A government-created economic Flywheel — can it work?

Direct-to-consumer companies have successfully used flywheels to build big businesses. Idea is to create ‘raving fans’ through relentless experience on customers, these raving fans then refer others who in turn become ‘raving fans’. Amazon is a clear example fo a company that created this based on the idea that people will love to shop for anything, anywhere, anytime, delivered in a time lot less than one thought possible ‘for free.’

Create ‘raving fans’ through relentless experience on customers, these raving fans then refer others who in turn become ‘raving fans’.

I have started to believe that this concept may work for a government too. In this post let me cover the background — as to why the current thinking does not work.

Trickle-down — if it ever worked — does not work in the age of automation and AI. Companies are driven by boards and they are responsible to maximize shareholder value. Customer focus and benefits are included as customers bring in the money. Employees and social welfare are optional. Companies have shown that they prefer automation and AI over humans for efficiency in production and cost reduction. When humans are needed companies have proven that they prefer to move the operations offshore where the cost of labor is minimum. This makes sense as shareholder profit is the difference between what you earn and the cost of what it takes you to make and deliver. This makes employee and community welfare and expense that is optional and even undesirable.

Shareholder profit is the difference between what you earn and the cost of what it takes you to make and deliver. This makes employee and community welfare and expense that is optional and even undesirable.

The result is that we are moving towards and economy where we have jobs that fall into the following categories:

1. Low wage or gig jobs delivering services that are local and can be delivered by most people. Think at or below minimum wage.
2. Highly skilled job necessary for innovation and creativity that is at the core of a companies growth, we may like to think that there are lots of these, however these are not majority of the jobs.
3. Off shore work that can be performed at wages far below local minimum wage.

There are things that are left out in an economy that completely relies on private companies, and that is long term needs of people that have no immediate economic value or that require innovations that are very expensive with no immediate benefit and infrastructure. This is where the government can create a flywheel and I will share my thoughts on in in the next post.

Long term needs with no immediate economic value that require expensive innovations and infrastructure are needs that private companies do not and possibly cannot address.