How to pronounce "neoclassical"

You probably don't know me,

but I am one of those .01 percenters

that you hear about and read about,

and I am by any reasonable definition a plutocrat.

And tonight, what I would like to do is speak directly

to other plutocrats, to my people,

because it feels like it's time for us all

to have a chat.

Like most plutocrats, I too am a proud

and unapologetic capitalist.

I have founded, cofounded or funded

over 30 companies across a range of industries.

I was the first non-family investor in Amazon.com.

I cofounded a company called aQuantive

that we sold to Microsoft for 6.4 billion dollars.

My friends and I, we own a bank.

I tell you this — (Laughter) —

unbelievable, right?

I tell you this to show

that my life is like most plutocrats.

I have a broad perspective on capitalism

and business,

and I have been rewarded obscenely for that

with a life that most of you all

can't even imagine:

multiple homes, a yacht, my own plane,

etc., etc., etc.

But let's be honest: I am not the smartest person you've ever met.

I am certainly not the hardest working.

I was a mediocre student.

I'm not technical at all.

I can't write a word of code.

Truly, my success is the consequence

of spectacular luck,

of birth, of circumstance and of timing.

But I am actually pretty good at a couple of things.

One, I have an unusually high tolerance for risk,

and the other is I have a good sense,

a good intuition about what will happen in the future,

and I think that that intuition about the future

is the essence of good entrepreneurship.

So what do I see in our future today,

you ask?

I see pitchforks,

as in angry mobs with pitchforks,

because while people like us plutocrats

are living beyond the dreams of avarice,

the other 99 percent of our fellow citizens

are falling farther and farther behind.

In 1980, the top one percent of Americans

shared about eight percent of national [income],

while the bottom 50 percent of Americans

shared 18 percent.

Thirty years later, today, the top one percent

shares over 20 percent of national [income],

while the bottom 50 percent of Americans

share 12 or 13.

If the trend continues,

the top one percent will share

over 30 percent of national [income]

in another 30 years,

while the bottom 50 percent of Americans

will share just six.

You see, the problem isn't that we have

some inequality.

Some inequality is necessary

for a high-functioning capitalist democracy.

The problem is that inequality

is at historic highs today

and it's getting worse every day.

And if wealth, power, and income

continue to concentrate

at the very tippy top,

our society will change

from a capitalist democracy

to a neo-feudalist rentier society

like 18th-century France.

That was France

before the revolution

and the mobs with the pitchforks.

So I have a message for my fellow plutocrats

and zillionaires

and for anyone who lives

in a gated bubble world:

Wake up.

Wake up. It cannot last.

Because if we do not do something

to fix the glaring economic inequities in our society,

the pitchforks will come for us,

for no free and open society can long sustain

this kind of rising economic inequality.

It has never happened. There are no examples.

You show me a highly unequal society,

and I will show you a police state

or an uprising.

The pitchforks will come for us

if we do not address this.

It's not a matter of if, it's when.

And it will be terrible when they come

for everyone,

but particularly for people like us plutocrats.

I know I must sound like some liberal do-gooder.

I'm not. I'm not making a moral argument

that economic inequality is wrong.

What I am arguing is that rising economic inequality

is stupid and ultimately self-defeating.

Rising inequality doesn't just increase our risks

from pitchforks,

but it's also terrible for business too.

So the model for us rich guys should be Henry Ford.

When Ford famously introduced the $5 day,

which was twice the prevailing wage at the time,

he didn't just increase the productivity

of his factories,

he converted exploited autoworkers who were poor

into a thriving middle class who could now afford

to buy the products that they made.

Ford intuited what we now know is true,

that an economy is best understood as an ecosystem

and characterized by the same kinds

of feedback loops you find

in a natural ecosystem,

a feedback loop between customers and businesses.

Raising wages increases demand,

which increases hiring,

which in turn increases wages

and demand and profits,

and that virtuous cycle of increasing prosperity

is precisely what is missing

from today's economic recovery.

And this is why we need to put behind us

the trickle-down policies that so dominate

both political parties

and embrace something I call middle-out economics.

Middle-out economics rejects

the neoclassical economic idea

that economies are efficient, linear, mechanistic,

that they tend towards equilibrium and fairness,

and instead embraces the 21st-century idea

that economies are complex, adaptive,

ecosystemic,

that they tend away from equilibrium and toward inequality,

that they're not efficient at all

but are effective if well managed.

This 21st-century perspective

allows you to clearly see that capitalism

does not work by [efficiently] allocating

existing resources.

It works by [efficiently] creating new solutions

to human problems.

The genius of capitalism

is that it is an evolutionary solution-finding system.

It rewards people for solving other people's problems.

The difference between a poor society

and a rich society, obviously,

is the degree to which that society

has generated solutions in the form

of products for its citizens.

The sum of the solutions

that we have in our society

really is our prosperity, and this explains

why companies like Google and Amazon

and Microsoft and Apple

and the entrepreneurs who created those companies

have contributed so much

to our nation's prosperity.

This 21st-century perspective

also makes clear

that what we think of as economic growth

is best understood as

the rate at which we solve problems.

But that rate is totally dependent upon

how many problem solvers —

diverse, able problem solvers — we have,

and thus how many of our fellow citizens

actively participate,

both as entrepreneurs who can offer solutions,

and as customers who consume them.

But this maximizing participation thing

doesn't happen by accident.

It doesn't happen by itself.

It requires effort and investment,

which is why all

highly prosperous capitalist democracies

are characterized by massive investments

in the middle class and the infrastructure

that they depend on.

We plutocrats need to get this

trickle-down economics thing behind us,

this idea that the better we do,

the better everyone else will do.

It's not true. How could it be?

I earn 1,000 times the median wage,

but I do not buy 1,000 times as much stuff,

do I?

I actually bought two pairs of these pants,

what my partner Mike calls

my manager pants.

I could have bought 2,000 pairs,

but what would I do with them? (Laughter)

How many haircuts can I get?

How often can I go out to dinner?

No matter how wealthy a few plutocrats get,

we can never drive a great national economy.

Only a thriving middle class can do that.

There's nothing to be done,

my plutocrat friends might say.

Henry Ford was in a different time.

Maybe we can't do some things.

Maybe we can do some things.

June 19, 2013,

Bloomberg published an article I wrote called

"The Capitalist’s Case for a $15 Minimum Wage."

The good people at Forbes magazine,

among my biggest admirers,

called it "Nick Hanauer's near-insane proposal."

And yet, just 350 days

after that article was published,

Seattle's Mayor Ed Murray signed into law

an ordinance raising the minimum wage in Seattle

to 15 dollars an hour,

more than double

what the prevailing federal $7.25 rate is.

How did this happen,

reasonable people might ask.

It happened because a group of us

reminded the middle class

that they are the source

of growth and prosperity in capitalist economies.

We reminded them that when workers have more money,

businesses have more customers,

and need more employees.

We reminded them that when businesses

pay workers a living wage,

taxpayers are relieved of the burden

of funding the poverty programs

like food stamps and medical assistance

and rent assistance

that those workers need.

We reminded them that low-wage workers

make terrible taxpayers,

and that when you raise the minimum wage

for all businesses,

all businesses benefit

yet all can compete.

Now the orthodox reaction, of course,

is raising the minimum wage costs jobs. Right?

Your politician's always echoing

that trickle-down idea by saying things like,

"Well, if you raise the price of employment,

guess what happens? You get less of it."

Are you sure?

Because there's some contravening evidence.

Since 1980, the wages of CEOs in our country

have gone from about 30 times the median wage

to 500 times.

That's raising the price of employment.

And yet, to my knowledge,

I have never seen a company

outsource its CEO's job, automate their job,

export the job to China.

In fact, we appear to be employing

more CEOs and senior managers than ever before.

So too for technology workers

and financial services workers,

who earn multiples of the median wage

and yet we employ more and more of them,

so clearly you can raise the price of employment

and get more of it.

I know that most people

think that the $15 minimum wage

is this insane, risky economic experiment.

We disagree.

We believe that the $15 minimum wage

in Seattle

is actually the continuation

of a logical economic policy.

It is allowing our city

to kick your city's ass.

Because, you see,

Washington state already has

the highest minimum wage

of any state in the nation.

We pay all workers $9.32,

which is almost 30 percent more

than the federal minimum of 7.25,

but crucially, 427 percent more

than the federal tipped minimum of 2.13.

If trickle-down thinkers were right,

then Washington state should have massive unemployment.

Seattle should be sliding into the ocean.

And yet, Seattle

is the fastest-growing big city in the country.

Washington state is generating small business jobs

at a higher rate than any other major state

in the nation.

The restaurant business in Seattle? Booming.

Why? Because the fundamental law of capitalism is,

when workers have more money,

businesses have more customers

and need more workers.

When restaurants pay restaurant workers enough

so that even they can afford to eat in restaurants,

that's not bad for the restaurant business.

That's good for it,

despite what some restaurateurs may tell you.

Is it more complicated than I'm making out?

Of course it is.

There are a lot of dynamics at play.

But can we please stop insisting

that if low-wage workers earn a little bit more,

unemployment will skyrocket

and the economy will collapse?

There is no evidence for it.

The most insidious thing

about trickle-down economics

is not the claim that if the rich get richer,

everyone is better off.

It is the claim made by those who oppose

any increase in the minimum wage

that if the poor get richer,

that will be bad for the economy.

This is nonsense.

So can we please dispense with this rhetoric

that says that rich guys like me

and my plutocrat friends

made our country?

We plutocrats know,

even if we don't like to admit it in public,

that if we had been born somewhere else,

not here in the United States,

we might very well be just some dude standing barefoot

by the side of a dirt road selling fruit.

It's not that they don't have good entrepreneurs in other places,

even very, very poor places.

It's just that that's all

that those entrepreneurs' customers can afford.

So here's an idea for a new kind of economics,

a new kind of politics

that I call new capitalism.

Let's acknowledge that capitalism

beats the alternatives,

but also that the more people we include,

both as entrepreneurs and as customers,

the better it works.

Let's by all means shrink the size of government,

but not by slashing the poverty programs,

but by ensuring that workers are paid enough

so that they actually don't need those programs.

Let's invest enough in the middle class

to make our economy fairer and more inclusive,

and by fairer, more truly competitive,

and by more truly competitive,

more able to generate the solutions

to human problems

that are the true drivers of growth and prosperity.

Capitalism is the greatest social technology

ever invented

for creating prosperity in human societies,

if it is well managed,

but capitalism, because of the fundamental

multiplicative dynamics of complex systems,

tends towards, inexorably, inequality,

concentration and collapse.

The work of democracies

is to maximize the inclusion of the many

in order to create prosperity,

not to enable the few to accumulate money.

Government does create prosperity and growth,

by creating the conditions that allow

both entrepreneurs and their customers

to thrive.

Balancing the power of capitalists like me

and workers isn't bad for capitalism.

It's essential to it.

Programs like a reasonable minimum wage,

affordable healthcare,

paid sick leave,

and the progressive taxation necessary

to pay for the important infrastructure

necessary for the middle class like education, R and D,

these are indispensable tools

shrewd capitalists should embrace

to drive growth, because no one benefits from it

like us.

Many economists would have you believe

that their field is an objective science.

I disagree, and I think that it is equally

a tool that humans use

to enforce and encode

our social and moral preferences and prejudices

about status and power,

which is why plutocrats like me

have always needed to find persuasive stories

to tell everyone else

about why our relative positions

are morally righteous and good for everyone:

like, we are indispensable, the job creators,

and you are not;

like, tax cuts for us create growth,

but investments in you

will balloon our debt

and bankrupt our great country;

that we matter;

that you don't.

For thousands of years, these stories were called

divine right.

Today, we have trickle-down economics.

How obviously, transparently self-serving

all of this is.

We plutocrats need to see

that the United States of America made us,

not the other way around;

that a thriving middle class is the source

of prosperity in capitalist economies,

not a consequence of it.

And we should never forget

that even the best of us in the worst of circumstances

are barefoot by the side of a dirt road selling fruit.

Fellow plutocrats, I think it may be time for us

to recommit to our country,

to commit to a new kind of capitalism

which is both more inclusive and more effective,

a capitalism that will ensure

that America's economy remains

the most dynamic and prosperous in the world.

Let's secure the future for ourselves,

our children and their children.

Or alternatively, we could do nothing,

hide in our gated communities

and private schools,

enjoy our planes and yachts

— they're fun —

and wait for the pitchforks.

Thank you.

(Applause)