Your Livelihood and the American President

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Running a brilliant campaign does not translate into running a brilliant White House. — Gail Collins

Does it matter to your bottom line what the government does? Absolutely. Legislatures and bureaucrats and presidents and prime ministers can screw up an economy with the stroke of a pen. Witness, for example, the run-up to the Great Recession of 2008: the U.S. set low interest rates, encouraged home buying (and strong-armed banks to provide loans to incompetent borrowers), spent nearly $2 trillion on a useless military venture in Iraq, then blamed Wall Street when the bottom fell out … and then bailed out the Street’s investment bankers while workers and small firms on Main Street had to suck it up.

Okay, but does it matter to your bottom line who is the U.S. president? Yes and no. Great power does flow through the White House, but it’s like water through a firehose that’s hard to point at problems without backsplash or getting knocked over. Over the past century, a few Chief Executives have managed to wield enormous influence (for better or worse): Wilson, FDR, Johnson, Reagan, Bush. But most have come and gone without leaving much of a mark.

A finer-grained question is: does it matter to your income stream which party a president belongs to? Campaign contributors tend either to be labor groups or corporations, neither of which are keen on draconian measures that might cause job losses or declines in revenue. So there’s a political limit, despite all the rhetoric, to what either party can do to the economy once it controls the White House.

In fact, it may not much matter which party holds the office. Sometimes a Democrat can be good for business (as with Clinton’s budget surplus), and sometimes a Republican can be bad for it (witness Bush with Iraq and the Recession). What’s more, it’s hard to tell what kind of administrator a candidate will turn out to be, and it’s often just as hard to foresee what policies they’ll instigate once in office. Meanwhile, situations can change suddenly — Pearl Harbor in December 1941 … 9/11 … the recent upheavals in technology — with unpredictable results for White House policy.

On top of that, the Constitution was written deliberately to throw sand in the gears of political change, impeding the government from rushing headlong into wild-eyed projects that might do more harm than good. This applies to the Executive as much as to the Legislature. Sometimes the American government breaks through and hurtles toward disaster, but usually progress is glacial. Thus one change of government probably won’t result in enormous shifts in society or the economy.

In recent years, though, the purview of the White House has widened. Under George W. “I Am the Decider” Bush, overly broad use of signing statements — which are meant merely to outline a Chief Executive’s plans for implementing legislation — enabled him to get away with backdoor line-item vetoes. Then the administration pushed through Congress laws that vastly increased federal power to spy on, arrest and/or kill U.S. citizens, often without warrants.

In 2009, Barack Obama — a constitutional scholar who as a candidate railed against Bush’s assault on civil liberties — became president and added to Bush’s power grab, especially in the overuse of Executive Actions.

Every president feels beleaguered by ongoing assaults from political opponents and will cast about for any influence that may win the day. No sitting president willingly lets go of arbitrary clout inherited from previous administrations; worse, there’ll be an enormous temptation to expand on it. Basically, if a Chief Executive exceeds the limits to his authority and nobody calls him on it, the next president will do the same … and then some.

The overall result is an ongoing expansion of Executive power, with no sign that it will slow down. In that respect, it doesn’t matter which party occupies the Oval Office; presidential prerogatives will likely continue to grow. More and more edicts will be handed down arbitrarily, rulings that could cause your company, or your career prospects, to lurch crazily.

What’s a business owner or employee to do?

  • Don’t waste a lot of time worrying about who will be the next president. Their behavior and influence is hard to predict and often vastly different from what they promise. Besides, fretting about events you have virtually no influence over is a waste of resources. Instead, put your energies where they can do some good — work on your career. Hold a steady course despite the changing winds.
  • Assume taxes and regulation will continue slowly to increase, no matter who’s in office. They have done so for decades, and there’s no sign they’ll halt or reverse course. Any compliance process you can computerize will simplify the burden and save some of the time and money you’d otherwise lose.
  • Assume recessions will recur under Democrats and Republicans alike. The Fed tends to tweak interest rates to stretch out economic booms, and the resulting busts become that much deeper, regardless of who’s in office. Resist the temptation to invest or make expensive purchases at the end of a boom simply because you’ve been doing well and there’s no sign of trouble. You’ll find yourself over-extended just as your income drops.
  • Assume 5% unemployment is the best we’re going to get. Rarely does the rate fall much lower, and soon enough it begins to swing upward, often doubling within a year or so. At 5% get ready to batten down the hatches.
  • Never assume a strong economy, or a good job or business, will continue indefinitely, unmolested by national turmoil or bad governance. As they say in poker, “Take some chips south” — squirrel away cash from the win streaks, and you’ll still have resources after a loss.
  • Never assume Washington will save you! They’re much more likely to cause problems than fix them; at best, their help is a mixed blessing. It’s better to have yourself on your side: you’ll retain the best ally you can get … for both bad times and good.

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Uber vs. the Taxis

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Taxicab companies want the world to stay exactly as it is, which is not actually good for anyone, to just say, ‘The way that we’re gonna run is the way that we were running in the 1950s, and that’s the way we’re gonna be running in 3000.’ — Reid Hoffman

How can Uber possibly survive? The private driving service, now a worldwide phenom, faces huge obstacles from taxi cartels, suspicious regulators and anxious voters who wonder: is Uber a good thing or some sort of business conspiracy to make a profit by disrupting the established transportation system?

Maybe it’s both.

Granted, Uber’s cheaper, quicker ride service — a car within five minutes and less than $2 per mile instead of roughly $5 for taxis — threatens government-approved taxi operators, who worked hard to obtain their medallions in a restricted market space. Granted, the news has now and then carried garish reports of Uber drivers attacking their passengers. Granted, it takes weeks to certify a taxi driver, while Uber drivers can accept passengers within days. Granted, Uber — and Lyft, Uber’s smaller competitor — threaten a unionized way of life by offering part-time, flex-time work opportunities. 

But Uber and Lyft provide a service that’s so compelling, it overcomes all objections:

• Per-mile costs are much cheaper than taxis. One driver I spoke with showed me a couple of typical fares he got, and they both worked out to about $1.50 per mile. Even if the average charge were $2.00 or $2.50 per mile, it would still cost half what an official taxi charges.

• Uber has a business incentive to process applicants efficiently, but its certification requirements are strict. Taxi drivers, meanwhile, must wait weeks because their unions aren’t in a hurry to add new drivers, who push down pay rates. Likewise, government accreditation bureaus rarely have a reason to hurry.

• Once on the job, Uber drivers are continuously rated by their passengers. Any driver whose rating drops below 4 out of 5 is subject to suspension. But the drivers also get to rate the passengers! A difficult Uber user will get bad marks and have trouble finding a ride. Thus everyone involved has an incentive to be polite and cooperative. Try getting that from a taxi service.

• Uber and Lyft offer cheap solutions to congestion, swarming quickly to where they’re needed while reducing the number of private vehicles parked on streets or clogging traffic. The service helps low-income, elderly and disabled users who can’t afford taxis. And passengers give it high marks. Local governments find all this irresistible. Taxi cartels keep losing the arguments.

• The ride-sharing market creates jobs. These days, with a staggering recession in the rear-view mirror and automation horning in on all sides, it’s harder and harder to get a steady full-time job. For the under-employed, Uber and Lyft step in and offer as many hours (or as few) as a worker can handle. The pay isn’t great, and there are no bennies, though with practice drivers can learn tricks of the trade and improve their take-home. But the service offers a flexible way to add to a driver’s bottom line, all the way up to full-time work. It’s hard for politicos to say no to that.

Any one of these makes a compelling argument in favor of the ride-sharing industry. All of them together make it seem unstoppable. 

Still, there are pitfalls. Unions and taxi cartels and governments may yet find ways to suppress this nascent marketplace, to pull its monkey wrench back out of the bureaucratic machine.

But the greatest danger may lie within the corporate offices of Uber itself. Its leaders have been accused of arrogance, of flouting the law, and of cutting driver net pay. Reid Hoffman, founder of LinkedIn and a high-tech venture capitalist, believes Uber should tone down its aggressive approach with regulators:

The company tends to be very combative. . . . [Regulators] may be slow to change, they may be risk-averse, but their goal is a mission of protecting society. And so you should interface with them on that channel more than on the ‘Just get out of my way, I’m innovating.’ — Reid Hoffman

Meanwhile, Uber and Lyft have checked off all three main requirements for a successful business in the modern age:

1. Great product — A cheap ride in five minutes!

2. Great marketing — Both Uber and Lyft have branded themselves ingeniously, the word-of-mouth is tremendous, and all the media attention gives ride-sharing tons of free publicity.

3. Great fulfillment — The app is easy to use, payment is handled automatically, and the cars are reliable and clean.

Uber may yet shoot itself in the foot and limp off into history. More likely, though, is that the ride-sharing company will be remembered as the front line in a phalanx of businesses — Airbnb, TaskRabbit, Angie’s List — that attack the limitations of an aging corporate infrastructure.

We may be witnessing the decline of the standard 40-hour job, replaced with work that adapts to workers’ schedules, responds quickly to changes in consumer demand, and automatically rewards excellence and civility.

The Uber/Lyft revolution is hurtling toward us like a fleet of rebellious vehicles, and in each car sits … the future.

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UPDATE: Consumers wrest control from government

UPDATE: How Uber got a city council to back off

UPDATE: Uber’s peaceful revolution

UPDATE: Driverless L.A. Taxis at 25c/mi

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