Investor and entrepreneur Nick Hanauer explains why customers, not just entrepreneurs and investors, drive our economy. Even in a world dominated by AI and robots, people will still need to get paid one way or another, or there will be no one to buy products and services. The people will rise up before the robots do!
Nick Hanauer is one of the inspirations for this event. His 2012 TedU talk about the virtuous cycle of aggregate demand and the need to pay workers well for the economy to prosper, was a contrarian attack on trickle-down economics and a warning of the danger of rapidly increasing income inequality. It is a message that all of us need to hear in a world that for decades has focused on driving down labor costs and even entirely eliminating human labor in the pursuit of higher profits. Nick has gone on to work on a series of policy recommendations to support his ideas, including his work on “middle-out economic policy”, his work with David Rolf to put in place a $15 minimum wage, and the notion of a “shared security account” that would use the power of networks and big data to allocate benefits across part time work for multiple employers, rather than, as now, enforcing an artificial distinction between full- and part-time workers.
Hanauer’s ideas are an attempt to replace traditional progressive rhetoric based on fairness with one based on enlightened business self interest. And it’s working. One reason that the $15 minimum wage initiative he worked with David Rolf to promote has spread so fast is that even committed free market advocates are starting to recognize that there’s something very wrong when workers are paid so little that they have to supplement their earnings with food stamps. These are not free market wages; they are wages kept artificially low by corporate welfare! Taxpayers are subsidizing those low wages.
— Tim O’Reilly
Gone is the era of the lifetime career, let alone the lifelong job and the economic security that came with it, having been replaced by a new economy intent on recasting full-time employees into contractors, vendors, and temporary workers. It is an economic transformation that promises new efficiencies and greater flexibility for “employers” and “employees” alike, but which threatens to undermine the very foundation upon which middle-class America was built. And if the American middle class crumbles, so will an American economy that relies on consumer spending for 70 percent of its activity, and on a diverse and inclusive workforce for 100 percent of the innovation that drives all future prosperity.
We’re all better off when we’re all better off.
I think the idea that giant profitable corporations should pay their workers enough so that they don’t need food stamps—since when is that left wing? How did that become “leftie?” That doesn’t seem leftie to me. That seems common sense.
People seem to have this ‘econo-erotic fantasy’ in which everyone else continues to pay their workers enough that they can still afford to buy my products, but I can keep squeezing my own labor costs down to zero. It doesn’t work that way.
What everyone wants to believe is that when things reach a tipping point and go from being merely crappy for the masses to dangerous and socially destabilizing, that we’re somehow going to know about that shift ahead of time. Any student of history knows that’s not the way it happens. Revolutions, like bankruptcies, come gradually, and then suddenly.
As the sharing economy kicks into high gear, more and more Americans will become independent contractors activated at the touch of a button on an app, working for a fleet of employers. According to a 2015 Bureau of Labor Statistics report, Americans born in the late Baby Boom have held around 12 jobs in adulthood. It’s possible that 30 years from now, the average American might well work for four or five or even more different employers in a single week. This hyper-nimble form of employment means the economy will likely be even more efficient in years to come, as workers are hired for very specific tasks of a highly limited duration. But a nation of independent contractors is a nation of workers without any of the benefits that defined the decent and dignified life that gave one reason to be optimistic about the future—a gross violation of the social contract that helped create the greatest economic expansion, the most dramatic increase in living standards, and the largest, most prosperous, most productive, and most secure middle class in human history….
An economy based on micro-employment requires the accrual of micro-benefits, and a twenty-first-century sharing economy requires a twenty-first-century social contract that assures shared economic security and broad prosperity.
Prosperity in human societies can’t be properly understood by looking just at monetary measures, such as income or wealth. Prosperity in a society is the accumulation of solutions to human problems.
The orthodox economic view holds that capitalism works because it is efficient. But in reality, capitalism’s great strength is its problem-solving creativity and effectiveness. It is this creative effectiveness that by necessity makes it hugely inefficient and, like all evolutionary processes, inherently wasteful. Proof of this can be found in the large numbers of product lines, investments, and business ventures that fail every year. Successful capitalism requires what venture capitalist William Janeway calls ‘Schumpeterian waste.’
Nick Hanauer is a co-founder and partner in Seattle-based venture capital firm Second Avenue Partners. Second Avenue provides management, strategy, and capital for early stage companies. Hanauer is one of the most successful entrepreneurs, investors, and managers in the Northwest, with over 30 years of experience across a broad range of industries including manufacturing, retailing, e-commerce, digital media and advertising, software, aerospace, health care, and finance.
Hanauer’s experience and perspective have produced an unusual record of serial successes. Hanauer has managed, founded, or financed over 30 companies, creating aggregate market value of tens of billions of dollars. Some notable companies include Amazon.com, Aquantive Inc. (purchased by Microsoft in 2007 for $6.4 billion), Insitu group (purchased by Boeing for $400 million), and Market Leader (purchased by Trulia in 2013 for $350 million). Some other companies include Marchex, Newsvine, Qliance, Seattle Bank, and Pacific Coast Feather Company.
Hanauer is actively involved in a broad variety of civic and philanthropic activities. In 2000, he co-founded the League of Education Voters (LEV), a non-partisan statewide political organization focused on promoting public education. He currently serves as co-president of the LEV. Additionally, Hanauer serves or has served a broad range of civic organizations including the boards of the Cascade Land Conservancy, The University of Washington Foundation, The Seattle Alliance for Education, and The MT Lemmon Science Center. He currently serves as a director for The Democracy Alliance and as a board advisor to the policy journal DEMOCRACY. He recently founded Washington Alliance for Gun Responsibility. He also co-manages The Nick and Leslie Hanauer foundation with his wife.
In 2007, Hanauer published the national bestseller in politics The True Patriot with co-author Eric Liu. In 2010 Liu and Hanauer published their second book, The Gardens of Democracy, also a national bestseller in politics.
Hanauer has been featured in a variety of publications and is a frequent commentator on politics and economics in the media. He has appeared on the Charlie Rose Show, Fareed Zakaria, National Public Radio, Ed Schultz Show, The Lawrence O’Donnell Show, and others. He was recently featured on the cover of the National Journal. His TED speech on the true job creators went globally viral in 2010. His opinion pieces have been featured in the New York Times, Bloomberg Business Week, The Atlantic, Democracy Journal, and other publications. He has been featured in two documentary films on economic inequality, “American Winter,” which premiered on HBO, and “Inequality for All,” which was theatrically released in fall 2013.
Hanauer has a degree in philosophy from the University of Washington. He lives in Seattle, Washington and is married with two children.
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