Nick Hanauer: Beware, fellow plutocrats, the pitchforks are coming

Recorded atAugust 06, 2014
EventTEDSalon NY2014
Duration (min:sec)20:09
Video TypeTED Stage Talk
Words per minute129.38 very slow
Readability (FK)40.64 very difficult
SpeakerNick Hanauer
CountryUnited States of America
DescriptionAmerican businessman

Official TED page for this talk


Nick Hanauer is a rich guy, an unrepentant capitalist — and he has something to say to his fellow plutocrats: Wake up! Growing inequality is about to push our societies into conditions resembling pre-revolutionary France. Hear his argument about why a dramatic increase in minimum wage could grow the middle class, deliver economic prosperity ... and prevent a revolution.

Text Highlight (experimental)
100:13 You probably don't know me,
200:15 but I am one of those .01 percenters
300:19 that you hear about and read about,
400:20 and I am by any reasonable definition a plutocrat.
500:25 And tonight, what I would like to do is speak directly
600:28 to other plutocrats, to my people,
700:30 because it feels like it's time for us all
800:33 to have a chat.
900:35 Like most plutocrats, I too am a proud
1000:37 and unapologetic capitalist.
1100:40 I have founded, cofounded or funded
1200:43 over 30 companies across a range of industries.
1300:47 I was the first non-family investor in
1400:50 I cofounded a company called aQuantive
1500:53 that we sold to Microsoft for 6.4 billion dollars.
1600:57 My friends and I, we own a bank.
1701:00 I tell you this — (Laughter)
1801:02 unbelievable, right?
1901:04 I tell you this to show
2001:07 that my life is like most plutocrats.
2101:10 I have a broad perspective on capitalism
2201:13 and business,
2301:15 and I have been rewarded obscenely for that
2401:19 with a life that most of you all
2501:21 can't even imagine:
2601:23 multiple homes, a yacht, my own plane,
2701:26 etc., etc., etc.
2801:30 But let's be honest: I am not the smartest person you've ever met.
2901:33 I am certainly not the hardest working.
3001:35 I was a mediocre student.
3101:37 I'm not technical at all.
3201:39 I can't write a word of code.
3301:41 Truly, my success is the consequence
3401:44 of spectacular luck,
3501:47 of birth, of circumstance and of timing.
3601:52 But I am actually pretty good at a couple of things.
3701:56 One, I have an unusually high tolerance for risk,
3802:01 and the other is I have a good sense,
3902:03 a good intuition about what will happen in the future,
4002:06 and I think that that intuition about the future
4102:09 is the essence of good entrepreneurship.
4202:13 So what do I see in our future today,
4302:15 you ask?
4402:17 I see pitchforks,
4502:19 as in angry mobs with pitchforks,
4602:24 because while people like us plutocrats
4702:29 are living beyond the dreams of avarice,
4802:32 the other 99 percent of our fellow citizens
4902:35 are falling farther and farther behind.
5002:38 In 1980, the top one percent of Americans
5102:41 shared about eight percent of national [income],
5202:43 while the bottom 50 percent of Americans
5302:46 shared 18 percent.
5402:48 Thirty years later, today, the top one percent
5502:52 shares over 20 percent of national [income],
5602:55 while the bottom 50 percent of Americans
5702:57 share 12 or 13.
5803:00 If the trend continues,
5903:03 the top one percent will share
6003:04 over 30 percent of national [income]
6103:06 in another 30 years,
6203:08 while the bottom 50 percent of Americans
6303:10 will share just six.
6403:12 You see, the problem isn't that we have
6503:14 some inequality.
6603:16 Some inequality is necessary
6703:19 for a high-functioning capitalist democracy.
6803:22 The problem is that inequality
6903:24 is at historic highs today
7003:27 and it's getting worse every day.
7103:30 And if wealth, power, and income
7203:33 continue to concentrate
7303:35 at the very tippy top,
7403:37 our society will change
7503:39 from a capitalist democracy
7603:41 to a neo-feudalist rentier society
7703:45 like 18th-century France.
7803:47 That was France
7903:50 before the revolution
8003:51 and the mobs with the pitchforks.
8103:53 So I have a message for my fellow plutocrats
8203:56 and zillionaires
8303:58 and for anyone who lives
8403:59 in a gated bubble world:
8504:02 Wake up.
8604:03 Wake up. It cannot last.
8704:07 Because if we do not do something
8804:09 to fix the glaring economic inequities in our society,
8904:13 the pitchforks will come for us,
9004:16 for no free and open society can long sustain
9104:20 this kind of rising economic inequality.
9204:23 It has never happened. There are no examples.
9304:26 You show me a highly unequal society,
9404:27 and I will show you a police state
9504:29 or an uprising.
9604:31 The pitchforks will come for us
9704:33 if we do not address this.
9804:35 It's not a matter of if, it's when.
9904:39 And it will be terrible when they come
10004:42 for everyone,
10104:44 but particularly for people like us plutocrats.
10204:49 I know I must sound like some liberal do-gooder.
10304:52 I'm not. I'm not making a moral argument
10404:54 that economic inequality is wrong.
10504:58 What I am arguing is that rising economic inequality
10605:02 is stupid and ultimately self-defeating.
10705:05 Rising inequality doesn't just increase our risks
10805:09 from pitchforks,
10905:11 but it's also terrible for business too.
11005:15 So the model for us rich guys should be Henry Ford.
11105:19 When Ford famously introduced the $5 day,
11205:23 which was twice the prevailing wage at the time,
11305:26 he didn't just increase the productivity
11405:28 of his factories,
11505:30 he converted exploited autoworkers who were poor
11605:33 into a thriving middle class who could now afford
11705:36 to buy the products that they made.
11805:39 Ford intuited what we now know is true,
11905:43 that an economy is best understood as an ecosystem
12005:47 and characterized by the same kinds
12105:49 of feedback loops you find
12205:52 in a natural ecosystem,
12305:54 a feedback loop between customers and businesses.
12405:58 Raising wages increases demand,
12506:01 which increases hiring,
12606:03 which in turn increases wages
12706:05 and demand and profits,
12806:07 and that virtuous cycle of increasing prosperity
12906:12 is precisely what is missing
13006:14 from today's economic recovery.
13106:19 And this is why we need to put behind us
13206:24 the trickle-down policies that so dominate
13306:28 both political parties
13406:30 and embrace something I call middle-out economics.
13506:33 Middle-out economics rejects
13606:35 the neoclassical economic idea
13706:38 that economies are efficient, linear, mechanistic,
13806:42 that they tend towards equilibrium and fairness,
13906:45 and instead embraces the 21st-century idea
14006:49 that economies are complex, adaptive,
14106:52 ecosystemic,
14206:54 that they tend away from equilibrium and toward inequality,
14306:58 that they're not efficient at all
14406:59 but are effective if well managed.
14507:03 This 21st-century perspective
14607:06 allows you to clearly see that capitalism
14707:09 does not work by [efficiently] allocating
14807:12 existing resources.
14907:14 It works by [efficiently] creating new solutions
15007:20 to human problems.
15107:22 The genius of capitalism
15207:24 is that it is an evolutionary solution-finding system.
15307:29 It rewards people for solving other people's problems.
15407:35 The difference between a poor society
15507:38 and a rich society, obviously,
15607:40 is the degree to which that society
15707:43 has generated solutions in the form
15807:45 of products for its citizens.
15907:48 The sum of the solutions
16007:49 that we have in our society
16107:51 really is our prosperity, and this explains
16207:54 why companies like Google and Amazon
16307:56 and Microsoft and Apple
16407:58 and the entrepreneurs who created those companies
16508:01 have contributed so much
16608:05 to our nation's prosperity.
16708:08 This 21st-century perspective
16808:10 also makes clear
16908:13 that what we think of as economic growth
17008:15 is best understood as
17108:17 the rate at which we solve problems.
17208:20 But that rate is totally dependent upon
17308:23 how many problem solvers
17408:27 diverse, able problem solvers — we have,
17508:29 and thus how many of our fellow citizens
17608:32 actively participate,
17708:34 both as entrepreneurs who can offer solutions,
17808:38 and as customers who consume them.
17908:42 But this maximizing participation thing
18008:46 doesn't happen by accident.
18108:47 It doesn't happen by itself.
18208:49 It requires effort and investment,
18308:53 which is why all
18408:56 highly prosperous capitalist democracies
18508:59 are characterized by massive investments
18609:01 in the middle class and the infrastructure
18709:04 that they depend on.
18809:07 We plutocrats need to get this
18909:09 trickle-down economics thing behind us,
19009:12 this idea that the better we do,
19109:14 the better everyone else will do.
19209:16 It's not true. How could it be?
19309:20 I earn 1,000 times the median wage,
19409:24 but I do not buy 1,000 times as much stuff,
19509:27 do I?
19609:28 I actually bought two pairs of these pants,
19709:32 what my partner Mike calls
19809:34 my manager pants.
19909:35 I could have bought 2,000 pairs,
20009:38 but what would I do with them? (Laughter)
20109:41 How many haircuts can I get?
20209:44 How often can I go out to dinner?
20309:48 No matter how wealthy a few plutocrats get,
20409:52 we can never drive a great national economy.
20509:55 Only a thriving middle class can do that.
20610:01 There's nothing to be done,
20710:03 my plutocrat friends might say.
20810:07 Henry Ford was in a different time.
20910:10 Maybe we can't do some things.
21010:12 Maybe we can do some things.
21110:15 June 19, 2013,
21210:19 Bloomberg published an article I wrote called
21310:23 "The Capitalist’s Case for a $15 Minimum Wage."
21410:28 The good people at Forbes magazine,
21510:31 among my biggest admirers,
21610:33 called it "Nick Hanauer's near-insane proposal."
21710:37 And yet, just 350 days
21810:41 after that article was published,
21910:43 Seattle's Mayor Ed Murray signed into law
22010:46 an ordinance raising the minimum wage in Seattle
22110:50 to 15 dollars an hour,
22210:52 more than double
22310:53 what the prevailing federal $7.25 rate is.
22410:58 How did this happen,
22511:00 reasonable people might ask.
22611:02 It happened because a group of us
22711:03 reminded the middle class
22811:05 that they are the source
22911:06 of growth and prosperity in capitalist economies.
23011:10 We reminded them that when workers have more money,
23111:14 businesses have more customers,
23211:15 and need more employees.
23311:17 We reminded them that when businesses
23411:20 pay workers a living wage,
23511:23 taxpayers are relieved of the burden
23611:25 of funding the poverty programs
23711:26 like food stamps and medical assistance
23811:29 and rent assistance
23911:31 that those workers need.
24011:33 We reminded them that low-wage workers
24111:36 make terrible taxpayers,
24211:39 and that when you raise the minimum wage
24311:41 for all businesses,
24411:43 all businesses benefit
24511:44 yet all can compete.
24611:47 Now the orthodox reaction, of course,
24711:49 is raising the minimum wage costs jobs. Right?
24811:53 Your politician's always echoing
24911:55 that trickle-down idea by saying things like,
25011:58 "Well, if you raise the price of employment,
25112:00 guess what happens? You get less of it."
25212:03 Are you sure?
25312:06 Because there's some contravening evidence.
25412:09 Since 1980, the wages of CEOs in our country
25512:14 have gone from about 30 times the median wage
25612:16 to 500 times.
25712:19 That's raising the price of employment.
25812:22 And yet, to my knowledge,
25912:25 I have never seen a company
26012:27 outsource its CEO's job, automate their job,
26112:31 export the job to China.
26212:33 In fact, we appear to be employing
26312:35 more CEOs and senior managers than ever before.
26412:38 So too for technology workers
26512:42 and financial services workers,
26612:44 who earn multiples of the median wage
26712:47 and yet we employ more and more of them,
26812:49 so clearly you can raise the price of employment
26912:54 and get more of it.
27012:56 I know that most people
27112:58 think that the $15 minimum wage
27213:00 is this insane, risky economic experiment.
27313:04 We disagree.
27413:06 We believe that the $15 minimum wage
27513:08 in Seattle
27613:09 is actually the continuation
27713:11 of a logical economic policy.
27813:14 It is allowing our city
27913:16 to kick your city's ass.
28013:19 Because, you see,
28113:20 Washington state already has
28213:22 the highest minimum wage
28313:24 of any state in the nation.
28413:25 We pay all workers $9.32,
28513:28 which is almost 30 percent more
28613:29 than the federal minimum of 7.25,
28713:32 but crucially, 427 percent more
28813:36 than the federal tipped minimum of 2.13.
28913:40 If trickle-down thinkers were right,
29013:42 then Washington state should have massive unemployment.
29113:45 Seattle should be sliding into the ocean.
29213:48 And yet, Seattle
29313:51 is the fastest-growing big city in the country.
29413:55 Washington state is generating small business jobs
29513:59 at a higher rate than any other major state
29614:02 in the nation.
29714:03 The restaurant business in Seattle? Booming.
29814:07 Why? Because the fundamental law of capitalism is,
29914:12 when workers have more money,
30014:13 businesses have more customers
30114:15 and need more workers.
30214:17 When restaurants pay restaurant workers enough
30314:20 so that even they can afford to eat in restaurants,
30414:24 that's not bad for the restaurant business.
30514:27 That's good for it,
30614:28 despite what some restaurateurs may tell you.
30714:33 Is it more complicated than I'm making out?
30814:35 Of course it is.
30914:36 There are a lot of dynamics at play.
31014:38 But can we please stop insisting
31114:40 that if low-wage workers earn a little bit more,
31214:43 unemployment will skyrocket
31314:44 and the economy will collapse?
31414:46 There is no evidence for it.
31514:48 The most insidious thing
31614:50 about trickle-down economics
31714:51 is not the claim that if the rich get richer,
31814:54 everyone is better off.
31914:55 It is the claim made by those who oppose
32014:58 any increase in the minimum wage
32115:00 that if the poor get richer,
32215:02 that will be bad for the economy.
32315:04 This is nonsense.
32415:06 So can we please dispense with this rhetoric
32515:10 that says that rich guys like me
32615:12 and my plutocrat friends
32715:15 made our country?
32815:18 We plutocrats know,
32915:20 even if we don't like to admit it in public,
33015:22 that if we had been born somewhere else,
33115:24 not here in the United States,
33215:26 we might very well be just some dude standing barefoot
33315:29 by the side of a dirt road selling fruit.
33415:32 It's not that they don't have good entrepreneurs in other places,
33515:35 even very, very poor places.
33615:37 It's just that that's all
33715:38 that those entrepreneurs' customers can afford.
33815:43 So here's an idea for a new kind of economics,
33915:47 a new kind of politics
34015:49 that I call new capitalism.
34115:52 Let's acknowledge that capitalism
34215:54 beats the alternatives,
34315:56 but also that the more people we include,
34416:00 both as entrepreneurs and as customers,
34516:04 the better it works.
34616:06 Let's by all means shrink the size of government,
34716:10 but not by slashing the poverty programs,
34816:12 but by ensuring that workers are paid enough
34916:14 so that they actually don't need those programs.
35016:18 Let's invest enough in the middle class
35116:21 to make our economy fairer and more inclusive,
35216:24 and by fairer, more truly competitive,
35316:28 and by more truly competitive,
35416:29 more able to generate the solutions
35516:32 to human problems
35616:34 that are the true drivers of growth and prosperity.
35716:39 Capitalism is the greatest social technology
35816:43 ever invented
35916:44 for creating prosperity in human societies,
36016:47 if it is well managed,
36116:49 but capitalism, because of the fundamental
36216:52 multiplicative dynamics of complex systems,
36316:55 tends towards, inexorably, inequality,
36416:58 concentration and collapse.
36517:03 The work of democracies
36617:05 is to maximize the inclusion of the many
36717:10 in order to create prosperity,
36817:12 not to enable the few to accumulate money.
36917:16 Government does create prosperity and growth,
37017:20 by creating the conditions that allow
37117:23 both entrepreneurs and their customers
37217:26 to thrive.
37317:27 Balancing the power of capitalists like me
37417:31 and workers isn't bad for capitalism.
37517:34 It's essential to it.
37617:36 Programs like a reasonable minimum wage,
37717:38 affordable healthcare,
37817:40 paid sick leave,
37917:42 and the progressive taxation necessary
38017:45 to pay for the important infrastructure
38117:47 necessary for the middle class like education, R and D,
38217:51 these are indispensable tools
38317:54 shrewd capitalists should embrace
38417:56 to drive growth, because no one benefits from it
38518:00 like us.
38618:02 Many economists would have you believe
38718:04 that their field is an objective science.
38818:07 I disagree, and I think that it is equally
38918:10 a tool that humans use
39018:12 to enforce and encode
39118:14 our social and moral preferences and prejudices
39218:17 about status and power,
39318:21 which is why plutocrats like me
39418:23 have always needed to find persuasive stories
39518:27 to tell everyone else
39618:29 about why our relative positions
39718:33 are morally righteous and good for everyone:
39818:37 like, we are indispensable, the job creators,
39918:42 and you are not;
40018:44 like, tax cuts for us create growth,
40118:47 but investments in you
40218:49 will balloon our debt
40318:51 and bankrupt our great country;
40418:54 that we matter;
40518:55 that you don't.
40618:58 For thousands of years, these stories were called
40719:00 divine right.
40819:02 Today, we have trickle-down economics.
40919:06 How obviously, transparently self-serving
41019:10 all of this is.
41119:12 We plutocrats need to see
41219:14 that the United States of America made us,
41319:17 not the other way around;
41419:18 that a thriving middle class is the source
41519:21 of prosperity in capitalist economies,
41619:24 not a consequence of it.
41719:26 And we should never forget
41819:29 that even the best of us in the worst of circumstances
41919:33 are barefoot by the side of a dirt road selling fruit.
42019:38 Fellow plutocrats, I think it may be time for us
42119:41 to recommit to our country,
42219:43 to commit to a new kind of capitalism
42319:46 which is both more inclusive and more effective,
42419:50 a capitalism that will ensure
42519:52 that America's economy remains
42619:55 the most dynamic and prosperous in the world.
42719:59 Let's secure the future for ourselves,
42820:01 our children and their children.
42920:04 Or alternatively, we could do nothing,
43020:07 hide in our gated communities
43120:09 and private schools,
43220:12 enjoy our planes and yachts
43320:14 — they're fun
43420:16 and wait for the pitchforks.
43520:18 Thank you.
43620:19 (Applause)