Michael Strong on Creating a World in Which All Humanity Flourishes
2017-09-17 · Guest: Michael Strong and Joe Quirk (Conscious Capitalism Inc and Seasteading author) · 51:55
Entrepreneurial capitalism and governance innovation for global poverty
Charlie Deist hosts Michael Strong and Joe Quirk to discuss how entrepreneurial capitalism and governance innovation can solve global poverty and improve human flourishing. They explore the historical success of city-states, the concept of “conscious capitalism,” and the need for competitive governance models like seasteading and startup cities.
Topics: Capitalism, Entrepreneurship, Global Poverty, Governance, Seasteading, Education, Conscious Capitalism, Economic Freedom
Speakers: Charlie Deist, Joe Quirk, Michael Strong
Introduction [00:30]
Charlie Deist: Welcome to the Bob Zadek Show. I am your guest host this morning, Charlie Deist, filling in for Bob this Sunday. As always, we welcome your calls. The number is 424-BOB-SHOW here on the show of ideas, not attitude. Today’s show is about the ideas really at the heart of Western society: ideas about education, entrepreneurship, and capitalism. If you ask 10 different people what capitalism is, you’ll get 10 different answers. If you ask 10 different libertarians, you’ll probably get at least 12 different answers.
Our guest today is not a typical libertarian. Michael Strong describes himself as a radical social entrepreneur. He’s the founder of several charter schools and of Conscious Capitalism Inc., which he co-founded with Whole Foods CEO John Mackey to promote voluntary exchange and entrepreneurial solutions to the world’s problems. Michael is the author of Be the Solution: How Entrepreneurs and Conscious Capitalists Can Solve All the World’s Problems. And I should also mention that he is soon to move from Austin, where he joins us from, to the San Francisco Bay Area, where he’ll be starting another one of his innovative schools. So on behalf of the San Francisco Bay, I’d like to welcome Michael in advance to the Golden State and welcome you onto the show.
Michael Strong: Thank you. I’m delighted to be here, Charlie.
Charlie Deist: And I’m also joined by Joe Quirk, my co-host in studio here in Sausalito this morning, where we’re overlooking a beautiful morning on the Richardson Bay, just around the corner from the Golden Gate Bridge, where we can see some anchor-outs. I mention this because these sailboats out here are related to Joe’s line of work, only tangentially, but Joe is the author of Seasteading: How Floating Nations Will Restore the Environment, Enrich the Poor, Cure the Sick, and Liberate Humanity from Politicians. Welcome, Joe.
Joe Quirk: Great to be here, Charlie.
Why Capitalism is the Solution to Poverty [01:20]
Charlie Deist: So I asked Joe to help guide my conversation with Michael this morning for two reasons. One is because he knows both me and Michael Strong from seasteading, which you might know about from Bob’s past shows. Joe’s been on the show once or twice, and you can find those episodes in the archives. There’s also one of Bob’s very first shows in our archives which he did with the founder of the Seasteading Institute, Patri Friedman.
And the second reason is that both Joe and Michael started off, if I’m correct, as progressives before becoming more friendly to the ideas of free markets when they started to think about the world in terms of what people can do about problems like poverty or the lack of education when they have more freedom. So I start with the question, and I’ll put this to Michael: what made you change your mind about free markets, and what do you mean when you talk about conscious capitalism, this idea that you and John Mackey are promoting as a solution that both progressives and libertarians should agree on?
Michael Strong: Sure. Well, to start with, I care about the poor. Poverty—we don’t have to rehearse all the ways in which poverty stunts human potential and human growth. It is often horrible. A lot of the worst gender situations come as a consequence of poverty. Children die, just to be blunt. My wife is African, and many young people in Africa routinely die in a way that used to be the case hundreds of years ago in the West, but thanks to capitalism, is no longer.
So one of the big turning points for me was realizing that unambiguously, capitalism has given us our prosperity—us being the West. As other nations have adopted free market capitalism, they have become prosperous, including Japan, Hong Kong, Singapore, South Korea, Taiwan. And what very few people understand is poor countries are poor because they still have heavily controlled, government-controlled economies. If you look at the World Bank’s Doing Business index, which ranks how easy it is to do business around the world, most of the bottom 50 countries are Africa, alongside places like Venezuela. Senegal is one of the bottom 30 countries; that’s where my wife is from. So when you realize that poor countries are poor because of an absence of property rights, rule of law, and free markets, if you actually care about the poor, you should become an ardent advocate of capitalism.
So just on that score alone, I have absolutely no patience for anti-capitalists who in essence want to sentence the world’s six billion poorest people to ongoing poverty. Just to go on to the conscious capitalism bit, I started a number of schools and John, of course, started Whole Foods. And when you find most entrepreneurs, most entrepreneurs are driven by a sense of purpose. In the early stages of an entrepreneurial enterprise, it’s not clear whether or not you’re actually going to succeed, but you’re driven to do something to make a difference in the world. And most of the great capitalists were purpose-driven entrepreneurs. Conscious capitalism is recapturing that purpose-driven entrepreneurship where, in addition to the purpose, you want somebody who treats their employees well, who is a conscious leader, and who also attends to the various other ways in which a company impacts the world. So conscious capitalism is recapturing the identity of capitalism from the critics who want to say it’s all evil and harmful. So I would say, on the one hand, we recognize that capitalism is the most powerful force for eliminating poverty the world has ever known, and many capitalists are purpose-driven, thoughtful human beings who want to make the world a better place by means of the incredible institutions they create.
Regulatory Barriers in the Developing World [06:25]
Charlie Deist: Okay, so you’re talking about the developing world or the underdeveloped world, places outside of Western Europe, the United States, and then these handful of countries that have been able to develop and embrace the institutions that gave rise to this prosperity in the West. What would you say are the obstacles for the bulk of poor populations to the life of an entrepreneur, to this purpose-driven life in the context of stable institutions that can actually give rise to prosperity?
Michael Strong: Well, certainly, just to address the stability issue, if a country is engaged in conflict or violence, it’s impossible to—or very difficult—to create bourgeois broad-based prosperity in a war zone. That said, conversely, once an economy is growing, it rarely collapses into civil war. The most robust way to prevent civil war in any country is to have rapid economic growth.
So once you have property rights—and property rights mean that you own something and you can trade it with other people, and there are all sorts of interesting ways to bundle property rights—and then really it’s government getting out of the way. Senegal, I happen to know because my wife has a business there on the ground, has a 45% tariff on goods coming in. And so that means if a business in Senegal has any inputs it wants to use for its final products, it’s uncompetitive. You have to pay a 45% tariff off the top.
Likewise, in most of the developing world, it is $500 to $1,000 to get a document notarized. In the US, you go down to the bank and get a document notarized for free. Most former Spanish, French, and Portuguese colonies, notaries are lawyers and they charge $500 to $1,000. And if in the course of a business transaction of any kind you need to get a document notarized, boom, 500 bucks a pop, which means that most of former civil law colonies today, only the top maybe 5% or 10% have access to legal business opportunities. The rest are forced into the informal sector where they have no secure property rights, they can’t build credit, the police won’t necessarily protect their rights. In a way, most of the developing world is stuck in a gray market because they cannot access the legal business system due to too many obstacles.
What people don’t realize is the Arab Spring was launched in Tunisia when a street merchant had been harassed by the authorities over and over again. They took his scale, and he burned himself alive because he was so frustrated. The strange paradox is that most of the well-intentioned do-gooder left claim to care about the poor, and yet they’re neglecting how six billion poorest people are stuck in these countries where they are de facto excluded from the wonderful opportunities available through entrepreneurial capitalism.
Charlie Deist: Wow, yeah, that’s a powerful and tragic anecdote, and I’m sure that there are so many examples like that that just go unnoticed. They don’t give rise to the great social uprising or—and I think the results of the Arab Spring are still ambiguous, but we know that there are certain changes that are starting to take place in some countries. Where do you see signs of hope or places that might be starting to look in the same direction that you are and that people who have seen how institutions can be good or bad and that the quality of those institutions matters very much? Where are the silver linings on this story?
The Failure of the Arab Spring and the Success of Special Zones [10:20]
Michael Strong: Well, thank you. Before I get there, I want to rant a little bit at why the Arab Spring has not been very positive. When I saw what happened with the street merchant burning himself alive, I expected everybody to report on the lack of economic freedom. I’d been in this world, I’d known the North African countries were all so terrible for economic freedom, way over-regulated. And I watched the media—the New York Times, CNN, NPR—they were all talking about the need for democracy. And democracy can be a useful thing, but if democracy doesn’t address the issue of economic freedom, it really does not address the heart of the issue.
And so the activists on the ground in North Africa and the mainstream media completely ignored the appropriate diagnosis of the problem. So what you get are elections where the elections could result in even worse leaders coming into power and even less economic freedom. So until and unless we have—and this is why, even though I come from the left, I have zero patience for the reporting of the NPR, New York Times, which are mainstream and establishment venues when they don’t identify economic—lack of economic freedom. I think we need to hold their feet to the fire and hold them responsible in part for the lack of progress in situations like the Arab Spring when it could have gone in a different direction.
So on the positive side, you know, just historically again, Hong Kong and Singapore, they were poor in 1960, now two of the richest jurisdictions on earth. They were former British colonies that are now richer than Britain, extraordinary. Dubai—a lot of people are critical of Dubai, and Dubai has treated workers very badly, almost slave-like conditions. The domestic workers and sex workers in Dubai, it’s still really slave-like conditions. That said, you look at the rest of the Arab Peninsula and Saudi Arabia is a lot worse than Dubai. So if you want to look at a bright spot, Dubai went from basically an empty place in the desert to the leading cosmopolitan innovative city in the Arab world in the last 30 years. It’s been extraordinary.
One of the things Dubai did that really accelerated its progress was innovation in free zones. They have many different free zones dedicated to different industries. One of the most innovative was the Dubai International Financial Centre where they actually took 110 acres of land and put British common law on that 110 acres of land. The rest of Dubai and UAE is Sharia law. If you don’t charge interest, it’s terrible for finance. The rulers of Dubai brilliantly looked around the world and they saw where do we have the world’s leading financial centers? London, New York, Chicago, Sydney, Hong Kong, Singapore—all of these jurisdictions run British common law. So they’re very pragmatic. They put a British retired British commercial law judge in charge and retired Singaporean commercial law judge and so forth. And with credible judges administering common law, Dubai is now a top 20 financial center.
So in so far as nations realize not just reduce taxes and regulations, but world-class rule of law, and usually that means common law, are part of the solution. Dubai’s been brilliant. Honduras passed legislation a few years ago allowing similar jurisdictions to those in Dubai for the Dubai International Financial Centre where they will allow jurisdictions with common law and free markets within Honduras. We are hoping that that will lead to pockets of prosperity in Honduras and thus prevent the need for millions of Hondurans to leave for the US where they have no rights and are abused by coyotes along the way, the unethical smugglers that bring them in. So I would say those places where there are new jurisdictions based on common law are the brightest hope. And if we can create a world where many developing countries experiment with common law jurisdictions and special economic zones designed for entrepreneurial capitalism, more free market than Hong Kong or Singapore, we could see poverty disappear more rapidly than ever before in world history.
Just one more thing on that since this is important: China is the most extraordinary moral victory in respect to prosperity creation in world history. 30 years ago the average GDP per capita in China was $1,000 per person. Now it’s about $6,000 per person. And even if you look at average urban wages, not just GDP per capita, the average urban worker in China makes about five times as much as they did 20 years ago. And there are about 700 million urban Chinese. So hey, again, most Africans are around $1,000 GDP, that’s per capita, super poor. Imagine if your income went up five-fold in 20 years. It is mind-blowing. And yet nobody talks about this. So we’ve seen some of the most wonderful miracles due to entrepreneurial capitalism in the last 20-30 years, and most of the left is still anti-globalization, anti-neoliberalism. I don’t see how they have any ethical legs to stand on. They simply ignore the progress we’ve made in eliminating poverty.
Charlie Deist: You know, it’s interesting thinking about all this progress that goes unnoticed. You don’t read about it on the front news or even in the back sections of a newspaper. And I think part of that has to do with the fact that there aren’t these pivotal events or there’s been no sort of major noteworthy breakthrough. It’s all happening rapidly by historical standards, but to our modern attention spans, it’s happening very gradually and people don’t necessarily have the patience to see the positive, the silver linings on what can otherwise look like a very bleak picture if you look to places like China or Dubai. So again, just to kind of reinforce the severity of the situation that people are coming out of, what—I was listening, overhearing you and Joe speak the other week on a seasteading podcast, and you were talking about the life of a typical person who maybe immigrates to Dubai for these opportunities. What would life be like for the typical person who is benefiting from common law jurisdictions, special economic zones?
Michael Strong: Well, of course, there are a lot of different kinds, but I can certainly describe some horror stories. One of the sad things is that the left used to care about poverty, now they don’t seem to so much because capitalism was the solution. But you know, there are certainly—there are people in Nepal where they’re selling their 10-year-old daughters into sex slavery. And I always say, would you rather go work in Dubai with no rights or sell your daughter into sex slavery?
Actually, here I’ll give the New York Times credit where credit is due. I think it was last year the New York Times reported on a young couple of young women who had left a village in India to go work in a city in India where it was a sweatshop basically. But in the village, the young women were expected to wash their in-laws’ feet every morning in a bowl of water and then drink the water from their dirty feet, which is unbelievably gross, disgusting, humiliating. But you know, there’s this romance of the rural poor, “Oh, they had such a better life.” No. They were treated like animals. It’s horrible.
And so when you see somebody working long hours in a factory, which may not entirely be safe, you have to compare it to the often brutal, horrible conditions. Senegal—there are Senegalese who try to escape to Europe. Many of them die in boats, in little fishing boats in the water trying to get there, or they get to Libya and they’re captured as slaves and sold for 300 bucks, 500 bucks as slaves, full-blown unadulterated slavery. And so you just think, these people’s lives must be horrible. We urgently need to give them opportunities. There are places where parents will cripple their children intentionally so they’re more effective street beggars. It is sad that people are not focused on the urgent need to eliminate poverty when we know through entrepreneurial capitalism—if we had a global coalition of people that said yes, we need to create much more free markets, we need to create these zones with entrepreneurial legal systems, more free market than Hong Kong or Singapore, we could dramatically improve the conditions of hundreds of millions of people just like has taken place in China.
The Problem with Bureaucracy and the World Bank Index [19:24]
Joe Quirk: So can I be the voice of the skeptical progressive? Michael persuaded me of this view a few years ago. But the standard response would be, “But isn’t this an argument for enlightened government to provide rule of law and provide the enforcement of property rights? Isn’t this an argument for ultimate progressivism that we can make yet better governments?”
Michael Strong: Well, I am smiling because of course when you look at many of these governments and you say “enlightened,” some of the—one of the great TV shows of all time with respect to understanding political science was Yes Minister, Yes Prime Minister, the British show which showed what a joke the British government was. And it was based on the life of a writer who had been in the British bureaucracy. And the British bureaucracy may be one of the most capable bureaucracies.
Most—actually to be fair, most of the world is messed up. So even a lot of people in big corporations realize how dysfunctional the big corporations can be. But if people have worked in government, it’s even more dysfunctional. And I would say most developing world governments are even more dysfunctional. Often I sit at meetings with ministers and sometimes just regular bureaucrats; they’ll be an hour late, two hours late, four hours late, a day late. These people are not motivated. It’s very simple: if you’re not going to have your life be better by means of performing better, you’re not going to do a good job. If your quality of your work is strictly based on how many years—there’s no quality standard. Bureaucrats typically get rewarded for being there longer.
Actually, on the good government side, though, what’s interesting is sometimes Singapore is described as Singapore Incorporated because there are some Singaporean public officials who get bonuses based on the previous year’s GDP growth of the nation of Singapore. So as a consequence, you actually have business-like incentives for the bureaucrats of Singapore, which is part of why Singapore is one of the best-run countries in the world. So if we want to improve government, we need to be no-nonsense, look at incentives. And again, public choice theory is an analysis of why governments do what they do. Most people are motivated by what they’re rewarded for. And if you don’t reward them for performance in some way that matters to the population, they will not care about actually improving things.
So if the progressives want to believe in good government, I encourage them to see what’s actually going on in most developing world governments. And even then they need to realize that if it’s a matter of enlightened government, why is it that these policies have not changed decade after decade after decade? The World Bank—if the World Bank had not created the Doing Business index and Hernando de Soto had not written The Mystery of Capital, quite likely nobody would have even noticed the developing world was massively over-regulated.
World Bank Doing Business index, by the way, was created by a former Bulgarian, somebody who had been in Eastern Europe under communism, and he knew what a mess governments were. And so he created this system for documenting just how messed up they are. When I’ve talked to progressive professors about this, they are unaware of this. When I point out the facts, they don’t deny them. Peter Singer, world-ranked philosopher, one of the—regarded as one of the top public intellectuals in the world, has written books on globalization. My wife and I went and met him in person to explain this to him. He had been completely unaware that the developing world is over-regulated. They cannot justify this. When we put this evidence in their face, most of these laws and regulations are simply irrational. And if government had the interest of people in mind, why have they kept their people unnecessarily poor for decades and really centuries?
Charlie Deist: Michael, we’re going to go to break shortly, but I think that this will make for a good transition from what we’ve been talking about, which is the underdeveloped world and the need to—the urgent need to implement the institutions and advocate for, even if it is unpopular or misunderstood, the institutions that have worked for the West to bring people out of poverty and that may work to bring these other places into the 21st century. But when we come back, I want to get back to this idea of what motivates people and the kinds of rewards that motivate people, both in places where there’s more material scarcity, but also in places like the United States where we’re sort of up the Maslow’s hierarchy of needs. We’re in a place where our material needs are met, we’re basically comfortable, and I want to get your opinion on how we can actually use the mindset that you talk about in your talks and in your books to be empowered each and every day, looking at—without getting depressed, because I think it’s easy to look at the situation and see that it’s hopeless. But you seem to suggest that there’s good news, which is that what each one of us does individually matters very much. So this will be our topic in the second half of the show. And I hope that we can also have Joe chime in on the seasteading project and the spin on special economic zones and new legal systems that you both share an interest in. And before we go, I just want to get a quick plug in for your Facebook page, which is Radical Social Entrepreneurs. Can you tell us just briefly a little bit about this project and how people can find it?
Michael Strong: Sure. I created first Flow, Freedom Lights Our World, with John Mackey, and that spun off Conscious Capitalism and Radical Social Entrepreneurs. The idea is that although people sometimes think of libertarianism as simply reduced taxes and regulation, I’m all about how we as entrepreneurs can solve more of the world’s problems. And if governments let us, we can solve all the world’s problems. So I want people to be focused on how they can make a difference with global poverty and with prosperity and happiness and well-being for people in developed countries as well. So we can shift to the radical social entrepreneurs in the developed world along with Maslow’s hierarchy and happiness and well-being in the US after the break.
Charlie Deist: Excellent. Let’s go to break and when we come back, we will have more of Michael Strong and Joe Quirk on creating a world in which all of humanity flourishes. We’ll be back shortly in just two minutes.
[Ad Break - Removed]
Historical Precedents for Governance Innovation [28:57]
Charlie Deist: Welcome back to the Bob Zadek Show. This is Charlie Deist, again filling in for Bob Zadek this weekend. And I am joined in studio by my co-host Joe Quirk, author of the Seasteading book. And we’re also joined on the phone by Michael Strong, who is a co-founder of Conscious Capitalism Incorporated, or Conscious Capitalism Inc. He is also the founder of several innovative charter schools and he was also on the board of the Seasteading Institute, which is a Bay Area nonprofit that is dedicated to advancing this idea of autonomous startup cities on the high seas. And the Startup Cities Institute is another project that Michael Strong is involved with. And this is an idea that expands on what we’ve been talking about in the first part of the show about special economic zones and these places that have been able to capture the institutions that work best in the West in order to bring people up out of poverty. And the idea of startup cities—I’ll have Michael explain it and what the kind of core philosophy is, especially with respect to the principles of experimentation and innovation that have worked well in the sciences, but that have not been applied as well to social sciences or to government. So go ahead, Michael.
Michael Strong: Sure. I want to start with pointing out that there have been several efflorescences in human history that have been—
Charlie Deist: Say that word again?
Michael Strong: I was going to say efflorescences—a flowering, so to speak.
Charlie Deist: Wonderful.
Michael Strong: So the Periclean Athens—we are well aware that not only a concept of democracy, but logic, tragedy, history, the notion of writing history, philosophy, all were birthed in Periclean Athens. And Athens was one of many city-states. So in all the islands and nooks and crannies of Greece, there rose this experimental bubbling cauldron of lots of different city-states. And as a consequence, we had incredible innovation in some of the most important cultural legacies in all of human history.
Then if you jump forward a few thousand years, we get to the Renaissance, 2,000 years. And in the Renaissance, once again, we have all these Italian city-states and all these different methods of government. The notion of a republic—the Republic of Venice and the Republic of Florence—each of these had a slightly different governance model and there was another bubbling cauldron of different ways to govern in small city-states. The Hanseatic League up north was another group of different independent city-states that had various ways to govern themselves. And much of the wealth of Northern Europe can be traced back to some of the seeds that were started then, including some of the city-states that eventually became Holland, the first commercial republic, and then much of the British legacy is a result of innovations in Holland as well as the unique institutions of England over the many centuries.
So when you think about innovations in governance, most people I think don’t even know what to make of it. There’s this very old-fashioned—even among people that think of themselves as Silicon Valley innovators or cutting-edge progressives—there’s the notion that government consists of the Constitution, or maybe the Constitution with a whole lot more redistribution. But the fact is governance is a hard issue. In the world of business governance, corporate governance, there are lots of different models. Corporate law has one standard model. There is now the B Corporation, which people know about. But there are also other models that are being developed and have been developed where really any group of people—if the three of us wanted to create a new entity, we could set our own rules of how that entity would be governed.
And I see the innovation of new entities for governance as one of the most important things. The US was a great innovation in government 250 years ago, but we need a lot more. The Constitution has gradually been eroded, mostly over the 20th century. And so part of this could be—it would be beneficial to go back to the original US Constitution. Meanwhile, I’m excited about city-states and Native American reservations and seasteads as opportunities to have many more innovations in government, some of which will do a better job of protecting human rights and protecting property rights and creating wealth, prosperity, happiness, and well-being than anything. So just as we had the efflorescence of Periclean Athens and the marvelous Renaissance with the city-states of medieval Italy, we are looking forward to a 21st century where we hopefully will have hundreds of these innovative city-states that will allow for better ways of living and better cultural innovations than we’ve ever seen before.
Charlie Deist: It’s always a good day when I get to learn a new word like that. And it brings to mind another one of your websites, blogs, which is thousandnations.com, where we both occasionally blog. I think it’s mainly lain dormant for some time, but nothing would make me happier than to see a new blossoming of both blog posts on the Thousand Nations blog as well as, as you’re saying, hundreds or even thousands of new jurisdictions, new city-states, or whatever we want to call them—communities. Someone might have an idea for something that is much smaller scale based on some kind of informal institutions. We really don’t know what could emerge if we had a new frontier, a new ecosystem.
Seasteading and the Future of Governance [33:50]
Charlie Deist: So Joe, I want you to jump in here and talk a little bit about the seasteading project and how this plays in, in your mind, to our conversation so far. What in concrete terms could seasteads accomplish here in just the next couple of years and beyond?
Joe Quirk: I really appreciate that Michael used lots of fluid analogies. And yes, it’s true, if you look at ancient Greece and the city-states in the islands there, and then you look at the next efflorescence in Venice, and then you study the Hanseatic League, and then you study the American frontier, you realize the mechanism that drives improved governments is the liberty of people to choose among different governance entities. So if you can choose among them and there are many available to you, governance gets better.
So what seasteaders are interested in is continuing this wave that is sweeping across history. More than 4,000 special economic zones are sweeping across the world. They have the city-states vastly outnumbered. And when you realize that half the world’s surface, 45% of it, is unclaimed by any existing nation-state, we still have half the world with which to experiment with new governance models. So I’m president of the Seasteading Institute, I’m co-author with Patri Friedman, grandson of Milton Friedman, of the Seasteading book. And I’m co-founder of Blue Frontiers, which is actually going to start this on a very small scale in French Polynesia, hopefully by the end of this year. Through our company Blue Frontiers, we’re going to establish some small floating islands with significant regulatory and administrative autonomy and set an example to provide the future of governance on the seas, which will be like the Hanseatic League accelerated, or imagine ancient Athens where all the islands can move, or imagine Venice where all those little modules can move about and people can choose what they want. That’s the future we’re envisioning. The technology is at hand, it’s becoming more affordable, so we’re going to unleash choice among jurisdictions on the oceans starting in 2020.
The Psychology of Flow and Purpose-Driven Entrepreneurship [36:52]
Charlie Deist: All right, well that’s something that people can check out at seasteading.org. And I want to go back to Michael. Joe, you mentioned the fluid analogies. There’s another word that Michael uses a lot, and that is “flow,” which is, I believe, originally a psychological term that was originated by—maybe you can tell me more, Michael, about that word “flow” and where it comes from and how you use it in the context of entrepreneurship and the quest to become empowered to put your values into action.
Michael Strong: Absolutely. And of course, it comes from the psychologist Mihaly Csikszentmihalyi, whose last name has so many letters everybody tries to avoid pronouncing it. But because I use it—
Charlie Deist: Csikszentmihalyi.
Michael Strong: Yeah, Csikszentmihalyi. He studied many years ago—this may be 30-40 years ago now—people who did what they did because they loved doing it. Surgeons who just love being in a state of flow in surgery, artists who spend hours and hours deeply engaged in their painting, mountain climbers who just love the rock climbing experience engaged in the challenge of climbing up a sheer face for hours. It turns out that there are a lot of people who in what they would regard as their happiest moments are not out partying or being entertained. They’re actually actively engaged in some challenging enterprise.
And he called this a flow state, and part of it is it’s something where it’s not too easy for you and not too hard, but you want to be pushed to your limits in terms of trying to take your capacity, your mastery of something, and achieving something based on that mastery. So while I certainly respect the idea to rest, I think most of us are happiest when we are engaged in actively creating. And so I love creating schools, I love working with students, I really enjoy the work I do. And most of the entrepreneurs I know love what they do. In addition to outright entrepreneurs who are leading companies, there are now many hundreds of thousands, millions of creative professionals who work in graphic design and user interface design and web design and video production—they love what they do.
So the good news is we’re getting to a point where I don’t regret the decline of the old-fashioned factories where I think often it was grindingly boring and difficult. Now most of the work that needs to be done to some extent is creative. And as it’s creative, we have an opportunity to enjoy what we do. We’re moving up Maslow’s hierarchy where instead of more stuff, we really want higher quality experiences. So both in terms of the experiences we consume and the experiences we use to produce things, I see a world in which the ideal is we’re all spending most of our time day in and day out creating new higher quality experiences for other people. And I would say a big huge nuts-and-bolts thing like a $5 billion seastead is a huge act of creation by lots of people, including the people actually moving huge chunks of concrete or whatever into place. I see a world in which we’re all working to create a better world for each other by means of entrepreneurial capitalism. And we enjoy it more and the people experiencing the results of it enjoy it more.
And I really think that as people realize that government mostly makes us bored and frustrated, they’ll get over their ideological hatred of it and be able to move towards a world where people like me could create schools. I create schools where kids love to come, they love to come after school, they want to hang out there, it’s enjoyable. There was a bus in San Francisco that was like a coffee shop, but it was shut down because it didn’t meet certain bureaucratic hurdles. Why not have a beautiful coffee shop experience while riding a bus? The example I often use is retail. People think of Whole Foods, they think of organic food. Forget organic food; for me, I think of Whole Foods as a beautiful retail experience, just a pleasant place to be compared to the old grocery stores. So I see a world in which we all work to create incredible experiences for each other. And then we need an education system so that people are prepared to create great experiences for each other, and memorize-and-forget learning is completely irrelevant to that. So part of this is mass creative destruction not only in governance system on the high seas, but also in ultimately education, healthcare, building—everything. Everything that is not progressing as fast as your iPhone is not progressing because government is slowing it down.
Charlie Deist: So I’m imagining that a lot of people would imagine entrepreneurship to just be all about sort of profits and the monetary reward. The entrepreneur takes a risk and if his bet pays off, then he gets rich. But you, as an education entrepreneur, seem to have kind of a broader concept of what motivates the entrepreneur. Is the profit-maximizing businessman the only model that we can look to for an entrepreneur or are there other versions that you can imagine coming out of the 21st century?
Michael Strong: Well, one of the things that John Mackey’s really great on is very few actual real-world entrepreneurs are about profit maximization. Again, they see a better way of doing something and they’re motivated because they think their better way of doing something is going to win. So it’s not about profit, it’s actually about creating a better world in some sense. And of course, in order to succeed and flourish and grow, a company must be profitable. And the more profitable it is, the more it will be able to sustain its activities and grow them by means of the cash that’s created, the profits that are created. But the point is not how to maximize profits; that’s an ex post facto description by economists in order to make it mathematically simple to analyze. But the real world of entrepreneurship is creating a better way of doing something.
And one of the reasons we need to focus on reducing government obstacles is that many better ways of doing things are not yet profitable. That which is profitable is entirely or largely determined by the legal ecosystem within which things are done. So for instance, a lot of very low-cost housing is not possible in San Francisco because of incredible regulatory obstacles to building. In so far as there is a huge concern about the gap between the wealthy and the poor in a place like the Bay Area, a lot of this is because government won’t let entrepreneurs create really low-cost high-quality housing, government won’t let entrepreneurs create low-cost high-quality education, government won’t let entrepreneurs create low-cost high-quality healthcare. And so as a consequence, what we see based on existing profitable opportunities are very narrow range of what should be. And there are people who want to do things in a better way, but who cannot yet go to the VCs because the legal system does not allow them to show a profitable business based on the existing obstacles to their business.
Charlie Deist: So there could be even other categories of entrepreneur outside of business. Joe, you started off your career as a writer. What did you have in mind? What was your motivation for writing and ultimately what did you find to be the balance of monetary concerns versus other concerns?
Joe Quirk: I haven’t realized it until recently, but it was entrepreneurial. I was one of those people—I think an entrepreneur, the people I know that want to make money become professionals and are interested in securing a high salary throughout their life. The entrepreneurs I know are people that become obsessed with a problem and think they have an idea that no one else has and they can solve it. And then when they solve that problem, they’re taking their winnings and investing in solving another problem. It’s like a personality type.
And I realized I had that as an artist. I was like, “The way everyone’s writing novels is wrong and I could do something really unique. I could combine the page-turner and the literary novel and combine these two things so they’re not different. I’m going to do that.” It wasn’t about making money because I had to live like a monk for a long time. And then when I was done with that, the next step would obviously be, “Okay, now write another book like the book you wrote so that you can start building on your career and making more money.” And that’s not what I did. I became obsessed with, “Isn’t there a better way to explain evolutionary psychology to people than these boring papers? Can’t you talk about it like you’re a guy in a bar?”
And so I just kept doing that, and I did it most recently with the Seasteading book. This idea is too good, it’s explained in too many different ways, we need one big overview for the whole thing. So I’ve belatedly realized that writing books is sort of like building your own business and then handing it over to someone else to run incompetently, which is the traditional publishing industry. So I realize people, artists don’t realize it, but they’re entrepreneurs. They’re making tremendous sacrifices for their idea. So writing a book is an entrepreneurial process and now I’m doing it with trying to create new societies.
Charlie Deist: Yeah, I love it. And I love that you mention that you lived like a monk for a period of time. And I think that’s another thing that you and Michael have in common, which is this generally disparaging outlook toward accumulating material possessions for the sake of it. Michael, in your book, you mention that when you moved across the country at one point, you could fit all of your possessions in a sedan. So what do you think, Michael, is the—I guess I’m thinking of the entrepreneur based on this conversation more as not just the risk-taker who is out to make a profit, but someone who has a single-minded purpose that gets up every day trying to advance that purpose and is less concerned with the everyday material pursuits that so many people seem to spend their life going after. Would you agree with that, Michael?
Michael Strong: Absolutely. And there’s a whole research literature on happiness beyond flow. Dan Pink, who’s a wonderful author, talks about drive, the importance of autonomy and mastery in drive. And Joe’s right, a lot of people, if you want to have a big salary, you can go work on Wall Street. A huge number of Ivy League graduates go to work on Wall Street where some of them, it is possible to be entrepreneurial on Wall Street, but others, they have a certain role and in the financial industry you can make a lot of money in that role, but you don’t have as much autonomy as you do as an entrepreneur and you don’t have this sense of mastering new disciplines. I love Joe’s writing a new kind of book every time he writes. I’m always doing new things as well.
I think that a lot of people discover that happiness comes from a life in which one is creative and autonomous. And if the legal system lets one, then there are opportunities to make money by doing so, and especially the more people you serve. That’s a great thing about entrepreneurial capitalism is the more people you serve, the more money you’re likely to make. But I really think that most young people today—we were concerned about, rightly so, about the percentage of the US population, maybe bottom 20-30%, that does not have perhaps a comfortable life. But what people don’t know about the shrinking middle class is most of the American shrinking middle class became the upper class. We have an extraordinary number of families now with comfortable lives. And a lot of young people from these homes, they want to have a meaningful life at this point. They don’t need a bigger house. At some point, how many empty rooms can you use? A lot of retired people downsize. What they really want is to have a really interesting life where they have a meaningful impact on the world. And I think that that is the path to happiness that more and more people are going to pursue. And we need to guide them, instead of fighting via politics, to create win-win situations through voluntary exchange where they can have a meaningful life, make money, and do good all in one course of action.
Education and the Habit of Thought [49:46]
Charlie Deist: So I’m finishing up my conversation with Michael Strong, who is an educational entrepreneur, the author of Be the Solution: How Entrepreneurs and Conscious Capitalists Can Solve All the World’s Problems, and another book on education called The Habit of Thought: From Socratic Seminars to Socratic Practice. And since I opened the show talking about the crisis that we have in the West with what do we really believe in, what is at the foundation of our society, I want to kick it back to Michael to talk a little bit about education and some of the principles that he tries to put into place in his schools. We’ve got just one minute left, but Michael, if you can briefly talk about your upcoming project here in San Francisco and what principles you put into place.
Michael Strong: Sure. Again, happiness is based on purposeful, meaning-driven activity. Most students, most teens experience school as cruel and boring, without purpose. We’ve got a huge percentage of teen dysfunction and medication because of this. So I create schools where teens can be purpose-driven entrepreneurs, masters of their own fate, experience autonomy in learning at a very high level. And as a consequence, they’re prepared for the 21st-century workplace because they are creative entrepreneurs as teens, whether it’s creatively learning their academics more effectively and/or creating real-world entrepreneurial projects that have a positive impact in the world. Let’s get them starting young, making a better life for themselves and others at the age of 12, 13, 14.
Charlie Deist: Wonderful. And as you say in the book, and I’ll just repeat it one more time, the good news is that what we do matters. We can put our values into action. I want to thank Joe Quirk for joining me as co-host today, and a special thanks to Michael Strong for coming on the show and sharing his ideas about education, entrepreneurship. Remember that the Bob Zadek Show can be found on the podcast on bobzadek.com. We hope you’ll tune in next week and have a great rest of your weekend. Tuning out, this is Charlie Deist.
Joe Quirk: And this is Joe Quirk. Thank you.
Michael Strong: Thanks Charlie and Joe. Bye-bye.