A Sharp Demarcation of Differences

Don't Be Fooled By Rhetoric

I stumbled across this article this morning on the development of an enzyme that eats plastic in landfills. I have seen some other “plastic” innovation over the years from corn starch to make bags and ways to clear the oceans of garbage.

Recycling works to a point. I am glad the big drink makers have combined to try and use recycling as a part of their operations. But, recycling is generally a money loser. The only thing worth recycling en masse is metal or glass. China used to buy most of our recycling but not anymore.

The other neat thing about this project is the bringing together of several scientific disciplines to solve a problem.

I want to draw a huge distinction and line of demarcation.

When scientists, engineers, or the typical entrepreneurial human sees a problem, they try to use innovation to solve it. Through trial and failure, they learn and work to solve it. If they solve it, they have created something of value. If they can scale it to make it large, they have created something of value millions of people will use and pay for. They get rich.

But, the reason they solve for it isn’t to get rich. It’s to solve it. Getting rich is a byproduct of solving, not the means to an end.

If these scientists and entrepreneurs are successful and can scale this invention, landfills all over the world should grow smaller.

The motivation behind their effort has been proven over and over again in studies on theories of motivation. My old professor Greg Oldham co-authored a theory of motivation with Richard Hackman and it bears out in the real world. So much so that I argued in class vociferously with Professor Oldham about it. When I began trading, arguably the most selfish and capitalistic thing you can do with your life, money wasn’t the ultimate motivation. Autonomy and competition were.

Governments on the other hand look at problems very differently than scientists and entrepreneurs.

They see that same landfill. Their solution is to regulate how much plastic can be used. They offer up taxes on plastic. They tax people who use plastic. Eventually, they might even ban plastic.

What happens?

The landfill grows. Black markets in plastic form. Crony capitalism happens as lobbyists talk to their Congresspeople and heads of regulatory agencies to try and get the best deal for the people they represent. The taxes and regulations de-incentivize scientists and entrepreneurs to innovate, crushing any potential competition. Monopsonies, Oligopolies, and even Monopolies form, and the taxes and regulations get stronger and stronger.

The landfill gets bigger. We still have the problem.

Eventually, some government agency person gets a very perverse idea of Coase Economic Theory. They decide to pay companies not to produce any plastic using taxpayer dollars. They decide to subsidize alternatives, using taxpayer dollars. They might even pay another country to take the plastic and build landfills in their country, using taxpayer dollars for the entire project.

Those countries engage in crony capitalism too. They sometimes hold the government hostage for more money to keep the landfill open. Hearings are held and politicians make public soundbite political points for their lobbyists. Companies that make money processing the landfills and plastic are threatened by politicians for having “too much profit”. Windfall profit taxes are proposed. Those same companies’ board rooms are attacked by activist investors who are in cahoots with the lobbyists and their politicians. The money river grows larger to feed all the mouths engaged in the crony capitalism.

Meanwhile, the heads of agencies dole out government grants to people who curry favor with them. They are given grants to study problems. Grant after grant is given and more studies happen. Sometimes, little projects are undertaken with the grants, and any rules that any agency has on the books are suspended for the project even though there might be people harmed. The government is engaging in “science” after all.

If you happen to get on the bad side of the autocratic bureaucrat who doles out the grants for any reason, too bad for you. Your life might even be destroyed.

Instead of the scientists and entrepreneurs getting rich off solving a problem, wealth is distributed to the pockets of anyone that can work their way into the “government value chain”.

Meanwhile, the landfill gets bigger and we still have the problem.

This is happening again and again in industry after industry. The political-industrial complex is far more dangerous to US citizens than the military-industrial complex or individuals that make a lot of money building companies that solve problems.