Plutocrats: The Rise Of The New Global Super-Rich And The Fall Of Everyone Else

This book is an interesting look into the lives of the uber wealthy, not just the 1% but the 0.01%. Instead of just hating on them, the author (Chrystia Freeland) offers a look into their lives and why they think the way they do. She also offers some compelling evidence on how great the divide truly is.

She starts off by explaining how economists thought that fully industrialized or post-industrial societies would see income inequality decrease as education became more widespread and the state played a bigger, more redistributive role. What they discovered was that equality is prevalent only at the historical poles of a civilization. “Savages are equal because they are equally weak and ignorant. Very civilized men can all become equal because they all have at their disposal similar means of attaining comfort and happiness. Between these two extremes is found inequality of condition, wealth and knowledge - the power of the few, the poverty, ignorance and weakness of the rest” – Alexis De Tocqueville.

She talks about how political decisions helped to create the super elite in the first place and as the economic might of the super elite class grows, so does its political muscle, which creates an endless loop. A stark example of this is that income inequality in communist China is now higher than in the U.S., and is on the rise in India & Russia. This has created a new ‘virtual nation’ of mammon (worshipping wealth/greed), where the rich have more in common with each other than with their countrymen. The business example she gives of this is Citigroup, a global bank, which has a devised a ‘consumer hourglass theory’ where they invest in super-luxury goods producers and deep discounters. They are working under the assumption that as the middle class is hollowed out, the companies that sell products to them will disappear.

In the U.S., the first income inequality gap was created by the industrial revolution and the 1% were called robber barons. Between the 1940s and the 1970s, this gap shrank, largely due to the government compromising with the 99% due to the rise of communism in Europe. In 1980, the average U.S. CEO made 42 times as much as the average worker, while in 2012, that number was 380 times as much. This change was largely due to the fact that in the early 80’s Ronald Reagan (President at the time), slashed the highest marginal tax rate from 70% to 28%, reined in trade unions, cut social welfare spending and deregulated the economy. The U.S. was emboldened by the fall of communism – it no longer had a strong ideological competitor to Freidman’s free market ideas. They underwent 3 major transformations in this time: a technology revolution, globalization and the rise of the Washington consensus (the World Bank’s decision on how best to pull a country out of poverty). The rules of the game again favour those who are winning it.

The author then talks about how we aren’t reliving the ‘Gilded Age’ – we are living through 2 simultaneous Gilded Ages. The West is experiencing its second, while emerging markets are experiencing their first. She argues that with time, the creative destruction of capitalism inevitably brings an overall improvement in everyone’s standard of living, and that this twin Gilded Age is positive. However, the costs and benefits of trade are unevenly shared. “As individuals we aren’t getting smarter, but society as a whole is accumulating more and more knowledge” –Joe Mokyr. We have the ‘unhappy growth paradox’ due to the uncertainty and inequality of periods of rapid economic change.

She then discusses the current group of plutocrats. She says that the defining quality of the current crop of plutocrats is that they are the ‘working rich’. They are not aristocrats but rather economic meritocrats, preoccupied not only with consuming wealth, but also with creating it. We are in the age of alpha geeks, where education is key. They are seen as the ‘heroes’, trying to battle for the collective good. They move in circles that are defined by ‘interests’ rather than geography. Essentially, they are global citizens. For these super rich, ideas conferences are a big thing (ie. TED talks), as is philanthropy. They want to bestow their fortunes the same way they made them – entrepreneurially. All their wealth allows them to test new ways to solve big problems. They are trying to apply the secret behind their money making success to their giving. The biggest question becomes, where to give when you’re a global citizen? She talks about how Bill Gates and Warren Buffett made it important, not only to give away a lot of your money, but also to be actively engaged in how it is spent. They want to transform how charity works and change how the state operates. The plutocrat as politician is becoming an important member of the world’s governing elite. America’s super elite has been particularly effective at using the tools of a political democracy – where in theory, the majority should rule – to protect its minority privilege. She mentions how they corner the market for positional goods, which are products and services whose value is derived in part from their scarcity and how much everyone else wants them (ie. A place in the Harvard first year class). If you have them, I don’t.

She then begins to explain the gender gap within the 0.1%. Of the 1226 billionaires, only 104 are women and most of them are wives, daughters and widows. Within the 99%, women are earning more money, getting more educated and gaining more power, but the top 1% has remained an all-boys club. In 2009, it was the first time women outnumbered men on the country’s pay rolls (in America) and in 2010, 4 in 10 working wives were the chief bread winners for their families. She guesses that this hasn’t translated into the same percentage of women at the top because women aren’t as cutthroat, they are missing that killer instinct. She also says that the skill biased technical change has brought the technocrats to class power, with technical change being the main driver of income polarization. We live in a world where being the most successful in your field delivers huge rewards, but coming in second place has much less economic value (winner takes all mentality). “The relative fall in the incomes to be earned by moderate ability is accentuated by the rise in those that are obtained by men of extraordinary ability” –Alfred Marshall. This environment of superstar economics takes meritocracy to the next level, only rewarding those who are at the very top, and rewarding them with insane amounts of money.

Technology has allowed superstars to export their skills to the masses. It’s has always been a battle between capital (the people who have the money) and talent (the people who have the skills), and previously capital was winning. But now, it’s possible for the talented to practice their profession independently, cutting out the ‘capital’. Superstars are able to be better paid for the value they create - thanks to richer clients, more clients and better terms of trade with their financial backers. The superstar phenomenon also feeds on itself because the world tends to give credit to people who are already famous. CEO’s and executives at the very top are rewarded for corporate success but almost no one else is. CEO’s are a special type of superstar; the one who is in charge of the company that pays his salary. The reason this system has lasted so long is because we all like to think we are superstars in waiting and will get our big break any day now.

However, the rich tend to get richer by buying to get rich. Many people have become richer by using their influence to bend the rules of the economic game in their own favour, benefiting greatly from things like Russia’s super sale of public assets which helped create arguably the greatest number of billionaires. The world’s richest man at the moment is Carlos Slim, who hugely benefited from the privatization of Mexican assets. Financial deregulation has been crucial to the emergence of the plutocracy, leading to the pre-eminence of the financiers within the global super elite. One telltale sign the state is deciding who gets rich is how much time and money plutocrats spend on selecting their government and influencing decisions. ‘Legal corruption’ is increasing the gap between the rich and everyone else. The threat that business, particularly finance, might move to another country, was one of the most powerful arguments in favour of deregulation. The rich argue that the common good is better served when the wealthy ‘self-tax’ by supporting charities of their own selection, rather than paying taxes to fund government spending. Most lobbying is pro-business, in the sense that it promotes the interests of existing businesses, not pro market in the sense of fostering truly free and open competition.

Nearly half of all members of congress were millionaires in 2010 and their median net worth was $913,000, which just shows that the people are not truly represented in their democracy. “We may have democracy, or me may have wealth concentrated in the hands of the few, but we cannot have both” – Louis Brandeis. What separates successful states from failed ones is whether their governing institutions are inclusive or extractive. Extractive means controlled by ruling elites whose objective is to extract as much wealth as they can from the rest of society and to maintain their own hold on power; inclusive means everyone has a say in how their society is ruled and has access to economic opportunity. Greater inclusiveness leads to more prosperity. As the people at the very top become every richer, they have an every greater ability to tilt the rules of the game in their favour. She finishes by saying that the next big threat posed by income inequality is the transfer of privilege from one generation to the next, those who are ‘born rich’ and how that will affect our society.

Crazy fact from the book: It now costs less than $600 to buy a disk drive with the capacity to store all of the world’s recorded music. 

Jony Ive: The Genius Behind Apple's Greatest Products

This book was an interesting look at Apple from a design side and did a good job of explaining how the culture and decisions they have made, have led to huge successes and to some of their failures. It’s important to keep in mind that the author, Leander Kahney, is also the editor and publisher of a blog titled ‘Cult of Mac’, and therefore is very informed, but also biased, when it comes to all things Apple.

He starts off by talking about Jony Ive, and how his childhood and education has brought him to such a place of prominence today. Ive was born in England, and he learned a lot from his father, who loved design and constantly encouraged him. At a young age his talent was obvious and he would build scores of models and prototypes. Ive had a talent for adding tactile elements to his designs, and often used the colour white, which would eventually become significant for Apple. He also focused on simplicity and minimalism, and was very interested in humanizing technology. His starting point for designs was always what something SHOULD be. Ive also understood that style had a corrosive effect, aging a product before it’s time if it’s design went out of style. He often got upset when his work was ruined by the people he was working for, and he disliked consulting because he couldn’t see projects through to completion.

His interest in Apple grew when he noticed that they gave personality and meaning to technology that was still being treated as though it were anonymous. A man named Robert Brunner tried 3 times to get Ive to join Apple, and he finally succeeded. He was the man who set up the design studio at Apple, hired the talent, and when he left, he recommended that they promote Ive, which they did. When Jobs was gone, Apple tried licensing out the Mac operating system because they saw Microsoft successfully doing it, but it failed for Apple. When Jobs returned he said that the goal was not just to make money, but to make great products. That’s what convinced Ive to stay with the company.

Jobs had a new strategy. Apple was going to make 4 products: a desktop computer for a consumer, a desktop computer for a professional, a portable computer for a consumer and a portable computer for a professional. When he first came back, he laid off 4200 people. He decided he didn’t want to compete in the broader market for PCs because they competed on price, not features or ease of use, which Jobs viewed as a race to the bottom. He believed that well designed, well made computers could command the same market share and margins as a luxury automobile. With Ive’s help, industrial design would be the centerpiece of Apple’s comeback. Design was not just about how a product looked, but also about how it worked.

“As industrial designers we no longer design objects. We design the user’s perceptions of what those objects are, as well as the meaning that accrues from their physical existence, their function and the sense of possibility they offer” – Jony Ive. The computer industry had become about product attributes that you could measure empirically (very inhuman and cold), but Ive wanted to design objects that dispensed positive emotions.

The author then begins to talk about each of the Apple products under Jobs and how they led to the Apple products we see today. First is the iMac, which they decided would be the first all in one PC, built with focus and simplicity. During the summer leading up to the release of the iMac, Apple spent $100 million on advertising. The iMac launched ‘translucence’ as a product trend. Apple then focused on the PowerBook, which was a laptop designed for professionals. They were the first to recognize the potential of USB and Wi-Fi, and also incorporated a magnetic latch (buttons and latches that make a design pop are called jewelry), which would become very standard for Apple. Then there was the Power Mac Cube, which represented breakthroughs in manufacturing techniques and miniaturization, eventually leading to the Mac Mini. The design team challenged every preconceived notion about every material. Toshiba then came up with a 1.8” hard drive that could hold 5GB (1000 cds), which allowed the iPod to be possible. The iPod was the first product where they thought about packaging.

“If there was ever a product that catalyzed Apple’s reason for being, it’s this (iPod), because it combines Apple’s incredible technology base with Apple’s legendary ease of use with Apple’s awesome design. Those 3 things come together in this, and it’s like, that’s what we do. So if anybody was ever wondering why Apple is on the earth, I would hold this up as a good example” – Jony Ive.

The author then talks about where Tim Cook fits into the picture. He originally worked on an Enterprise Resource Planning (ERP) system and reduced inventory on hand to 2 days. He sold off Apple factories to increase profit margins, and his team figured out how to produce the products in their millions and deliver them all over the world, on time and in utmost secrecy. This allowed Apple’s designers to do more. They started to work on a unibody process, where products could be made out of one piece of metal. Machining is the way to make the best parts possible, the pinnacle of refinement and precision, but it takes time and money.

The author then delves into how Ive and the design team started to be involved in designing the software side of things too. It’s presumed that Scott Forstall lost a power struggle with Ive in 2012 and was fired, allowing Ive to become the head of hardware and software (the creative side). The biggest disagreement he had with Forstall was about skeuomorphic design, which basically means graphic interfaces that resemble real world objects. The user interface conventions looked like their real life counterparts (ie. Bookshelves for ebooks). It allowed neophytes (beginners, newcomers) to be immediately familiar with an unfamiliar device. Problems started because Jony didn’t like skeuomorphism, and because Apple started to get criticisms that it was ‘tacky’, which put Forstall in the line of fire. This is why iOS 7 is drastically different than previous operating systems. It had Jony’s minimalism, stripping away anything that was unnecessary. It was also infused with a deep appreciation for print graphic design (ex: typography=Helvetica Neue). Ive believed that hardware changes could only be incremental, not fundamental, at this point. Software was the new design frontier and Ive wanted to be a part of that.

Ive believes that Apple’s goal is not to make money, but to make great products, and that if you do that, everything will follow. Jobs always said that focus isn’t a question of saying yes to projects, it’s saying no. Under Ive’s guidance, Apple has remained highly disciplined in saying no to products that are competent as opposed to great. However, Apple no longer takes risks, generational leaps grow more incremental and the continuity Ive has brought means the ‘shock of new is gone’. Apple has gone from being the alternative to the mainstream and that brings with it more challenges. Ive and his design style are seen as the establishment, as the status quo, and Apple has to find a new design language if they want to survive. Jony Ive’s new challenge is to find a new design style for Apple, and essentially, for himself.

Thoughts: I thought this book was a great look at how Apple’s products came to be the way they are, building a story around how each design element came to be. Things that users take for granted like magnetic latches, white products, touch screens, all came to life in Apple’s design studio. I also learned a lot about design and various terms used when designing. The book would perhaps be a bit more balanced if it talked about how this shift to a design focus hurt Apple in some ways. The most recent example of this would be the iPhone 6 bending, which I would guess is due to engineering having to give up some things to make the design teams designs come to life.