Author: Isaac Morehouse

Why I Love the Anonymity of the Market

A lot of people say they want to know the person who sells to them.  They want a tight-knit Mayberry-like marketplace where you buy from and sell to your friends and family.  Seems more civil and cozy than the widely dispersed and highly specialized global market, doesn’t it?  I don’t think so.  And I don’t think most people realize that the very anonymity they claim to dislike is one of the more humanizing and freeing aspects of the market.

Trying a new format, I recorded this while driving home from Starbucks.

You Were Born an Entrepreneur

Have you ever watched a baby with a goal?  They know what they want, but they don’t know how to get there.  They have limbs they can barely control and a variety of toys, tools, and furniture around them.  They collect information by watching others.  They test and explore, flailing their limbs until they invent their own kind of motion to get from point A to point B.  It’s remarkable when you think about it.  None of the adults around them are crawling, but babies find this solution on their own.  They will not be denied.

It takes years in a conformity-based education system to train that kind of initiative out of us.  In fact, conformity was one of the primary goals of the education system when it was established.  Experts believed that people needed to be molded into uniform widgets, then plugged into an assembly line like spare parts, ready to take orders.  It wasn’t a great model then, and it’s even worse for the world today.

Despite the slower economy, opportunity abounds.  Cloud-computing and other innovations have dramatically reduced the cost of creating, collaborating, and starting a business.  The best businesses are struggling to find people who can come in and add value, out-of-the-box thinking, and innovation.  The market is full of unmet needs, but there aren’t enough entrepreneurs to solve them.

Now is not the time to wait around for more jobs to open up.  Now is not the time to wander aimlessly through a status quo education, or sit in classrooms struggling to stay awake.  Now is the time to rediscover your inner entrepreneur.  Break free.  Pick goals, even if they’re notional, and think clearly about the best way to achieve them.  Test different approaches.  Is the well-worn path really the best option?

Why Now is the Time

These are exciting times in education and career training.  The landscape is changing, and everyone knows it.  College degrees are still expected by most employers, but the trend is in the other direction.  Some of the most interesting companies don’t care.  They want something that stands out and signals real value.

Online education is exploding.  It still falls short in many ways, but for basic conveyance of knowledge to the motivated learner, it’s incredible.  Meanwhile, innovators are furiously trying out ways to test and verify knowledge, make it interactive, and enhance the experience.

Young people are listless and frustrated, but not willing to throw in the towel.  More and more are taking longer to make it through college; not because they’re dumb, but because college doesn’t help them discover their passions and hone their skills, even in four years, so they try a semester abroad, a new major, and on and on.  They crave a new, immersive experience.  They want something for them, not for the people who created the system.  They want to be the customer, and have their educational needs catered to; rather than feel like the cog who is used by the system then discarded.

Yet there is hesitancy.  Young people want to try something new, and break the mold, but they’re scared to be too far out there or too different.  They read articles about the declining value and rising costs of college, but they still see degrees listed as a requirement for many jobs, and their friends and parents keep urging them to go, to finish, and if that’s not enough, to try grad school.

Is it a little radical to try something like Praxis?  Yes.  That’s precisely why it’s so valuable.  Five years ago, doing something other than college was risky. In five years it will be common. Now is that sweet spot, where you have a chance to do something just enough on the edge to make you stand out, but not so far that no one understands. This is the time to push yourself just a little out of the comfort zone, be an innovator, and reap the first mover rewards on the job market.

The opportunity cost is low for young people.  The older you get, the harder it is to try something for a year.  It’s always possible, but the mental hurdles become harder to overcome.  Now is the time.

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Praxis in the News

A nice story in the Daily Caller about the emergence of higher education alternatives mentions Praxis and quotes me.

“Can new opportunities like Praxis and Gap Year really supplant the traditional four-year degree? Morehouse thinks so.

“It seems radical only because the impractical and increasingly ineffective status quo is so normal,” he wrote. “Really, it’s radically practical.””

It’s been exciting to see the interest since launch, and I’m even more excited to see how the landscape continues to change to the benefit of young learners and job seekers. As I’ve written before, the current approach to life and career prep is as absurd as teaching a kid how to ride a bike without letting them actually do it.

It’s Time for Praxis

It’s here.

When I was 16 I was a sophomore in college and I couldn’t believe how inefficient the whole thing was. I loved many of my classes, especially philosophy. I loved my job, which I worked probably 30 hours a week while taking 15 or 20 credits a semester. The problem was that everything I learned of any value was stuff I taught myself because I wanted to, or because I was working.

My job taught me so much that is of value to me today. It gave me confidence. I learned from classes sometimes as well, but it had nothing to do with making the grade. I did what I needed to get A’s and B’s, and then if I was interested, I also learned stuff from the texts, teachers, or in class discussions. Learning was not necessary to make it through college. Sometimes it happened, but only for those who wanted it. Meanwhile not learning on the job was impossible. If I wanted to keep my job, it happened.

In addition to my job, I put my savings into a bank-owned house and flipped it with a few guys. I learned a lot and made some decent money. I thought it would cover the next semester’s tuition, maybe a new car, maybe a summer trip to Peru I had planned. Then I was hit with capital gains taxes I was not prepared for. Tuition and parking fees on campus also went up significantly. So did the cost of textbooks. (Luckily, I discovered two ways to get a decent grade. You could buy the text and read it, or you could show up to class. Doing both was redundant. I attended the classes I enjoyed and never bought the texts, and I avoided the boring classes, opting to read the texts instead. I saved a few bucks and many hours.)

Between the taxes and the cost of school, I was frustrated. I felt hemmed in. It seemed doing the normal thing – getting financial aid, doing class but not working – was rewarded, even though the costs were borne in part by those who took no part in it. I didn’t live on campus, for example, but I had to pay all kinds of fees and higher tuition to subsidize those that made campus life a big part of their experience. Meanwhile, going above and beyond was punished. Work hard to earn extra? Pay extra in taxes. Study enough on your own to test out of a class? Pay tuition anyway or don’t get credit.

All I wanted was knowledge – of myself and of several fields of study – and some kind of proof that I’m a reasonably competent guy to show employers. I barely got these, yet I paid for innumerable add-ons and frills that I had no interest in.

I used to walk around downtown Kalamazoo and dream about renovating one of the old buildings and turning it into a real college. A place where you learn what you want to learn. Where you only pay for what you want. Where you learn by doing as much as by thinking. Where theories were tested and applied right then and there.

Today, the frustration I felt with college is widely known and shared. I was in the middle of a growing bubble – one that has reached a fever pitch. Everyone knows it’s too expensive. Everyone knows graduates are barely equipped to do what they want to do. Most haven’t been able to try enough stuff out to even know what they want.

Online education shows great promise. If it’s knowledge you want, it’s out there. In fact, so much is out there that it can be overwhelming. Where to start? What to study? It’s also worrisome to people that they have a hard time proving their knowledge without some kind of certification. And online learning itself is great for theoretical knowledge, but the things we need to succeed in life are primarily learned through practice.

What’s needed is a combination of the best online content, compiled and structured to challenge and expand the mind while showing how it applies in real life, and on the ground experience at businesses that create value. Imagine working through interdisciplinary online courses – readings, videos, podcasts – until you really grasp the topic. Imagine being tested not with multiple choice quizzes or essays, but in conversation with experts in the field through an oral exam. Imagine working full-time with entrepreneurs and small business owners, and seeing and being a part of every aspect of business.

That’s why we launched Praxis. The name says it all. According to Wikipedia:

“Praxis is the process by which a theory, lesson, or skill is enacted, practiced, embodied, or realised. “Praxis” may also refer to the act of engaging, applying, exercising, realizing, or practicing ideas.”

Praxis is here because college isn’t enough. Praxis is here because a growing number of smart, driven young people want more than the factory schooling approach. They want more than internships where they do menial tasks. They want more than debt. They want to build human capital, gain confidence, knowledge, experience, and a network. They want to discover what they want to do by trying it out. They don’t want to pay for a bunch of frills they don’t need. They want to take ownership of their education and life.

It takes courage the break the mold. Thankfully, this is a courageous generation, not content to follow prescribed road-maps and insistent on creating their own path to success. Praxis is for them.

Check it out.

It Goes Both Ways

People have a tendency to put themselves into one role in the market, and vilify the other.  They think of themselves as consumers, and producers are nasty.  They think of themselves as employees, and employers are greedy.  They think of themselves as sellers, and buyers are stingy.  They think of themselves as borrowers, and lenders are predatory.  To condemn any of these roles in the market is to condemn oneself.  We all play every role at one time or another.

Why is it wrong for the price of gas or groceries to go up, but right for the price of your home or the value of your 401(k) to go up?  You’re the “greedy” seller when you post on Craigslist.  You’re the “stingy” capitalist when you shop for the bank with the highest interest rate.  You’re the one “taking advantage of others” when you take a few extra minutes on lunch break or treat customers rudely.

There needn’t be any bad guy.  The point is, in a market we’re all at once buyers and sellers, producers and consumers, borrowers and lenders.  These are functions, not people, and all market participants play these roles at various times.  None of these roles are more or less noble than the other.  They’re all wonderful, so long as they’re all voluntary.  If they’re voluntary, they only come into being when another person, playing the counterpart, agrees to the exchange.  There are no sellers without buyers, there are just people with stuff they can’t get rid of.

Go easy on the one-sided category judgments.  Next time you’re tempted to condemn a company for taking advantage of employees, for example, consider all the employees that take advantage of the company as well.  Consider that both parties have to agree to work together, and both are aware of the ways in which the  other will try to get the most for the least in the deal.

We Are Gods

Not content with smoking logs and larval bogs,
We wrought from dirt a burst of light,
It’s sinewy veins spontaneous in their order, living bricks and mortar,
Anything we want we get, here and made to order,
We fly, we’re telepathic, teletransporting, telekinetic,
We write in dreams and dream in I-beams, anything it seems,
Our existence we redeem, reclaim and redirect, ideas we erect,
On the bones of ideas before, we move beyond and we restore,
In one finger more power than all men once had, our stats we pad,
Notions we explode like the frozen forests we once rode,
From that lowly abode, we emerge and we encode,
All that we survey, all that we desire, flies freely from our minds without a wire,
Brighter than fire and hotter than embers,
We don’t even care or need to remember,
The future is ours, we make the odds,
Have I not said we are gods?

Abortion and the Idolatry of Law

After Roe v. Wade, something amazing happened.  New organizations, care centers, adoption services, and support networks for pregnant mothers popped up all across the country.  There’s a powerful lesson here about the corrosive effect of law.

Whatever you feel about the morality and legality of abortion, more help for women with unwanted pregnancies is a good thing.  Today, there is a vast network of privately funded crisis pregnancy centers, counseling, even housing and food for mothers who fear retribution because of their pregnancy.  What’s startling is how recent this support network is.  Why did it take the Supreme Court ruling that abortion was legal before all of these alternative services became so widely available?  Because often those who feel most strongly about their beliefs are the first to do nothing once the state gets involved.

Surely unwanted pregnancies took place before the Roe decision.  Abortions also took place.  With greater medical and personal risk, and fewer places to turn to talk over the situation.  As long abortion was illegal, those who wanted mothers to choose not to abort, or even just to have someone with them during the pregnancy, did very little to help.  Instead of offering comfort and assistance to those in a tough spot, courts and cops were relied on to prevent and punish.

There is a serious moral decay that comes with law.  When the state says you can’t do drugs, drink alcohol, gamble, pay for sex, eat unhealthy foods, or engage in any other activity commonly deemed dangerous or immoral, the very people who worry most about those activities largely give up on trying to help those who engage in them.  Whether or not any of those things are bad, without freedom to choose, people’s preferences and often their struggles are pushed under the rug, into the back alleys, and out of the public consciousness.  The problems that can arise are no less acute, but the availability of help and alternatives vanish.

Even if you think abortion should be illegal, the fact that almost none of the crisis care, counseling, and adoption services available today existed when it was ought to give you pause.  Where else are you failing to live up to your own moral standards, but instead letting the clumsy coercion of law do the work for you?

A Good Feeling

For several years, I used this blog as a place to store a few odds and ends and articles. At the beginning of this year, however, I felt like I was in a rut and needed a new outlet for creating. I decided to start blogging regularly.

I wrote a post every single day, seven days a week, for just shy of six months. It was an amazing experience and re-inspired me in many ways, some of which had no direct relation to blogging. My creative juices got flowing fast, and so many big ideas emerged that I now have an overflow of exciting stuff to work on. The exercise served its purpose.

It forced me to produce something every day, and made me more comfortable putting ideas out there into the stream of society, even if they’re not fully formed, not all that great, or not paid attention to. It hopefully improved my writing a bit. It also surprised me how many things I put little thought into were of great interest to others, and how many things I found fascinating that got little notice.

I was in a rut when I began daily blogging and now, thanks in large part to doing it, I’m occupied with more projects and ideas than I can keep up with. It feels great. My need for creative expression had no channel, now it has several. I’ll be putting more effort into these things, and less into blogging, at least until I need it again the way I did to start the year.

I’ll probably post every so often, but not with the regularity I have been. I hope it’s been fun for those who’ve read a few or several posts, and for the handful who’ve read every day. I hope you’ll dig through the archives and read more.

Until the next post, thanks!

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Justice and Morality

It seems there’s a difference between justice and morality.  I’ve never quite come to a comfortable conclusion about the nature of the two concepts and their relationship, but it’s worth exploring.

Suppose you jump in someone else’s car parked in the valet entrance at a hotel and speed away to get your wife in for an emergency C-section.  You’ve saved the baby and possibly the mother.  It would be strange to call this immoral.  In fact, it might be very moral, even heroic.  But it also seems clear that the owner of the car has been wronged.  She was unable to make her meeting in time, some of her gas was used up, and maybe you even got a few dings in the door.  She has suffered an injustice.  So even though you acted morally, it’s possible you acted unjustly.

Let’s say you have a deep hatred for your neighbor.  One day an envious rage takes over so you pick up a rock and throw it at his new car, hoping to shatter the window.  You miss.  No one sees the action, and the rock rolls harmlessly into the weeds.  It seems likely you’ve acted immorally by trying to destroy his property.  But it would be odd to say any injustice was done.  Your neighbor hasn’t suffered a wit from your failed attempt at vandalism.

Justice is about living with other people, while morality is about living with yourself.  Justice is about right relation to others as measured against the mores of society, while morality is about right relation to right itself, as measured against your own beliefs.

Whether or not justice exists objectively or is entirely a social construct, it has an unmistakable universality.  The particulars, and the process of discovering and remedying injustice differ in each society, but the basic tenets are the same.  No society has ever praised or rewarded breaking a promise, stealing, or murder.  There are instances where such acts are called by other names or given a pass under special circumstances, but that’s just it; they always require justification.  The default human position is that coercion is bad, and social systems evolve to mitigate it.

What would justice demand from you in the car theft scenario?  The nice thing is, we don’t have to decide in the abstract.  Justice always takes place in a social context, and the process seems just as important as the outcome.  For productive cooperation, the systems that determine and deal with injustice are best when they are transparent, stable yet flexible, knowable in advance, and not applied preemptively.

Even though everyone may acknowledge that your theft of the car was unjust, if the process allows arbitrators to consider circumstances, they may let you off, or they may ask only that you pay the owner a small fee.  These contexts are rich, and the owner has a lot to consider as well.  Perhaps she hears your story and decides not to pursue any recompense.  Maybe she is really ticked and wants to, but realizes the social approbation she’ll get for doing so isn’t worth it, even though she would win her case.  Since justice exists only in a social context, and for the use and benefit of humans, even if it is violated, there needn’t be black and white, always-and-everywhere rules demanding uniform punishment.  Though a uniform and recognizable process is needed, uniform outcomes don’t seem to be.  This is why common law is so much more effective than legislation at maintaining peace.

Morality is trickier.  I might be using the term differently than most people in this post (I have often used it more loosely myself, many times on this blog…don’t hold it against me!), but I think morality is something that exists in all of our minds, whether or not it exists “out there” objectively.  We have a conscience.  We have beliefs about right and wrong that are distinct from our sense of justice.  That’s why nearly everyone would agree that you acted immorally in story number two, even though justice demands nothing of you.  Our sense of morality changes over time, and is very different from person to person.  Part of life’s journey is discovering it and constantly adapting to it.

I’ve known people who genuinely believed it was wrong to have a drop of alcohol.  Whether or not I agree, it was clear that if they did, they would feel a lot of guilt.  They would be violating what they know to be right.  Some of those same people’s views changed over time, to where years later they no longer thought it wrong to drink, and they could do it with a clear conscience.  Morality doesn’t seem to be about the acts themselves like justice does.  It seems to be about whether or not a person is violating their own sense of right.  Many spiritual traditions talk of being in unity with oneself, being of one mind, or having an undivided heart.

It’s easy to conflate justice and morality, in part because we deliberately do so with children.  It’s more convenient to wrap everything up into right and wrong, and train kids to do and don’t do based entirely on these words.  I don’t think it’s helpful for kids in the long run, but it requires less work, so most adults do it.  Kids are told to say hi when someone says hi to them for the same reasons they’re told not to take Johnny’s toys; because it’s the right thing to do.  Yet the first is not unjust and probably not immoral, while the second is definitely unjust and probably immoral.  Children are also trained to obey the law because it’s right to do so.

They’re not often told that justice demands an abstention from coercion, even if the law doesn’t, or that the law may ask them to do something they feel is deeply immoral.  This oversimplification and lumping everything into basic right/wrong categories has the potential to result in atrocity.  Those who allow the law to be a shortcut for justice or morality, for example, can find themselves rounding the neighbors up and sending them off to prison, or worse.

There’s more to be explored on this topic, but I’ll save it for another day.

UPDATE: Check out this post with a handy-dandy 2×2 matrix to visualize these concepts.

Milton Friedman on Risk, Choice, and Regulation

A while back I came across one of many video clips in which Milton Friedman insightfully responds to a tough question.  The question is about Ford making a car with a part that saved 13 dollars, when studies showed that using the more expensive part could reduce harm in the case of collision and potentially save 200 lives.  The questioner feels this is a clear example of the callous, money-grubbing nature of the free market, the implication being that some regulatory body should prevent Ford from making such calculations.

Friedman asks how much Ford should be willing to spend to reduce the risk of a single death.  The student refuses to answer.  Friedman’s point is that the question was not over any principle, but over what amount of money Ford should be willing to pay for a single life.  It’s about costs, benefits, and trade-offs.  The student doesn’t seem to follow, but Friedman is dead-on.

Let’s say Ford decides to install the more expensive part.  Their profit margin goes down, maybe some shareholders start selling shares.  How do they make-up the difference?  Maybe they lay off a few low-wage workers.  Maybe they raise the price of their cars, putting them out of the reach of a few low-wage consumers.  Is it worth it?  Maybe these consumers would have been happy to buy the cheaper car, even if it was less safe.  Aye, there’s the rub.

Friedman mentioned this, but in the short Q&A there wasn’t sufficient time to really hammer it home. This real discussion is not about what Ford should make and sell, or how much risk is too much. It’s about who should decide how much risk is acceptable.  That’s the principle worth debating.

Advocates of free-markets like Friedman believe that each individual is in the best position to decide how much risk they are willing to incur.  In every action, every purchase, and every sale, there are costs, benefits and risk involved.  You are the best person to decide whether you should buy a motorcycle, or not buy the most expensive dead-bolt, or produce and sell an extremely sharp cooking knife.  The principle Friedman was referring to is that of freedom to choose what decisions to make and what is in your own interest.

Those who favor regulatory intervention want such choices made once for all by bureaucratic bodies.  They want a set standard of tolerable risk to apply to every human in every situation, no matter how costly abiding by it may be, or how much poverty or even death may be the unintended result.  These regulatory bodies are in the perfect situation to be captured by the largest, most connected businesses who will get them to pass regulations that help them and hinder smaller competitors, with no concern for what it does to consumers.  These bureaucracies are also most attractive to the very kind of unscrupulous, greedy sociopaths that interventionists worry about in the marketplace.

If Ford sells a risky product it may be a bad move on a variety of counts, but no one has to buy it.  Government decisions are the only ones that every single person is forced to abide by, no matter how bad they may be.  Regulatory intervention not only falls far short of free-markets on moral grounds – coercing everyone to make choices set by elites – it dramatically reduces the benefits to all.  It destroys wealth and the incentive and space to innovate.  It rewards political gamesmanship over consumer service.  It interferes with valuable signals sent by and to all market participants about what level of risk people want, and what makes them happy.

There are trade-offs all around us.  The question is not which decisions are correct for other people – we have a hard enough time figuring out which are correct for ourselves.  The question is, where should these decisions be made, and by whom?

Compound Your Worth

Would you prefer to have one million dollars in one month, or have a penny, doubled every day for that same month?

It’s a popular question that illustrates the power of compounding.  The penny, doubled every day, equals more than five million dollars in a thirty day month, and nearly eleven million in a thirty-one day month.

Compounding is powerful even if you’re not doubling every day.  And it works with more than money.  If you assign a numeric value to something, even arbitrarily, it can illustrate the transformational ability of this effect.  Let’s say the value of you as a person – your abilities, output, and offerings to yourself and the world – is 100.  If you resolve to improve your self by one percent every day, in just a month, your value will be 135.  In a year, it will be more than 3,700.  However imperfect this quantification is, there is no denying that a small, daily improvement has immense power to enhance your worth.

How do you improve, even by just a little each day?  By doing.  What things matter to you?  What do you want to produce, or be skilled at?  Once you pick something, just do it.  Do a little every day.  Sure, you can read about cooking, counseling, playing the oboe, writing, tennis, or investing.  That’s fine, but it won’t be of much use unless you’re also doing those things.  It’s not that intimidating when you realize the power of compounding.

Improve yourself every day, even a tiny bit.

A World of Kramers

Nobody knew what Kramer actually did.  He was always doing something, but it remained a mystery how he obtained the resources to pull of his schemes, let alone pay for rent and food.

Kramer had a brand.  He was the crazy, out of the box guy who’d help you overcome a problem in an unconventional way.  He was a fringe entrepreneur and occasional activist.  He was relentless in pursuing whatever was his latest fancy.  He somehow made a living just being himself.  This is increasingly possibly, even for less quirky types.

I can think of at least a dozen people I know personally who somehow live a good life, despite the fact that I’m not really sure where their income originates.  It’s so easy now to sell a product, start a business, market and distribute ideas, and connect with partners, customers and investors.  It’s entirely possible to draw a circle around the stuff you care about, become the guy or gal who’s known for doing and talking about that stuff, and with enough hard work, get a living out of it.  It starts by giving your audience things they like.

If you’re known for providing something others value – even if it’s just good jokes on Facebook – you can generate a following.  You can offer to write a book, if your fans will pledge the money via Kickstarter.  You can ask for donations to keep producing whatever it is you produce.  You can sell your services to people all over the world with very low transaction cost.

Before long, apartment buildings could be full of people who don’t commute to an office every day, but instead spend their hours doing an assortment of bizarre and interesting projects.

Regulation Schmegulation

The number of hurdles to jump before you can legally create value is astounding.  There’s a law at every corner, working to impede the peaceful pursuit of profit.

Highly resourceful or talented people simply find ways around it.  They pivot, contort, or even work to alter the law to achieve their goal.  They devote entire divisions of their companies to overcoming these arbitrary obstacles.  But eventually, they can overcome them.  Some entrepreneurs have an amazingly high risk tolerance, and choose to ignore the laws entirely and provide their products illegally.  Others aren’t willing to risk prison but have the smarts, connections, or wealth to navigate and comply with the labyrinthine legal system.

So what’s the problem with state intervention in the market?  Visionaries can find a way to achieve their vision, laws or not.  The problem isn’t for them.  It’s for everyone else.

People with limited means and average ability suffer.  The barriers are often too much for them to overcome and too risky to ignore.  Their ideas languish.  Each new obstacle sucks away too many resources and leaves them unable to move forward.

Even those who with no particular entrepreneurial vision suffer.  The immense dead-weight loss of all the creators devoting resources to fighting, influencing, or complying with the regulatory state destroys value for all.  I’ve met business owners who devote ten or twenty percent of company resources to state created problems, meaning ten or twenty percent fewer resources are available to solve customer problems and make everyone better off.

People think economic regulations hamper big businesses and rich people.  The opposite is true.  If an idea is big enough and an entrepreneur driven and resourceful enough, it can come to fruition, despite the state.  But there’s no way to comprehend just how many smaller ventures never got started, or how much more wealth would be created for all if the ham-fist of regulation were entirely replaced by the invisible hand of the market.