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Did the FED create wokeness?
I graduated with a CS degree ten years ago, and I still regularly meet my old class-mates. Some are right-wing, often libertarian types, while some have gone full woke including some unexpected ones. The main factor separating the two seems to be what industries they are in. Those who write software for the electrical grid, defence contractors, or industrial machines seem to have moved rightwards over the past decade. Those who work in industries propped up by low interest rates have all gone radically left. Spotify's headquarters are close to my office, and I am good friends with several of their employees. Their business-model is essentially dependent on an extreme individualist philosophy. If music is an integral part of culture, something that is typically experienced live and locally, the business of making cents per thousand listens is infeasible. Spotify is built on billions of people listening to the same pool of music. No nations, no borders, just atomized consumers is a suitable ideology for such a company. Grubhub, uber, twitter and Netflix make small sums of money off vast quantities of people. In a more nationalistic world, they wouldn't be nearly as valuable. My woke friends nearly all went for a company that has millions of clients all over the world, generating tiny profits off each client. The art stemming from these companies tends to be bland and placeless. Strong collective identities such as nationalities, ethnic groups, traditions and gender roles doesn't flow well with a world consisting of users.
These companies had another pillar holding them up besides global homogenization, low interest rates. Spotify, Netflix, Uber, and Twitter have lived for over a decade without any real profits. They have consumed monstrous amounts of cash without generating much revenue. This has only been possible because of low interest rates. If bonds were yielding 8% a year, borrowing money for fifteen years and dumping it into spotify wouldn't have been an attractive investment. These companies have lived on cheap credit and a globalized world pooling wealth into a few major cities. A global financial hub is going to be multicultural, it won't be able to have a strong culture or strong norms, and it will be inherently individualistic. NYC needs rich arabs buying expensive apartments. Those working in finance insurance and real estate benefit from Saudis buying lavish apartments which are empty 95% of the time. A janitor trying to buy a house is less amused by Saudi oil flooding the NYC housing market.
Those coding for the electrical company are more interested in people who are committed long term to their society. They don't need a global market, as their market doesn't extend further than the grid. Their interest is people with high skin in the game in terms of the society they live in and who are willing to make long term investments in the grid.
Those on the left seem to still view the elite as those managing local businesses. They see the elite as conservative, and having the values of my friends working at industrial companies. They seem to have missed the growth of a new elite that is international by nature. This elite builds its wealth on taking a 0.1% fee for managing the investments of millions of people, or charges a few cents per payment on their fintech app. My suspicion is that they don't want to see the nature of the new elite, since so many of them make their living serving it. Universities need foreign students, journalists need international readers. The blue tribe is urban because they make their living teaching, entertaining and managing with funding coming from tech/finance. The bookmakers at the coliseum in Rome were more dependent on Rome as a vast empire than the farmers were. Thousands of people betting on gladiator fights required an empire to sustain it. Farmers on the other hand didn't like competing with slaves.
Interest-rates are rising and tech lay-offs are in the news. Spotify, twitter and Facebook are slashing employees. Meanwhile, new nuclear power is in the news and thousands of coders will be required. Defence contractors are trying to hire all the people they can find. Reindustrializing has lead to a surge in jobs in manufacturing, and the machines require code. Government, health care and other sectors are in dire need of developers and there is no shortage of jobs. We are seeing a shift away from 10 cent per thousand adds to agricultural machines.
With higher interest rates San Fransisco, LA, NYC, and London will decline as portions of GDP and manufacturing hubs will increase their portions of GDP. We are seeing a shift away from a global woke class to manufacturing, both in rust belts in the west, but also in China and various developing countries. The end of occupy Wall street is often viewed as the start of the great awokening, the end of the global financial crisis was the FED printing money. The great awokening occurred roughly at the same time as zero interest rates started to have a tangible effect on the economy.
Havin done work for the real deal MIC types and utilities types: Maybe, but probably not.
The majority of the defense guys I know (under the age of 45, note) and woke as fuck, they also like missiles and think that war is bad but super cool.
Those Lockheed pride socks are real. This is because they are all highly educated gradates on the high side of the bell curve.
Likewise utility people. The lower IQ shovel swingers and tradespeople are 45/45 milqtoast neolib/neocon, the radical fringe are 5/5.
The people with college degrees are woke exactly in proportion to the defense guys, because again: they are highly educated graduates on the high side of the bell curve.
It's the same old research: IQ==educational attainment==openness==liberal views.
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I'll attach my related post on this. I think that's my most popular post on this website: https://www.themotte.org/post/238/what-if-your-entire-worldview-was/43892?context=8#context
Is there any evidence that manufacturing is increasing in the West? According to the Fed, US Industrial Output has been basically stagnant since the GFC and has barely grown since 2000. https://fred.stlouisfed.org/series/INDPRO/
I believe the problem is that there are excessive regulations on building things in the real world. There are endless permits and permissions and approvals that you need to build a house, pipeline, factory, power plant. But in finance and services, you can just get going. It's a totally free market in crypto, you just set up the project, do your airdrops and trade on a decentralized exchange and nobody can or will do anything about you. Maybe Gensler's goon squad will come for them some day soon. It's slightly less laissez faire in ads or Spotify or Uber but it's still a pretty free market, all things considered. If you want to build a gas project in Australia, you run the risk of having to pay 1.5 billion AUD in regulatory/legal fees, wait six years and not even be sure it'll be approved (this is according to Santos, the company involved so the figures might be blown up a bit): https://www.afr.com/companies/energy/santos-ceo-frustrated-as-narrabri-process-drags-on-20210830-p58n2f
Australia is not the US but I think the same principle applies. The US is not welcoming to development. There are many expensive environmental approvals and more coming soon with the Green New Deal, I believe. Money and talent is thus being funnelled out of industrial production and pumped into finance, tech or services. Agriculture is similarly suppressed. If anyone's seen Clarkson's Farm Season 2, it shows the great lengths that local councils will go to prevent development or people starting businesses. Or in the Netherlands, farmers were very angry about environmental regulations that prohibit them from producing due to nitrogen emissions. In San Francisco restaurants have to pay about $22,000 USD in legal fees to start: https://ij.org/press-release/new-report-shows-how-san-francisco-stifles-entrepreneurship-with-expensive-time-consuming-rules-and-regulations/
And just look at California's experience with High Speed Rail! They're less functional than dodgy North African countries like Morocco, according to a French rail company: https://www.businessinsider.com/french-california-high-speed-rail-north-africa-biden-trump-2022-10
On the other hand, China does well at manufacturing because they like efficiency and development, they mechanize their ports, encourage development, support industry, keep energy prices low and build HSR (as opposed to spending money and not building it). I predict that higher interest rates will constrain the frothy tech and finance sector in the West somewhat but that they'll remain the leading sector of the economy simply by being sabotaged the least.
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So your claimed mechanism involves ... a UI designer or AWS wrangler for Spotify somehow imbibing trans-acceptance from spotify's global customer base, but ... someone coding internal tools for an electric company gaining an appreciation for 'tradition and gender roles'? How could that possibly work? There's just not enough contact between the company's supposed material interests and an individual worker's job or incentives.
Culture going global and homogenizing is interesting! But that's a centuries-old phenomenon - TV, radio, records ... even before that, the nation-state itself (which your supposedly localist nationalism refers to!) homogenized local traditions, including musical traditions, so that many diffuse cultures could work together. To say that Spotify employees are incentivized to be more globalist than engineers because they sell music globally - when said engineers probably listen to rap or country - is strange. And Spotify's business model would still work if music was more local, for the same reason Google's model still works even across language barriers
An electric company also has tens of thousands to millions of users!
Same for the 'international elite' - that's also a centuries old phenomenon, one the left in the time of marx took note of. It's advanced, sure, but that's been locked in since the 1900s - there's no recent change there that Netflix employees haven't noticed.
Both depended on Rome for military protection, which is pretty important!
Obviously, the pattern you notice exists - ctrl-f and click 'engineering' here, and software leans dem and EE/MechE/etc are half/half.
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Reverse causation sounds like an obvious alternative hypothesis to consider. The military and heavy industry are already right-coded, while Silicon Valley and art/creative industries are left-coded. Beyond the explicit politics, there's going to be lots of differences between working at Spotify and at an energy company. The former will probably value the use of data, changing things quickly, employee independence, creativity, new technology, etc. The latter will move slowly, do things the traditional way, have a stricter hierarchy, etc. I suspect these sorts of factors weighed more on your average classmate than did considerations such as:
I doubt most of them thought this way at all, and were instead attracted to places where other employees were like them, or the workplace culture was one they appreciated, and you just didn't notice they were already like that back in college (or their preferences changed over time).
(On a side note, Spotify actively recommends new artists, has contributed to me seeing at least 1 in-person concert by pointing it out to me, and makes sharing music or playing it in social contexts extremely easy).
I admittedly have limited experience with the energy industry, but based on what I do know, it's about as global as industries get. European companies are building solar plants on American farmland, every country in the world relies on oil from a handful of major producers, etc. If every country became much more insular, you would still have an energy industry, but it would be way smaller and poorer.
I don't think these events could have happened quickly enough to explain the "awokening," which was already starting by 2014. The biggest tech companies (facebook, google, microsoft, apple) all quite predate this time frame and were successful already (facebook had a billion dollars in profit in 2012, for example; Netflix was originally a mail-service company founded back in the 90s and was profitable as early as 2003). Even twitter was founded back in 2006. Even if there was an effect, it seems unlikely that it could have happened so quickly. From the fed funds rate being lowered in 2008 to the aforementioned 2014 is only 6 years--not a lot of time to found a company, grow it, hire lots of people, and then have it become an unprofitable zombie enterprise.
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Well the FED didn't create wokeness but the conditions is because of their actions. You are touching upon the idea that Austrian Economists call misallocation of capital. You can read about it in The Skyscraper Curse.
This sounds like a different flavor of extreme policy bias. Color me skeptical of any radical free-thinker who happens to have a pile of reasons why The Man won’t listen to him.
I’d be interested in a book review, though.
There is a difference between hypothesis/theory put forward in the book that it is something inherent in our current monetary system where cheap credit makes people and organizations less careful how they budget it and the policy prescriptions of changes in the monetary system. You can derive value of from framework the book provides for what we the consequences are for an inflationary monetary system and an explanation what we are currently seeing. It looks like unprofitable initiatives within corporations has been fueled by cheap credit and when it recently disappeared we then the unprofitable ventures are being pressured. You don't have to believe the solutions in the book to enjoy the bit of predictive power it provides. Edit: "A little predictive power" I mean that you can see that somethings wont last but can't see which is the first domino to fall or by how much which requires a bit more thought and knowledge. Case in point is renewable energy, the expansion has been fueled by cheap credit but energy prices has been keeping up with the interest rates so they aren't being pressured as much by this crisis.
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It did, but through antidiscrimination and Title IX and VI rules, not through the weird methods you describe.
That wouldn't be the FED as in the Federal Reserve, that would be the federal government.
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No, it didn’t.
You are mistaking correlation for causation, here. Look at previous drops in the rate. Was 2002 particularly globalist? Was the mid-80s? Interest rates are raised in times of inflation and slashed after a recession, forming one of the fundamental control systems of the economy. The industries which grow in that space depend on other trends.
If you are correct that woke culture is downstream of globalist and/or narrow-margin products, those are a consequence of our transition from manufacturing to service industries. That’s driven not by the Fed but by comparative advantage with other countries. Back in the 50s we had the edge in tech, raw materials, and not being bombed to hell. Now India and China can compete on price, so we’ve shifted more towards intellectual and interpersonal labor. This would have happened regardless of the interest rates.
I don’t think you’re correct, mind you. Consider Wal-Mart. Narrow margins, global supply chains, and a completely different approach than Silicon Valley tech. It makes money by connecting producers to consumers. The network effects are subject to measurable market forces. In contrast, parts of fintech and all of social media aren’t competing on price, but on brand. You can’t eat Facebook’s lunch by undercutting them. What’s left but weird political signaling?
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Apologies for tacking a quip onto an interesting comment, but this related Paul Graham tweet was one of the funniest things I've seen in a while.
More seriously ... what surge in jobs in manufacturing? FRED data says we're finally back above pre-COVID levels, but nowhere near pre-Great-Recession levels even. In absolute numbers there was a bubble from WWII through 2000 that seems to be thoroughly over; in relative numbers there's just a steady decline that bottomed out in 2010.
When the data changes why do you it a bubble? Isn’t their a fairly obvious other explanation? A productivity boom? We can only consume so much physical stuff. I wouldn’t call agriculture a bubble because employment went from 90% of humanity to 1%. A thousand years ago everyone starved if 1% of people worked in agriculture.
Bubble in the "f(x)=x(1-x) is sometimes called a 'bubble function' on [0,1]" sense, not South Seas / Dot-Com / etc. sense. Sorry for the weird vocabulary. The connotation I was trying to get at was "it's over now and don't expect it to come back", not "it didn't make sense at the time".
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Probably why Spotify was accused of making fake artists, though it seems like that doesn't make all that much sense as a money-making scheme.
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The Spotify situation seems related to exemplify the problem of streaming services in general, considering that video streaming seems to suffer from the opposite problem. Sure, the major labels have the streaming services by the balls because if they pull out the streamers lose about 1/3 of their total content. But if there were more competition from the content production end of things, it would end up like video streaming where there are 12 different services that all offer different content. The advantage that Spotify, Apple, Amazon, etc. have is that, despite their differences, they all have pretty much the same stuff available, which is basically all the stuff that it's easy to license in bulk.
A few years back, right around the time that content creators were announcing plans to start their own streaming services, Bill Simmons interviewed a media analyst type who argued that this was a huge mistake that Netflix begat by paying huge sums to host exclusive content. He said essentially that content creation and content distribution are two totally different animals that should be separate. If you're a company like Netflix that specializes in distribution then you already have pretty much a monopoly and you're better off spending you money making sure your library has as wide a variety of titles as possible. Since there's no advertising high streaming numbers don't do you any direct good and having exclusive series or films isn't going to increase your subscriber base as much as being able to boast the biggest library. There might be some effect from a big hit, but not all projects are going to become big hits. The hundreds of millions you spend developing content that may be hit or miss is much better spent on long-term licensing deals with major studios, which will ensure that you have a larger library than any competitor. If you're a studio the calculus is simply the reverse—Disney or NBC or whoever offering their own streaming service is assuming that the difference between what they spend on technical development plus the loss of licensing fees and what they take in in subscription fees for a service whose library will necessarily be limited will be more than what they could have made by simply licensing their content to Netflix or whoever. Not to mention that the proliferation of these things will necessarily lead to lower subscriber numbers for each one.
The issue for Spotify is that the incentives are totally reversed from what they had been prior to streaming. In every era, from Edison Cylinders to iTunes, the industry's best customers were the ones who were the most into music. It goes without saying that a real music junkie who buys every new album his local record shop gets in on the day of release makes more money for the business than someone who buys one or two albums a year; it's almost tautological. Yet Spotify has completely upended this business model, which holds for practically everything else. The music junkie who wants to hear everything is Spotify's worst nightmare—since they have to pay al the various stakeholders per stream, it's possible that he's actually costing them money. The best Spotify customer is the one who pays for a subscription but never uses the service!
There are also a few other weird quirks that are side effects of Spotify's business model. First is the fake artist problem. Look at any Spotify-created playlist, particularly one with a mood-related name, like "Jazz in the Background". Who would you expect to find in such a playlist? Legends like Miles Davis and John Coltrane? Maybe more introspective stuff like Bill Evans or Ahmad Jamal? How about newer stuff like Jon Batiste, Brian Blade, or Kamasi Washington? Nope, you're going to hear names like Hara Noda, The Wildflower Trio, and CMC 3. I'm a pretty big jazz fan and I've never heard of any of these. More importantly, critic Ted Gioia hasn't heard of any of them either, and he's widely recognized as an expert on the subject. Upon further investigation, little to no information is available about any of these artists. They all have "albums" with only 2 or 3 songs, and the one that's on the playlist has several million listens while the other has only a few thousand, i.e. nobody's listening to them outside of the playlist. Most importantly, they're all Swedish. In fact, they're probably all, if not the same band, then varying configurations of the same musicians. People who listen to Spotify-curated playlists intended as background music aren't interested in hearing anything in particular provided it fits the mood. So instead of curating playlists with music from real musicians whom they would have to pay, they brought local musicians into the studio to record for a flat fee, slapped fake artist names on the songs, and now they can advertise playlists that don't cost them anything for people to listen to. And then there's the band that tried to break the system by recording an album full of a bunch of short songs. Spotify pays royalties by the song, not the total play time, so artists are incentivized to make their songs as short as possible to maximize revenue. One artist took this to the extreme and released an album called 1000x30 - Nobody Makes Money Anymore, which included 1000 30 second songs. This was more of a protest against low royalty rates than a serious cash-in attempt, but songs are becoming shorter.
I honestly don't have any idea how this ends. For the video streaming services the obvious solutions is realignment between streamers and content providers, but Spotify doesn't seem to have any viable way forward. They'll probably hang around in limbo for another decade or so until the next thing comes out. Or maybe they'll just go out of business and established companies like Apple and Amazon will take over and just treat music streaming like a loss leader. Or maybe they'll switch to a model similar to video streaming where they'll pay a flat fee for content instead of paying by the stream. It's an exciting time to look forward to. I still won't have a subscription.
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I think this is probably true, but I think there's more to it than that. Plenty of - probably a majority of - the smartest people are probably at least "woke"-leaning, if not outright "woke," but the vast majority of the "woke" aren't in that group, which includes people from all over the spectrum of intelligence. I'd guess that, on average, they're more intelligent than average purely due to them likely skewing college educated, but it's probably a weak effect at most. But more to the point, "woke" makes it harder to discriminate between people who are and people who aren't capable - it's explicitly and openly about overriding that sort of discrimination in individuals - e.g. the much maligned "the best person for the job" - with another form of discrimination that is more based on the demographic group in which the individual fits, in an ostensible effort to counteract the unjust discrimination that that individual must have faced due to belonging in that group. This is less attractive to highly capable "woke" people, because if you're highly capable, you get more benefit from a system that rewards capability than a system that rewards something else. If you're Usain Bolt, you want a footrace that is determined purely by time, even if the alternative is something that randomly gives extra points to Jamaicans - in the latter system, if you get unlucky, a slower Jamaican than you could win due to those extra points, whereas in the former, you'll always win as long as you're the fastest.
So even though (I'm guessing) a high proportion, possibly a majority, of highly capable people are "woke," I would imagine that if the economy tightens and pushes companies to be more frugal, it would result in the "wokeness" being less influential in these companies. The highly capable people who remain won't be as incentivized to push "wokeness" as much as the more generic median "woke" person, and there will be less of those around.
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Wonderful post and insight about Spotify. I love it.
What if we had high inflation AND low rates at the same time? High rates won't persist for the simple reason that they can't. The U.S. government can't withstand 5% rates on its debt. We already have trillion dollar deficits. Adding another trillion in interest payments annually is not feasible.
This would seem to make yield curve control inevitable and will lead to the combination of low rates and high inflation. If managed correctly, this provides a way through the debt crisis, allowing negative real rates to gradually deflate the debt. Some people say the Fed will lose control and we will see much sharper inflation. This would also get us out from under the debt, although at great human cost to the losers.
One particularly obstreperous commenter has been calling this "Project Zimbabwe" and believes we will have hyperinflation when the Fed caves and lowers rates too quickly. Certainly, speculators have been pumping up questionable tech stocks at the slightest whiff of a Fed pivot.
It remains to be seen whether fast-takeoff AI will come first and create high productivity/deflation. But financially speaking, I probably wouldn't have too much of my money in cash or bonds long term as they seem destined to be inflated away.
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I feel like you could just mentioned Parker’s 5 forces as your explanation.
https://www.mindtools.com/at7k8my/porter-s-five-forces
You basically do that. Industry concentration in the platform model does effect profitability, but I think the issue is more low switching costs on the consumer side. And some inability to differentiate. Uber struggles with profitability and they run a network with millions of drivers on one side and billions of riders on the other. I would argue there’s still low switching costs. Even now ubereats offers me 40% off almost constantly. I play a game to figure out how much I can order at the lowest costs.
My guess is Spotify would still struggle with profitability even if the music libraries were not consolidated.
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I don’t believe the smartest of the smartest are woke.
Probably a plurality (majority if we exclude 'doesn't care about politics much') of the "smartest of the smartest" are sort of "woke" in the sense of having significantly left-leaning views. They didn't like trump, don't like racism, worried about the climate, cool with trans people, maybe they find Musk offensive. A lot of the people on e.g. https://mathstodon.xyz are like that. Many math professors (very smart!) with pronouns.
Fewer, but still a significant number, are very "woke". Rust's a great programming language, see creator graydon hoare's mastodon, which is pretty funny (following are retweets within the past 1.5 months)
Ehh…In my experience (including at a top law school) most kids are generically progressive but the smartest kids tend to be classically liberal (ie not woke)
To take this beyond my-anecdote vs your-anecdote, higher cognitive ability is associated with more support for free speech across ideologies. But while classical liberals support free speech, not everyone who supports free speech is a liberal.
(I suspect the connection is that smart people hold more beliefs heretical to their in-group, so opposition to punishing heretics is self-interested.)
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Notoriously less woke economics is high IQ, lowest IQ majors are the wokest ones. Source 1. The evidence seems to be pointing more towards classical liberalism being correlated with IQ. Source 2.
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I agree that post graduate degrees probably lean heavily progressive. But a lot of that is selection effects (eg smart people who aren’t progressive don’t go into academia).
Also, donor class donations is quite complex. I don’t think that is very indicative. Hell, it would be interesting to know if major donors look a lot like the ex ms Bezos.
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Inflation projections for the UK over the last two years have been repeatedly wrong. More importantly, they've all been repeatedly wrong in the same direction: assuming inflation will come down starting with the next time interval, then approach 2%. The Bank of England seems to be in denial about the cause of inflation, and their projections seem to amount to arbitrarily assuming the future will trend towards their 2% goal regardless of any action or policy.
In 2018, Markets weren't acting in a way that suggests high rates in 2023 either.
Inflation is far higher than wage growth. the root cause of high inflation is running a policy of stimulus while simultaneously outlawing economic activity with lockdowns. More money chasing fewer goods.
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They don't know it, they believe it. What is the difference between their belief now and the repeatedly refuted past beliefs of markets/BoE/Fed on this point?
That we've seen banks fail. Which means the Fed can't keep tightening forever without risking systemic collapse.
Nobody really knows if we're going to end up in the scenario where they just straight up fail the inflation control part of their mandate, but it's definitely getting priced in as a possibility. People are still "fighting the fed", which is unwise because they're supposed to always win, but what actually happens isn't always what's supposed to happen.
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