Nick Hanauer, UW Philosophy BA ’81, is a co-founder and partner in Seattle-based venture capital firm, Second Avenue Partners. In 2015, he also founded Civic Ventures, a small group of political troublemakers devoted to ideas, policies, and actions that catalyze significant social change. We sat down with him to discuss his work with Civic Ventures including: funding public education, defending the liberal arts, increasing the minium wage, career dyanmics, gun control, and to find out what he is up to next.
It is both morally and practically important, I like to think. In an increasingly technological society, there is an ever-higher premium on skills and education. The world has changed. It was certainly the case before that you could be very successful with only a high school education, but that is getting harder and harder. So we need to find ways to educate the most people possible, in whatever way that we can. And that costs money. Funding for public education needs to keep up with those trends. The education system in our country was built for an industrial society, not a highly technological society. So at the time, we thought education should be free up until high school graduation, which made sense in 1950. But today, obviously, it is hard to be super-successful without at least another four years of school beyond that. We have this big gap between the system that we set up and the current needs of society, and people are slow to recognize that changing dynamic and make the policy adjustments that are required.
The other big challenge in our society is that the country got swept up in the trickle-down economics revolution and persuaded itself that the lower taxes were on very rich people, the better off everything would be. The theory was that would lead to growth, and that theory is just not true. But a consequence of reducing the burden on the most successful people in the country and the biggest enterprises in the country are that you sort of rob the society of the resources to make these investments. So the convergence of less funding and more need created a big gap and a big problem and a big challenge. My group of collaborators are working hard on both of those things and trying to close the gap. We work on political economy and economic inequality and all the things that cause people to not be able to afford school, and we are working on things that will cause schools to be better.
You have been very involved in reform efforts for K-12 education. Can you tell us about your motivation and ideas for that as well as your ideas for higher education?
A lot of the political efforts that we have worked on have been about integrating the system from preschool all the way to post-secondary and trying to find ways to bridge the gap and not have this really stupid zero-sum fight between K-12 and higher-education, which is not constructive at all. We’re trying to find a way to have educational institutions work together and integrate more successfully. We have done some things that have worked and some things that have failed. One of the things that failed was initiative 884, which was an effort to fund the entire system. We got destroyed at the polls, although a lot of that work was worth doing because many of the ideas from that initiative have become law.
The bigger challenge is the way in which post-secondary education’s public price has been able to rise. The cost of a secondary education has remained around the same in constant dollars. It cost about the same to educate me at UW as it does today. The difference is that my cost was $250 a quarter and now it is $4,000 a quarter. The difference of course is the difference between having public support and not having public support, and shifting the burden from the community to the individual—all in the name of growth. The trickle-down theory is that the less taxes we pay, the better the economy will be and that shift has created a giant problem both here in the state and nationally where students are taking on an enormous amount of debt to get themselves through college. So all you have done is stolen from the poor and given to the rich, essentially, and created a poor system in which we have 1.2 to 1.3 trillion dollars in student debt. It is not just that that debt is unjust; by saddling 40 million people with student debt, we have robbed them of the capacity to buy stuff which is what the economy depends on. If you take 40 million people and put them underwater, who are we going to sell stuff to? It is just the most ridiculous, backwards approach to economic growth. It is a huge anchor on the economy, and it is getting worse. I am working on trying to get people to think about these things.
Fortunately, people are finally really starting to talk about this, and there is talk about making public post-secondary education free or affordable again.
We have been finding that students have a lot of pressure to go into tech fields and not pursue a liberal arts degree. We are constantly defending a liberal arts education. Have you found your degree in philosophy to be valuable?
The defending of the liberal arts has two challenges. The first challenge is that we have deliberately created a society where a few people make a lot of money and most people do not. We have giant industries that pay poverty wages, but that is a choice; there is no reason that Walmart cannot pay all of its workers twice what they are paid, thereby raising them to the middle class. They don’t do it because they don’t have to; there are no forces that require them to do it. And that has an effect throughout the economy all the way to your institution, because if my only option to lead a dignified life is to become a software engineer, then that is the only thing I will choose to do. So part of the big problem is we have programmatically devalued so much of what people do, relative to a few things such as managing money and writing code, that you end up with circumstances where no one wants to do anything but go into finance—which is completely insane. But if you have an economy in which you raise the floor and lots of people can lead dignified lives doing lots of things, then not everyone is trying to do the few things that currently pay well.
We have led the fight on the $15 minimum wage. There are all sorts of reasons for doing it. Puget Sound Business Journal ran a story this week, “Apocalypse Not”. So many people had predicted the end of days with the $15 minimum wage, but instead it got better. When restaurants pay restaurant workers a wage that ensures even the workers can afford to eat in restaurants, it is going be good for the restaurant business. The best part of the article is an interview with a cook who said “It is a big boon to the kitchen employees, since they do not get tips. It legitimizes cooking as a craft.” This an important cultural shift. If you live in a commercial society, as we do, how much you make legitimizes what you do—to a greater degree than what we would like to admit. And if someone pays you a horrible wage, it doesn’t just prevent you from buying stuff, it pulls dignity away from you. But when you take somebody and all of a sudden give them a middle-class life, you have elevated them in all sorts of non-financial ways, and you have now made it possible for someone in your society to not be a software engineer. They can study philosophy and become a cook, because that is a craft. You can’t disconnect these two forces.
The thing that is devaluing liberal arts education is that we have created a society in which only technical fields are valued, and that has do with our wage policy. Raise the minimum wage to $15 an hour and now there all sorts of opportunities to lead a dignified life without being a software developer. These two things are deeply connected and you can’t fix the one without fixing the other. You are never going to be able to talk people into a liberal arts education. The road to riches is not through the classics department at a university; it is possible, but not likely. What you want to do is create a society where if you want to study classics you can still live a dignified life.
Then people will realize, ‘finance is really boring and dehumanizing and I’m not going to do that, even though I would make more money. I’m going to study classics because it moves me and I think it is important, and I will still be confident that I’ll be able to go out into the world and have a life where I am not condemned to poverty.’ And that’s why the work that we are doing on political economy is so relevant to what you care about.
We are helping lead the fight nationally to get the Obama administration to change the rule on overtime. Overtime is to the middle class what the minimum wage is to low-wage work. Back in the day, about 65% of all workers were entitled to overtime, if they worked more than 40 hours a week. Today only 9% of salaried workers are entitled, because the threshold above which you don’t have to pay overtime is $23,600. So if you earn $23,700 and your employer calls you an assistant professor or assistant manager, you can work 80 hours a week and not get overtime. In today’s dollars that number should be $69,000, so that means it is super-easy for organizations big and small—well-meaning and exploitive—to take two workers and have them do the job that three used to do.
There are two bad things about that: the two workers are working too much and the labor market has soften to one job for every two, which creates more leverage for the employers and less for the employees. This weakens the negotiation leverage of the workers and it is a vicious cycle, which is one of the reasons wages are going down and profits are going up. People do not have an alternative. But if you have a high overtime threshold companies will seek to avoid paying overtime by adding workers, which in turn drives wages up because the unemployment rate goes down, and the labor market tightens.
Getting the administration to raise the overtime threshold is a very big deal and no one has done it for 40 years, so that is another piece of the process. Hopefully it will be implemented next year. And of course at the University, President Ana Mari Cauce is going to have to pay overtime to people who do not earn overtime presently, and we’ll hear that there is not money for it and it is going to put the whole institution in crisis, and everyone is going to blame Obama. But somehow it will all work out.
Additionally, my colleague David Rolf, president of SEIU 775NW, and I published a piece in a policy journal titled “Shared Security Shared Growth” which laid out a shared security system that integrates a whole bunch of the ways employees and businesses interact, to benefit society.
I am a big believer in a liberal arts education and it has served me well, but we have to create an economy where people with liberal arts degrees, who don’t somehow magically become successful technology entrepreneurs, can lead a great life. And when that is done, you are going to have a lot of people who want to be liberal arts majors.
The rate at which society is changing increases exponentially over time, because technological innovation is what drives change, and innovations create other innovations. Technological innovation is the source of all human prosperity, because it is what allows us to solve the problems that we face. Human prosperity is best understood as the accumulation of solutions to human problems. Technological innovation is not always a good thing—like napalm is not a good thing. But in general we want lots of innovation, and in general the more innovation you have, the more disruption you have, becaseu innovation creates change. The rate of change in society is rapidly increasing and that is problematic because the change rate is now faster than a generation.
Centuries ago you would have the same career as your parent, grandparent, and great-grandparent, and you would be a butcher, say, for generations. Then with the industrial age, people worked in factories and their children would also work in a factory, but the type of factory would change. Our parents had life-long careers but we are not likely to follow the same career path as them. That cycle is going to accelerate to two to four times in the life of someone that is graduating today. The premium on education is not what you learned, but whether you learned how to learn. That needs to be the job of a higher learning institution, to enable people to learn. That’s different than what we teach sometimes, and we need to set up more civic structures to give people the space, money and time to learn to think. Continuous learning is very important—every 10 or 20 years it feels like you need to go back and get some new skills. It is almost like you need to go to college twice, after high school and then 20 years later for a year or two, to recalibrate and take your life in a new direction to get where the world is going. Particularly since you have no idea where it is going—you could not guess 20 years ago that something like YouTube was going to be invented and a whole new industry would be created around it.
Your work on gun control in Washington State has been very successful, but gun control on the national level has not been successful. Many people have commented that since nothing has been done nationally since Sandy Hook, that tragedies like Sandy Hook have become an acceptable part of our culture.
I don’t agree with that. I think important social change never comes from the top. Marriage equality did not happen because the U.S. Senate felt it would be righteous. All important social change bubbles up from the bottom. In the same way, the technological process is an evolutionary process, in which you have to try many things until something works, and off it goes. Civic and social change is the same. It is an experimental and evolutionary process. Local places are where that innovation happens. On one hand, the federal government is super-dysfunctional and should get more done. On the other hand, there is great wisdom in experimenting locally and proving that these things work and letting people catalyze action across the country and allowing it to bubble up to the top. Marriage equality is a great example. Look at any social change in history and it worked like this.
There is a terrible problem of gun violence in our country and there are a lot of things that contribute to that culturally. The Senate is not going to change that culture. We are going to have to do it state by state, and community by community, so the things we helped start in the states will be the path to victory, long-term. We will not need to depend on the US Senate to all of a sudden do the right thing. My partner Zach Silk and I authored a national state base strategy, where you stop fighting in the Senate and start fighting in the states, and then transition from massive defense to offense, and stop fighting over the Second Amendment and start fighting over public health. And if you do those two things, you go from a ‘can’t win’ situation to a—pretty much—‘can’t lose’ situation. We were the first state to take on the NRA in an initiative and we kicked their asses 60 – 40. In this cycle, five states are running initiatives, and what that means instead of the NRA getting to use their 20 million dollars wherever they choose, they are pinned in five states with potentially 30 million dollar opposition budgets facing them in each state. The NRA only spends 20 million, but now they have 150 million dollars facing them in addition to the 20 million that they thought they were going to spend on Senate races. Hopefully, in the next cycle, we will be in 10 states. And this is how you win. We are moving in the right direction, and it will take a while, but I believe it will sort itself out, and we will win and the world will be a better place.
Do you believe it is just the NRA or a cultural issue?
There is a cultural issue at play but powerful political actors are stoking that culture. If you take young men—or men in general—and you economically disenfranchise them, they get pissed and they look for ways to equalize, and guns turn out to be a good way. For as long as there have been humans, disenfranchised men have sought weapons. We have created this economy that disenfranchises people and in addition, the world is changing ethnically, demographically, and economically, and these changes scare people. They are angry and guns are one expression of this. In my opinion, if everybody felt that they were thriving, you would have a lot less guys who felt they had to carry a pistol everywhere. It is all connected. All of our efforts are to try and create civic and political institutions that include more people and help them feel enfranchised. Because when you do that, things happen for the better. I am feeling very optimistic about gun control, but it is going to take a long time.
My group, Civic Ventures, is exploring opportunities to do things on climate change. A highly functioning society makes sure the pace of civic and social innovation matches the rate of its technological innovations. We are always looking for opportunities to make that happen. When a region grows fast like ours, we have the problems of a fast-growing region—like traffic, housing and public transportation. These are good problems to have, and we’re excited to work on them.
How do you see ideas as part of this process?
Ideas are everything, and that is not just because I have a philosophy degree. My collaborators and I all agree that ideas shape how people view the world and thus what they want and prefer. You cannot change the self-interest people have, but you can change where they see their self-interest lies. It is almost impossible to change human nature but you can change how they connect the dots. If you say, ‘we should change the minimum wage to $15 an hour because we feel really sorry for those people, and it’s mean to pay them less,’ most people think, ‘my life sucks too, so no.’ But if you say, ‘if we pay those people $15 an hour, they would be able to buy things from your store and you would not have to pay taxes for their food stamps,’ they change to ‘yes—we should do that.’ Just showing that their self-interest lay with making sure those people were ok too is the idea that makes all the difference. It’s all about getting people to think in new ways.
Thank you so much for your time Nick. We look forward to seeing where Civic Ventures and your ideas lead us, now and in the future.