globalization, as I said a moment ago, is the symptom of a money system that fosters growth until it costs too much to grow.
And now it costs too much to grow.
The United States President-Elect, Donald Trump, very much hinged his campaign on the idea that free trade, for example, is now at odds with the America worker and the sustainability of the American economy.
This message is not confined to the U.S., either.
European nations, led by the UK and the Brexit referendum, are expressing the same distaste for globalist agendas that rip out the heart of “We the People” at the altar of GDP growth.
What does voter distaste mean?
But it could mean something very big.
It could mean that nations regain sovereignty over decisions that hugely impact the integrity of their economies. Immigration and trade are two such items. Yet those are merely the most visible from a global perspective.
Nations will regain sovereignty and grassroots influence can more easily return to industries that sold out to globalism in pursuit of the almighty dollar.
Realigning Our Faith
To be sure, transitioning out of a global economy fueled by debt-driven GDP growth will require we withdraw our faith in centralized economics and put our faith in the local economy.
Fortunately, technology is making it such that realigning our faith feels far less like a fool’s errand.
Facebook, for example, though it allows users to project an artificial self and struggle with a flawed perception of everyone else’s reality, is bringing together people, groups and communities in a way that happened naturally (albeit far less efficiently) before money and debt became a wedge that made our essential daily interactions so remote.
This digital reunion is helping to mend the separation wrought by our debt-enabled self-sufficiency. (Yes, it’s an oxymoron.)
Today a small family selling responsibly-raised pork can establish their product and get found by local consumers who had until recently relied on the industrial pork industry. An industry that raises pigs in unsanitary and inhumane environments and pays workers bare minimum to mass process the meat.
That process releases tons of harmful pollutants into the environment during day-to-day operations. That family also saves on shipping so that they can minimize internal costs of getting the bacon to market.
Facebook and Squarespace (a dynamic website building tool for dummies) have, for example, eliminated some barriers that might otherwise keep a business like, say, South Florida Heritage Farms from getting their pigs to table.
I can, with little effort, come to find and trust a business like SFHF because a network of people online give it accessibility and credibility. It’s word of mouth … from farm to smart phone.
Of course, technology isn’t always and everywhere a blessing.
Jobs will go the way of the robot. And though many say that claim is all boy-who-cried-wolf, remember that the wolf does eventually show up. And the speed at which the wolf will take away jobs is only going to increase as technology makes many tasks obsolete.
The goal is not to pave the way for robots but to reduce the administrative and time-consuming burdens that let human workers focus their energy on doing human work for other humans who live nearby.
We want technology that levels the playing field, so that large corporations are not rewarded simply because they have enough size, wealth and questionable ethics to maintain their stranglehold on market share.
Now, I don’t use the term “level the playing field” loosely. It should not be taken as robbing the rich to give to the poor.
Rather, it should be understood as a market-driven redistribution of resources that let smaller businesses with fewer connections and less capital compete in geographically sustainable territories.
Technology is one tool to help level the playing field.
Another is policy, namely interest rate policy. And while it would be a nightmare for investors looking to park their money and earn a risk-free yield, negative interest rates would help level the playing field by making it unprofitable to hold accumulate idle wealth.
I touched on the idea three months ago when I wrote:
You see, a money system that hinges on a rate of interest must necessarily create increasing amounts of debt. (In case you’re wondering, this is what’s at the root of the income gap – growing inequality – often characterized as the hollowing out of the middle class.)
Debt creation eventually inhibits growth because it requires capital be earmarked to servicing that debt.
It’s possible that debt leads to substantial return and wealth for one segment of the economic pie. But it must mean that another segment is short of capital needed to sustain growth or service existing debt or both.
The solution is to accept a deceleration in growth or to create more debt in order to generate more growth.
Fare enough. But I know the alternative – the idea of implementing negative interest rates – is kryptonite to the average saver. But let’s flesh this out a little bit …
Negative interest rates would need to be negative enough to penalize money sitting idle. Economic activity can only occur when money and resources are moving through the economy.
Right now, with interest rates around the zero bound, plus or minus a little bit, there is little incentive to move money because there is such limited growth potential in the economy. In an economy mired by debt, growth potential is going to remain limited.
Now, it’s commonly accepted that raising interest rates is the solution to low money velocity, that a higher rate of interest brings forward borrowing and spending if money is expected to be worth less to hold (inflation) or costlier to borrow in the future.
In certain situations, this can be true. But even in the most ideal scenario, the money is moving through an economy based on the interplay of debt.
Interest rates might encourage the movement of money through the system, but to what end? Will not a meaningfully positive rate of interest not simply enable a growing divide between debtors and creditors?
Then the only prudent way to move money through a system bogged down by debt is with meaningfully negative interest rates. If money is expected to decay during its holding period, there will be an incentive to get rid of it – to spend it.
I’ll leave it at that for now. Chew on it a little.
Shortfalls of Share-Tech
Let’s bring this back to how technology is helping economies transition away from debt …
The collaborative economy can also be called the sharing economy, the on-demand economy, the gig economy or the gift economy. Whatever you call it, at its core is the hyper-efficient use of labor and goods met with a renewed interconnectedness of its actors.
Technology is helping to make this happen.
You’ve surely heard of Uber, AirBnB and eBay.
Maybe you’ve even heard of TaskRabbit, providing same-day on-demand labor for everyday tasks, or Craigslist, an online network of classified ads listed around the globe.
Then there is Neighborgoods, Streetbank and Peerby, each intended to facilitate sharing of assets among neighbors.
These things are all great. They bring together real people in ways to optimize the value of goods and labor. But that this coming together isn’t happening naturally still poses a problem.
Because trust remains an issue.
This is how money has become so successful at facilitating an economy underpinned by a culture of separation. Money is a medium of exchange that bridges the trust gap. Instead of dealing in social currency, our world deals in fiat currency.
So even though technology is helping build a bridge back to local communities built on meeting needs for one another, technology has its limitations.
Of those trying to work out the entitlement mentality kinks in platforms like Uber and AirBnB, seem to want social safety nets to apply to all laborers regardless of whether they are considered employees or independent contractors. And let’s not forget that government and regulators will always have their say too.
Technology can lead a horse to water, but it can’t make him trust.
Therefore, the technology that will have the greatest future impact on the collaborative economy is the kind that reduces the costs of operations, that empowers small businesses to do more with less, so that economies can become self-sustaining on a much smaller scale.
Considering the nature of that technology, it’s likely going to be difficult to pinpoint public investment opportunities with direct exposure for now. Venture capital and managed funds, however, see the investment landscape in private niche opportunities growing by leaps and bounds.
Until exchange-listed opportunities arise, I’ll continue to pursue shares of companies that are targeting new ways of doing business right.
At the same time, I’ll continue to monitor the situation in global markets as the Federal Reserve inches ever closer to inching ever closer to normalizing interest rates in an environment that’s plagued by debt yet possibly on the verge of a short-term inflationary jolt.