Occupy Wall Street claims to operate by consensus: they’re only open to taking action or making a statement with unanimous consent. That’s part of why it’s so hard to get a coherent set of grievances out of them: if drum circle organizers, union apparatchiks, and Ron Paul fans can all agree on something, it’s probably not something of substance. But the data indicate that the big deal isn’t specifically income inequality, or even lack of opportunity. It’s college.
Occupy Wall Street is, statistically, a movement composed of people who went to college expecting good jobs, and got saddled with debt instead. Very few guidance counselors will describe college as anoption, or as something worth considering against other opportunities—basically everyone who has a shot at getting into college is advised to do so, and to go to the best college they can get into more or less regardless of the cost.
In any market where every participant is advised to have a certain portfolio weighting in an asset class, you’ll see adverse selection: the best investments are crowded out by opportunities that mimic some of the superficial traits of the underlying investment. In a sense, University of Phoenix is an extension of the same phenomenon that brought about dot-com tracking stocks a decade ago.
So it’s not surprising that the cost of education is going up, and the return on investment is falling. But the deeper question is: should we expect the economy as a whole to need more college graduates?
In a narrow sense, the answer is yes: we are in an information economy, so we’ll need to invest more and more of society’s resources in informing people.
But an “Information Economy” can mean two very different things: in one sense, it could mean an economy in which there’s a linear relationship between getting more information and creating more wealth. But that doesn’t really describe the modern economy: a better description would lean oninformation theory, instead. By that reading, an information economy is an economy in which return on investment from making obvious decisions tends towards zero.
That seems to reflect the way economic fundamentals are changing. More and more of the economy is being eaten by computers, especially by always-on, always-connected, and always-handy mobile devices. And even within the computer ecosystem, complicated environments and single-use devices are being surmounted by multi-use devices that combine physical platforms (e.g. the iPad or a standard Android phone) with online platforms (e.g. Facebook, Twitter, Stocktwits). When everyone shares the same platform, good ideas achieve ubiquity fast: platforms render obsolete a lot of the mental equivalent of manual labor that used to accompany the spread of brand names, best practices, and other memes.
(To put it in more concrete terms, compare: if an engineer at Toyota gets a brilliant idea, how long does it take for that idea to go into production, for Ford to reverse engineer it, and for Ford’s copy to go into production? The lag is measured in years. If a LivingSocial engineer has a good idea, it’s going to be visible to Groupon in hours; if it’s a good enough idea, Groupon will copy it within days.)
A staggering number of the white-collar jobs we thought we needed are on the implementation side. It has certainly been possible to have a nice corporate career without coming up with any original ideas.
But that’s changing. Look at where the top 1% make their money: the big growth categories are technology (i.e. coming up with big new ideas) and finance (i.e. assessing how society will be affected by changes in underlying fundamentals, at various levels of abstraction). A more technologically advanced society is a society that should expect widening income inequality, and that should expect for people who have followed last geneation’s default assumptions to suffer for it.
The question of what policies should mitigate that is a separate one, and there’s room for healthy debate. But fundamentally, Occupy Wall Street is flawed because the real problem is academic. If they want to effectively protest, they either need to march on the universities and startups that drive technological advancement and thus change the rules of the game, or they need to march on the offices of guidance counselors who didn’t know (or didn’t bother to tell their charges) that the economy was vastly different.
Digital Due Diligence Weekly