I come from down in the valley/
where mister when you’re young/
they teach you to grow up to do/
like your daddy done
-Bruce Springsteen, The River

In his state of the union speech, President Obama predictably praised America’s “spirit of discovery and innvoation” and talked about making it easier for entrepreneurs to start new businesses in a single day. This is bad news, and let me explain why.

There are basically two significant visions of the climate crisis (I’m deliberately excluding those who believe there is no climate crisis, and also those like Guy McPherson who believe the looming crisis is so extreme that nothing will serve to enable a single human to survive another century) and those are first, the only plausible response is cease the extraction and consumption of fossil fuels, and to absorb the social disruption and change in standard of living that this would entail, and second, that some new technology will come along that enables renewable sources to provide the energy that drives our modern quality of life. There is actually surprisingly little in the median strip between these two solutions: at a conference last year Hans Bruyninckx mentioned, offhandedly, that the European Environment Agency is basing its policy and planning recommendations on exactly the 4^o world that the World Bank says “must be avoided.”

Both of these “plans” have their problems- for the first, stopping the trade in fossil fuels would essentially destroy USD10 trillion in private wealth, specifically the assets of some of the most politically powerful private entities in the world. Furthermore, the disruption in lifestyle suffered primarily by the wealthiest and most militarily powerful countries as a result would be profoundly destabilizing. Unsurprisingly, major Western powers have traditionally opted for the second response, calling for “innovation” as a solution.

Only problem is, innovation is a “scalable” enterprise. You can dream about a worm or a spear-carrying soldier and invent space suits or sewing machines, or you can pour trillions of dollars into research programs and come up dry- there’s no automatic connection between inputs and outputs. Engineers call these as-yet-unrealized solutions to difficult problems “unobtainium” but lay observers have taken to another phrase: “hopium”

Its safe to say that at present, the idea that climate change can be averted or even accomodated without a major shift in the american way of life depends on hopium, but that’s a science and engineering question, and this isn’t an engineering essay.

Entrepreneurship is Hopium for the Economy

I had a nasty realization the other day- at my first “real” taxable job, working retail at a bookstore, I was making USD0.65 more than minimum wage. Since then I’ve gotten a college degree, come within striking distance of finishing grad school, and acquired a number of practical and social skills I simply didn’t have as a teenager. And I’m making… USD0.65 more than minimum wage. Sure, the minimum’s gone up, but in inflation-adjusted dollars I’m earning less than 2% more in middle age than I was as a teen. That’s not even unusual. Wages vs. inflation is a hotly debated topic, but unless you buy the Heritage Foundation’s argument that DVD players make you wealthy, incomes have stagnated while the cost of living has gone up.

I’ve never understood the argument that technological toys compensate for a declining standard of living in real terms. Like hey, my dad is dying in his fifties of kidney disease from heavy metals in the municipal tapwater, but at least he got to play Candy Crush- what?

I won’t revisit the collapse of the manufacturing economy in North America except to point out that the Springsteen lyric I used as an epigraph was, for a while, true. Now it isn’t- how many readers could actually go into the same business as our parents and expect a similar career? How many non-scalable careers are even out there? People read Taleb’s question of scalability as advice on how to get rich- choose a career where you have a chance to be mindblowingly successful, as opposed to one where your income is capped by the numbers of hours in the week- but I read it backwards as a statement on your chances of finding work that might pay anything at all. There aren’t steel mills and shipping companies ready to absorb thousands of eager workers with strong backs, who show up on time, put in a day’s labor, and expect to own a house by the time they’re thirty. Even the modern replacement careers- nursing schools, medical schools, which, contrary to the American legend, are calibrated to turn out very few brilliant practitioners in favor of a large, reliable number of perfectly adequate practitioners and a vanishingly small number of screwups- are becoming more lottery-like. Specifically, the ratio of medical school “slots” to the number of residencies waiting for those students once they graduate is going way up… but I digress. The point is, doing like your daddy done just isn’t an option anymore.

Lotteries Overt and Otherwise

So, what’s a smart person to do to avoid pauperism? Well that’s obvious, isn’t it? Create your own job! Start a new business in a day! Making… well… this is the part where it gets tricky. If it were apparent what businesses need started already, they’d be started already. The first “job” today’s kids have to answer is, what the hell am I going to do that anyone is willing to pay me for? And each kid, increasingly, is expected to answer this alone as an individual. When poor or less-educated people do this, its called “hustling” but when it trickles upwards to the children of the 1%, its our national economic plan. Play the small-business lottery, cross your fingers, and hope.

I should also acknowledge that so far, this hasn’t caused any major collapse. There’s a lot of elasticity built into the system: one of the odd aspects of the global economic slowdown is that there are virtual oceans of liquid capital looking for a safe harbor for investment. Only a very few “startups” have to generate 10000% ROI to justify funding an enormous number of bright young sparks, especially when the bond rate is zero or close to it. This serves as a weird, semi-Keynesian stimulus for the tech sector as secondary producers that make tools for startups are able to extract a living from these mayfly customers. Labor costs are subsidized by the savings of the previous generation, who pay the living expenses of young “interns” who work for free. Ultimately the game is based on the assumption that somebody, somewhere will come up with something that is more important than Google Glass, actually necessary and marketable in the long term, but there’s a long, long short term during which the traditional rules of Keynesian stimuli apply- for those on the inside anyway.

Its also worth noting that while true Keynesianism, defined as state investment in wage labor to decrease humanitarian problems and increase spending by the lower quartiles, has been attacked as a “moral hazard” (even a moral panic) since it was first invented, the actual moral costs of a quasi-Keynesian venture-capital “boom” going to the 1% are actually far worse than any “undeserving” person driving a nice car every could be.

So what?

There are two major problems with this. The first is that investment in tech “innovation” promotes inequality. Don’t believe me? Try moving to San Francisco, Boston, NYC, or any other “innovation hub.” The second problem is the hopium problem- there’s no reason to believe that any of this will actually play out for the better of the rest of the world, or even the country. Sure, there’s a possibility that Tesla batteries will become a major industry employing millions of average people who didn’t go to Stanford or the Wharton school, but there’s also a possibility that some clever person will discover “zero point energy” and solve the climate crisis without incurring any human lifestyle cost at all. Both represent gambles with very long odds, and both have substantial short-term and possibly long-term downsides. A rational economic policy would accept that some sort of keynesian stimulus for the 99%- okay, the 90%- or better yet a system that decoupled standard of living from economic “growth,” just as a rational climate policy would begin the process of dialing down resource consumption in preparation for a world in which cheap, plentiful energy is simple not available. Instead, we’re promised unbelievable “successes” right around the corner.

The track record so far has been terrible for both “innovation” and “entrepreneurship” and the fact that they remain our official policy can only really be seen as evidence that the powers that be- the economic planners and engineers who determine the priorities of the most powerful corporate and state actors in history, have basically given up.