by John Tamny
In September 2002 I moved to Boston to work for Wainwright, selling their empirical economic research to fund managers who used it to allocate capital. “Empirical” meant numbers, but I understood where Ranson was coming from. Finally, I was selling something I understood (for the most part). Even better, Ranson allowed me to write reports on the economy. Four years after graduating from business school, I was actually doing something I enjoyed. And I was getting to write for clients out in the open. As painful as losing my job had been, it finally forced me down a new path—the right path for me. If Goldman had kept me on, I might have more money, but I’d have a lot less confidence.
Ranson taught me an enormous amount, but the market was still weak and many of Wainwright’s clients were leaving. Convinced that I was in the path of another downsizing, I started to look around.
I had regularly attended talks sponsored by the libertarian Cato Institute in midtown Manhattan, and I often relied on its work in my own writing. On its website one evening, I clicked on “Jobs at Cato” and found that it was looking for a fundraiser. The job had nothing to do with writing about economics, but I sent in my résumé.
Soon enough, I was in Washington, D.C., interviewing with Cato’s co-founder Ed Crane. We hit it off, and he’s been an influential friend ever since. He wasn’t interested in my writing, but he thought I’d do well with the institute’s top donors. Crane offered me a job, and I took it, a decision that had my friends and family wondering. Not all that long ago I had been working at Goldman Sachs, and now I was fundraising for a nonprofit? It sure looked like my career had been grounded.
But I had a plan (and bills to pay). I would continue to write, albeit on the side. Meanwhile, I believed in Cato’s mission, and they were going to pay me to talk policy with highly successful and generous people. The visits were amazing. I learned a great deal from these people, who educated me in ways that college and business school never could. In fact, my second book, Who Needs the Fed?, was inspired by my conversations with Cato donor Hall McAdams. I dedicated the book to him.
Around the time that I arrived at Cato, Eliot Spitzer, then the New York attorney general, launched a Wall Street witch hunt. The Internet boom, like all booms, left a lot of failures in its wake. Eager to build a national reputation out of a normal market correction, Spitzer set about attacking analysts who had promoted ill-fated Internet stocks and went after mutual funds that allowed “market timers” to move in and out of mutual funds. I knew from my time at Goldman Sachs that Spitzer’s attacks were baseless, and I wrote an opinion piece calling him out. Alan Reynolds of Cato liked it and sent it to National Review, where it ran online.
Here I note a happy irony in my story. The collapse of Internet stocks ended my time at Goldman, but the rise of the Internet presented huge new opportunities to writers. No longer confined to the limited space of printed newspapers and magazines, writers with a point of view now had unlimited space for expression. The Internet was unknown when I graduated from college, but by 2003, it was ready with an opening for me. When National Review Online posted my first public op-ed, I was a changed person.
After that opinion piece on Spitzer, I gradually migrated to economics op-eds. Raising funds from Cato donors was fun, but writing policy pieces was my passion. I’d work a full day for Cato and then write well into the night. Weekends included a lot of writing too. It’s easy to go into the office on weekends when you feel elevated by what you’re doing. I finally understood why Goldman Sachs investment bankers were willing to work the horrible hours that they did. While the handsome compensation surely factored into it, deal-making reinforced their talents in the way that I felt writing did mine. I couldn’t get enough of it.
None of this was easy, and sometimes it was embarrassing. At a party with my parents, people asked me what I was doing. I told them fundraising, but my mom added quickly that I also wrote op-eds. That stung. My parents obviously didn’t take the fundraising work seriously, but they were proud of the writing.
By 2005, I was fairly regular at both National Review Online and the now defunct TechCentralStation. It was a dream, and I’m forever grateful to Chris McEvoy (National Review) and Nick Schulz (Tech-CentralStation) for giving me a chance to opine on economics as “a writer based in Washington, D.C.” Cato wasn’t interested in employing me as a policy analyst, and no one else seemed to be either. That stung too, but if you’re doing what you love it’s important to embrace the snubs. That’s what I did. If no one thought me worthy, I’d prove them wrong.
The more I wrote, the more notice I achieved. In 2006, one of my heroes, Steve Forbes, cited me as a “monetary expert” in his influential magazine column.3 Not long after that, David DesRosiers of the Manhattan Institute asked me to consider succeeding him as director of fundraising there. It was flattering, but I told him that my next job would be as a policy writer. It turned out that the Manhattan Institute was helping to launch RealClearMarkets.com—a companion site to the successful RealClearPolitics—and they were looking for an editor. I was hired a week later. It was difficult to leave Cato, but this was the chance I’d been waiting for.
I began working at RCM in January 2007, and the site went live in November. Now I could comment on economic and market developments right away. No more waiting for an editor’s decision. I wrote three columns most weeks. That’s a lot, but it wasn’t work. It was what I was born to do.
In the summer of 2008, Forbes, Inc., bought nearly a half share of RealClearHoldings, joining it with a globally established brand. Two summers later, I was called up to Forbes’s impressive Fifth Avenue headquarters in New York. They were interested in making me full-time there. The interviews went well, and an offer was extended.
And yet I turned it down. My reservations were rooted in the Internet, which had made my writing work possible but had thrown the media business into uncertainty. By 2010, I was not only editing RealClearMarkets but was re-affiliated with H. C. Wainwright, was a senior economic adviser to Toreador Research & Trading, a small mutual fund company, and was back at the Cato Institute part time doing fundraising. Forbes expected me to give up all of those jobs for one. I wasn’t ready to do that.
A week later, Steve Forbes himself called me. He said they needed me as opinions editor for the online version of Forbes. If allowed to maintain my other work, would I take it? He also stressed that it wouldn’t get in the way of my eventually writing books. The answer was easy. I started in October 2010. It was time-consuming, but also a blast. I was charged with bringing in top economics and policy writers as Forbes contributors, so it was an interesting challenge.
I loved the job, and felt important. For the first time I was vetting op-eds as opposed to begging editors to give me the time of day, all the while recruiting a dream team of writers that included one of my heroes, Steven F. Hayward. At the same time, I didn’t adapt as quickly to new media. While it’s the settled norm today, the idea of allowing writers to write without being edited seemed alien to me. And so I micro-managed; wanting to edit each piece ahead of time.
All of this slowed down the production of op-eds. No doubt some of what I was doing added value, but the broad truth was that I was late to the evolution of media. That I was put me at odds with management. That’s at least how I saw it. By October of 2013 I knew I was in trouble. Further evidence that Steve Forbes is one of the nicest people I’ve ever known, he came down to Washington to personally tell me that the management team overseeing Opinions had decided to demote me. Not long after, the head of that management team (Lewis D’Vorkin) came down to tell me the news too.
That they did what they did spoke and speaks volumes about what a great organization Forbes Inc. is. Still, the news devastated me. It wasn’t as brutal as Goldman Sachs, but it was close. I was lost.
Still, failure is once again healthy. Being demoted to Political Economy editor forced to me to think about what I was doing. I had a little more free time, and my fiancée, Kendall, had for the longest time been
needling me about writing a book. While I worked all or part of seven days a week doing what I truly loved, I often spent Saturdays at an independent movie theater. Why was I spending so much time at the movies, she wondered, instead of writing a book? She had a point, so I got started on the book, spending nearly every weekend from January to the end of March in the office.
George Orwell said that writing a book is like struggling with a long illness, and the months leading up to my wedding were difficult. Writing op-eds is fun, but books are terrifying. Working on something so much bigger than an op-ed, I feared that the result would be disappointing. And that’s the point. I was able to write a book, and suffer the brutal hours, because writing is what I love to do.
Investment bankers can spend seven days a week in the office, football coaches and players can be in the film room all week, and writers can produce books because they’re getting to express their unique skills. Doing what animates your talents isn’t always going to be fun, but nothing worthwhile in life is easy.
About a week before my wedding, I completed what became Popular Economics, about a month later I had an agent, and not long after that I had a publisher, Regnery. In March 2015, George Will reviewed my book, calling me “a one-man antidote to economic obfuscation and mystification.”4 All those years of hard work had finally paid off. I’d begun writing for the public in 2003 as “a writer based in Washington, D.C.” By 2015, I had a book out that received a lot of good notice. Since then I have moved from the Cato Institute to the Reason Foundation and then to FreedomWorks, all the while working with major donors.
It has been quite a ride—exciting, occasionally tense, and rarely what I expected. The biggest surprise was the rise of the Internet, which made it far easier for me to write for the public than it would have been in the more primitive economy of the twentieth century.
My struggles at Goldman Sachs and Credit Suisse forced me to think about what I really wanted to do. You shouldn’t shrink from trying different things. All work is education, and a day rarely goes by when I don’t make use in my writing of what I learned on Wall Street. Fear of the unknown, of losing my various jobs, moved me to write a book. My wife thinks I work too much, but I keep telling her that it’s not work. It took me a while, but I finally found work that it would pain me not to do.
I’m not alone. USA Today reported in 2016, “Getting American workers to power down is an uphill battle.” Indeed, “More than half of working Americans did not use all their time off in 2016.”5 That’s a beautiful problem. It indicates that amid America’s growing prosperity, more of us are doing what we love. We can’t not work.
When Alexis de Tocqueville toured the United States in the 1830s, he found us to be “restless in the midst of abundance.”6 Perhaps Americans are consumed by work because we’re descended from immigrants—people who had the “get up and go” to get up and go to a land of personal and economic freedom.
There’s a strong correlation between economic freedom and economic growth, as China has demonstrated in recent decades. When an economy grows, more people can make a living doing what they love. Americans are known as being industrious because this is the country where a person’s job is most likely to match his talents.
A young Andrew Carnegie wrote to an uncle in Scotland, “If I had been at Dunfermline working at the loom it’s very likely I would have been a poor weaver all my days, but here, I can surely do something better than that, and if I don’t it will be my own fault, for anyone can get along in this country.”7 Carnegie nailed it.
Would you be a tireless worker if your only options were working long days on the farm or at the mill? That’s what’s so great about economic growth. The advances in productivity in rich countries continue to erase traditional forms of toil while expanding the range of new jobs. Hard work made the United States a rich country, and that wealth has produced the opportunities for more Americans to combine work with passion.
In the next chapter we’ll consider the policies and thinking necessary for that growth to continue.
CHAPTER EIGHT
The “Venture Buyer”
“Whenever capital is withdrawn from production, or from the fund destined for production, to be lent to the State and expended unproductively, that whole sum is withheld from the laboring classes.”1
—John Stuart Mill
On July 3, 2016, the U.S. Senate announced that it was making the switch from BlackBerry smartphones to the more popular Android and iPhone versions. As USA Today remarked, it was a change “most of us made years ago.”2
The Senate’s archaic smartphone policy speaks volumes about the problem with government spending: it’s very conservative. Governments spend money on what is known, as opposed to what will eventually be known.
Three weeks after the Senate announced its smartphone switch, Apple reported that its quarterly profits had fallen 27 percent, admitting that slower iPhone sales were a big part of the reason.3 While iPhone sales were dropping, Apple’s Chinese rival Huawei Technologies enjoyed a major surge in sales of its own smartphone, challenging the giants Samsung and Apple. The same week that Apple announced its falling profits, Huawei projected that it would ship 140 million smartphones in 2016, a 30 percent jump from the previous year.4 Profits always attract competition.
Will Huawei eventually knock Apple and Samsung off of their lofty perch? It’s impossible to know. The most successful investors earn billions because they are able to see into the future correctly—sometimes. You never know, but the iPhone could be yesterday’s news at some point. Figure that we’ve seen this before.
At one time, BlackBerry was king of the smartphone hill. In 2005, National Public Radio decreed the BlackBerry “a must-have gadget, a wireless hand-held computer that can send e-mail and make phone calls,”5 and compared it to the Palm Treo. Heard anything about that recently?
To be fair, when NPR reported on the BlackBerry, it was the dominant product. No one was thinking that a computer or Internet company might produce a marketable smartphone. Palm’s CEO observed in 2006, “We’ve learned and struggled for a few years here figuring out how to make a decent phone. PC guys are not going to just figure this out. They’re not going to just walk in.”6
Microsoft’s CEO Steve Ballmer was no more prescient. In January 2007, he asked mockingly about the coming wave of phones, “Five hundred dollars? Fully subsidized? With a plan? I said that’s the most expensive phone in the world and it doesn’t appeal to business customers because it doesn’t have a keyboard, which makes it not a very good e-mail machine.”7
A couple of months later, the computer industry pundit John Dvorak said, “Apple should pull the plug on the iPhone” since there was “no likelihood that Apple can be successful in a business this competitive.” Dvorak concluded that first-mover advantage had closed the market for new entrants: “This is not an emerging business. In fact it’s gone so far that it’s in the process of consolidation with probably two players dominating everything, Nokia Corp. and Motorola Inc.”8
BlackBerry’s own CEO, Jim Balsillie, was just as complacent back in 2007: “The recent launch of Apple’s iPhone does not pose a threat to Research In Motion Ltd.’s consumer-geared BlackBerry Pearl and simply marks the entry of yet another competitor into the smartphone market.”9
As the history of smartphones shows, no one knows the future. Not even the best minds in technology know with any certainty what’s ahead. Could Huawei or some other lightly regarded entrant knock Apple out of the smartphone market? Definitely. So while the U.S. Senate is switching its allegiance to iPhones and Androids, the smartphone ground continues to shift.
Why does this matter? Because the federal government is not purchasing just iPhones. As USA Today notes, it has “more purchasing power than any other buyer in the world.” In 2014 alone, the federal government awarded more than $445 billion in contracts to private sector suppliers.10
That spending power is the direct result of the enormous productivity of the A
merican worker. While government can theoretically “print” dollars to spend, those dollars have purchasing power only to the extent that they’re backed by the productivity of you and me. That is to say, the federal government could spend that $445 billion in 2014 only because the American people had 445 billion fewer dollars to spend that year.
Now, you may have a generally favorable or unfavorable view of government spending, depending on your politics, but the point I want to make here is that government spending blunts the expression of consumers’ desires. We get up and go to work each day so we can exchange the fruits of our labor for what we desire but don’t have. Our purchasing is a message to the market about those desires. Government spending necessarily diminishes that message.
In our consumption of goods and services, all of us are message-senders. But there’s a particular kind of consumer who plays a critical role in the economic evolution that is transforming work. I call that consumer a “venture buyer.” While a venture capitalist provides funds to a young and unproved business in exchange for an ownership share, a venture buyer is willing to try new products and services that are still unproved, and he’s willing to pay a premium to be among the first to try them. Bloated government spending hinders the venture buyer, depriving entrepreneurs and businesses of vast amounts of market knowledge.
The venture buyer shows up in the stories of all kinds of products that we have come to take for granted. Consider the laser printer, a device now commonly found in American homes. You can buy one today for less than a hundred dollars, but not so long ago a laser printer was a fancy piece of high-tech equipment costing $17,000.11 The only people who had them in their homes were the rich, who acted as the test market for what eventually proved desirable to us all.