Big Vs Little

That's The Divide

If you have never listened to a Joe Rogan podcast, I suggest that you listen to this one with Marc Andreessen. I listened to it and as cynical as I am it was eye-opening.

Andreessen and his partner Ben Horowitz did a podcast for their firm a16z in what seems like eons ago now talking about why they supported Trump over Harris. They received a lot of blowback from the Silicon Valley community over that endorsement. Horowitz was personal friends with Harris, and still wrote a check to her campaign but never reneged on the endorsement.

In that podcast, they talked about “little tech”. Big government favors Big Tech. Big Tech can pull the levers of power to entrench itself killing potential competition.

One thing that has dawned on me over my life is that corporations are not evil. They are great ways to organize and allocate resources to serve customers. However, corporation’s economic incentive is to grow ever larger and to dominate as much as it can.

Free market competition and innovation, not government regulation is the best way to check corporate power because powerful corporates can manipulate regulation. See George Stigler.

Today we are divided in America. But, as the Trump election shows it is not along traditional lines. It’s not fascist vs freedom either. As a matter of fact, Democrats when in power are a helluva lot more fascist than Republicans. I won’t delve into chapter and verse here, but there are hundreds of examples. Democrats accuse Republicans of fascism, then actually execute it.

The innovations in technology potentially give tools to people in power to enact all kinds of control over citizens without citizens even realizing it. Those controls will end freedom and free will as we know it.

The divide is not just a small one. It’s a chasm. People like me want to be left alone. We want government to resemble the one outlined in the original Constitution. Sec of Defense, State, and maybe a few others. 90% of the agencies and departments in the federal government are not needed.

I do see a role for the government in providing data. Economic data for example is a good use of government to inform citizens and markets. That is, provided they do it objectively which people have made a case that it is not objectively gathered and distributed today.

The other interesting thing is how we have sorted out. Most people who look to the government as a problem solver also have college degrees. Many have graduate degrees. When I initially studied the differences between Behaviorial Economics and Classical Economics, one facet that I saw was how people who wanted control and thought they could help others using that control rallied around Behaviorial Economics. Essentially, “You aren’t smart enough to know what’s good for you and we do, so we are going to design everything so like a rat in a maze you make the decision that we think is best for you.”

When you think about choice architecture, things are arranged differently. It takes a lot for you to take a step back and overcome obstacles to make the choice you might prefer. With artificial intelligence, choice architecture becomes ever more powerful.

Not only are we divided between those who prefer small government and big government, but we are divided over which economic system we want to guide our economy.

Classical economics postulate the rational investor and that’s where the Behavioral people start their disagreement. They will point out all kinds of corner cases where rationality didn’t prevail. Then, they will go further and say that you should eat an apple instead of a candy bar and if you eat that candy, you aren’t rational. But, it’s a failure to understand what rational means.

One of the hardest things for people to do is relinquish control. It makes a lot of people uneasy. Things aren’t “safe”.

Classical economists show the market, and then relinquish control. Individuals make their own decisions based on how they interpret the market signals. They try to maximize their own personal satisfaction with their decisions. No one is controlling that decision, except the individual making a free choice. Free to Choose is a great book worth reading by Milton Friedman which should help you understand the concept.

Once I was speaking with a friend who is a left-wing Democrat. We were talking about all kinds of policy. One thing they said stuck out to me. They were so busy leading their own life, and engaging in work/family etc, they didn’t have time to do deep research into everything. Hence, they were willing to “trust the experts”. Those experts were bureaucrats in the government, credentialed people at think tanks, and non-government organizations.

That sort of thing saves time, and if you follow them it technically takes risk out of your life. That allows you to focus on the stuff you need to focus on.

Of course, this assumes that those people are objective. The divide in America is there are those of us who think they have a different agenda and see them not as objective angels but normal humans affected by their own economic incentives. The economic incentive of government is to get bigger, and exert more power over citizens.

I don’t know what it will take for that set of people who vote Democrat to change. One will be a humbling. What’s best for them might not be best for someone else.

Another thing that will have to change is their view on the private sector vs the government. Many of them are compassionate and empathetic. You see that poor person and feel terrible. How can we “fix” it?

Their knee jerk reaction is, use tax dollars to fix it through a government program. We are a wealthy country and we can afford it. Makes sense.

Except from data we know it doesn’t happen because that money gets filtered through a system where the economic incentives are not aligned with the outcome we desire. Private industry would do a far better job at getting to a better outcome. But, private industry needs to turn a profit in exchange for getting there. In addition, many of these “markets” are small and private industry isn’t interested because there isn’t enough profit in them. Marginal costs are greater than marginal profits.

However, I believe as Andreessen and Horowitz do that the innovation we are seeing today can change the economics around those marginal costs allowing private industry to earn a marginal profit. The innovation will open up new opportunities, and lift up Americans far better than anything anyone can design using government or some NGO.

That’s the true divide in America. One side trusts themselves and business. The other trusts the government and wants to regulate business without realizing that business can manipulate the government. A case in point is the food pyramid.

Republicans have 18 months to execute. They own both houses of Congress and the White House. If they don’t, they will have blown an opportunity. $DOGE has promise but will a farm Republican do something like vote to end farm subsidies or ethanol subsidies? We will see.

The cynic in me says they won’t. The hopeful part of me hopes they will see the light and vote to end all this nonsense that has been with us for 100 years.