The 2011 Ludwig von Mises Memorial Lecture, given on March 10 at the Austrian Scholar’s Conference. Watch it online.
It’s the most privileged honor to be here at the Austrian Scholar’s Conference and deliver the Mises lecture. It’s carnival in Brazil this week, but to me the real feast is happening right here!
Professor Salerno wanted me to speak about how Misesian ideas can change Brazil and Latin America; I’ll say a few words about that, but also I’ll talk about Austrolibertarianism, our particular freedom philosophy, whose pillars are the non-initiation of force and private property. And I will relate it to two aspects:
My experience as an executive of a performance-based organization, the one founded by Brazilian partners led by Jorge Paulo Lehman, who now are the controlling shareholders of Anheuser-Busch Inbev, whose present CEO is Carlos Brito. I’ll draw from that experience and from the lessons those great people continue to provide.
The book The Starfish and the Spider.
Let me start with a flavor of the book. It is a five-year-old business book that talks about what exactly is a decentralized organization — its strengths and weaknesses — by comparing it to two animals whose structures superficially look similar: a starfish (it is actually a sea star, not a “fish,” but I will henceforth use the term adopted by the authors), and a spider.
The spider has a central body and eight legs. The starfish has a central body and five arms. Internally, however, their biology is completely different.
If you cut a leg of the spider, well, you have a crippled seven-legged spider; but if you cut the head, what happens? It dies. It can’t live without its command center. We are familiar with spider organizations: corporations, governments, and traditional think tanks with CEOs, hierarchies, headquarters, etc.
If you would cut an arm off a starfish, however, another one will grow. And if you would cut it in half, an amazing thing happens: two starfish, two organisms survive.
There is a species of starfish, the Linckia, that if one were to cut all five arms off of, it would grow five separate organisms. Each arm generates an autonomous creature. There is no central organ, and each arm has its own organs, stomach, muscles, and way of feeding itself; except for a nerve ring that connects the arms. That’s a decentralized organization.
When you look at the world today, more and more starfish organizations are sprouting, and in our Austrolibertarian intellectual movement, I would argue that we are starting to behave like an adaptable, hard to combat, starfish; with each institute or organized initiative behaving as an arm of the starfish, and the nerve ring being the Austrolibertarian doctrine. I’ll get back to that.
First of all, a few words on Brazil. Brazil has always had a statist mentality. For example, while in the United States you would ask “How much money do you make?” we Brazilians ask “how much do you receive?” — as if it were a grant or gift — as opposed to a get-what-you-give mentality in the United States.
My father used to say that Brazil is “an island of initiative completely surrounded by government.”
Brazil also has an ingrained red-tape mentality. He also said that “Brazilians place more trust in the death certificate than in the presence of the dead body.”
We were famous back in the 1980s for holding a world record! The record for inflation — and even between 1990 and 1994, less than 20 years ago, the average annual inflation was above 1000 percent. At the peak, prices would rise 1 percent per day. Every price was indexed daily to the official daily-inflation index. Prices rose daily, investments rose daily, even deposits in your current account and assets rose daily, but wages rose only monthly or by fortnight. Workers and middle class would get their wages by fortnight and rush to the very large supermarkets to buy nonperishables.
By 1994, the Brazilian people had had enough of corrosive inflation, exchange-rate superdevaluations, and government surprise plans and packages (which were usually accompanied by week-long bank holidays) and demanded a halt. Politicians finally decided to act because they were suffering: presidents were being impeached; central-bank presidents and ministers changed every six months or so, etc. Therefore, the government increased taxes (which is bad), balanced the budget, drastically decreased money creation, and floated the currency.
Since then, we are now a normal country, that is, a social democracy, with a big government. We are “normal” because we took care of the most pressing problems: spiraling government debt, inflation, and balance of payment deficits. We are now reaping the benefits of that commitment to stability, while the rest of the world is going in the opposite direction, with huge deficits and out-of-control money printing.
The first organized effort to promote the ideas of liberty started by the Instituto Liberal (IL) — founded in Rio in 1982. Its objective is basically to translate and publish books of the Austrolibertarian tradition. Its founder, Donald Stewart, a construction businessman, translated Human Action and Interventionism. The IL expanded in an autonomous and decentralized fashion to other capitals by the initiative of local businesspeople. Most of those funders had a special-interest agenda, and didn’t stick to the same libertarian line adopted by Donald.
The substantial money was spent on lavish headquarters and bad books.
The pseudo network of ILs didn’t have the libertarian nerve ring connecting the cells, and it capitulated to special interests. They shared the same name, but segregated into quite different creatures, losing their status as a network. The IL in Rio is still around; it was always small, but has shrunk further, and is only a shadow of what it was in its early years.
At about the same time, in 1983, a group of people from Porto Alegre started an elite leadership study-group for entrepreneurs (the IEE) with a free-market doctrine. They also set up an annual conference that now is the largest in Brazil, the Forum da Liberdade, with about 6,000 people attending last year.
MisesBrasil officially launched with a Conference right before the Forum. It was a success with 200 people per day attending, mostly young people and students that were already following our work online. Lew Rockwell, Joseph Salerno, Tom Woods, and Mark Thornton were there. We had very positive coverage by the two main weekly magazines in Brazil (which have in excess of 1,500,000 copies of combined circulation), and had two full pages in each of them.
In the liberal-libertarian spectrum we have arguably the largest following base, in Portuguese, in the world, with more than 3,000 people per day visiting our site. We have published or republished 17 books.
The Forum da Liberdade had as its theme Mises and his Six Lessons, as his Economic Policy is known in Brazil. Each of the 6,000 participants got a copy of six lessons. Tom spoke at the Forum, and each panel was based on one of the six lessons. They had a wonderful exhibit quoting Mises, heralding panels with pictures and stories about his life, etc.
We are hosting our second conference next month, where we will have as speakers Hans-Hermann Hoppe, Guido Hülsmann, Bob Murphy, Peter Klein, and others. We expect a larger public than last year. The mainstream media is also beginning to pay attention to us. In summary, there are huge challenges, and we are just starting, but we are on a roll.
So much for MisesBrasil.
Let’s get back to Austrolibertarianism and our big challenges. In my opinion, we have the some of the best ideas and the best people developing ideas — why are we still a marginal, fringe, school of economics?
We are standing on the shoulders of the scholastics, Bastiat, Menger, Mises, Hayek, Rothbard, and the present-day stars. Our ideas have better explanatory power of the consequences of government interventions than competing theories. Our ideas are consolidated, tested through more than 100 years, some even centuries. Ideas are not holding us back.
So, which barriers that are making us drag?
What’s more, we are small, bottom-up, voluntary, and flexible, while the statists’ organizations, starting with the government itself, but also other organizations such as the UN and the IMF, are big, coercive and centralized. Governments are inefficient, slow, corrupt: the Katrina governmental disaster, the war on drugs, and countless other examples come to mind.
How come we do not dominate the mainstream, as we once did 100 years ago?
Let me first differentiate how we behave as individuals and how we behave as teams. What is the actual role played by organizations? I mean organizations such as the Mises Institute, or MisesBrasil, and other organized efforts to promote ideas? Do we need them?
Can we have a starfish system made only by individuals? Or in order to be a well-functioning starfish must we work as organizations, or teams, or cells, behaving as the arms? Can individuals behave as cells?
I would argue that it is very difficult to do so, and it’s an uphill battle for individuals.
Freedom lovers and freedom-fighting individuals, i.e., ourselves, participate in the ongoing battle of ideas, and there are those who discuss and write every day — they are very important.
However, individuals alone are not equipped with what’s necessary to pursue objective goals in a systematic, organized, and effective way. What we need is a team, of great people, working together.
A great organization, company, or institute is formed by great people, working together. Period. Not ideas, not books. It’s formed by people that understand the social environment, that have insights, know how to market them, have the best connections (which helps to raise funds), and that drive all of the execution capacity to achieve the objectives. Great people are those that may be better than each one of us, if we give them a few years. Those make a great team, and we need to attract and retain them.
A team of great people needs to filter, translate and transmit the ideas, to journalists, writers, editors, and other opinion leaders. I call opinion leaders those 20 percent or so of the population that can grasp and act on an idea. Those are our most obvious customers.
Think about John Papola and the Hayek versus Keynes video, and other short materials we see from time to time on the Internet, for example, and that inspire us. These are wonderful exceptions, of individuals working without the support of a great team, and doing the almost impossible, guided only by their dreams and passions. But, a team of good people could do even more, and systematically. For every Papola, unfortunately there are thousands that act individually, but are not able to effect change.
Good organizations are systematic and effective; they avoid floating ideas in a disorganized way, through channels and forms that might not work. That happens because they are goal-based, they have metrics, goals, they measure them, they benchmark. They are slim, adaptable, and “localize,” or as we say at MisesBrasil, “tropicalize,” the product and strategy. In some places and times, a natural-rights approach may be effective; in others a value-free approach might be more appropriate. In some occasions articles might work better than books, in others radio shows may get more results.
“Our product cannot be one that advocates the initiation of force, or an attack on property rights, but it may have different flavors for different consumers.”Imagine a beer company; its product is beer; our product is Austrolibertarianism. The beer company may have different labels of beer, with different flavors, and it’s the same with us — provided, however, there is no toxic substance. They have their quality standards, and so do we. Our product cannot be one that advocates the initiation of force, or an attack on property rights, but it may have different flavors for different consumers. That’s tropicalization.
And tropicalization does not only affect the ideas and the way we market them, but also how you attract talents and funding. Brazil, for instance, is much different from the United States. We don’t have, for instance, a culture of donations by individuals, and we don’t get tax breaks — so we opted for sponsorships by big business and stay close to the mainstream media.
The Brazilian controlling shareholders of most of our mainstream media are very sympathetic to libertarian ideas. Veja, the main weekly magazine, for example, has recently announced they will always write “state” with a small “s”. They wrote a marvelous editorial justifying that decision. That really took us by surprise. That’s an editorial policy we also have at MisesBrasil.
But whatever we choose do in terms of marketing or funding, we must always keep the quality standard of our product, as does the beer company. Otherwise we will fail like the network of ILs in Brazil did back in the 1980s.
Ok, so we have ideas, different flavors, and a team of great people working together. How do we manage the team?
An organization, in the same way as individuals, needs dreams.
Dreams are natural, they keep us going — being with a person, traveling to some remote place, being employed by some company, doing well at school, buying that car, etc.
In addition, thinking big takes the same work as thinking small. Therefore, we should think big.
But we need to set realistic dreams and goals; one must know 80 percent how to get there and learn the other 20 percent along the way. People must buy into it, commit to it — passion, energy. If we know only 20 percent how to get to the goal, and must learn 80 percent along the way, it’s an adventure, not a realistic goal.
Some individuals do have some goals such as “end the state.” If this were a goal for a real-life organization, it would be an adventure. But it is ok, because it is personal, doesn’t involve others or a team. The only downside is that this individual gets frustrated, because there is a good chance it will not happen in his lifetime. For organizations, though, it cannot be an “adventure-type” goal.
For MisesBrasil we use metrics: those may be the reach of our ideas in the media (mainstream and Internet), book sales, fundraising for new projects, or any other performance indicator that correlates reasonably well with the efforts of the team.
What kind of pressure should we put in the future? We have to constantly aim to raise the bar.
Too much pressure is bad, because people may panic, but too little is bad as well. We are at our best when under pressure and have deadlines. Think about it: in the days before this very event, I presume that everyone that made it perfect like it is was totally focused, making sure everything would work right. Everyone turned their Facebooks off, spent less time in petty conversations, etc.
As catalysts — managers, or team leaders, we need to apply that same pressure, with deadlines, all year round.
It’s like the high jump. If you set it low, people would jump only enough to clear the hurdle, because we are rational and minimize energy.
Additionally, there should be an environment of meritocracy, candor, and informality.
Meritocracy: We should reward the best! The best should be promoted, to have more space, more responsibility, regardless of seniority and even the strict adherence to our ideology. If a person is young, and does not agrees 100 percent with our doctrine, but is very talented, he or she must be promoted. We can train him or her. That’s not a problem, as long as he or she helps us achieve our goals.
The risk is that we don’t have to courage to promote the best without regard to seniority or strict adherence to our ideology; the talented people would see through it, and leave or stay away, and we may be stuck with a mediocre team.
Candor: People must know where they stand. The team needs constructive and respectful feedback, of the type “here you are doing well; this you need to improve.” In the company I used to work for, Jorge Paulo Lehman’s Banco Garantia, we used to do this two times a year. Talented people are high maintenance, and need a continual feedback process to grow. Besides, we know the status quo is not our friend, especially if we want to achieve our dreams.
Sometimes you might have a person that is not delivering. You might feel pity, you might delay a decision to let him or her go. You would say, “well he studied under Rothbard, he is such a nice guy,” “let’s wait some more time to see if she improves and delivers.” It’s not going to happen. Don’t waste his or her time.
As a professor in a classroom, you would never do that. Grades are grades, there can be no rationalizations, because it is best for the person as well. For scholarships, it’s the same thing. People are different; we are individuals — that’s our philosophy, right?
Informality: People should be able to speak their minds, in a cultural and physical environment that is conducive to continuous communication. We should avoid letting people hide in their own corners.
When we decided to start MisesBrasil, we didn’t yet know Lew Rockwell personally, and contacted him by email to ask whether we could start translating articles. We got a prompt email back, with one simple sentence: “Please, do translate.” That’s a great example of efficacy and informality.
A great team must also raise the funds for projects, be it a conference, video, books, or other. Funding for projects, in my experience, is easier, because the sponsor sees the product and its immediate result.
But, as importantly, we must also raise funds to pay for the good team’s work! Because we need a team of talented people, potentially staying for a whole career, they must know they will be rewarded, and they will live a good life if they stay — for this we need funding, specifically for that purpose.
But it doesn’t necessarily mean that endowment funds are the way to go. I’ll explain with an example from The Starfish and the Spider.
It’s the story of the Apache people. When the Spaniards arrived in America, they found huge empires. In 1519, Cortés and his 80 men arrived in Central Mexico, which was dominated by the Aztec Empire, with Tenochtitlan as capital — only a couple of other cities in the world were larger. It was a centralized empire, with Montezuma II as supreme leader. Cortés had a meeting with Montezuma, in which he said, “give me all your gold, and I won’t kill you.” He didn’t fulfill his promise, took Montezuma prisoner, and then killed him. The Aztec people lost their drive with the death of Montezuma, and crumbled. They were quickly defeated.
The same happened in South America, with the Inca Empire. Pizarro followed the same “take-the-gold, kill-the-leader strategy” with Atahualpa.
Further north in Mexico, in the present day United States, the Spaniards encountered the Apaches — and lost. The Apaches were a much less sophisticated people than the Aztecs and the Incas — they had never built a pyramid or a paved road, or even a town. But they distributed political power: they weren’t a coercive, “leader-calls-the-shots” people like the Aztecs and the Incas; they worked voluntarily, without a supreme leader.
They had leaders, but they were spiritual leaders, who led by example only — the Nant’ans. One of the famous Nant’ans was Geronimo, who never commanded any army. When he decided to fight, all Apaches joined him not because Geronimo said so, but because they thought it was a good idea; but you didn’t need to.
Apache decisions were made at different places. An attack may have been planned at one tribe, organized at another, and executed at a third place.
The anthropologist Tom Nevins explains that the Spaniards started to kill Nant’ans, but immediately new ones emerged. They also tried to put fire to and destroy villages, but the Apaches became nomads. Try to catch them now! The Apaches even unwillingly gained control of territory they didn’t control before.
The Spaniards lost to the Apaches. The Mexicans, later, also lost to the Apaches. The Americans finally defeated the Apaches, in the 20th century, by giving cattle to the Nant’ans. Previously, they led by example, now they could reward and punish tribe members using this valuable resource. The Nant’ans began fighting each other in tribal councils for control. The power structure became hierarchical and centralized. This finally broke down the Apache society.
That explains my skepticism of endowment funds — people shouldn’t be chasing the endowment money, but working toward the dream. That makes things more challenging, because fundraising must be a continual, full-time job.
Another interesting example from The Starfish and the Spider: AA, Alcoholics Anonymous, which is totally decentralized. Bill Wilson, the founder and an alcoholic himself, after many attempts to cure himself through specialists, realized that it is far easier not to comply with a commitment of sobriety to a specialist than to a group of your peers. His initiative became an instant success.
As the organization expanded autonomously to other cities, Bill was faced with the decision to whether or not to claim control and centralize it. He decided to let it stay an open system, without a central command. Therefore, there is not even a way to know how many members or circles there are. The AA became flexible, equal, and mutating. The Apaches mutated and became nomads, while the AA mutated and today helps food addicts and gamblers. Well, it may even mutate to cure Charlie Sheen!
When the record industry first faced Napster 10 years ago, it was tough for them, because they were up against a very decentralized network, but Napster still had an identifiable CEO, management, and central servers. Napster lost via lawsuits.
The decentralized music network then mutated, and further developed the Peer-to-Peer anonymous technology. The customers’ information was still centralized in some of the mutated initiatives, which allowed further persecution. Eventually everything was spread and decentralized and now we have torrents. And we mostly don’t recognize the record industry as it once operated.
Lew is like Bill Wilson of the AA — he catalyzed the idea, built the main cell and got out of the way for the talents to rise and cells to spring up like MisesBrasil and many others.
At first it may seem LvMI is a spider — it has a board, a CEO, some hierarchy, a physical address. But look again — Auburn is not where the organization exists. The professors are spread all over the world, there’s no formal hierarchy, and we have the Mises and Rothbard Institutes acting independently, and at the same time as a network.
If you would thump the Mises Institute on the head, would Austrolibertarianism die? No! Is there a clear division of roles among the cells? No! Is knowledge concentrated? No! Are cells self-funded or are they centrally funded? I wish the Mises Institute would throw some checks at us, but no, we are not centrally funded! Ladies and gentleman, we then reach the conclusion we are genuine starfish. As with the Internet, if one pulled down half of its sites, it would survive.
We’re a cell-based, independent, underground network. We are building the network as we speak. Because it is an open system, more and more people want to contribute, first as individuals, and then — which is what really makes a difference — as a team, as independent cells.
And if we are talking about people that would like to start an Austrolibertarian cell, you don’t need more than to put up a site, and start translating and publishing material. Just do it. It’s simple, and virtually costless. We’ve done it in Brazil, Gabriel Calzada has done it in Spain, the Joachims have done it in Sweden, Vlad in Romania, and likewise in Poland, Japan, Russia, Belgium, and other places. To build a great team, of course, is more of a challenge, but they are sprouting, because we have the example of Lew and the LvMI team.
When the network fully develops and the network effect kicks in, or should I say accelerates, there’s no stopping us. The centralized statists won’t be a match for us!
