America 3.0 Rebooting after the American Crash

Taplin’s Blog-December 25,2007 “So where does the aforementioned dread come from? It comes from a sense of profound economic peril. We have lived as a country off the rich inheritance of past generations and now the party may be coming to a close.”

“So where does the aforementioned dread come from? It comes from a sense of profound economic peril. We have lived as a country off the rich inheritance of past generations and now the party may be coming to a close.”

Prof. Nouriel Roubini-10/9/08 “ A housing bubble, a mortgage bubble, an equity bubble, a bond bubble, a credit bubble, a commodity bubble, a private equity bubble, a hedge funds bubble are all now bursting at once in the biggest real sector and financial sector deleveraging since the Great Depression.”

“ A housing bubble, a mortgage bubble, an equity bubble, a bond bubble, a credit bubble, a commodity bubble, a private equity bubble, a hedge funds bubble are all now bursting at once in the biggest real sector and financial sector deleveraging since the Great Depression.”

Crashing Economy

Hidden Unemployment

The Conventional Wisdom

The Real Culprit

Overcapacity

America 1.0 We hold these truths to be self-evident, that all Men are created equal, that they are endowed by their creator with certain unalienable Rights, that among these are Life, Liberty and the Pursuit of Happiness Thomas Jefferson It will be our policy to cultivate tranquility at home and abroad and extend our commerce as far as possible George Washington 1776-1915

We hold these truths to be self-evident, that all Men are created equal, that they are endowed by their creator with certain unalienable Rights, that among these are Life, Liberty and the Pursuit of Happiness

Thomas Jefferson

It will be our policy to cultivate tranquility at home and abroad and extend our commerce as far as possible

George Washington

America 2.0-Making the World Safe for Democracy 1917-1980

America 2.5-The Conservative Revolution

The Neoconservative Gospel The twin poles of the Neoconservative philosophy first elucidated by Irving Kristol in The Public Interest in 1965: In domestic affairs the national government should shrink (by cutting taxes and business regulations) In foreign affairs the government should grow (by becoming the world’s sole military superpower).

The twin poles of the Neoconservative philosophy first elucidated by Irving Kristol in The Public Interest in 1965:

In domestic affairs the national government should shrink (by cutting taxes and business regulations)

In foreign affairs the government should grow (by becoming the world’s sole military superpower).

Preemptive Wars & Tax Cuts The Long War

Something Had to Give The Upside of Down- Thomas Homer-Dixon

Creative Destruction “ Schumpeter’s signature legacy is his insight that innovation in the form of creative destruction is the driving force not only of capitalism but of material progress in general. Almost all businesses, no matter how strong they seem to be at a given moment, ultimately fail and almost always because they failed to innovate.” Joseph Schumpeter

“ Schumpeter’s signature legacy is his insight that innovation in the form of creative destruction is the driving force not only of capitalism but of material progress in general. Almost all businesses, no matter how strong they seem to be at a given moment, ultimately fail and almost always because they failed to innovate.”

The Interregnum The old is dying and the new cannot be born; in this interregnum there arises a great diversity of morbid symptoms. - Antonio Gramsci

The Interregnum of 1649

The End of Empire

Unobserved Revolution

The New Interregnum

Empires Always End

The Cost of Empire Imperial Overstretch Cultural Decline Accelerating Inequality Scientific Regression

Imperial Overstretch

Cultural Decline

Accelerating Inequality

Scientific Regression

Signs of Decline Imperial Overstretch

Budget Priorities “ One cannot help but wonder: were there alternative ways of spending a fraction of the war’s $1-$2 trillion in costs that would have better strengthened security, boosted prosperity, and promoted democracy?”-Joseph Stiglitz, fmr. Chief Economist, World Bank

“ One cannot help but wonder: were there alternative ways of spending a fraction of the war’s $1-$2 trillion in costs that would have better strengthened security, boosted prosperity, and promoted democracy?”-Joseph Stiglitz, fmr. Chief Economist, World Bank

The Free Rider Problem

Do we get oil any cheaper? $700 Billion/year outflow for oil

$700 Billion/year outflow for oil

Who Finances the U.S.?

Personal Savings Rate Source: Federal Reserve

Signs of Decline Scientific Regression

Education- 12th grade science scores Source: O.E.C.D.

Health Care The United States ranks 23rd in infant mortality, down from 12th in 1960 and 21st in 1990 The United States ranks 20th in life expectancy for women down from 1st in 1945 and 13th in 1960 The United States ranks 21st in life expectancy for men down from 1st in 1945 and 17th in 1960. And yet, the United States spends at least 40% more per capita on health care than any other industrialized country with universal health care Source-WHO

The United States ranks 23rd in infant mortality, down from 12th in 1960 and 21st in 1990

The United States ranks 20th in life expectancy for women down from 1st in 1945 and 13th in 1960

The United States ranks 21st in life expectancy for men down from 1st in 1945 and 17th in 1960.

And yet, the United States spends at least 40% more per capita on health care than any other industrialized country with universal health care

Source-WHO

Global Warming

Energy Efficiency (BTU/GDP) 1-Denmark 2-Switzerland 3-Japan 4-Italy 5-Ireland 6-Austria 7-Germany 8-France 9-Finland 10-United Kingdom 21-Portugal 22-Belgium 23-Norway 24-Argentina 25-Uruguay 26-Greece 27-Bangladesh 28-United States 29-Sri Lanka 30-El Salvador Source: International Energy Agency

1-Denmark

2-Switzerland

3-Japan

4-Italy

5-Ireland

6-Austria

7-Germany

8-France

9-Finland

10-United Kingdom

21-Portugal

22-Belgium

23-Norway

24-Argentina

25-Uruguay

26-Greece

27-Bangladesh

28-United States

29-Sri Lanka

30-El Salvador

Industry in Denial

Wars for Oil

U.S. Business Under Attack

Signs of Decline Cultural Decline

Capitalism’s Crisis “ It can no longer be assumed that welfare is greater at an all-around higher level of production than at a lower one. The higher level of production has, merely, a higher level of want creation necessitating a higher level of want satisfaction.”-J.K Galbraith, The Affluent Society

“ It can no longer be assumed that welfare is greater at an all-around higher level of production than at a lower one. The higher level of production has, merely, a higher level of want creation necessitating a higher level of want satisfaction.”-J.K Galbraith, The Affluent Society

Disconnected Source: New York Times

Civil Unrest

U.S.Daily Gun Deaths=81

The Underground Economy $650 Billion per year U.S. is world’s largest consumer of cocaine and methamphetamine

$650 Billion per year

U.S. is world’s largest consumer of cocaine and methamphetamine

Brave New World

Bread and Circuses

Signs of Decline Accelerating Inequality without Regulation

U.S. Wages & Productivity Source: New York Times

50 Million Jobs at Risk “ The total number of current U.S. service sector jobs that will be susceptible to offshoring in the electronic future is two to three times the total number of current manufacturing jobs”-Alan Blinder, former Fed Vice Chairman

“ The total number of current U.S. service sector jobs that will be susceptible to offshoring in the electronic future is two to three times the total number of current manufacturing jobs”-Alan Blinder, former Fed Vice Chairman

Income Distribution

The Housing Bubble

The Fatal Move-6/4/04

Run On The Bank

Derivatives ” Derivatives are like hell… easy to enter and almost impossible to exit”. - Warren Buffet

” Derivatives are like hell… easy to enter and almost impossible to exit”. - Warren Buffet

America 3.0 Government, Technology & Innovation

Assumptions-1/21/09 Unemployment will be close to 8%. The Christmas Retail season will have been the worst in 25 years. Many retail bankruptcies or closures More banks will have failed States and Municipalities still having credit market problems Credit card defaults and bankruptcies will have climbed significantly

Unemployment will be close to 8%.

The Christmas Retail season will have been the worst in 25 years.

Many retail bankruptcies or closures

More banks will have failed

States and Municipalities still having credit market problems

Credit card defaults and bankruptcies will have climbed significantly

Tools For Recovery

Mass Collaboration Extended Enterprise Industrial Age Corporation Value Creation Critical Resources Physical Financial Knowledge Self- Organization Traditional Hierarchy Business Webs Mass Collaboration

Think Globally, Act Locally “ All Innovation happens at the edge”-John Seely Brown

T he Role of Experimentation “ It is one of the happy incidents of the federal system that a single courageous state may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country.” –Justice Brandeis

“ It is one of the happy incidents of the federal system that a single courageous state may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country.” –Justice Brandeis

Imagine 2020 Energy independent Universal healthcare Reduced carbon footprint Highly educated public Multi-lateral Foreign Policy

Energy independent

Universal healthcare

Reduced carbon footprint

Highly educated public

Multi-lateral Foreign Policy

From Consumption to Investment “To provide a stable recovery path government spending needs to fill the gap – not consumption. Public works programs, badly needed infrastructure repairs, as well as spending on research and development projects should form the heart of our path to recovery.”-Bill Gross

“To provide a stable recovery path government spending needs to fill the gap – not consumption. Public works programs, badly needed infrastructure repairs, as well as spending on research and development projects should form the heart of our path to recovery.”-Bill Gross

R & D + Infrastructure $500 Billion per year

How do we pay for it? Freedom Energy Tax $146 Billion-in gas taxes $170 in other carbon taxes 90% to states ($31 Billion/yr. to Calif.) 10% to Alternative Energy R & D No payroll taxes for below $40 K earners Cut Federal Middle class Tax bracket but restore Clinton era taxes on wealthy ($250K+) Raise Corporate Taxes back to the postwar norm

Freedom Energy Tax

$146 Billion-in gas taxes

$170 in other carbon taxes

90% to states ($31 Billion/yr. to Calif.)

10% to Alternative Energy R & D

No payroll taxes for below $40 K earners

Cut Federal Middle class Tax bracket but restore Clinton era taxes on wealthy ($250K+)

Raise Corporate Taxes back to the postwar norm

Capital Investment Debt

Harness Nature “ We only need to capture 1 percent of 1 percent of the sunlight to meet all of our energy needs (3 percent of 1 percent by 2025) and nano-engineered solar panels and fuel cells will be able to do this.”-Ray Kurzweil

Modern Nuclear Power

Modern Transportation LA-San Francisco in 2 hours with minimal pollution

Universal Broadband

Rebuild Bridges and Highways

Education Double Teacher Salaries U.S. High School Teacher-$36,000 (1.2x average income) Korean High School Teacher-2.5x average income Cut Classroom Size

Double Teacher Salaries

U.S. High School Teacher-$36,000 (1.2x average income)

Korean High School Teacher-2.5x average income

Cut Classroom Size

Universal Health Care The U.S. pays $98 billion a year in excess administrative costs, with more than half of the total accounted for by marketing and underwriting — costs that don’t exist in single-payer systems. The U.S. pays $66 billion a year in excess drug costs, and overpays for medical devices McKinsey & Co. Report

The U.S. pays $98 billion a year in excess administrative costs, with more than half of the total accounted for by marketing and underwriting — costs that don’t exist in single-payer systems.

The U.S. pays $66 billion a year in excess drug costs, and overpays for medical devices

McKinsey & Co. Report

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