He was right.

Bardacke, a respected labor activist and educator based in Watsonville California, was first mentioned in this blog six years ago in connection with his research on Cesar Chavez. Like Bill Gates and Mark Zuckerberg, he dropped out of Harvard after his freshman year and moved west to change the world. Unlike them, he joined the Berkeley Free Speech Movement and has had an abiding interest in radical politics ever since. In the early 70s, I traveled to China with Bardacke to get a first hand look at Mao’s proletarian dictatorship. Frank admired all things proletarian; I feared the dictators. Bardacke often views the world through a different template than I do, but I have learned a lot from him and continue to have enormous respect for his views.

Bardacke became a farmworker – one of a handful of Anglos and surely the only former Harvard student to work the celery fields. He became fluent in Spanish and formed friendships with many of the union staff and farmworkers who appear in his book. He spent more than a decade interviewing every major participant in the drama, reading every known book on the farmworkers and scouring every archive. He received help in managing this massive project from faculty in history and politics at nearby UC Santa Cruz.

The result, Trampling Out the Vintage: Cesar Chavez and the Two Souls of the United Farmworkers, is the most complete account yet of the rise and fall of the UFW. It is also an epic, Shakespearean drama with all of the elements of a Hollywood blockbuster. The pitch meeting would be surreal:

OK, picture this: we have a conservative Catholic who fasts and marches like he’s Ghandi. He courts progressive clerics and hires liberal Jews and alienated Anglos to mobilize immigrant Mexicans and Philipinos to fight Slavic and Italian growers. At first David slays Goliath, but then he morphs into King Lear and destroys his newly built kingdom amidst slaughter and recrimination. We’ve got side plot romances between devotees who work for $5/week and bad food trying to raise farmworker pay. We’ve got violent Teamster, UFW, and grower thugs straight out of the Sopranos. We’ve got a certifiably batshit human potential guru who wreaks havoc getting everyone to criticize everyone else. And under the carpet here somewhere, we may even have communists trying to advance a proletarian revolution without a proletariat. How can we miss?”

Astonishingly, it is a true story and Bardacke delivers it with intelligence and compassion. Unique among labor historians, he grounds his analysis in “the work itself”, with brilliant, memorable descriptions of how different stages of production for different crops in different regions of California all affect the ability and willingness of different crews to self organize. He describes clearly why organizing was often sustained by the tight-knit, highly skilled lechugeuros or the celery cutters, not the garlic or asparagus workers or those in ladder crops. He describes the skill and endurance that the work requires, introduces leaders that arise from various crews, and captures in fine detail how they interact with a union that was built on a very different set of principles from farm work. In a decade spent organizing waiters, housekeepers, nurses, bartenders, machinists, cannery workers, and assembly workers, I observed precisely these differences. The work itself shapes our propensity to organize. Bardacke is the first writer to apply this principle to the fields and he does so with a deep understanding and compassion for the work.

Bringing an existing union into a workplace is an act of industrial combat not for the faint of heart — but starting a new union from scratch is a herculean task that almost always fails.  I started a company that has lasted more than a decade, a public agency that lasted three years, and a union (United Espresso Workers – I was a bit early) that lasted all of three weeks. With the proud exception of the United Farmworkers, I cannot think of a single independent union formed in the United States in the past 50 years that was not sponsored and controlled by an incumbent union (I can think of several that tried and died – but none who made it).

This was not always true — new unions once spawned regularly in the US. There are many reasons for the change, but the lack of competition between unions has positioned them nicely for extinction. Organizations evolve through the mutation, variation, and selection that is always produced by competition. The labor movement stopped growing the instant the AFL joined with the CIO and prohibited unions from competing with each other. When two teachers unions competed, both grew. The instant the Teamsters stopped raiding the UFW, growth stopped. I hated the Teamsters (who were kicked out of the AFL-CIO for corruption and are not subject to the noncompete provisions) and I took a nasty beating from them once, but like sharks or wolves, they have their place in the ecosystem. (I am aware of no union leader who agrees with this view, by the way. Most feel that they have all the competition they can handle from employers).

But for a brief moment following the civil rights movement in the 1960s, a new labor union arose in the United States and in the least likely place. If you had asked in 1960 where in the economy a new union might appear, you would never have selected the farmworkers of California. Organizers prefer workers who are tied to one place and to one employer, not workers who are seasonal and often itinerant. Probably wrongly, organizers prefer workers who are covered by labor laws, which had always exempted farmworkers. Organizers like English-speaking Americans, not Tagalog or Spanish-speaking immigrants or Braceros who are tolerated for a season then ushered back to Mexico. A dozen or so failed efforts by farmworkers to form agricultural unions seemed to validate Marx and Lenin’s belief that workers would organize once they were forced into factories and worked for a single employer.

Bardacke demonstrates that Cesar Chavez succeeded in organizing farmworkers because he was, at heart, a brilliant and hard-working Alinksy-trained community organizer. As a community organizer, Chavez pioneered an enormous innovation that had the potential to transform labor organizing: he mastered the secondary boycott (illegal for most workers under the federal labor law, which thoughtfully excludes farmworkers). Chavez tirelessly organized enormous boycott operations in grapes, lettuce, and against major retailers including Safeway.

Farmworker boycotts were the Occupy movement of the 70s and 80s – a way for college students, community activists, and middle class young people to participate directly in the tough work of social change. And credit Chavez’s brilliant leadership, it worked magnificently: faced with effective boycotts, growers raised wages and improved working conditions and politicians begged the army of grass-roots Chavistas to help register voters and turn them out on election day. The UFW became a powerful force for social change.

But the UFW was only briefly a powerful labor union. Bardacke correctly diagnoses the boycott as creating a formidable tension within the UFW. He frames the tension between labor and boycott organizing as a struggle between the “two souls” of the UFW. The metaphor is fraught. As Bardacke demonstrates, the UFW collapses not because it has two souls, but because none of its activities were organized, financed, or led in a manner that enable them to grow. The problem is not that community organizing is a distraction – most American labor unions lack a community service organization and are much the weaker for it. This is tragic: having discovered and refined one of the few recent innovations in union organizing, Chavez cannot let it grow. Instead, he strangles his own child.

One of the heros of Bardacke’s book is Marshall Ganz, one of America’s most innovative labor organizers. Ganz also dropped out of Harvard, but moved south to organize for civil rights before heading west. After his exile from the UFW, Ganz helped the Silicon Valley Central Labor Council build a powerful neighborhood-based political organization for the 1984 elections. He was terrific at posing fundamental questions – and at directing me and others to writers and thinkers who helped answer them. In 1984 he urged me to read, of all things, a business book, In Search of Excellence. I quickly developed an appetite for business writing. decided to get trained in it, and ended up working with the book’s authors. Marshall returned to Harvard, got his degree after a 28 year hiatus, and now teaches at the Kennedy School. (His version of the UFW story, told in Why David Sometimes Wins, is a fine companion volume. It suffers for being his PhD dissertation and dwells more deeply on theories of organizing and less on the dynamics of local struggles).

So let’s ask a Marshall Ganz-like question: what does it take for an organization to grow successfully? Venture capitalists, a group not deeply concerned with the welfare of those who produce their salads, obsess about this question. There are at least as many answers as there are VCs, but common elements include:

• A big market. If there is not substantial demand for the product or service an organization produces, the organization cannot get very big.

• Positive unit economics. If serving one more person imposes more cost on the organization than it generates in revenue, then growth makes no economic sense and the organization will depend for growth on funding from charity or government. Anyone can sell a dime for a nickel; selling a nickel for a dime means that an organization has to add at least a nickel’s worth of value if it wants to grow.

• Customer or member acquisition costs that scale. Every organization has a cost of acquiring a customer that must be repaid over the lifetime of that customer or member. Smart organizations exhibit declining COA: the cost of acquiring each incremental customer declines with scale. Very smart organizations (and effective social movements) are viral: COA approaches zero as current participants recruit new ones. See Facebook, Google, or Arab Spring.

• Leadership. Growth is very, very demanding on an organization. Everyone in a fast-growing organization has to grow with it: jobs change radically every few months. Not everyone grows at the same pace, so leaders must recruit furiously, communicate direction and values continually, promote and replace people regularly, and test what works all the time. It is stressful and a lot of fun – ask anyone who has been involved in a fast-growing company, boycott, strike, or organizing campaign.

Back to the fields. Boycotts have completely different economics than labor organizations. Boycotts have huge markets: liberals eager to shop their conscience. Churches and colleges do the recruiting at very low cost to the boycott sponsors. Every convert adds more value (the grapes they don’t buy) than cost (the very low cost of volunteers leafleting).

Unions are different. The market for a membership organization of farmworkers is not small, but it is small enough that the UFW needed to capture almost all of it because, as Bardacke notes, organizing half an industry penalizes the organized growers. A union has a responsibility to organize the remaining growers and will frequently be cheered on quietly by those who have signed. More fundamentally, unions need to grow big enough to achieve minimum economic scale: they cannot fund the fixed cost of their operations if they are too small. Unions with fewer than a half a million members are nearly always too small to operate efficiently across the US (meaning that most unions in the United States waste money because they are too small). The UFW never had 100,000 members — although its field operations were mostly in California. Bardacke would counter that the democratic character of the union matters more than its size, which is true, but creating organizations that are not economically sustainable is a bad idea. Unions do this all the time.

Unions have a second problem, to which Chavez developed a unique but ultimately unworkable solution: the economics of labor organizing are often unattractive. Campaigns, negotiations, and strikes are expensive and uncertain of success. If unions file for elections on half of the campaigns they run, win half of the elections they file on, and negotiate contracts successfully 80 percent of the time, then every successful contract has to finance four unsuccessful campaigns and potentially a strike. If the campaigns and the negotiations are labor intensive and the union bears all of those costs, then the economics of organizing turn heavily on the cost and productivity of staff and on the cost and duration of strikes.

The Chavez solution to this dilemma was simple but utterly unsustainable: pump talented people through the organization. Those of us who worked boycott operations worked 14-16 hour days, often 7 days a week. We were paid $5/week and had to beg for donated food to eat. Once we were burned out, the UFW happily replaced us in a process Chavez once compared with pumping water. At any given time during large boycots, hundreds of young people slaved on the campaigns for months and sometimes years. Staff at headquarters (located in the small misnamed town of La Paz), were likewise furnished with living quarters, food, and a miniscule stipend. Chavez personally approved all expenses. From here, it looks like a cult – although from inside the cult, it looked like La Causa and stands today as some of the best work many of us ever did. Regardless of how it feels or looks however, and regardless of the ethics of exploiting volunteers on behalf of underpaid farmworkers, an organization without a core of talented, motivated leaders simply does not scale. Volunteers are not enough — and finding people like Marshall Ganz and Eliseo Medina to fight year after year for farmworkers without paying them even farmworker wages is simply unrealistic.

Bardacke does not go deeply into union economics in part because there is a much bigger tension restricting growth: a command and control organization. Chavez not only micromanages, but much worse, he prohibits local labor or boycott operations. Centrally led boycott operations could work: boycotts demand a consistent message and negotiations with a single adversary and since allied organizations delivered most of the volunteers with help from a skeletal UFW staff, there were relatively few local issues to resolve. But labor organizations are built in hundreds of unique workplaces. This is in part due to the work itself: the problems of lechugueros are simply not the same as tomato workers or lemon pickers. More important however, is that without elected reps, stewards, and ranch committee members, contract negotiations suffer because strike threats lose credibility. Without a credible strike threat, backed in this case by a credible boycott threat, growers rationally refuse to negotiate. Chavez tried to run the union from the top, like he built and ran the boycott. When George Meany and others derided the UFW as “not a real union”, they were wrong at the level of the fields. But in their description of La Paz, they were right.

Bardacke reveals Cesar Chavez to be a brilliant community organizer who campaigned for farmworkers but did not empower them. Bardacke plots the tragic trajectory of the UFW from an authentic movement led by a charismatic leader to one paralyzed by demoralized staff that could see no way to grow a union beyond the constraints imposed by its increasingly unstable founder. Chavez died afraid of his own organization, which he had shriveled into a family business devoted to nonprofit services, La Raza not La Causa, and promoting the Chavez legacy. The union was all but gone.

Bardacke masters an enormous amount of material to relate these events skillfully. He salts his prose with stories and characters straight out of Steinbeck. He rarely leaves the reader guessing about his point of view: Walter Reuther, the brilliant activist who built the United Auto Workers (and marched with Cesar in Delano) is a worthless hack because he voted against seating the Mississippi Freedom Delegation in 1964 and drove communists from the union. Those who cross the US border illegally are noble immigrants deserving of union embrace; those who cross picket lines legally are scabs deserving of UFW tire-slashing and intimidation (but not of UFW efforts to call La Migra and send the illegals among them home). Teamster and grower goons are thugs; Manual Chavez, designated hitter for his nonviolent cousin and other UFW punks are charming rogues who firebomb field sheds and beat their opponents. Those who seek to impose Synanon’s destructive ideology on the UFW are obviously crazy and should be driven from the union; those who seek to advance various communist or nationalist ideologies within the organization are dedicated activists who should be protected. Trampling Out the Vintage is a beautiful work despite these caricatures; it would be even stronger without them. It is a book that deserves a wider distribution and better copy editing than Verso, a niche left publisher, can provide. It would also be nice had Verso published the book electronically (then again, Frank confesses in the postscript that he composed the early chapters of the book on a typewriter!)

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Journalist Chris McDougall wondered why he was getting hurt when humans have been running for two million years. His best-selling book, Born to Run, is a well-told tale of people who run barefoot without getting hurt and of researchers who discover a paradox: support can make you weaker, not stronger. The more support a running shoe gives you, the more it weakens your foot, ankle, and calf muscles and the more prone you become to injury.

McDougall presents the stories that led to the science and the science that has led to a resurgence of barefoot or minimal shoe running. He visits the Tarahumara, an impoverished clan of long distance runners living in the very remote Copper Canyons of Mexico. McDougall romanticizes their lives, describing men and women of all ages routinely running for dozens of miles in sandals over hot, steep mountains.

Scientists have studied the Tarahumara for years because their isolation makes them good subjects. As roads arrive, the Tarahumara embrace modernity: their diet goes from corn meal and long runs to pickup trucks and Hohos. Epidemiologists have documented the diabetes, cancer, and heart disease that result. McDougall looks past this, focusing instead on the propensity of the canyon-dwelling Tarahumara and some of their more crazed gringo brethren to race ridiculous distances wearing heuraches cut from old tires.

Back home, McDougall consults a Stanford track coach who refuses to let his athletes wear expensive running shoes and discovers data suggesting that both the extent and severity of injuries go up with the price of shoes. He interviews Daniel Lieberman, a Harvard biomechanics professor, who explains precisely how the support a of a running shoe makes most runners over stride and heel strike, which delivers a much sharper blow than a barefoot runner who lands mid foot. A good video of Lieberman explaining his research is below. The peer reviewed work is here in Nature.

Lots of testing and learning is still being done both by individuals and by researchers, but nobody these days takes for granted that running shoes are always helpful. Shoe companies are trying to shift their designs and their message to promote “minimalist” shoes, some of which are now best-sellers.

Is this just a fad? Of course any shoe can become a fad if well marketed. On the other hand, humans have run barefoot for two million years but have worn running shoes for only about 30. I would not bet against barefoot running, given the injury rates that shod runners experience.

Protection turns out to be deceptive. It seems completely normal to me that as a runner, I would prefer a protective shoe. I want lots of cushioning. I want to avoid pronation, which must be awful because it sounds so bad. It would be simple to sell me orthotics — hey, my knees hurt sometimes. Although some people surely do fine in running shoes, for many people, highly protective shoes are like a cast. They reduce your mobility and your foot gets continually weaker as a result.

Economists, of course, know that protection often makes competitors weaker. They believe instinctively that competition strengthens counterparties, be they muscles, individuals, teams, companies, or regions. I have even argued that those who want stronger labor unions need to force unions to compete. Economists left and right can show that trade protection weakens both parties, although this knowledge never stops companies, communities, or workers who are hurt by trade from seeking it. Doubtless some similar principal applies to parenting: too much protection weakens your kids. Fine, now buckle your damned seat belt.

To evaluate social programs or parenting, we need the equivalent of the Tarahumara — a group isolated from extraneous influences that can test whether social protections produce more benefits than costs. Fortunately, an impressive young economist has shown that many of our protective programs are testable. Esther Duflo is an MIT professor, a MacArthur genius grant winner, and the winner of the  2010 John Bates Clark Medal for the best economist under the age of forty. Watch her fascinating TED talk on how she tests programs to fight malaria, educate kids, and immunize children. This is barefoot economics at its best.

Testing of this sort requires an appetite for failure. Politicians, business people, and scientists each approach tests differently, depending on how failure affects them.

• Politicians pay a huge price for failure. This forces them to simplify problems and promise sound bite solutions. If they do not do this, they won’t be elected and they won’t be politicians. Politicians cannot say “wow, this is a tough problem. Let’s try a bunch of things, fail at most of them, and learn what works.” Most politicians suffer from what Tim Hartford calls the “God Complex”. Hartford writes the Undercover Economist column for the Financial Times. He has published a terrific book called Adapt: Why Success Always Starts with Failure. You can get a flavor of his thinking at his fantastic TED talk. The God Complex is the equivalent of intelligent design: certainty that complex systems can best be managed centrally and that complex questions can be answered without the painful process of trial and error. Parents, CEOs, physicians, gods, and anyone else who pays a high price for failure are especially vulnerable.

• Business people embrace trial and error mainly because markets force them to. Hartford notes that ten percent of all businesses fail every year.  A market economy can be looked at as a huge, ongoing experiment that evolves, like every complex system, because of variation and selection. The best leaders of complex systems acknowledge that leading edge problems don’t have obvious solutions and encourage a structured process of trial and error. Hartford’s book discusses the value of lots of small, low cost trials that are decoupled so that they don’t spill over and of carefully documenting and interpreting results. An important and highly recommended read.

• Scientists love failure. It’s how they learn. They understand that humans have evolved as complex systems through millions of years of variation and selection. They reason either deductively from data or inductively to ask have we evolved to run? Evolutionary biologists have long noted that the unique way we sweat for thermoregulation, our hairlessness, our odd bipedal design (more energy efficient than any quadruped), our unusual ability to breath multiple times per step, and our highly engineered feet, ankles, and hips all suggest anatomy designed to run.

But until the 1980s, researchers were stymied by one big problem: we are slow. Why on earth would running matter, when every mammal worth eating can outrun us? 

It fell to David Carrier, a graduate student at the University of Utah, to notice something that had escaped other scientists: we are built for endurance, not for speed. The case for humans designed for endurance running is now widely accepted. This is partly because we have discovered a story that backs the data. Hunter-gatherers in the central Kalahari Desert in Southern Africa still practice persistence hunting: they run their prey to death (there is one other group that practices persistence hunting — or at least remembers it. Our pals the Tarahumara). Running down a large mammal takes as little as an hour or as long as 8 hours, but if a human can keep a mammal galloping so that it cannot catch its breath, cool down, or rejoin its herd, it will collapse of exhaustion before the human does. It appears that before we invented spears, humans survived by high-endurance, persistence hunting. Barefoot.

The BBC managed to film a group of men in the Kalahari hunting a kudu this way. Despite the drums and the breathless narration, it is a stunning film. Notice that the runners are shod in cheap shoes that do not let them heel strike. They look a lot like the sneakers we all wore as kids.

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But amidst the carnage, a funny thing happened: the music industry grew larger even though it had fewer labels and far fewer retailers. Revenue from CDs was replaced by revenue from live concerts, ring tones, downloaded singles, merchandise, and sponsorships. The new industry has its challenges (many of them traceable to lousy music), but it has hardly collapsed.

This transformation presages the coming destruction of traditional book publishing and retailing, even as their overall publishing industry grows. Here are the seven reasons that bookstores and traditional book publishers are doomed.

7. Americans have stopped reading books. This is a non-trivial problem (after all, we did not stop listening to music). But the landmark National Endowment for the Arts study “Reading at Risk” confirms what we intuitively know: Americans read less than we used to. 43% of Americans read no books outside of work or school — a number meaningfully lower than Canada or most European countries.

Those who do read books, don’t read many of them. About 24 percent of Americans read eight or more books in 2002, a lower percentage of “strong readers” than two thirds of European countries surveyed. Only 16% of the US population reads a book or more each month. According to Morgan Stanley, 20% of all book buyers purchase a majority of all books. Men read much less than women. NPR reports that among active readers, women typically read nine books in a year, compared with only five for men. Women read more than men in all categories except for history and biography.

When most of us read, we prefer magazines and online articles that are shorter and less demanding than books. Kind of like you are doing right now.

6. Many of the books we read are crap. The largest single book category is still romance novels — a fact so embarrassing to the New York Times and other tastemakers that they exclude the category entirely from best seller lists. These bodice-rippers, together with religion, self-help, fantasy, and thrillers, account for a majority of books sold in the US (Gothic romance, which did not exist before 1972, by itself accounts for a majority of all paperback sales). Nearly all of these sales are to women, but women buy and read a lot more books than men even if you adjust out the Harlequins.

Part of this is, no doubt, that brains exposed to constant media are not well wired for long form reading. We prefer writing that is built around tidy lists…oops. Nice essay to this effect by Alan Jacobs (hey, if you have read this far, you can manage it).

5. We can easily get books for free. Just Google “Torrent” and “Books” along with anything else and you will be directed to many sites that enable you to download books as pdf files easily readable on a tablet or an eReader. The site I checked helps you steal any of several dozen books on religion, most of which presumably counsel the reader against theft.

It is always hard to estimate the economic impact of illicit downloading. I wonder if the net effect isn’t positive, even if authors howl. WordPerfect marketer Pete Peterson had a sensible point when he said that “if someone is going to steal software, I hope they steal ours”. Every illegal download is not a lost sale — but every time a reader finishes a book and raves about it, the marketing leads to new sales. Realizing this, most publishers will let you read the first chapter for free anyway. If we see publishers offering books for free but with advertising, we will know that the torrent sites have struck a nerve.

My current bet is that it won’t happen for the same reason that iTunes curbed illegal music downloading. Customers like the ancillary content and the reliable file quality enough that if the experience is frictionless and the price sensible, we will pay.

4. “Books” are mutating.  Like music and movies, books are becoming a service, not a product. Today Amazon launched its Kindle Lending Library, which turns books into a service like Spotify for music or Netflix for movies. The number of publishers who have embraced this idea? Zero. These guys would rather face the Torrent sites than let Amazon loan their books. But publishers need to monetize their back list. Over time, they will do a deal with Amazon, even if they require Amazon to purchase a new copy after a finite number of rentals. Many publishers require libraries to do that now — and would doubtless oppose libraries as socialist if Ben Franklin hadn’t established libraries before they got organized.

Books have become protean. Sites like Byliner and the Atavist are publishing long form essays by well known authors. This writing is longer than most essays but shorter than a book. Sometimes the pieces are free, sometimes paid, and sometimes, as in the case of a recent piece by author John Krakauer, free for the first 50,000 downloads, then paid. Inkling, a San Francisco startup, takes textbooks and transforms them into socially enabled multimedia iPad apps that end up not looking much like textbooks at all. They have just released The Professional Chef, the bible textbook produced by the Culinary Institute of America. You can buy the book or you can just buy a chapter. It features photos, note sharing between cooks, demonstration videos, etc. Their south of market neighbor,  Blurb, does the opposite: it converts your online blog into a nicely bound book you can give to mom. O’Reilly makes many of its books available by the chapter and lets you join a club to get lifetime book updates and access to community events. EBrary lets academic subscribers read huge online libraries and charges by the page for printing or copying.

3. Robo-books.  I shared a taxi yesterday with a guy who bragged that his wife “cranks out eBooks”. She writes 2-3 books each week the same way some kids write college papers: by stealing content and re-writing enough of it to not get caught. Of course, free market capitalism being the spectacular engine of innovation that it is, some late night huckster even sells Autopilot Kindle Cash that helps “your ten year old kid publish 10 to 20 new Kindle books a day.”

The impact of the resulting spam “books” has been extraordinary. In 2002, about 250,000 books were published in the US; about 15% of these books were self published. By 2010, the number of books had increase thirty times. 3.1 million books were published in the US — about 8,500 “books” per day and 90% of these books were self-published.  In response, Amazon has been forced to “curate” the user experience, meaning that they must try to filter the output of products like Amazon Kindle Cash. If they are wise, they will start charging “authors” $20 to publish their “books”, and deploy the same software that faculty use to detect even clever plagiarists.

Amazon's best selling Single

2. Economics. Amazon has put the publishing industry on notice by hiring respected industry veteran Larry Kirschbaum. In a sly reference to the music industry, Kirshbaum launched Amazon Singles. A single is what it sounds like — a chapter, not a book. It can be an article or an essay, like this terrific one by Hitchens on Bin Laden. In books as with music, you often want just the single, not the entire album.

By promoting authors whose books sell, Amazon has also created self-published millionaires. John Locke and Amanda Hocking are the superheroes of self-publishing. By making millions, they have helped transform self publishing from an industry backwater inhabited by the untouchables to a place where writers no longer share sales with publishers. Importantly, writers price their books and they have become smart about demand elasticity. Locke discovered that his CIA  novels increased twenty fold when he dropped the price from $1.99 to $.99.

“It wasn’t so long ago that an aspiring author would … don a pair of knee pads and assume a supplicating posture in order to beg agents to beg publishers to read their work. And from way on high, the publishers would bestow favor upon this one or that, and those who failed to get the nod were out of the game. No more.”

This trend will affect all publishers. Famous authors will wonder why they share revenue  with publishers. New authors (like Amanda Hocking) will demand enormous advances once they establish a reputation as a successful self-published writer. Because the profitability of the publishing industry turns on the ability of a few popular authors to subsidize the great majority of unprofitable ones, the defection of popular authors is especially threatening.

Publishers and retailers are being badly disintermediated not only because they add too little value, but because they add unnecessary costs. Traditional book retailing is insanely wasteful: at any given time about a quarter of the books are moving backwards in the supply chain because retailers can return product, usually without penalty, to distributors or publishers. I am not aware of any other industry that permits this. These and other costs make printed books more and more more expensive. Price increases, not unit sales, account for nearly all of the “growth” in the sales of traditional books. Trade book prices have risen twice as fast as inflation for more than a decade. Libraries now pay more than $80 per book, in part because library books require specialized processing.

1. Amazon. The number one reason that bookstores will close and publishers will die in large numbers is that Amazon is continuing to take a page from the Apple playbook and create a user experience that is integrated from content development to ecommerce and the device. They are not identical models: we will not see Amazon stores any time soon, nor Apple publishing, but clearly Amazon has learned a lot from Apple.

Indeed one could argue that they learned too well. Walter Isaacson’s asserts in his recent biography of Steve Jobs that Apple won the battle over agency pricing (they let the publisher set the price and took a cut, whereas Amazon set the price as the retailer and paid publishers a commission). In truth, Amazon won and Isaacson got the story wrong. Customers care enormously about price and convenience, as a quick glance at iBooks reveals: it is a wasteland. By combining a preeminent retail experience, offering books as physical, print on demand, or eBooks, featuring buy-back programs and used books, offering Singles, Publishing, and now Libraries, Amazon controls the reading waterfront. They are quickly taking the oxygen out of traditional book retailing and publishing.

When the dust settles, we will see the same thing we saw in music. Spending on what we read will go up with economic growth or a bit faster. But it will go to very different players for very different products than in the past.

Fine. 

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Cryin' Time

As of tonight, it is not at all clear when the US debt ceiling will get extended or when the entirely artificial crisis caused by Republican House members will be resolved. But one thing is now very clear: the ham-fisted GOP tactics will raise interest costs for every American family and business. It is the economic equivalent of a tax increase — except that that it increases government expenses, not revenues. These higher interest rates are caused by Congressional flakiness.

Interest rates reflect perceived risk — and China and other lenders now see the US as a lot riskier than we used to be. Real risk is unchanged — but perceived risk is higher, and that’s what counts. The power to punish political stupidity with higher borrowing costs is what once caused Clinton advisor James Carville to announce that in his next life, he wanted to come back as the bond market, since it powerfully influenced all federal economic decisions.

It used to anyway. At least one rating agency, S&P, is poised to downgrade US debt. This is unlikely to be calamitous, but it is entirely avoidable and it will needlessly increase US borrowing costs. This makes government more expensive, not less. Worse, it increases interest rates for banks whose borrowing costs that are pegged to Treasuries, which is roughly all of them. It erodes our privilege of serving as the world’s reserve currency — the equivalent of a tax break extended by the world economy to Americans but to no other country. The President of France once termed it an “exorbitant privilege” — and he was right.

For Cryin' Out Loud

This is very likely to end badly for Republicans. There is no economic crisis — the US is obliged by self-interest, to say nothing of the 14th amendment, to pay all debt obligations. Obama will however, end up paying doctors and soldiers late or with IOUs, like California did a couple of years back. The fractious Republican Party will quickly begin to devour it’s Tea Party wing, which has already been denounced by Gingrich, McCain, and Anne Coulter — hardly left wingers.

If the market starts downward, plenty of people will buy stocks because many investors regard the “crisis” as temporary political insanity. Economic fundamentals, although not great and not helped by a spike in interest rates, are also not vastly changed. Treasury bonds have to remain the global fixed-income benchmark because there’s no good alternative. The $9.3 trillion of Treasury securities in circulation is five times more than the total debt of countries like France, Germany, or the UK and the $580 billion of US bonds that trade every day is 17 times higher than UK gilts, the next highest triple-A rated government debt security. The world is learning what every bank knows: if I borrow a small amount from you, I am your debtor, but if I borrow a large amount, I am your partner.

Still, Congressional perfidy will cost Americans billions of dollars in needless interest expense. Nobody benefits except banks and China — the banker to the US government. Perhaps there is after all a reason Speaker John Boener cries so often.

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On September 7, Amazon relented and made a deal to pay sales taxes on shipments to California (no doubt the trenchant analysis that follows persuaded them to do the right thing). For details of the deal see http://goo.gl/kNwjQ.

Now every other state in America needs to make a deal with Amazon — even if they have fewer than California’s 10% of the population. This reinforces the need for Congress to enact a cross-border VAT and to rebate 100% of the funds to the state to which the product ships.

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Amazon’s refusal to collect sales taxes is bad for the company’s reputation, bad for honest retailers, and bad for state governments. Six states have taken modest steps to level the tax playing field, causing Amazon to respond with a business, political, and legal offensive to protect its tax-avoidance strategy. The first battleground will be California, where Amazon and national retailers will fight a very expensive ballot initiative. Longer term however, Congress should close the unintended sales tax loophole created by Article I of the US Constitution.

One-click Tax Evasion?

Unlike almost every modern country, the US has never had a national sales tax. Most states tax sales within their state but are rightly prevented by the Constitution from taxing out of state transactions. Amazon has turned this important limit on state tax authority into a major piece of its business model. Unfortunately, a smart tactic is becoming a stupid strategy. Congress needs to level its head — and then level the playing field.

From its first day of business, Amazon.com has taken extraordinary measures to avoid collecting sales taxes. It locates distribution centers in low population states to minimize the number of customers for whom it must collect sales taxes. It builds complex software to ensure that every possible product ships across state lines so that customers have no tax obligation. It puts engineers and logisticians to work in shell corporations even if they work on Amazon’s retail website just to avoid creating “taxable nexus” — which obligate Amazon to collect sales taxes. It hires legions of attorneys to minimize and manage the inevitable tax claims. When states like Texas attempt to collect taxes, Amazon retaliates by closing facilities and filing f-you lawsuits. When states declare that Amazon’s hundreds of thousands of third party sellers and affiliates amount to a physical presence in the state, Amazon simply closes the programs — as it did last week in California. Today Amazon went even further: they filed a state ballot initiative in California that will let Californians vote on whether or not to pay sales taxes on third party purchases. National retailers are gearing up for a mammoth fight.

California Turns Green

Amazon is now America’s Number One Tax Evader. The company says that if you buy Hot Freddy’s Thai Salsa from a Los Angeles seller on Amazon, the sales taxes on the transaction are for you and Fred and the state to sort out. Unlike the corner grocery store, they won’t collect these taxes. Nobody disputes that Fred owes taxes on his sales to Californians, but Amazon says that collecting them is Fred’s job, not theirs. Since, as a practical matter, it costs California more to chase Fred than it is worth, Amazon’s policy needlessly costs California tax revenues and denies Californians badly needed public services.

So California sensibly joined five other states that require Amazon to collect sales taxes on the intrastate sales of third party sellers. The law goes further, and declares that third party sellers or affiliates (sites that earn commissions on traffic they send Amazon) constitute taxable nexus — as do subsidiaries. Jerry Brown signed the measure into law on June 30, whereupon Amazon immediately notified all California third party sellers and affiliates that they were discontinuing their program.

Amazon has built its business model around a court decision. In 1992, the Supreme Court ruled  in Quill Corporation v. North Dakota that a state can compel a company to collect taxes only if they have a physical presence, or a nexus, in the state. Absent nexus, the court held that online retailers and mail-order companies can sell products across state lines without collecting the tax. This decision reflects the current law and our national architecture as a republic formed in an era when very few goods were traded across state lines. It also reflects an odd twist in the way the US collects sales taxes: by taxing transactions based on where the seller does business not based on where the buyer lives, we effectively tax selling, not buying. In old fashioned Main Street America it doesn’t matter: every sale is local. But the rise of mail order and online retail meant that our peculiar approach created a giant loophole. I am aware of no other country that makes this mistake.

Your sales taxes have arrived...

The cost of this loophole is huge. According to the New York Times, “The state Board of Equalization, California’s tax collector, estimates the unpaid taxes at $1.15 billion in the last fiscal year, and estimates it will grow to almost $1.2 billion this year and $1.27 billion in 2012.”. For California, this is roughly the size of the state’s cuts to higher education. Not all of these taxes would have been collected by Amazon, but as the largest retail site in the world and the most aggressive defender of the interstate shipping loophole, they symbolize the problem.

Six states, including California, Texas, and Illinois, have now demanded that Amazon collect taxes based on the existence of third party sellers in their state. In each case, Amazon has killed third party and affiliate sales rather than comply. More states are likely to follow. Jeff Bezos has become an outspoken opponent of any move by states to cooperate on taxing cross-border sales and opposes any effort by Congress to resolve the issue. Amazon collects sales tax in only five states — Kansas, Kentucky, New York, North Dakota and Washington — where it has offices or another physical presence (and it suing New York). To avoid collecting taxes in several other states, it simply operates warehouses as subsidiaries which do not sell anything and are not subject to sales taxes. In California, Amazon hires engineers under the name of A9, its search subsidiary, and Lab 129, which digitizes books for the Kindle. In fact, these engineers all contribute directly to Amazon.com retail sales. Amazon does not even operate a search business in California or anywhere else and 100% of Kindle sales take place on Amazon — but Amazon is fighting for its right to use state resources without helping pay for them. A9 hires Silicon Valley engineers but argues that it creates no taxable nexus because it is a separate company and not itself a retailer. The new law makes this impossible. Amazon, of course, is suing.

Once upon a time, policymakers justified online sales tax exemptions on the grounds that e-commerce was an “infant industry” entitled to a break. The infant is now grown: online sales are now almost $200 billion. Soon, a majority of all media (books, movies, music, games) will be purchased online and the online share of many other retail categories will exceed 20%.

Amazon’s policy is narrow and short-sighted. Instead of building a finely tuned sales tax evasion machine, they should help shape a level playing field. Instead of crippling the tax base of states, they should lobby Congress for a national tax on interstate sales. This tax would only apply to goods shipped across state lines — something the commerce clause clearly lets Congress legislate. The taxes would be collected federally but rebated to states according to the ship to address. This would be the first step in rationalizing consumption taxes to actually tax buyers instead of sellers. Amazon could ask for two tax exemptions: for downloaded digital media because it is essentially a service — you cannot resell digital goods as property. Second hand items would be exempt, as they are in many states already, on the grounds that they were taxed once already.

Amazon is not going to do this, so citizens should. We could design the interstate tax as an education tax to build political support. Of course, any such measure would require Congressional tax leadership, a complete oxymoron at the moment. Amazon has effectively made a large business bet that Congress will be unwilling to enact a national consumption tax. But if national retailers and states combine to lobby Congress for a national sales tax on goods shipped across state lines, they have a powerful argument leveling the playing field and closing the loopholes that Amazon has invested far too much IQ figuring out how to exploit.

Besides, Amazon does not need a tax advantage in order to succeed. The company has a built a powerful brand by offering customers a great selection, a fine shopping experience, convenience, and low prices. The low prices are not simply the result of not charging taxes — they are the result of a much more efficient delivery system. Amazon has overhead that is radically lower than retailers like Home Depot, Barnes & Noble, or Sears. Amazon customers are not going to stop shopping online because they have to pay the same sales tax they would pay at the local store. With public pressure for Congressional leadership, Amazon will quickly figure out that the cost of collecting sales taxes is trivial relative to the cost of being branded the nation’s number one tax evader. If ever there were a time for retailers to organize a campaign to boycott Amazon, it is now. Independent booksellers should be especially easy to mobilize, since most are terminally ill and have nothing to lose.

Amazon is is rightly admired by consumers, investors, and business partners. It is suicidal for them to risk this reputation by becoming a poster child for tax evasion. With states struggling to finance basic health and education services and tens of billions of revenue dollars now at stake, Amazon should send a message that it is a public-spirited brand.  It owes us, and itself, a much higher standard of corporate citizenship.

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During the past two months, I have helped three technology startups raise early stage growth capital and casually advised several others. Each business is in a completely different market: mobile, pharma, cloud computing, crowdsourcing, global communications, etc. Each has unique strengths and weaknesses. The entrepreneurs have wildly different backgrounds and personal qualities.

Not all have completed their funding, but in the process each team has learned similar lessons in how best to approach outside investors (investments from friends, family, and fools doesn’t count. They apply different criteria.) Although I managed to raise tens of millions of dollars for early stage businesses, mainly Alibris, I have personally made most of the mistakes listed here and I have made some of them more than once. Nor is this list particularly unique: investors and experienced entrepreneurs write about them all the time.

So here is my list of the top ten mistakes that entrepreneurs make when they try to raise money from outside investors:

1. No story.  Entrepreneurs try to convince investors that they have a winning business – but investors have no idea which businesses will really work. It’s just too complicated. So investors do what human brains are wired to do when confronted with bewildering complexity: they listen for a coherent story. They listen for a particular kind of story that nearly always has three parts: a strong team that achieves impressive traction solving a big problem. These may be called Team has Traction on Trouble or Management has Momentum in a big Market, but to sell your company, you need to tell your version of this story.

2. No pain. Gill Cogan is a savvy financier, a friend, and a former investor of mine. I once pitched a business to him and after ten minutes, he smiled and said, “that’s what we call a vitamin business.” He explained that people often skip their vitamins – but they never skip their painkillers. Investors prefer a painkiller business. Or as another VC put it “what I really like is a tourniquet business”. A solution to a problem that is acutely felt can grow rapidly. A solution to a minor problem may not be a market at all, even if the problem is widespread. VCs do not fund vitamin businesses.

The flip side of no pain is, of course, no gain. More than anything else, investors want to back companies in huge or potentially huge markets. This leads to herd investing: everyone piles into mobile, cloud computing, or gaming. This is why venture investing has always been a fashion business. This looks irrational, but it makes perfect sense even if it kills the Phoenix. To start with, the cost and risk of investing in any startup is high and approximately constant, so why not focus on companies with huge upside? Moreover, fast growing markets put a lot of wind at a startup’s back, which makes errors much less costly. Investors understand what Google’s Eric Schmidt means when he says “rising revenues solves all problems” — so they back companies where explosive revenue growth is most likely. These are markets that solve big problems or capture huge opportunities.

3. No hub. You live in the wrong place. Capital is highly mobile, but capitalists and startup infrastructure are not. They live in Silicon Valley, Boston, and New York and more importantly, so do the entrepreneurs, technologists, researchers, startup attorneys, talented marketing types, engineers, specialized commercial banks, vendors, mentors, and much else. You can raise venture money in Austin, Charlotte, Seattle, LA, Portland, Chicago and a few other places – although investor quality drops precipitously outside of the major hubs. (If you care why and how this occurs and where is it all going, Google AnnaLee Saxenian – a leading scholar on this topic and a fantastic wife to boot). You may be able to raise money if you are not in a place with active venture or angel investors (several companies have, of course) but it’s tougher. If you live outside a funding hub and are serious about building a technology company, it often helps to relocate.

4. No traction. Your company has an idea but no product or service. Or it has a product but no customers. As Babak Nivi and Naval Ravikant, two well known investors behind the indispensable site VentureHacks, like to say, “traction speaks louder than words”.

You believe that you have invented a revolutionary new dog food that will quickly disrupt the market. Investors cannot possibly figure out if it is really better, so they look for a metric that is rising rapidly up and to the right – often by 20%/month. Any metric that shows rapidly growing engagement will do. Profit is ideal (if profits are growing fast, you can always raise money — although you may not need to). Revenue growth is next best, even if it is from a tiny base. Next best after that is growth in accounts, beta customers, users, or page views. Worst case, show videos of dogs wagging their tails and survey data from dog owners excited about your products. If you don’t have any signs of traction, you don’t have something that people appear to want. You don’t yet have a business.

As important as traction, is an understanding of why you achieved it and why it will continue. Are users engaging other users? What are your viral metrics? Are large companies buying? Why are they trusting a startup? Are customers buying? What are you offering that others cannot and how do you know? Real data about traffic, conversion, average transaction size, repeat rates, defections, costs, margins, etc. begin to paint a clear picture to investors. Ideas about what you hope will happen are simply no substitute.

5. No team. You love your team, but it may not be financable. Most investors back teams with a combination of proven business and technical experience. Why? A VC who was ex Air Force used to say, “backing entrepreneurs is like picking a pilot for an F-15. I favor the guy who has already crashed one, because he or she really doesn’t want to see that happen again”.  Or more commonly: “we know that good judgment comes from experience – and that experience comes from bad judgment”.

This may seem like a Catch-22, but it is rational. Recent research concluded that a venture-capital-backed entrepreneur who succeeds in a venture has a 30% chance of succeeding in his next venture. By contrast, first-time entrepreneurs have only an 18% chance of succeeding and entrepreneurs who previously failed have a 20% chance of succeeding.” The solution? Recruit a co-founder with the skills your team lacks. It does not substitute for product/market traction – but many investors will recognize that your ability to attract talented people is a form of traction.

By the way, there is one glaring sign of a weak team and I see it a lot: relatives in the company, especially on the founding team. Husbands and wives, fathers and sons, brothers and sisters, and couples of all sorts. It is rare that the weaker of these individuals would have been hired in a dispassionate search. Having your relatives in the company, especially a spouse, is a great way to signal investors that you are not determined to hire the very best.

6. Lousy communications. A lot has been written about this. Usually what gets called a communication problem is really a business problem. Bad communication is frequently a sign of bad thinking. But there is one communication problem that is chronic to entrepreneurs: over-communicating. You know too much about your business and in early stage conversations, your knowledge is a liability.

The solution is to prepare three sharply focused business summaries: a 15 word “big idea”, a 15 second elevator pitch, and a 15 slide funding pitch. The big idea is the subject line of the email that your trusted intermediary sends the VC. If they were helping you pitch YouTube in 2005, it might have said “Flickr for videos”. If you were pitching Alibris in 1997, it might have said “find millions of out of print books in one online store”. It is not a consumer-facing tag line, it is the cocktail party handle that people will use to describe your business.

The elevator pitch is the most important and most overlooked. Intermediaries who introduce you to investors will use this in the body of their email. You will use it to describe in a few sentences what problem you solve and what traction you are achieving. Bonus points if you can also fluff the team. Marc Andreesen, were he someone who needed money, might have pitched Ning in 2007 by asserting, “Social networks are an amazing, powerful medium. Ning lets any group build it’s own private social network. We recruited a first rate team, we are hosting more than 100,000 user-created networks, and we are growing at 10% per week.” Boom. Hold the elevator – I want to hear more.

Attached to the introductory email is either the 15 page pitch or a one page summary. Either can work. Do not prepare the pitch from scratch — follow a proven recipe like the excellent ones outlined here, here, here, or here. 15 pages, 15 minutes, 30-point type. It  is hard to over communicate in 30-point type.

There are three things that you should not communicate to an investor. Do not show them secrets. Investors share ideas — that’s often how good ideas germinate. They will share yours. Don’t show them an NDA — they won’t sign it. And don’t show them a business plan. You may want a business plan to force yourself to think through your operations and to have something to use to build a founding team, to brief a board member, or to attract talented leaders. But a business plan will not help you raise money because investors won’t read it and they shouldn’t.

7.  High burn. You have ten employees working for cash, nice offices, no product, and no customers. There are PR and law firms on retainer. You are burning faster than you are learning. Remember this: investors are not looking for companies that need money. They look for companies that will succeed whether the investor commits or not. Raising equity is like borrowing: quite often, the more desperately you need money, the less likely you are to get it. If this is you, take heart: you are unlikely, no matter how hard you try, to violate this rule more than I have.

To state the obvious: any business without revenue has to run very lean, even if they start with a million dollars of 3F seed money. You are still trying to fit your product to the market. You are testing, tweaking, selling, and learning. For most web-based businesses, you don’t need titles; you need one or two people who can sell and small team that can build. Pay is low – everyone works long hours for a bunch of stock. As one investor memorably put it, “an early stage business runs like a one story whorehouse: no fucking overhead”.

8.  No cred. Experienced investors listen for a team that shares the details about what it has built. They listen for specific milestones that reflect customer needs met. Weak teams spend more time talking about future plans – their unproven ideas about where to go next. Talk about traction, engagement, measurable progress both in your current business and in past ones. If you worked at a brand name company or went to a brand name school, mention it – but focus on what members of your team have built. You are trying to build a business, so your record of what you have built gives your team credibility.

9.  No insight into sales or distribution. Early stage companies often don’t know what they don’t know about sales or distribution. This is understandable because early stage companies are obsessed with building a product or a service to fit a market. Achieving product/market fit, or traction, or engagement is hard, critically important work. When it finally happens, it is like a deep sea fish striking your baited line – customers start pulling the product from your hands. You know it instantly (recall the crazy moment in the Social Network where Facebook suddenly goes viral at Harvard).  Getting to this point is the obsession of every startup team. As a result, most are not yet obsessing about sales and distribution.

But they will. Sales and distribution challenges vary all over the map, but most in most companies there are large learning curves and scale effects. Your customer acquisition costs drop as you get bigger and smarter. But in the beginning, you don’t really know how much it costs to acquire customers. The number is likely to be much bigger than you imagined. Which means you can burn through a lot more cash in year one than you expected to.

Put another way, traction can be a trap because it leads entrepreneurs to try to get as much capital as possible out of their growth. This is completely backwards. The point of starting a company is to get as much growth as possible out of your capital.

10. No lawyers. Entrepreneurs, with rare exception, did not go to law school or if they did, they did not pass the bar and become lawyers. New entrepreneurs often dislike lawyers – but they quickly learn that good lawyers matter. A lot.

Once investors are shareholders, their interests are substantially aligned with yours. Until they are shareholders however, the economic interest of an entrepreneur and an investor are opposed. Investors want to buy low; entrepreneurs want to sell high. And the terms, which can be bewildering to a new entrepreneur, matter a lot (as many a VC has said, “you can set the price, if I can set the terms”. They mean it.) In this situation, an entrepreneur needs legal counsel at least as competent as that enjoyed by investors. Day to day, a low cost lawyer is fine. For a major financing however, get a good lawyer who does startup financings for a living.

That’s my list of ten common errors. It is not comprehensive: you could no doubt put together a list of ten others. Nor is it universally right: every generalization has exceptions, including this one. And avoiding these mistakes is no guarantee that you will attract an investor. In raising money, most entrepreneurs kiss a lot of frogs before they find a prince. Then again, so do investors.

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Of course, along with a heart of oak, the town also has a brain of well mashed potatoes. We celebrate diversity beyond parody and indulge in thousand clown politics “somewhere to the left of whoopee!”. Our schools work with immigrant kids that show up speaking more than two dozen languages (actually, nobody speaks two dozen languages. That’s the problem. Each kid speaks one. A different one). Like our libraries, these schools are collapsing under the weight of dodgy managers, paleolithic unions, and ineffective parents (not necessarily indifferent, just collectively ineffective outside of Crocker Highlands).

My part of town, near Lake Merritt, has been brought together by a weekend farmer’s market and by the perpetual comedy of the Grand Lake Theater billboard (typical offering: “Prosecute Dick Cheney for torture” followed by “Kick Ass II”).

We have a terrific neighborhood association which, like most neighborhood associations, is where liberals go to be conservative. Ours is earnestly opposed to rich corporations. And to poor corporations. But perhaps not to Trader Joe’s, because they are German and cool. Also not to Peets, because he was Dutch, their coffee is cool, and they come from Berkeley. (Starbucks: you are clearly suspect). We like “small local businesses” because they are so small and local. The Gap is a dilemma. It is local, but not small — so like Starbucks, we tolerate but do not embrace. What matters here is not whether you create stable, well-paying jobs with health care benefits or even whether you deliver useful goods or services. What matters most in Oakland is that you are small, local, and (ideally) ethnic. Our motto: we love you. Unless you succeed.

Which pretty much rules out McDonalds. In 2004, the Golden Arches wanted to take over Kwik Way, a burger joint that had been abandoned for years. In 1980, Commander Cody and his Lost Planet Airmen memorialized Kwik Way in “Two Triple Cheese” on their Lose it Tonight album. The lyrics suggest that the Commander lived in this part of town, even if he takes liberties with the street names. His ode to saturated fat, salt, and cholesterol now enjoys a place of honor in the permanent collection of the Museum of Modern Art in NYC. Watch it below: it’s pretty good.

Post Cody, the Kwik Way became an abandoned dump and a favorite haunt of sketchy crackheads who sold stuff in plastic tubes and left them lying all over the massive drive-in parking lot. McDonalds offered to renovate the place, hire local kids to run it, and keep it swept up. The arches might have framed the Grand Lake Theater quite nicely, but no way. The ‘hood mobilized against the would be corporate trespassers. Conveniently ignoring the KFC next door, we stopped Big Mac by asserting that the traffic would snarl up the place (we argued, in short, that “we gotta stop this restaurant because it might be so popular”).

Gleeful idiocy of this sort mixed with strong coffee is what keeps Oakland running. Truly if you polled my neighbors, 65% would nod solemnly at the assertion that McDonalds was responsible for Dick Cheney and his Guantanamo torture. (The sordid truth, of course, is that McDonalds has killed more people than Dick Cheney ever dreamed of and quite likely contributed to the Veep’s own lousy ticker. But the Oaklandish among us objected to the crowds that McDonalds would attract, not to the celebrated American tradition of serving cardiotoxins to teenagers.)

Kwik Way crumbled until it was finally sold to a local developer with an appreciation of mauve, ecru, and other soothing colors. He relaunched it as a higher priced burger joint a couple of weeks ago. The place sells food that is arguably more salty, fatty, and sugared than McDonalds, but hey, it is small and local. Here is a video of the opening (a prime specimen of neighborhood values appears at the 1 minute mark).

Comparing the two videos, who wants to argue that we have made real progress?

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I embed Jobs’ fascinating talk above. As usual, it is a tour de force. Jobs proves himself constitutionally incapable of touting a company line. When Apple is messing up, he says so. When he disagrees with management, he says so. When he is being outvoted on something, he complains. He has just been invited back in to Apple and is a consultant — but he respectfully and happily disses executives, managers, and product developers. He announces that some of them have done nothing in years. Several times he lays out an alternative path before noting wistfully that “it’s not my decision”.

Second, he describes his vision of the future. At about 14 minutes, he discloses that whether he is at Pixar, at home, or at work, he never loses a file, has the wrong version, or even has to back them up because Apple has a large server that replicates his content immediately, so he always has the current file.

When asked about Newton, the underwhelming Apple PDA, he comments on the impossibility of supporting three operating systems, noting that two (back then Rhapsody and AppleTalk) was an enormous job. Then he acknowledges that the device isn’t helpful because it has no keyboard and is not connected. “Who wants to use a little scribbly stylus? I don’t. ” If it were connected and had a keyboard, I’d use it in a heartbeat and I would not care what operating system it used.”

This week, Jobs gave the 2011 World Wide Developer Conference keynote and he finally brought this vision to market. Processors are now fast enough, storage now cheap enough, mobile bandwidth now high enough, and the Apple mobile ecosystem now developed enough that he could launch iCloud. It is the foundation of a unique and consistent vision of cloud computing that is quite different from Amazon or Google’s.

It is also the last major piece of the Apple puzzle. The company will continue to innovate and is likely to become very large — but the boundaries of the business are now clearly set. For years we have seen Apple expand its boundaries: an MP3 player, a phone, a tablet. Restructure every media business: music, movies, books, periodicals, and games. Cloud integration is the last piece of this vision, which is why your grandchildren will recognize today’s Apple.

Apple wants to use the cloud differently than Amazon or Google, mostly by keeping it invisible. Amazon EC2 sells cloud services that let you can host your applications or content on cloud servers. Google serves you apps that are cloud hosted, so you can use them with a browser any time you are connected. Apple wants the cloud in the operating system, under the hood, and out of the way. To use the new tag line introduced at WWDC, it should “just work”. 

Apple has rewritten core apps with instant content replication built in. Note that it is never called synchronization or replication. Content is available everywhere, but never called content. Your music, photos, documents, presentations, or spreadsheets are not even called files — indeed Apple has rejected the whole idea of a file system in favor of devices connected to the cloud. A cloud is “much more than a hard disk in the sky” because “the truth is always in the cloud” and because you need pay it no attention at all.

It is, once again, an audacious vision. Among other things, it deprecates computers to mere devices — peers of tablets and phones. It also means that your Macs, iPad, and iPhone will soon become impossible to steal because they are joined at the cloud. As a result, every owner could brick then locate a stolen device. (You can do this today with software like Hidden, which helps people recover stolen computers by taking photos and screenshots of the bad guy. Local news reported a hysterical local example here). Like every major operating system upgrade– especially one that supports a revolutionary change in computing architecture, it  makes certain products and companies obsolete (Dropbox and Sugar Sync had a bad week — as did Instapaper). 

iCloud is the last piece of the vision Jobs brought to the company starting in 1997. The company will continue to grow geographically. It will continue to bring out innovative new products, including, one hopes, a giant flat screen TV, which is really just a large monitor. Software will improve forever and new books, music, movies, games, and magazines will always educate and entertain. Apple will acquire and integrate a few other companies including, hopefully, Netflix and Twitter.

But all of these activities will be coloring in the business that Jobs has now fully outlined. Jobs has been pushing new boundaries for Apple since he rejoined in 1997. With iCloud, the outline is complete and, in a profound way, Steve’s work is done.

Jobs did not look fantastic in his talk — but his trademark audacity was everywhere on display. He really would have made a good King of France, or even a revolutionary Danton (“De l’audace. Encore de l’audace. Et toujours de l’audace.”) Clearly he is suffering the effects of the Whipple procedure that saved his life from pancreatic cancer. Hopefully he has many productive years ahead of him. But even if he doesn’t, he can retire knowing that his vision, on display for many, many years, has given the world delightful products, a valuable company, and an exemplary and powerful brand. That Jobs has done this in multiple industries is inspiring. Reality distortion field or no, I feel lucky to be on the same planet as this guy.

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Public employee unions are losing public support, at least in part because taxpayers are unwilling to grant civil servants wages, job security and retirement benefits that they no longer enjoy. Public support is not something that government employee unions take casually. It is literally their oxygen and they die quickly without it. 

Chronic, structural state and local budget shortfalls due in part to unfunded defined benefit pensions, mean that the challenges facing public unions are essentially permanent. Public unions will be tempted to see criticism and attacks as either the temporary product of tough economic times or simple anti-unionism. This would be a huge mistake: the landscape is changing fundamentally and public employee unions will either adapt or they will go the way of their private sector brethren.

What should public employee unions do? Unions are reactive organizations — their instinctive response to a crisis or to criticism is to curse the opposition and to seek comfort in the solidarity of victims. This wastes time. Instead, unions need to rebuild both membership and advocacy services on more solid footing.They need to build professional associations based on technologically enabled membership services. They need to focus advocacy efforts on the needs of private sector families, not their own members. To do this requires leaders focused on service innovation and talent development, not on the protection of an unstable status quo.

This is achievable — indeed many public sector unions have built prototypes. The unions that would emerge from these changes would be less dependent on collective bargaining, less dependent on unsustainable compensation, less committed to protecting the marginally competent and the malign in their ranks, and less focused on using political influence to advance the interest of members at the expense of citizens. Most importantly, these unions can regain the strong public support that is vital to their success.

Many and probably most public employee unions began as professional associations. The larger of the two teacher’s unions, the National Education Association, for example, grew largely by affiliating local associations of teachers. (Its rival, the AFT, embraced political action and collective bargaining from its earliest days and was the driving force behind the movement to universalize tenure in the 1930s).

These associations of county or city employees varied enormously in quality and impact. In most, membership was voluntary and the association rendered symbolic services that combined health care benefits, advocacy, and professional education benefits with discounts to Disneyland. Most regarded unions as too proletarian. The leaders of these associations tended to be genteel advocates, not firebrands. 

By the 1970s, most professional associations embraced collective bargaining and became labor unions. The combination of the guaranteed dues from union security provisions and the quick return on political investment from protected political funds persuaded teachers, nurses, and cops that “the union made them strong”. As state after state enabled collective bargaining in the 1960s and 70s, the economic logic of unionism overran all other considerations. I recall several professional associations growing from a staff of one or two to a staff of dozen or more people during this period. 

Public unions blossomed as industrial unionism peaked. Frequently public employees imitated their dying comrades in the private sector, encrusting rights, rules, and benefits in collective bargaining agreements lifted (occasionally verbatim) from auto and steel contracts. Interest in advancing individual professionals gave way to campaigns of solidarity. Interest in best professional practices yielded to large and sophisticated political operations, able to mobilize, elect, and lobby local and national Democrats. 

These changes made a great deal of sense at the time. I argued for them and helped them along. Looking back, I doubt that public unions would have grown as fast or as powerful any other way. But the move from professional association to labor organization was unquestionably a deal with the devil.  It’s a deal that public sector unions need to revisit in light of very changed circumstances.

The future of public sector unions is as professional associations, not as traditional labor unions. What would a modern professional association do and, as important, what would it refrain from doing? 

• Professional associations focus relentlessly on the continual training and credentialing of members. The certification and continual upgrading of professional skills provides valuable information to enable potential employers discern the highly qualified from the merely competent. Labor economists such as David Card at UC Berkeley have shown that credentialing can improve employee incomes as much as collective bargaining. (To be sure, training matters more than credentialing and “sheepskin effects” appear to be strongest in uncredentialed fields — but there are a lot of those and more each day, as anyone who has tried to hire a database administrator, an SEO specialist, or a BI programmer can quickly attest). 
• Members of professional associations should participate in hiring and firing. Serious professionals realize that the only way for a self-governing profession to increase increase the average competence of its members is to reward the best performers and replace the worst. Professional peers, not generalist managers, are best able to judge professional performance. (Indeed, the definition of a profession is that it regulates and regularly advances its own quality standards). Teachers, nurses, cops, and building inspectors would all be well served by participating directly in professional evaluations of their peers. Self governing professions weed their own gardens: architects, accountants, professors, consultants, and lawyers do not advance within their organizations except with the agreement of their highest achieving colleagues.
• Promote professionalism, not job security. Associations can serve as a check against capricious or arbitrary managers. Terminations need to be related to management initiatives, performance, or cause – not whistleblowing, union activity, or unwillingness to submit to an abusive boss. Anyone who thinks these issues never go on in public employment is naïve. Professional associations that expect forced turnover of 3-5% each year as a part of normal reorganization and performance improvement should have no trouble working with competent public sector managers and ensuring generous severance arrangements.
• Finally, professional associations need to promote self organization. An association of computer professionals will suddenly have a group of SysAdmins, which will spring a group of DBAs, which may spawn a group of XML professionals who work all day with APIs. It is simply not possible for the parent group to know or to define in advance which of these groups will get traction and which will not. That is why we have social media: for self organization, not as a megaphone to people under 30, which is what most unions use Facebook for today.

Evaluating professional performance takes real work and bears no resemblance at all to performance reviews as practiced in most organizations. It takes thinking, planning and time by people intimately familiar with your work. It is not at all unreasonable for evaluating and developing the performance of the people who work for you to take 10% of your time – that’s at least a half day a week, every week. Companies and professional service firms that devote this sort of time to evaluating and developing people make good decisions. Those who hack out a performance review by spending an hour a year on it reap what they sow.

Teacher evaluations are a good example. Teaching is hard work – and evaluating teachers is even harder. It is not possible to come to a final view of a teacher’s capabilities by simply analyzing student test scores. Which critical skills does a promising teacher lack? Can they acquire them? How? What personal qualities help this person’s teaching and which hinder it? Can they overcome their weaknesses? Can they modulate their strengths? Who, at the end of the day, are the outstanding teachers who deserve annual 15% pay increases? Who can develop teachers? Who are the ones stuck in the bottom quartile who should be glad to pursue another profession? Solid data is just the beginning of the conversation, not the end. Good evaluation takes thought, discussion, and judgement. It is never a perfect process — but so long as it is fact-based and not deeply political, it will work and have a huge impact on professional productivity and quality.  

Teachers unions or professional associations need to be deeply involved in this process and committed to it, not as a way to protect their members but as a way to advance the productivity, respect, and quality of their profession. If they do this, public support and higher earnings will follow.  

Professional associations should run online services to facilitate professional mobility and advance.

• Associations should run jobs boards. They should replace the moribund Craigslist, which is primitive, or they should aggregate dozens of different sites using simple APIs. This gives associations incredibly valuable information about regional labor markets and provides an opportunity to  engage members much deeply. 
• Professional associations can also help members to document their reputations, which in many professions matters more than certification – and reputations have moved online. But Facebook is too personal and LinkedIn too vapid to tell me anything about what you are really good at. Klout and PeerIndex are brilliant starts, but twittercentric. Xobni is a promising example (it is much more than an inbox tool) and there are others. 
• In doing this, professional associations can learn from unexpected sources. From the Girl Scouts, they can study a nonprofit that refocused its mission and the youth it chose to serve. From USAA, a financial services organization targeted at veterans, they can see a powerful example of ancillary services with world class customer service. From Groupon, they can learn the power of engaging members as consumers. From Hizbollah they can learn how even groups with noxious ideologies thrive if they provide convenient access to day care and health care. 

OK, maybe not Hizbollah, but you get the idea. It should become much easier to use “union” and “innovation” in the same sentence.

Public unions also need to rethink their political advocacy. They will not volunteer to be placed under Hatch Act restrictions, but it would do a lot to ensure their survival. Especially if, as professional associations, they took on social causes unrelated to the near term professional needs of their members. Teacher’s associations can (and sometimes do) campaign for healthy lunches. Cops can (and very often do) sponsor Youth Athletics. Nurses can teach kids about avoiding illness and injury. The point is to focus on the broa needs of constituents, of private sector families, and of the underserved — not on the narrow needs of members. Professionals engaged in public advocacy can be hugely effective and important — and effective advocacy can strengthen the standing of any association. 

At the same time, public unions need to advance the interests and raise the incomes of their members. Bargaining won’t be enough — or even a terribly useful way to achieve this. For the foreseeable future, public services will be under pressure to improve productivity and service delivery. Smart unions can contribute to this — and public unions are often very smart. 

A story from the private sector illustrates the challenge. A car plant that will remain unnamed had a really atrocious safety record. OK, it was a GM plant and I was advising management. The union bitched and grieved about safety, but accidents and injuries persisted. I met with hourly employees and union leaders and simply asked “what if the company turned responsibility for over safety to you?” It was the sort of question that often freaked union guys out because they are much more comfortable in opposition. Union leaders advance not due to their management skills, but due to their anti-management skills. Nonetheless, one influential shop steward finally said, “Bring it. Can’t get any worse.”

Results improved significantly (results always improve if you focus on something. A famous experiment once showed that just turning up lighting improved plant productivity. So did turning it down again.) The real impact in this case, was not just that accidents went down as the union focused on training, equipment, and redesigning dangerous practices. It was that the union decided to take responsibility for improving things, not just for grieving about them. Soon they were initiating quality improvements and asking to meet with designers about ideas for improving the cars (they had plenty — and they knew the cars sucked). GM closed the plant before anything really exciting happened, but it confirmed what every parent and most managers know: challenge complainers to solve the problem. They will either shut or focus on a solution. Either is fine.   

Can public employee unions advance the professionalism of their members? Not easily, and in candor, not likely. The major barrier is ideological: unions are spiritually attached to a dissipated legacy of labor solidarity that makes no sense at all in an information age. Power in public sector unions should stem not from collective action but from the talent, commitment, and professionalism of individual members. Public unions can and should certify skills or certify other groups that do so. Who says that you are qualified to administer a database or a water supply? We certify cops and nurses, but who certifies x-ray techs, foresters, or Spanish teachers beyond the schools that grant them diplomas? More importantly, which skills will be in short supply in three years, ten and twenty? How will we attract and develop outstanding teachers, nurses, and managers? How will we help people to have not one forty year career but four ten year careers — or ten four year ones? 

These and other questions raised by this series point the way to revitalized public sector unions. The need for these changes is clear and it is urgent. Whether unions can generate the leadership and vision required to navigate these changes is, however, far less certain.  

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My previous post took note of the decline of private sector unions and suggested that it has left public employees unexpectedly vulnerable to citizens who are jealous of the job security that most public workers enjoy. I recommended that we replace job security with very generous mandatory severance and argued that without the ability to replace people, managers cannot restructure, consolidate, or redesign public services.

Job security is not the only public employee benefit that causes envy among private sector workers: the public sector is the last bastion of your daddy’s defined benefit pension. When public workers can retire at age 55 and expect to live another twenty to thirty years, this can represent a multi-million dollar retirement benefit. Aggravation turns to rage however, when taxpayers suspect that these benefits were not negotiated at arm’s length but were purchased by union contributions to state and local politicians.

At one level, this is foolish. If unions could easily purchase politicians and make deals with them, public sector pay would be exorbitant, not merely higher. Teachers and firefighters would be earn as much as physicians – a profession whose collective organization and political influence puts teachers to shame. And obviously businesses and other interests make campaign contributions as well. Why single out public employees?

For two reasons. First, there is solid evidence that small contributions make a big difference in city, county, and school board elections. Second, it undermines both public service and democratic values to permit even the appearance of labor capture – particularly since restrictions on the partisan political activities of federal employees has produced good outcomes for more than six decades.

What has this to do with public employee pensions? Plenty. Nationally, unfunded state and local health and pension obligations now total over a trillion dollars. This is a crisis because these commitments are economically catastrophic and, in many states, constitutionally binding. Court decisions have mandated that pension obligations be honored, even in the event a local government declares bankruptcy. These pension obligations are a ticking time bomb for states and ultimately for public employee unions. 

The financial black hole of public pensions was the result of three forces — not all the responsibility of public unions: bad managers, bad forecasts, and bad politics. The latter, unfortunately, contributes to the former.

Public managers who negotiate union pensions often work under terrible incentives. Too often, they are judged not on the lifetime cost of the contracts they negotiate but on the impact on the current cash cash budget. They are rewarded for settling union contracts with what amounts to free money: future pension benefits that are not charged to current budgets. Worse, the manager’s own pension is often raised to match the increase that he or she had just granted the union (this happened a lot in the private sector as well, notoriously among automakers).

Bad forecasting made bad management worse. Unions bear no responsibility for this. Public pension managers frequently assumed real returns that were 200-300 basis points higher than they could deliver on a consistent basis. A financial collapse obviously made this much worse, because in a defined benefit plan, capital appreciation risk remains with employers (a big reasons that the private sector went to 401(k) defined contribution plans).

Bad politics aggravated bad management because public sector unions contribute heavily to local election campaigns in which they have an interest. It is not uncommon for public employee unions to be the largest donors in a campaign.

Of course it was only “bad politics” for the public. For unions and their lawmakers, it was very good politics. Agreeing to large future pensions not only enabled lawmakers to appease unions, but it set up second game for which unions are not directly responsible: budgeters often deferred funding these obligations, effectively increasing the funds available for current services. Viola! Happy unions, more public services all without tax increases.

But voodoo economics never works for long. Promising pensions without paying for them, although no different from borrowing, was frequently not accounted for in state and local balanced-budget requirements. Until the market crashed and forced the issue, it was free money — a politician’s dream. 

The risk of politicians “captured” by public employee labor unions has long been recognized by many thoughtful progressives. It is easy to forget now, but most politicians, labor leaders, economists, and judges warned of this risk and long opposed collective bargaining in the public sector for just this reason. President Franklin Roosevelt, surely the staunchest friend of labor ever to occupy the White House, declared in 1937 that

Meticulous attention should be paid to the special relations and obligations of public servants to the public itself and to the Government….The process of collective bargaining, as usually understood, cannot be transplanted into the public service.

F.D.R. believed that

[a] strike of public employees manifests nothing less than an intent on their part to obstruct the operations of government until their demands are satisfied. Such action looking toward the paralysis of government by those who have sworn to support it is unthinkable and intolerable.

Private sector labor leaders, men who did not routinely turned down an opportunity to collect dues, were virtually unanimous in their opposition to public sector unions. The first president of the AFL-CIO, George Meany, believed it was “impossible to bargain collectively with the government.” 

The result of labor capture, critics asserted were predictable:

• Unions would distort the labor market because they would be able to protect less competent employees. Government service would soon attract the risk averse and repel risk takers.
• Unions would weaken public finances by driving up not only the cost of labor but demand for it, since they would develop the political capacity to lobby consistently for government employment
• Unions would negotiate work rules and employment protection that would help diminish the responsiveness of government and the quality of public services.

Not only were these concerns voiced at the time by progressive thinkers, they have been vindicated not by conservatives, but by some of the nation’s most progressive economists.

• On the subject of labor capture, it was every intellectual’s favorite union leader, Victor Gotbaum who lead New York City’s AFSCME District 37 who boasted in 1975: “We have the ability, in a sense, to elect our own boss.”
• It was the son of UAW leader Irving Bluestone, progressive economist Barry Bluestone, who demonstrated that between 2000 and 2008 the cost of state and local public services increased by 41% nationally, compared with 27% for comparable private services.
• It was pro-labor economist Richard Freeman at Harvard who concluded that ”public sector unions can be viewed as using their political power to raise demand for public services, as well as using their bargaining power to fight for higher wages.”
• And it was my fellow Clinton Administration Assistant Secretary of Labor Jack Donahue at Harvard whose most recent book concludes that public-employee unions have reduced government efficiency and responsiveness to the point that government work increasingly attracts those with limited skills and repels talent to the point of a significant “brain drain”.

(Credit for these examples goes to a nicely researched and well-written article by Daniel DiSalvo, an assistant professor of political science at the City College of New York).

The standard union defense to concerns about capture, is to point out that companies contribute money to government too. They do, and it can be a problem. But there are fundamental differences between the public and private sectors:

• Private sector unions rarely affect company strategy. But government employee union contracts deeply shape government policies by constraining what officials can or cannot do — regardless of voter mandates. The UFCW has little to say about meat-cutting reforms but even a cursory view of the role of teacher’s unions in education reform illustrates the power of a large block of unionized professionals outside the realm of bargaining.
• Private sector unions cannot donate money to a company it bargains with. It is flat illegal  (you will sleep better knowing that this was one of the laws I enforced in the Labor Department). These contributions do not decide every issue, of course, but on average and over time, they matter enormously. Union leaders, among other things, enjoy virtually unrestricted access to local politicians. A convincing amount of political science research suggests that these contributions matter. And the appearance of a union “electing its own boss”, to say nothing of lobbying for extra work (yeah you, California prison guards) is utterly corrupt and lacking in even rudimentary checks and balances.
• Public unions, unlike private sector ones, are relatively free from market forces. Unless a union represents workers in a tight monopoly (the defense sector comes to mind), wage demands are tempered by market competition. But a government monopoly eliminates market pressure on public sector unions.
• Organizing private workers is very tough — an act of industrial combat. Organizing public employees, is much easier because management does not hit back. Likewise, private negotiations are conducted by managers who answer directly or indirectly to owners who are jealous of their capital. Public sector negotiations are conducted with managers who have no stake in where a contract settles and a high stake in preserving stability and avoiding a strike.
• Private sector companies fail all the time. Governments never fail. Private sector unions have to organize new members just to avoid falling behind because of this. Public sector workers once organized, stay organized. As a result, public-employee unions are able to devote much more resources to political organizing since the cost of acquiring a new member is so much lower.

afscme

Public union capture is a problem — and not a small one. Happily, it is a problem we solved seventy years ago when WPA funds were ending up in the hands of local politicians as “contributions” from employees who had been hired to work on WPA funded projects. The solution was the Hatch Act, which applies to federal employees but should be extended to all state, county, and city employees as well.

• The Hatch Act restricts federal employees from participating in partisan political campaigns. Federal employees may nonetheless register and vote as they choose, contribute money, register voters, express opinions about candidates and issues, and participate in campaigns where none of the candidates represent a political party. They can contribute money to political organizations or attend political fund raising functions, attend political rallies and meetings, join political clubs or parties, sign nominating petitions, and campaign for or against referendum questions, constitutional amendments, municipal ordinances. It effectively restricts employee unions as well.
• But under the Hatch Act federal employees may not be candidates for public office in partisan elections, campaign for or against a candidate or slate of candidates in partisan elections, make campaign speeches, collect contributions or sell tickets to political fund raising functions, distribute campaign material in partisan elections, organize or manage political rallies or meetings, hold office in political clubs or parties, circulate nominating petitions, work to register voters for one party only, or wear political buttons at work. These restrictions have been upheld repeatedly by the courts.

The Hatch Act is why you do not see Obama stickers on federal vehicles or Bush buttons on five star generals. The enforcement of the Hatch Act in the federal government is incredibly serious; violating it is usually a career-ending offense.

At the DOL, two OSHA employees once invited a candidate for Congress to tour their local offices (after Clinton had relaxed some of the more draconian provisions of the Hatch Act in 1993). The invitation was deemed a Hatch Act violation and the employees were forced to spend their savings on counsel to defend themselves. Many of us believed the enforcement overzealous; none of us doubted that it would seriously damage the careers of the individuals involved. I am sure that I had colleagues who would at that moment anyway, have favored repeal. In retrospect, I think that the nation is well served by the law, even if enforcement is sometimes overzealous.

The internet has made email, Tweeting, and blogging subject to Hatch Act enforcement. In one high-profile case, a NASA employee was suspended for 180 days without pay for sending political e-mail messages and using his blog to solicit campaign contributions during work hours. Active duty military are subject to similar restrictions, which is why – fortunately in my view — you do not have generals ordering their soldiers to campaign for the Presidential candidate they prefer. Teachers, cops, public nurses, or firefighters who are paid by taxpayers should live under the same restrictions – because public service requires abstinence from partisanship. Indeed, it is hard to explain why a provision that clearly solved a this problem seventy years ago has not been extended to local public employees.

Next: Can Unions Innovate?

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