Interview: George Gilder on Knowledge and Power

“Wealth is essentially the accumulation of knowledge,” George Gilder tells me in our new interview. “It requires that government get out of the way, that government not be a noisy force in the economy, distracting entrepreneurs from their creative purposes toward government goals and government distractions.”

In his new book Knowledge and Power, the veteran technology author and futurist writes, “Socialists believe their mission is to seize capital for the masses. But the great secret of capitalism is that, detached from a capitalist, there is no capital.”

As Gilder adds during our interview, “You know, we have the same material resources that the cave man, the Neanderthals in their caves had the same natural resources that we have today.  The difference is the knowledge that’s accumulated.”

Regarding Knowledge and Power and its author, last month Ralph Benko of Forbes noted:

George Gilder, whose new book publishes today, is one of the original pillars of Supply Side economics. As stated by Discovery Institute, which he co-founded, “Mr. Gilder pioneered the formulation of supply-side economics when he served as Chairman of the Lehrman Institute’s Economic Roundtable, as Program Director for the Manhattan Institute….”

He was the living writer most quoted by President Reagan. And he is back with his most brilliant work yet — one of potentially explosive importance if taken to heart by our political and policy thought leaders. It is a radical guide, with surprising insights on almost every page, to the creation of a new era of vibrant prosperity.

After writing his best-selling Wealth and Poverty Gilder most notably spent decades traveling down various rabbit holes into, and thoroughly exploring, technological Wonderlands. He has been an essential guide to the technological cornucopias that immensely enrich our lives. He personally surfed the tech bubble and experienced, very up close and personally, its pop. Gilder is a veteran of the ecstasy and agony of entrepreneurship: a player, not a spectator. Gilder’s Knowledge and Power: the Information Theory of Capitalism and How It Is Revolutionizing our World is his finest work, which is saying a lot.

During our interview with Gilder, we explore:

● What is the information theory of capitalism?

● Was the overreach by Obama and Congress beginning with the 2008 financial crisis something unique or just another example of government rapaciousness?

● Why would an Obama crony describe insurance firm AIG as “evil,” when it’s a word that’s anathema for the left when it comes to describing al-Qaeda  and other terrorists?

● Can the once-Golden State overcome what Gilder calls “California debauch” and the heavy handed over-regulation of Sacramento?

● Gilder was an early proponent of the World Wide Web. Do the reports that the NSA is spying on us via the Internet put a damper on his early visions?

And much more. Click here to listen:

(18 minutes long; 16.7 MB file size. Want to download instead of streaming? Right click here to download this interview to your hard drive. Or right click here to download the 3.13 MB lo-fi edition.)

If the above Flash audio player is not be compatible with your browser, click on the YouTube player below, or click here to be taken directly to YouTube, for an audio-only YouTube clip. Between one of those versions, you should find a format that plays on your system. (Note, there are a few telephone line dropouts from about the 5:30 to 8:30 mark in the interview, at which time the interference on the line clears up.)

[jwplayer config=”pjmedia_eddriscoll” mediaid=”64961″ width=”300″ height=”200″]

Transcript of our interview begins on the following page; for our many previous podcasts, start here and keep scrolling.

MR. DRISCOLL:  This is Ed Driscoll for PJ Media.com, and we’re talking with technology author and futurist George Gilder, His latest book is titled Knowledge and Power: the Information Theory of Capitalism and how it is Revolutionizing our World. It’s published by Regnery, and available from Amazon.com and your local bookstore. And George, thank you for stopping by today.

MR. GILDER:  Glad to be here.

MR. DRISCOLL:  George, we should probably start with the title of the book.  What is the information theory of capitalism and who pioneered it?

MR. GILDER:  Well, I — I pioneered it.  But information theory was developed by Claude Shannon to explain networks, to define information, so it was possible to gauge the capacity of infor — of channels or networks or telecommunications systems to bear information.  And Shannon defined information as unexpected bits, as surprise, essentially.

And ever since I wrote Wealth and Poverty, years ago, I’ve been looking for a way to incorporate entrepreneurial creativity, which always comes as a surprise to us, into economic models.  And writing about telecommunications technology and about the Internet, I discovered Claude Shannon’s works and saw that he defined information as surprise.  And so what we have is this vast theory that underlies all the most productive industries in our economy, all the information tools that enrich our lives in so many ways, that that very same theory also is perfectly aligned with a capitalist economy.

MR. DRISCOLL:  For those who haven’t heard of him, can you talk a little bit about who Claude Shannon was?

MR. GILDER:  Well, Claude Shannon is one of the great figures of our history.  He was an engineer at MIT and Bell Labs.  And his job was to explain how you can build vast networks to transmit information around the globe in the face of noise and interference and other obstacles to communication.

And essentially what I do is take Claude Shannon’s theory and apply it not to transmission of information across wires and across the electromagnetic spectrum and wireless devices, but across the world, entrepreneurial ideas transmitted across the world in the face of resistance and government interference.

MR. DRISCOLL:  Shortly after Barack Obama won in November of 2008, Time magazine created a Photoshopped cover which featured him as Franklin Roosevelt, complete with jaunty cigarette holder, and the words “The New, New Deal.”  Which really set the antediluvian tone for this administration. What is it about the diversified high-tech free market that seems so anathema to Obama and his cronies?

MR. GILDER:  Well, the knowledge in our economy is distributed in people’s heads.  And the sophisticated knowledge that underlies our technology is concentrated in the minds of a few thousands or hundreds of thousands of people around the world.  And in order to unleash this knowledge and convert into wealth, which — and wealth is essentially the accumulation of knowledge — it requires that government get out of the way, that government not be a noisy force in the economy, distracting entrepreneurs from their creative purposes toward government goals and government distractions.

MR. DRISCOLL:  Even before Barack Obama took office, did we see some early signs of this government overreach from the Democrat Congress during the 2008 financial crisis?

MR. GILDER:  Oh, well, we saw it — we’ve seen it throughout the history of economics.  We’ve — we’ve seen government overreach.  Power tends to be centripetal.  You know, it’s concentrated in government bodies, while knowledge is dispersed and in the minds of citizens.  And in order to have a productive economy, you have to align the knowledge with the power.

And — but this sounds — this is good news, really, because it means that it’s easy to produce massive economic growth.  Removal of government obstacles is all upside.  And in my book, I have many examples of how the dismantling of government regulatory bodies — government interference, unleashes tremendous (indiscernible) of growth.

After the Second World War, for example, we cut our government spending sixty-one percent, dismantled all the regulatory apparatus of wartime.  We laid off 150,000 government regulators and about a million civilian government employees, and cut tax rates massively by creating the joint tax return and other retrenchments.

And the result predicted by Paul Samuelson, a Keynesian leader of the time, would be a new massive great depression, the worst dislocation in the history of economics, according to Samuelson.  Instead, we got a new golden age.  We look back on the ’40s — the late ’40s and ’50s as a wonderful economic period, ten years of superb economic growth and progress.

MR. DRISCOLL:  And I have to ask you one other question about the 2008 financial crisis. In Knowledge and Power, you quote Austan Goolsbee during that period referring to the insurance firm AIG, and saying that “It’s almost like these guys should have gotten the Nobel Prize for evil.” Funny how it would be far too gauche for an Obama administration figure to call al-Qaeda or another Middle Eastern terrorist group “evil,” but they have no problem using that word to describe a financial firm, don’t they?

MR. GILDER:  Yeah.  Well, I’d say — you know, the tremendous — the cause of the financial crisis was crony socialism.  All these banks were kind of converted into excrescences of government by overreaching government policy designed to promote mortgages, to guarantee deposits, to channel funds to favored recipients and crony businesses, and — the whole financial crisis came from the exercise of government power suppressing the knowledge inherent in free markets and entrepreneurial companies.

But if you guarantee — if there’s a government guarantee, it’s not a capitalist entity and can’t generate knowledge.  Knowledge is dependent on events that are viable, that can fail.  If they can’t fail, then they can’t succeed, and they actually reduce wealth rather than expand it.

MR. DRISCOLL:  There’s a wonderful moment in Knowledge and Power, where you write, “Socialists believe their mission is to seize capital for the masses. But the great secret of capitalism is that, detached from a capitalist, there is no capital.” Could you talk about that, along with the two socialist economists who dominate that chapter, John Maynard Keyenes and Paul Krugman?

MR. GILDER:  Yeah.  Well, socialism and regulation are essentially the exercise of government power to countervail the pursuit of knowledge by entrepreneurs and private citizens.  And the suppression of knowledge is tantamount to the suppression of wealth.  And capitalism works because the knowledge of the capitalist is combined with the power to reinvest his profits.  And if the profits are taxed away, the knowledge that they symbolize is eclipsed by government power.

And that’s why the New Deal didn’t work, why the Obama stimulus package didn’t work, why socialism always fails, because it divorces the knowledge that isn’t like wealth or an analogy to wealth, but actually constitutes the wealth of an economy.

You know, we have the same material resources that the cave man, the Neanderthals in their caves had the same natural resources that we have today.  The difference is the knowledge that’s accumulated.

MR. DRISCOLL:  George, Knowledge and Power has a chapter called “California Debauch.” What is it about Sacramento that makes it feel so stacked against anyone running a business, large or small in the once Golden State?

MR. GILDER:  Yeah.  Well, it’s — it’s really sad.  I mean, as I put it in the book, the venture capitalists of Silicon Valley are sicklied over by a pale cast of green goo.  The whole governmental and elite structure of California has taken over and is suppressing the knowledge of the California economy, which was once the leading economy in the entire world, the pioneers of all the new technologies that — that endow our information economy.

And now Silicon Valley has essentially moved to Israel.  Now, all the major American companies get their chief innovations, not in Silicon Valley, but in Tel Aviv and Haifa and Netanya and Migdal Ha’emek in Israel, from Cisco to Microsoft to Johnson & Johnson to Monsanto, all the great American companies — Intel, Paramount — all get their key innovations from Israel.  And our defenses are increasingly dependent on advances that are made in Israel.

MR. DRISCOLL:  Are there industries that at first glance seem moribund that could benefit from learning from the tech sector?

MR. GILDER:  I mean, all — all businesses are ultimately knowledge businesses.  And you know, agriculture is being transformed by biotech.  Pharmaceuticals are being transformed by the discovery that human — the human is not chiefly a physical and chemical system; it’s an information system, just as the economy is an information system.  And a human body is a programmable platform.

And a company I write about in the book actually, in the acknowledgements of all places, is — and other companies in Israel, are pioneering the use of economy as an informat — the human body as an information system that — with trillions of ribosomes that can produce any enzyme or protein that is needed.

MR. DRISCOLL:  George, your earlier books predicted a dazzling future for the Internet, which on the one hand, has come true beyond its inventors’ wildest dreams. But on the other, how much do the reports that the NSA is spying on us via the Internet put a damper on those early visions?

MR. GILDER:  They’re a great vindication of our information technology.  The NSA leads the world in computer capabilities and using the innovations that are supplied by information technology companies all around the world.  And they use computers to pore through vast quantities of data, looking for signals of terrorist threats.

And this is a great function of government.  The government is supposed to defend us.  And it doesn’t invade our privacy at all.  Our privacy’s invaded when police knock on our door and disrupt our lives and — but — or terrorists lay bombs in our path.  Our privacy is not violated by computers churning through data to find signals of terrorism.

MR. DRISCOLL:  George, I wanted to ask you about one of your earlier books, and then we’ll start to wrap things up. Over 20 years ago you wrote Life After Television. Given how badly the TV industry is struggling against the Internet these days, how is the diagnosis you predicted back then shaping up?

MR. GILDER:  It’s shaping up wonderfully.  You know, Life after Television really had an influence on this transition.  I mean Steve Jobs read it and handed it out to friends.  And Ari Emanuel, who’s a friend of mine, believe it or not, and colleague in a business venture, read it, and it affected his future.

Many leaders in television have benefited from Life after Television.  It was one of my most influential and successful ideas. It predicted worldwide webs of glass and light before the worldwide web was coined.

MR. DRISCOLL:  George, last couple of questions. given the environmental obsessions of the Obama administration and its acolytes in states such as California, what is the future for an energy industry needed to power a — hopefully! — growing American economy?

MR. GILDER:  Well, I believe the energy crisis is over.  You know, in the last year, the Germans have just abandoned their alternative energy projects.  And Germany was the world leader in pioneering the subsidy programs that California and other American states and the federal government have emulated.

And after eighty billion dollars and tremendous mandates and subsidies in German, solar energy still supplies less than one percent of their total energy.  And they’ve now launched twenty-three new coal-fired plants.

So it’s all over now.  And it’s just a matter of getting these troglodytes out of government.  I mean, we have these people who would literally want to suppress energy production dominating our government today in the United States; and they just have to be thrown out.  They — they’re — the — you know, our government’s been taken over by climate cranks and weather bores.  And it’s just got to stop.

MR. DRISCOLL:  So in general, what is the prognosis of the author of Knowledge and Power, for the future of capitalism?

MR. GILDER:  I think it’s great.  We’ve got more capitalists around the world than ever before in human history.  And they’re going to — going to lead the world into a new golden era of capitalism.  I hope the United States will turn around fast enough to join the party.

MR. DRISCOLL:  Well, I certainly hope you’re right. This has been Ed Driscoll for PJ Media.com, and we’ve been talking with George Gilder about his new book, Knowledge and Power: the Information Theory of Capitalism and how it is Revolutionizing our World. It’s published by Regnery, and available from Amazon.com and your local bookstore. And George, thank you once again for stopping by today.

MR. GILDER:  Thank you.  That was great.

(End of recording; for our many previous podcasts, start here and keep scrolling.)

Transcribed by eScribers.net, with minor revisions (including hyperlinks) by Ed Driscoll. Artwork created using images by Shutterstock.com.