The full interview transcript of the conversation between Nick Hanauer and Peter Leyden is available below. The transcript has been edited lightly for clarity.
Peter Leyden: Welcome to The Future of Sharing, where we’ll be exploring the key question, “How can we make the sharing economy work for everybody?” I’m Pete Leyden. I’m the Founder of Reinvent, and today we’ve got an interview with Nick Hanauer. Nick is a well-known entrepreneur and venture capitalist who also has been doing a lot of thinking on how we make the entire American economy work for everybody as well as those in the sharing economy. He is also quite active in politics and has been behind some very, very innovative policy solutions, including the fight for the minimum wage of $15.00 an hour. Nick, great to have you here. Thanks for joining us.
Nick Hanauer: I’m happy to be here.
Now you’re such a big picture guy. Among other things I will mention his Gardens of Democracy book laid out in a very big picture way, after the crash in 2008 there, a bigger analysis of what’s going on in the American economy. Before we bring it down into this sharing economy, give me your sense of the couple fundamental problems that we’re wrestling with here in the overall American economy that actually inform not just the sharing economy. Most people like to start from micro and go up. Let’s go macro down from you.
So that’s a terrific way to start the conversation and you will reel me in if I get too wonky or go too long. The way in which I think it’s important to start the conversation is to recognize that the shape of a society… literally the way in which it works and how people interact, everything about it, is defined by the ideas that people accept, either consciously or unconsciously, about how the society works. It’s not an overstatement to say that an economy is a kind of a virtual reality and if you accept one set of ideas you go in one direction and another set of ideas you go in another.
A way of analogizing is to say that if you believe that the sun is the center of the solar system, you will send a rocket to Mars in a particular direction. If you believe that the Earth is the center of the solar system, you will send it in a very different direction. And for 99% of human history people believed that the earth was the center of the solar system, and if you accept that idea, you will have a great deal of difficulty in getting a rocket from Earth to Mars. But once you have a better understanding of how the system actually works, you can successfully do rocketry. And in the same way and to the same degree, our way of understanding how economies work and what they are—you can be mistaken about how it works or you can have a pretty good idea about how it works, and I think we are right at the cusp of a profoundly new way of seeing how market economies in particular work. The change is no smaller than moving from a Earth-centric view to a heliocentric view.
And our book The Gardens of Democracy tried to capture a lot of those new ideas. The core of the insight is that for a very long time, for hundreds of years, human social systems like economies were imagined to be linear, mechanistic, and closed. Certainly in the 20th century, people were thought to be what was called homo economicus, which is that every single person was rational, calculating, and selfish. And all of those assumptions about how the economy works and what it is and how human beings behave have unraveled over the last 20 or 30 years. We now know as scientific certainty the economy isn’t a mechanistic, closed system; it’s actually an open, complex, adaptive ecosystem. Human beings aren’t rational, calculating, and selfish; they’re actually emotional, reciprocating, and approximating.
And that shift in our understanding of how the systems works leads to a radically new way of thinking about how to solve our problems. So if you accept that old world view, that the system is this linear thing where if one thing goes up another thing must come down, then for instance the proposition that if wages go up, employment will go down—it is plausible. That makes intuitive sense. The metaphor you’ve accepted sort of describes that. But once you see it as ecosystemic, then you realize that wages, for instance, are essentially the food that businesses eat to sustain themselves and to grow.
The more wages there are, the better business will be, and the more workers will be required to sustain that in essentially an ecosystemic feedback loop. So claiming that if wages grow, employment will shrink, is as ludicrous as claiming that if plants grow, animals will shrink. That’s idiotic and no serious person would accept that, but that old framework, those old metaphors, constrain our thinking in what my co-author Eric Liu and I call machine brain and prevent you from seeing the world really as it is. And so how does this play out in our society? Well, people have been told for a generation that if wages went up, that would kill jobs, right? This is accepted as a truism in corners of academia—it’s actually corners now, because most academic economists reject that—but certainly you see our political leaders repeating this again and again and again.
And here’s the thing Peter, there is zero empirical evidence for this. There is zero evidence for this. There is a mountain of microeconomic data to show for instance that there are no job losses when you increase the minimum wage. The minimum wage has been increased 22 times since it was invented in 1938 and you can actually go back and check and see what happened, right? You actually can go look by industry segment about what would happen every time you increased the minimum wage. It turns out that unless the country was in recession, in every single case where we increased the minimum wage jobs went up too. Why? Because that’s how capitalism works. When workers have more money, businesses have more customers and hire more workers.
Here’s a really interesting tidbit that you wouldn’t expect. The more affected the industry segment was by that wage increase—in other words, it’s a big difference between if you’re a doctor or a lawyer and if you’re a hospitality worker if the minimum wage goes up. You would think accepting the conventional wisdom, that jobs would really go down in the hospitality industries. It wouldn’t affect doctors and lawyers at all. It turns out that those industries actually fare even better the more you increase the minimum wage. So why? Again, because that’s how capitalism works, if you understand it in this systemic way. And so I used that minimum wage example as a way of dimensionalizing in a less abstract way why it’s so important to understand these systems in a 21st century way as ecosystemic. And why if you see it in that way, what actually happens becomes more obvious and easier to understand. Does that make sense?
Well, it totally makes sense and it actually does apply to the sharing economy because that’s one of the things they’re trying to figure out, is who benefits and how to benefit from that. Before we can move into the sharing economy though, you’re also well known for having done very well for yourself successfully as a venture capitalist, as a founder, about talking about the problem of the billionaire class, or the problem of such great wealth amassed at the top. You’ve kind of described the world view in terms of the minimum wage and there’s also a world view of how we have to unleash….Talk about the other piece of that economy that I think is misunderstood.
I’ve been a critic of not so much the billionaire class but of rising economic inequality.
The problem is not that we have billionaires; the problem is that while we’re creating billionaires we’re systemically impoverishing everybody else. In an ideal circumstance, we have more and more billionaires every day, but the rest of the society is coming along economically at the same rate as we’re producing billionaires. My argument is that the better the people at the bottom do—because it’s ecosystemic—the more billionaires we’ll create. The problem is not so much that we have rich people, it’s that we have re-written the rules of the economy in a way such that you might say there is an outsized return for being at the tippy top.
The top 1% of Americans used to share 8% of national income about 30 years ago. Today they share about 23%. So about three times as much. When you get to the top 1%, you get about three times as much as you used to get when you were in the top 1%. If you’re in the bottom 50% of Americans, you used to share about 18%. That’s down to about 11%. What that difference reflects is simply the difference in negotiating power in the economy. People aren’t paid what they are worth, they are paid what they negotiate. What happened is that the people at the bottom of the economy lost power and the people at the top of the economy gained power and so a smaller and smaller group of folks get a bigger and bigger proportion of the massive amount of value the economy creates.
My argument has been that that is unfair, but even more importantly, it’s self-defeating. Not only do you destroy the economy by killing the feedback loop between consumers and businesses as you systematically impoverish greater and greater groups of people, but you also seriously threaten the democracy as people begin to believe it is not legitimate. The political cycle that we are in today, dominated by Bernie Sanders and Donald Trump, is proof positive of that phenomenon. While I disagree with the people who follow those two folks, their anger is absolutely valid. These people have been screwed. That is true and we did it to them collectively and if we can’t find a way to make sure that every American feels like the economy is fair and benefiting them then we are in deep, deep, deep, deep shit.
Collectively we have a responsibility to solve the collective action problem which is the economy, which means, for instance, a reasonable floor for wages. I’m often struck by this phenomenon, which is that my fellow business people are adamant that capitalism is the greatest economic system ever invented—unless capitalists and business people are required to pay people a living, wage in which case it will collapse. They are like, “But the whole thing collapses if we have to pay people a living wage.” Other than that it’s a great system.
Exactly. It can adapt to everything else.
So anyway, the truth is that no one has a bigger stake in a thriving middle class than the wealthy, because where does all that money come from? You raise the minimum wage from $7.25 to $15 bucks—who gets all that money? People like me. Where does that money go? Into products and services that people like me build companies to sell to. It’s so obvious that in the medium and long term this makes sense.
Completely. Just to clarify one thing you said, cause I think it’s an interesting insight. You mentioned those that would support Trump, those that would support Bernie—make the connection a little bit more there of how they share a common kind of anger and how does that work?
The truth is that the middle and working class in this country has been eviscerated over the last 30 years. 95% of the benefits of growth over the last 20 years have accrued to the top 1% of earners. It’s not just that wages have been suppressed. It’s that the infrastructure that those folks depend on, the schools they send their kids to, all of this stuff has been savaged. Prices for healthcare, education, housing are going up. Wages are flat or down and so for most people, for the typical family in our country, the economy has been a disastrous failure. And so if you lean right, you blame immigrants. If you lean left, you blame corporations.
There’s a smidgen of truth to both of those things, but you know, we have to find a new way to make the economy work for everybody. The Trump campaign of course is one of the most appalling things to unfold in a prosperous democracy in a generation anywhere in the world, and the racism and nativism and just the horrible stuff that he is bringing out in people is something that I think most thinking Americans are just appalled by. But look, those people are hurting and they’re pissed. I think it’s important to remember, or at least say, that prosperity won’t eliminate racism in our country, but it is one hell of a distraction.
When people are feeling good about their circumstances, confident about the future, secure and optimistic about their kids and their families, they have a lot less time and a lot less reason to be blaming whoever it is around them about their problems, right? And that’s why raising the minimum wage among other things is such an indispensable part of what we must do to make our country a better place. We need to make people do better, and feel better, and feel more secure, and that’s what all these labor standards that we’ve been talking about, why they are so important. Why they’re so important to places like Uber, and Airbnb, and Lyft—the sharing economy, which is the leading edge of a profound disruption in how our economy works, for good and ill.
Well lay that out because a lot of times there are people that are just trying to wrap their head around the sharing economy, what is it, how is it working? Layer it into this bigger picture. Now you’ve got this relatively recent phenomenon that emerges. Talk about how you think about that and how you’d explain it to people.
To be absolutely fair about the sharing economy, it is taking a lot of the blame for the disruption but that’s not fair. Whether it’s fair or not, by the way, Uber is going to be blamed. Airbnb to a lesser extent, slightly less disruptive, but places like Uber are the tip of the spear and they are going to have to figure this out, because somebody has got to be a scapegoat, and they’re going to be the scapegoat. But these problems started far before Uber ever invented that idea or Airbnb ever invented its idea. The truth is that the standards that we built in the last century to include people in what we call the middle class, which is really a state of mind more than an economic definition, but being middle class meant having a stable, secure, and dignified life. That’s what it meant. It meant it was the quiet miracle of a normal life. The idea that you would get a job, and get paid a reasonable amount, live in a decent neighborhood, send your kids to reasonable schools, and feel like well, they’re going to be okay. That state of mind has a lot more to do with security and stability than it does with how many dollars you’re paid.
That began to erode with the Reagan revolution, this idea that anything government, anything we do collectively has to be evil. That the government is the enemy of good. So we began to eliminate all the labor standards. We eliminated the capacity for people to organize. We instituted a way of thinking about the responsibility of businesses. This idea of shareholder capitalism, where the only thing that a C.E.O. in a board was responsible to was return to shareholders. No thought about the employees or the community or whatever it is. This is a modern phenomenon, but this is nuts. For a community to grant somebody limited liability, which is what a corporation is, there has to be idea that something will come back. Otherwise why would you do it? Why would you give somebody the protections if all they’re going to do is savage you?
There’s this idea that the more savage we are, that’s capitalism, but being rapacious doesn’t make you a capitalist, it makes you an asshole. These two things can and should be different. That began to unravel and the beginning of that was the contractor phenomenon, turning employees into contractors. Uber just skated on that, this idea that we owe nothing to these people. That we are independent of them and how their lives unfold is not our concern, our responsibility, nothing. If they’re willing to work for fifty cents an hour, that’s freedom. And the problem with that is that if you are part of a feedback loop which dehumanizes people in this way, if you animate a feedback loop that dehumanizes people in this way, there is no example in human history where eventually they will not come to your house rape your wife, kill your kids, and burn it down with you in it, right?
Eventually that ends horribly for everyone. We collectively want to avoid that circumstance by making sure that our institutions have a responsibility to something other than just making a couple of guys who went to Stanford super rich. There has to be more to it than that. This unbelievably stupid and pernicious idea that so many of us accept because it feels so great to accept it, that the richer we get the better it will be for everybody, is nonsense. It’s just not true, that basic trickle down idea that the richer the rich get the better off everyone will be. And the flip side of that, which is the richer the poor, get the worse off we will all be.
So the sharing economy, just to keep blathering on, is simply an evolution of something which has come before it: a change in the set of laws and consequently norms which has led to a world in which a few people do really super well and a lot of people do worse and worse and worse. That is very problematic. I think the challenge for the sharing economy is for the leaders of it to recognize that if you cannot make a successful robust argument that the products and services that you are bringing to people actually make everybody better off, then you’re going to be very, very vulnerable to political attack. That political attack is going to get sharper, and it’s going to get more vicious, and it’s going to get more effective, because the truth is that most people are pissed, and they’re getting more pissed by the day. We live in a democracy and eventually the problem is that the pendulum swings. You piss people off enough, they will do things that may surprise you.
So let’s unwind this a little bit, because this is exactly the heart of it. We’ve brought down this big picture, and I know it’s accurate and an interesting one, to the sharing economy. Now with your entrepreneurial hat, your understanding of technology, talk about the positive side of the sharing economy, the potential benefits. What’s the vision of it that’s worth really appreciating and understanding? And then we’ll get to the issues that kind of come off that. How do you think about it, and how would you explain it in terms of why would we want to go there anyhow, and what’s kind of emerging out of this that’s a good thing?
I’m a huge proponent of and believer in these new business models and technologies and they’re fantastic. These are fantastic ways of creating value in people’s lives. I’ll be the ten thousand millionth person to talk about how much better Uber is than taking a taxi. Anyone who has ever tried both knows that one sucks and the other is awesome. Airbnb is an amazing… I mean it’s not just a great service, but it’s an amazing cultural disruption. It’s this really cool way of changing the way in which people interact, travel and experience things.
Every innovation is intrinsically disruptive. It’s the nature of innovation. And the bigger and better the innovation, the more disruptive it is. And our view—by our, I mean my little gang at Civic Ventures, which is the entity that I do my politics out of—has a view that the quality of a society really can be thought of as its ability to match the rate of technological innovation with civic and social innovation.
[00:26:32] The real problem becomes when these two things get apart. It’s not that the Uber innovation isn’t awesome, but we have to civically and socially and politically innovate at the same time to adjust. I would argue that the folks that run Uber should be leaning into this civic, social and political innovation that’s necessary to help the society adjust to the technological innovation. Rather than running like scared rabbits away from it, which is my perception of it. And go, it’s not our fault. You know well, “Yes, it is your fault,” and good for you, but if you don’t want to end up swinging from a tree, you better find a way to make sure that the people who have been disadvantaged by this disruption find a way to channel that anger into something other than lynching you.
There are all sorts of ways to do that. Talk about Airbnb, I mean it’s the canonical example. It’s such a fantastically obvious collective action problem, right? So you have this awesome apartment in a building and you’re only there once in a while and you’re thinking, “It would be so awesome to rent it out. I make some extra money while I’m away for the summer. What could be wrong?” Except some group of frat bro clown rents it and wrecks the summer for all the people who live in your building and destroys their ability to either enjoy their lives or to sell their condominiums or apartments to other people, because who would want to live in a building where you have a bunch of drunk frat kids making noise and wrecking the building all the time. So those two interests are in opposition.
There’s a good being created and there’s a bad being created, and adjudicating between those two things is the role of civil society, government, and democracy. But pretending like these dynamics do not exist is stupid and irresponsible, to not acknowledge that this is a dynamic that is going to play out, and that the people who are being disadvantaged probably need in some way to be protected and compensated for the fact that you’re making all this money taking advantage of the fact that no one else is an idiotic frat kid living in the place. The place is fun to rent because the neighbors aren’t idiotic frat kids. That’s where the value comes. It’s a nice building. So all you’re doing is harvesting the value created by your neighbors or yourself so how do you adjudicate that? I don’t know. But pretending like there’s no conflict there and there’s no collective action problems is just super fucking stupid.
But now I know, given that you’re tapped into the tech thing and a lot of entrepreneurs, is it your sense that there’s a lot of founders, a lot of folks that work in these companies, a lot of people in this sector are down with that kind of, “Let’s figure this out, let’s move in this direction,” or do you feel that there’s more…Uber is kind of the bad boy that everyone points out, but in general in that sector do you think there’s a kind of an openness that—?
More and more. I think in any large group you have a bunch of people who don’t care about other people. You just do. If you’ve never met somebody who doesn’t care about other people, then you are probably a person who doesn’t care about other people. I’ve been doing the tech thing long enough to have met plenty of Asperger’s-y narcissistic maniacs who don’t care about anything other than themselves and can’t understand why other people don’t think that’s awesome. That said, there are a whole bunch of people who couldn’t be more different and you can name the people who are leading the charge to make the world a better place—Reid Hoffman, and, I mean, there’s a lot of really smart thoughtful people who are looking out and trying to think about how the ways in which the disruption they’re creating—which is awesome—may be negatively affecting other people, and how we might reorganize our society to make that better.
I know the folks at Lyft, for instance, have thought long and hard about this stuff, and have been, in my opinion, much more open to ideas about how you change the world in order to accommodate these new business models and not simultaneously savage people. Uber and Lyft are sort of everybody’s canonical example of disruptions and tradeoffs and stuff like that. And obviously it’s awesome for the people who own Uber and Lyft to have millions of people who sit in their cars quietly, getting paid zero, waiting for somebody to order up a motor override so they can scurry off to get them in their car and take them and send 40% to Uber or Lyft. I mean, it is an awesome thing. But if those people can’t afford to feed their families and they can’t take vacations, and they can’t pay for health care and they can’t participate robustly in the economy both as consumers and taxpayers, then that’s highly parasitic behavior.
I get how it works for Uber. I get how it works for investors like Benchmark. And as a customer of Uber of course in that transaction you’re like, “Yay.” Until you’re paying for the healthcare of that worker later because they couldn’t pay for it themselves and then you’re like, “Boo.” Anyway, we just need to account for things in a more systematic and mature and farsighted way than we currently do. And I think again we have created a corporate culture in my opinion that absolves the people who lead our businesses from the responsibility of thinking through those problems. The only responsibilities people think they have are to themselves and to their shareholders, and if profits are high and the stock price is going up then all must be good with the world, but that simply isn’t true. It’s good for them but the world is not necessarily improving.
We’ve been talking to a variety of people in these interviews from different perspectives. So there’s the founders and the people working in the companies. Is there a differentiated responsibility for venture capital or the capital behind them? Now you mentioned shareholders and then when you think of public companies you can really think of it that way, but for example a lot of founders feel like they’re under a lot of pressure to realize these kind of outsized returns and they’re cutting corners or they’re not… Talk a little bit about that given that you’re kind of understanding both sides of that.
No, I mean for sure. Again, if you wanted to go find a group of people who exemplify the view that the only thing that matters is money, West Coast-based venture capitalists like myself would be a very target-rich environment. And I think we bear responsibility for creating, sustaining, and incentivizing that culture of sociopathy. Like the only thing that matters I get a 10X return here, and it doesn’t matter how many people you harm, or how many lives you disrupt or whatever, that’s capitalism. Like I said, my view is that being rapacious doesn’t make you a capitalist, it makes you an asshole.
It’s not anybody’s fault; it’s the culture’s fault. We live in a democracy, you get what you wanted, to a certain extent, but we have allowed some really terrible and pernicious ideas about the meaning of life and so on and so forth, to pervade our culture, our norms, and our laws that have led to a bunch of bad outcomes.
I just want to say, that it sounds like I think the whole world is shit, Silicon Valley is shit. It’s not true. We live in the best country in the whole wide world in a lot of ways. We have the most innovative economy in the world for a bunch of great reasons. Human life on Earth for most people has never been better and I feel strongly that we can have it even better. It can be even more innovative. It could be even more disruptive. If we make some small adjustments in how we think about these problems and think about the future just a little bit more responsibly and realistically. It could sound like I’m highly critical of the culture of innovation in our country and venture capital in general and entrepreneurs. Nothing could be farther from the truth. I am that person. I started 35 companies or something like that. I am that guy.
All I’m saying is that we need to think it through a little bit more and make some more provisions for the disruption and the implications of these disruptions and if we do we’re not going to slow down the rate at which we innovate or disrupt, we’ll speed it up, as the society becomes ever more supportive of the disruptions. The danger here is that if you let middle class people feel worse and worse about life because their wages are suppressed and because their work lives are increasingly flat, fragile, and insecure in a democracy, they’re going to take that out on somebody and they’re going to take it out on us. The new is no longer going to be the friend of the Republic. It’s going to be the enemy. And we don’t want to go there. We don’t want to get there. So we need to bring people along with us when we do these things. And a pretty easy way to do that is to make sure that the people who work for us, if we’re Uber make a reasonable wage. That the relationship is defensible, that they’re paid $15.00 bucks an hour when they’re working for you. Full stop.
And if that means that your cut has to be lower and your company has to grow a little slower and your return to your shareholders has to be slightly lower, well that’s just the price of doing business. Suck it up.
This is great. So you’re talking about changing the cultural, political, social kind of innovation. Let’s go there. We’ve talked about the big problem, we’ve talked about kind of whose responsible or what we could be… And you even talked from the company point of view or the venture capital point of view how they are rethinking their returns. Do you have any kind of suggestions if we’re talking to folks in cities, you know running cities around the country?
So here’s my very strong feeling. It is not Uber’s responsibility to unilaterally fix these problems. It’s not realistic and it’s not possible. A, you couldn’t do it yourself and, B, if you tried to do it yourself you’d probably put yourself out of business. Stupid. It’s not Wal-Mart’s unilateral responsibility to fix the wage problem in the United States by raising the wages of their workers from seven or eight bucks to fifteen. An economy is a collective action problem. That’s what it is and the standard we need to hold the leaders of Uber to and the leaders of Wal-Mart to isn’t to take unilateral action but to lead collective action. That’s their responsibility. Why am I out there talking about raising the minimum wage? The guy who runs Wal-Mart should be out there talking about raising the minimum wage. That’s his responsibility, because who would benefit more from that than Wal-Mart? And look, that’s the standard we need to hold our business leaders to. It’s not to martyr themselves. That’s stupid and counterproductive. But to lead a civic, social, and political process that makes the whole damn thing better for everybody. So I don’t expect Uber to institute a system which makes their benefits universal, portable, and pro-rated, and make sure that every worker earns a certain amount and that they all get to take a vacation and they all have health care and all those things.
But why those guys aren’t in Washington D.C. insisting that we institute those national standards so every company does that is indefensible to me. It’s nuts. When everybody’s doing it, then nobody is at a disadvantage. You may be inconvenienced enough to change a few things. Your shareholders might make a tiny bit less in the near term. But you haven’t existentially threatened your enterprise. That’s the standard we need to hold people to, is to be part of a civic process that solves the problem collectively and does better. Does that make sense?
Totally, love that idea. So you are really kind of talking about a process. Do ou have thoughts on how to start that process?
Yes, I do. We’re hard at it. The $15.00 minimum wage which was one of those projects. This idea to re-litigate it. When we first started talking about the $15.00 minimum wage, and this was maybe in the summer or fall of 2012, people literally laughed at us. Believe me, they thought we were completely insane. But by reframing the debate around how the economy works and where growth comes from, we have changed the lives of 20 to 30 million people pretty fast.
And we’re going to get there and it’s going to be a pretty exciting thing. Particularly because the United States Congress and the Republican Party is so dysfunctional today, depending on national action is unrealistic. Even if it was less dysfunctional and the Republican Party was less insane, starting locally and proving things out in experiments is very wise. There’s great political wisdom to that. We now in Seattle pay tipped workers 600% more than the federal tip minimum of $2.13. So it was conceivable that every restaurant in Washington state would close because higher wages killed jobs. Could have happened. Seattle could have slid into the ocean.
Yeah, all the restaurants could have closed. Instead, Seattle now has the second highest density of restaurants in general of any major city in the country and the highest density of fast food restaurants of any other city in the country. The only people who beat us—San Francisco edges us out—is the only place in the country that pays restaurant workers more than we do. Right? Why? How can that be? Well, because it turns out that if you pay restaurant workers enough so that even they can afford to eat in restaurants, it’s pretty good for the restaurant business.
Anyway, so now that we can show people—even though it’s kind of obvious, they need to be shown—that when you pay people fairly, the world does not end, now you can begin to go to other places and before you know it maybe the Senate actually does something. It’s hard to believe; it’s been a long time since they have, but apparently when you read the history books, in the past they did do some things, apparently.
There’s always hope. Well if you had to put a little Nick Hanauer kind of agenda on the books that would be a handful of things for the sharing economy—I mean you mentioned the minimum wage. We flushed that one out. You made a somewhat oblique reference to portable benefits and things. But what would you say would be your priorities for how to really make this sharing economy work across the board better?
I have been incredibly specific about what I think people should do. And I co-authored a piece called, “Shared Security, Shared Growth,” that I would urge people to read, which laid out a 21st century labor construct, which is essentially a pairing of a new set of labor standards and a new security system. You have to have some new labor standards, so you have to have a much higher minimum wage. I was very active in President Obama’s raising of the overtime threshold. It just went from $23,600 to $47,000, an indispensable labor standard. A few other things, like paid leave, and vacation pay, and all these things are indispensable parts of what it means to have a secure, decent, dignified life as a worker. But then adjacent to that, all benefits being universal, which is to say anyone who works for anyone under any circumstances gets some. So there’s no contractors and there’s no this and that and the other thing. If you’re working, you’re getting the benefits. They are prorated, which means no more of this idiotic, “Oh, you only worked 29 hours a week so I don’t have to pay you benefits,” nonsense. You work an hour you get an hour’s benefits. And portable, which is to say, that my benefits are my benefits; they don’t stay with you if I leave, or if I have four jobs simultaneously. So if I’m working for Uber and Lyft and Task Rabbit and McDonald’s, it all goes into this account which is mine and portable with me no matter where I go.
Those principles: universality, portability, and proration, I think are the indispensable construct for having a 21st century economy which both works for working people but also enables all of the innovation that we want, because if you take care of people in that way, then no matter what people do in Silicon Valley or around the country, people are likely to benefit from it in a broad way and that feedback loop I think will be very, very healthy.
In moving towards that new vision, would that require letting go of kind of a 20th century labor construct, the trying to categorize people as employees or contractors?
We should have one category: worker. You’re working, you get the stuff. Full stop.
It’s really a fundamental rethink—
Absolutely. The the devil is in the details because there are gray areas. You have to kind of decide really when someone is an independent businessperson and a worker. So there are things that you have to work out but in general you need a construct like that. My opinion.
Some people think of the labor-oriented sector of the sharing economy, which is a big one, but for example home-sharing or you know you’re sharing assets. Is there any kind of different way you think about that or any kind of recommendations on that kind of side of things which is not really the same as the labor thing?
I’m going to admit that I have not thought carefully about the way in which you have to adjudicate the problems created by sharing assets, but the one that we talked about earlier, which is for a renter to get the benefits and their neighbors to get all the harm in an apartment-sharing scenario isn’t likely to be sustainable. That apartment building is very likely going to be like, “No it’s not allowed anymore,” and the city is going to get a lot of complaints from neighbors and all of a sudden there’s going to be no more Airbnb and whose fault will that have been? That will have been Airbnb’s fault for not having thought it through. I think that we just need to be thoughtful and programmatic about how we approach these problems and recognize that sometimes there are costs to doing these things.
Got you. So you’re encouraging this kind of process you could say that we’ve got to do. Do you feel that there’s any kind of window here where if we don’t get this right in X amount of years, that we’re going to see a lot of these things unravel or with some real backlash, or do you feel there’s a kind of urgency here or any kind of way that you think about the timing of this kind of evolution?
I don’t know how you can interpret the Trump campaign as anything other than a giant backlash. It’s a super scary backlash against progress. Anyone who isn’t white. Anyone who isn’t male. And that’s the tip of the iceberg. If we don’t make people feel better in the next four years, think about what the cycle will be next time. The backlash is coming. It’s here. I can’t predict the future, other than to say that there are no examples in human history where if you let things get bad enough, really bad shit doesn’t happen. The problem with revolutions is that they come slowly and then suddenly, just like bankruptcy, and the problem is it’s very difficult to predict when. And it’s so inconvenient to have your jet continually fueled ready to flee to Australia or New Zealand.
Well, the other thing is, you can be scared of the Trump phenomenon, rightly so I think. But on the other hand, it’s also minimum wage, how that’s gone from crazy idea to kind of…or the Bernie thing, in some respects you go, “Oh my god who would have thought you’d have all these millennials behind…” I mean something’s happening here. It seems like it’s not just the same old thing that happened with the last five cycles or whatever.
There are tons of reason to be super hopeful. As you know, there are a lot of people in the sharing economy who actually care a lot about these issues that we’re discussing and are super engaged in trying to solve them, and have organized themselves to begin to talk about it, and it’s very hopeful. I’m always an optimist. I think we’re going to figure it out and it’s going to be awesome. I don’t know how much more time we have, but I just wanted to finish with one thought.
We are prisoners of the ideas that we use to describe how the world works and we have been conditioned to believe that markets are efficient and money equals wealth and the point of capitalism is to enrich ourselves and so on and so forth. These things are not true. They are not true. Money isn’t wealth. How do you prove that? You can prove that by remembering that the king in the jungle with a pile of money in beads as high as a house can’t buy air conditioning or antibiotics or a comfy bed with all those beads, but even a working class American can afford those things. So prosperity in human society has nothing to do with money, it has to do with its ability to create and accumulate and share solutions to human problems, which in turn are created by innovation. That’s what prosperity is and innovation is where it comes from. Innovation in turn can’t happen or be sustained without consumption. It’s the sound of one hand clapping. You are never going to build an iPhone if there’s nobody around to buy it.
And so prosperity in human societies really is produced by the feedback loop between increasing amounts of innovation and increasing amounts of demand, and that in turn is created by including people ever more robustly as innovators and consumers, workers, civic citizens. We have a collective responsibility to drive that process of inclusion and to remember that because prosperity really is best understood as solutions to human problems, the amount of prosperity in the society that we create has nothing to do with how much money we earn, it’s how many of other people’s problems we solve. What that means is that every economic choice we make is an explicitly moral choice. Do we create cancer or do we cure it? And we business people need take much more seriously that responsibility, and if we do the world will be a much better place.
That seems like a perfect place to end. Tying it back to the beginning which is where you started, the big picture and the reframe. I really, really, really do appreciate you spending time here and I just want to say it’s been an awesome conversation with Nick Hanauer. And this has opened my mind to new thinking and hopefully it will open the minds of others. Thank you. Thanks Nick.
Super fun to do it. I appreciate the time.