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
Occupationentrepreneur
DescriptionAmerican businessman

Official TED page for this talk

Synopsis

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 Amazon.com.
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)
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