<div class="KonaFilter image-container display-table float_right"><div><div class="image on-image">Dan Kitwood/Getty ImagesFireworks light up the London skyline and Big Ben just after midnight on January 1, 2014 in London.</div></div></div>Payment processing company Worldpay had London's biggest stock market listing of the year so far this week - and it's a huge moment for fintech, short for financial technology.Worldpay was valued at £4.8 billion ($7.4 billion) when shares listed on Tuesday, and the stock price popped over 3% on the opening day.The reception of the listing could cement London's reputation as the fintech capital of Europe, if not the world. If London can prove its public markets "get" fintech it could herald a wave of floats here.<h2>'We expect to see more multibillion-dollar events'</h2>Worldpay's listing coincides with a bit of a "moment" for fintech. The sector has become the <a href="http://uk.businessinsider.com/these-2-simple-slides-show-just-how-hot-fintech-is-right-now-2015-5">latest hot area for venture capital investment</a>, with money pouring into everything from peer-to-peer lending marketplaces (Funding Circle, Prosper) to bond market technology (Algomi).Worldpay makes payment terminals and does payment processing for businesses. But most in the fintech sector don't regard Worldpay as a fintech business.It started out as innovative - the company was one of the first to offer internet payment services back in 1994 - but Worldpay was bought by Royal Bank of Scotland (RBS) in 2002 and quickly became pretty corporate. It was spun out of RBS as part of the bank's state bailout in 2009 and bought by private equity groups Advent International and Bain Capital.Fred Destin, a partner at VC firm Accel Partners, told Business Insider: "It's a large card processor - we don't really see it as a fintech like [Swedish card reader maker] iZettle or [Dutch payment processor] Adyen or Accel-backed Braintree [an online payment processor]. But it's a relevant, comparable, and clearly great to see a large IPO coming to the <keyword id="6354868" type="COUNTRY" weightage="60" keywordseo="UK">UK</keyword> market "While Worldpay may not be seen as fintech by many close to the sector, traditional public market investors may well lump it in with newer businesses. Yann Ranchere, finance director of fintech-focused investment group Anthemis, told Business Insider: "For European fintech startups, especially UK ones, it's probably one of the best indication of appetite for listings in the UK market.""For London, the saying had historically been that one of the constraints for startups was on later stage and liquidity events so having a sizable IPO is a good validator."Despite its best efforts, the London Stock Exchange failed to capitalise on the tech boom of recent years, with companies like Candy Crush maker King choosing New York over London.Just Eat became the first to join the newly created "High Growth Market" specifically set up for tech businesses when it IPO'd last year, but quickly moved to the main market instead.Ranchere says: "Obviously Worldpay has a different profile than startups in terms of growth trajectory/multiple but as they announced they will do substantial investment in technology (important use of IPO proceeds). They are a significant data point."The London Stock Exchange knows it's good business to pull in fintech and trumpeted Worldpay as a fintech float in an email announcing its success this week. If Worldpay can demonstrate the UK stock market understands and supports financial technology businesses, it could mean plenty more business down the line.<div class="KonaFilter image-container display-table float_right"><div><div class="image on-image">Index VenturesIndex Ventures' Jan Hammer.</div></div></div>Jan Hammer, a partner at VC firm Index Ventures who has backed firms like TransferWise and Adyen, told Business Insider: "The IPO demonstrates that payments is a mega large space, and that omni-channel is the direction things are going. We expect to see more multibillion-dollar events over the next few years."There are already two homegrown fintech companies worth more than $1 billion (<a href="http://uk.businessinsider.com/interview-with-funding-circles-samir-desai-and-sam-hodges-2015-10">Funding Circle</a> and <a href="http://uk.businessinsider.com/transferwise-58-million-andreessen-horowitz-2015-1">TransferWise</a>) and there are plenty coming up behind it.London's play for fintech also comes at a time when US markets so far haven't nailed it. Peer-to-peer lending platform Lending Club has been the highest profile IPO in the US and <a href="http://uk.businessinsider.com/lending-club-q4-earnings-2015-2">shares have fallen over 35% since the company listed at the end of last year</a>.If Worldpay can avoid the kind of stock price pit falls of Lending Club, companies will have to seriously think about whether London could be a better option than one of the US markets.Square, the high-profile card reader and payment processing company set up by Twitter's Jack Dorsey, <a href="http://uk.businessinsider.com/square-files-for-ipo-2015-10">this week filed documents to go public in the US</a>. How that float goes could be a defining moment for fintech in the US.<h2>'It's good for fintech to have an independent potential partner'</h2>There are other benefits to the fintech "ecosystem" from Worldpay going public too. Dan Cobley, <a href="http://uk.businessinsider.com/ex-google-uk-md-dan-cobley-on-brightbridge-ventures-2015-7">CEO of fintech VC firm Brightbridge</a>, told Business Insider: "It's good for fintech to have an independent scale player outside of the big banks as a potential partner."One such partner is Trustly, a Swedish online payment company that this week expanded to 21 new European countries including the UK.Johan Nord, Trustly's chief commercial officer, told Business Insider over email: "The company [Worldpay] has long been a driver in the fintech payments industry and is helping to establish alternative payment services to consumers and merchants across Europe as well as further afield."Worldpay is more than happy to work with fintech payment startups like Trustly - in fact, the company sees it as good for business.When I <a href="http://uk.businessinsider.com/worldpay-to-list-on-london-stock-exchange-2015-9">spoke to </a><a href="http://uk.businessinsider.com/worldpay-to-list-on-london-stock-exchange-2015-9">Worldpay's chief product and marketing officer Kevin Dallas earlier this year</a> he told me: "What you actually have is the whole payment landscape is becoming more complex, not less. The value that someone like Worldpay can bring is helping them navigate that."So the fintech startups there are, the more complex it gets, the more business for Worldpay.We could look back on Worldpay's stock market listing in a few years and see it as the point fintech in London kicked up a gear. To have a £4.8 billion FTSE 100 goliath batting for the sector is huge. <div class="margin-top"> <h3>NOW WATCH: <a href="http://www.businessinsider.com/pablo-escobar-cocaines-biggest-kingpin-life-death-2015-9">Pablo Escobar: The life and death of one of the biggest cocaine kingpins in history</a></h3> <div> <div> <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="phNnBrdzpKXE2oFtDyJRVBKwhim_ZHgP" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div> </div> </div> </div>

The &#163;4.8 billion float of the year is a pivotal moment for fintech in London

<div class="image-container display-table"><div><div class="image">AP"Are you kidding me?!"</div></div></div>
On Dec. 12, House Speaker <keyword id="51016" type="PERSON" weightage="60" keywordseo="John-Boehner">John Boehner</keyword> finally conveyed the bewildered sentiment that so many <keyword id="66537" type="ORGANIZATION" weightage="60" keywordseo="Republicans">Republicans</keyword> shared as far back as August. 
Speaking at a press conference where <a href="http://www.businessinsider.com/boehner-conservative-groups-budget-deal-heritage-club-for-growth-2013-12" target="_blank">he said outside conservative groups have "lost all credibility,"</a> Boehner referenced comments that <a href="http://www.buzzfeed.com/dorsey/heritage-action-ceo-to-fox-news-we-cant-repeal-obamacare-unt" target="_blank">Heritage Action CEO Michael Needham made</a> toward the end of October's federal government shutdown - one that Boehner suggested Republicans were pushed into by the "defund Obamacare"-happy outside conservative groups. 
"Everybody understands that we will not be able to repeal this law until 2017," Needham had told Fox News - as in, repeal isn't possible until a Republican is in the White House. To Boehner, that was a tacit admission that these groups knew their strategy was unworkable. 
"Are you kidding me?!" he bellowed on Thursday. 
A House GOP leadership aide told Business Insider on Thursday that for Boehner, the frustration has been building for the past three years.
But what <a href="http://www.businessinsider.com/budget-deal-boehner-conservative-groups-heritage-club-for-growth-2013-12" target="_blank">motivated Boehner to speak up so forcefully over the past two days</a> was the conservative groups' criticism of the <keyword id="6358021" type="PERSON" weightage="60" keywordseo="budget">budget</keyword> deal brokered by Rep. Paul Ryan (R-Wis.) with Sen. Patty Murray (D-Wash.). Boehner noted in his comments that that much of that criticism came before the deal was made public. 
"When you criticize something and you have no idea what you're criticizing, you've lost your credibility," Boehner said. 
Boehner didn't mention them by name, but four influential conservative groups have denounced the budget deal for busting the discretionary spending caps set under sequestration - Heritage Action, Club for Growth, Americans for Prosperity, and FreedomWorks. 
Dan Holler, a spokesman for Heritage Action, dismissed Boehner's criticism that the groups were pre-emptive. 
"No one close to this deal was surprised by our opposition or the timing of our opposition," Holler said. "This is a completely fabricated narrative."
One by one, the groups pushed back against Boehner's comments. Barney Keller, a spokesman for the Club for Growth, pointed to a statement Club President Chris Chocola issued on Wednesday, when Boehner engaged in his first round of criticism against the groups. 
"We stand with Marco Rubio, Ted Cruz, Tom Coburn, Rand Paul, members of the Republican Study Committee and every other fiscal conservative who opposes the Ryan-Murray deal," Chocola said. "After carefully reviewing the budget deal, on which we never commented until it was complete, we determined that it would increase the size of government. We support pro-growth proposals when they are considered by <keyword id="1575" type="ORGANIZATION" weightage="60" keywordseo="Congress">Congress</keyword>. In our evaluation, this isn't one of those."
FreedomWorks President Matt Kibbe responded by questioning Boehner's credibility. 
"Speaker Boehner may not care about what fiscally conservative groups do, but grassroots Americans still care about what he's doing in Washington," Kibbe said. 
"When it comes to 'credibility,' actions speak louder than words. And right now, it looks like the Speaker is leading the charge for spending increases and recruiting Democrat votes in the House to help get it done."
Many Republicans on and around Capitol Hill wondered why Boehner didn't go on the offensive two or three months ago, when leadership went along with the "defund Obamacare" push that eventually led to the government shutdown. 
One Republican congressional aide complained in September that Cruz, the leader of the "defund" movement in the Senate, didn't have a real strategy beyond expecting President Obama to sign a rollback of his signature legislative achievement in a fancy, Rose Garden ceremony. 
Kevin Madden, a GOP strategist who worked on the Romney campaign, said he thinks Boehner knows that the shutdown has changed things. Republicans have improved their standing in public polls so quickly because of the disastrous rollout of the Affordable Care Act, to the <a href="http://www.businessinsider.com/poll-2014-congressional-ballot-obamacare-gop-democrats-2013-11" target="_blank">point where they are back to being favored on generic congressional ballots</a>.
It's clear, Madden said, that Boehner doesn't want to risk that goodwill with another shutdown-type situation precipitated by those groups.
"Boehner's sending a signal that some of the tactics favored by outside organizations in the past didn't work and he's prepared to do things differently," Madden said.
"The last few months he was more than willing to work with members in the conference who felt differently, but the shutdown changed things. Boehner won't allow a winning 2014 debate framed around Obamacare get lost in another shutdown."
<div class="image-container display-table"><div><div class="image"><a href="http://www.nowthisnews.com/news/john-boehners-gif-able-moment/">NowThis News</a></div></div></div>

Why The GOP Civil War Just Exploded Out Into The Open - Again

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<a href="https://commons.wikimedia.org/wiki/Category:Suffragettes#mediaviewer/File:Opposed_to_suffrage.jpg">Quadell / Wikimedia Commons</a>
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</div></div>The economics blogosphere is atwitter over an interesting thought experiment: Is it better to be middle class today, or much more wealthy in an earlier time.
Here's <a href="http://econlog.econlib.org/archives/2014/12/why_debates_ove.html">Professor Scott Sumner</a>:
OK, so ask a millennial whether they'd rather live today on $100,000/year, or back in 1964 with the same nominal income. ... I recall getting cavities filled in 1964, without Novocaine. Not fun. No internet. Crappy TVs, where you have to constantly move the rabbit ears on top to get a decent picture. Lame black and white sitcoms ... Now against all that is the fact that someone making $100,000/year in 1964 was pretty rich, so your social standing was much higher than that income today. So it's a close call ... In which period does $100,000 buy more happiness? We don't know.
And <a href="http://marginalrevolution.com/marginalrevolution/2014/12/comparing-living-standards-over-time.html">Professor Tyler Cowen</a>, commenting on Sumner:
I say I prefer $100k today to $100k in 1964... But here's the catch: would you rather have net nominal 20k today or in 1964?&#xa0; I would opt for 1964, where you would be quite prosperous and could track the career of Miles Davis and hear the Horowitz comeback concert at Carnegie Hall.
And with a slightly different hypothetical, <a href="https://ello.co/weisenthal/post/r97JRqTaTeeSgvDaTM-BPQ">Bloomberg's Joe Weisenthal</a>:
Would you rather be middle class in the United States now, or be in the top 1% of income in 1900? I used to always think the answer was clear, that you'd rather be middle class now with all of our modern wonders. But now I'm not sure, and in fact I increasingly lean the other way, that relative wealth is the name of the game ... Relative wealth confers clear benefits. Relative wealth is likely to come with power and status and other things that humans strive for.
Before you get too nostalgic for the past, the problem with all of these is that they evaluate economic choices assuming a linear societal structure (working backward).
Only one group of people has had a consistent level of respect and rights over the past 115 years. Coincidentally, it's a group to which all the authors above belong.
For them, perhaps, being wealthy in an earlier era would have brought power and prestige (also, still a world without <a href="http://content.time.com/time/health/article/0,8599,1940525,00.html">toilet paper</a>). For the rest of us - anyone who is not a white, heterosexual male - asking about utility in the early 20th century is a nonstarter. Money doesn't mean much when you don't have freedom of choice.
Let's consider just a slice of what life was like for women and African-Americans in these two eras:
<h2>In 1900</h2>
This was the era of Jim Crow. There were <a href="http://www.english.illinois.edu/maps/poets/g_l/lynching/lynching.htm">more than 100 lynchings</a> in the US. Just four years earlier, the Supreme Court upheld legal segregation in Plessy v Ferguson. Wealth doesn't make up for systematic disenfranchisement.
Women did not even nominally have the right to vote. Birth control was illegal. As a wealthy women, life probably would not have been unpleasant, but would still probably be largely controlled by the men around you.
<h2>In 1964</h2>
For women, life was much better but still not great (I refer you to "Mad Men"). Would you rather be Betty Draper than middle class in 2014?
At the same time, the civil rights movement was heating up. Segregation was still institutionalized. Consider this piece from <a href="http://www.theatlantic.com/features/archive/2014/05/the-case-for-reparations/361631/">Ta-Nehisi Coates' essay</a> on the case for reparations:
From the 1930s through the 1960s, black people across the country were largely cut out of the legitimate home-mortgage market through means both legal and extralegal. Chicago whites employed every measure, from "restrictive covenants" to bombings, to keep their neighborhoods segregated.
What is the point of being wealthy if society doesn't allow you to choose how you spend your money?
Nostalgia is useful only for those with freedom of choice in the past in question. And that is a very small group indeed. By all means, they should think about it - it's indeed an interesting economic question - but also consider the experience of those whose experience might be different.
For another view, the ello user @richdhw had this really smart comment on Weisenthal's original post:
This raises a big problem I have with these sort of questions: we could imagine an impersonal version: was group of people x happier/better off etc. than group y according to some criteria. Or you can ask whether a person in group y would want to be in group x. They're not nearly the same question. In this case, given the actual preferences of group y (i.e. ppl alive today) I think we can all agree no one would choose to go back to 1900. So, then we start abstracting away certain facts about ourselves, like desire for modern technology/medicine, beliefs about what constitutes a good life etc. And what quickly happens is you lose all grip on this being a question on what "you" would rather do. It rather reminds me of Rawls' veil of ignorance, and one of the major (and I think correct) criticisms of it as an intellectual device is that there's no principled basis to decide what should be put behind the veil of ignorance, or what decision criteria you should use to adjudicate the different possibilities. And what happens is that what does or does not get put behind the veil ends up being to do with what answer you are trying to get.
<h3> NOW WATCH -&#xa0;<a href="http://www.businessinsider.com/china-airlines-new-luxury-jets-los-angeles-taiwan-2014-12">Here's The Latest Airline With An Insanely Fancy Business Class</a></h3>
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<h3><a href="http://www.businessinsider.com/china-airlines-new-luxury-jets-los-angeles-taiwan-2014-12"></a></h3>

It Says A Lot About You If You Think Being Rich In The Past Is Better Than Being Middle Class Today

The entire list and a brief profile of 'Delhi ke nirmata'⁠— the makers of Delhi felicitated at Kejriwal's oath taking ceremony

A Harvard Business School professor says that it might be a good idea to shut down Facebook or Google for 'a day or a week in order to show that it is democracy that rules here'

<div class="KonaFilter image-container display-table float_right"><div><div class="image">REUTERS/Mahmoud Hebbo People ride on a motorbike past damaged buildings in Bustan al-Basha district in Aleppo April 6, 2014. Picture taken April 6, 2014. </div></div></div>A THOUSAND years ago, the great cities of Baghdad, Damascus and Cairo took turns to race ahead of the Western world. Islam and innovation were twins. 
The various Arab caliphates were dynamic superpowers--beacons of learning, tolerance and trade. Yet today the Arabs are in a wretched state. Even as Asia, Latin America and Africa advance, the Middle East is held back by despotism and convulsed by war.
Hopes soared three years ago, when a wave of unrest across the region led to the overthrow of four dictators--in Tunisia, Egypt, Libya and Yemen--and to a clamour for change elsewhere, notably in Syria. But the Arab spring's fruit has rotted into renewed autocracy and war. Both engender misery and fanaticism that today threaten the wider world.
Why Arab countries have so miserably failed to create democracy, happiness or (aside from the windfall of oil) wealth for their 350m people is one of the great questions of our time. What makes Arab society susceptible to vile regimes and fanatics bent on destroying them (and their perceived allies in the West)? No one suggests that the Arabs as a people lack talent or suffer from some pathological antipathy to democracy. But for the Arabs to wake from their nightmare, and for the world to feel safe, a great deal needs to change.
<h3>The blame game</h3>
One problem is that the Arab countries' troubles run so wide. Indeed, Syria and Iraq can nowadays barely be called countries at all. This week a brutal band of jihadists declared their boundaries void, heralding instead a new Islamic caliphate to embrace Iraq and Greater Syria (including Israel-Palestine, Lebanon, Jordan and bits of Turkey) and--in due course--the whole world. Its leaders seek to kill non-Muslims not just in the Middle East but also in the streets of New York, London and Paris.
Egypt is back under military rule. Libya, following the violent demise of Muammar Qaddafi, is at the mercy of unruly militias. Yemen is beset by insurrection, infighting and al-Qaeda. Palestine is still far from true statehood and peace: the murders of three young Israelis and ensuing reprisals threaten to set off yet another cycle of violence (see "Israelis and Palestinians: A vicious circle speeds up again"). Even countries such as Saudi Arabia and Algeria, whose regimes are cushioned by wealth from oil and gas and propped up by an iron-fisted apparatus of state security, are more fragile than they look. Only Tunisia, which opened the Arabs' bid for freedom three years ago, has the makings of a real democracy.
Islam, or at least modern reinterpretations of it, is at the core of some of the Arabs' deep troubles. The faith's claim, promoted by many of its leading lights, to combine spiritual and earthly authority, with no separation of mosque and state, has stunted the development of independent political institutions. A militant minority of Muslims are caught up in a search for legitimacy through ever more fanatical interpretations of the Koran.
Other Muslims, threatened by militia violence and civil war, have sought refuge in their sect. In Iraq and Syria plenty of Shias and Sunnis used to marry each other; too often today they resort to maiming each other. And this violent perversion of Islam has spread to places as distant as northern Nigeria and northern England.
But religious extremism is a conduit for misery, not its fundamental cause (see "The Arab world: Tethered by history"). While Islamic democracies elsewhere (such as Indonesia--see "Indonesia's presidential election: Competing visions") are doing fine, in the Arab world the very fabric of the state is weak. Few Arab countries have been nations for long. The dead hand of the Turks' declining Ottoman empire was followed after the first world war by the humiliation of British and French rule.
In much of the Arab world the colonial powers continued to control or influence events until the 1960s. Arab countries have not yet succeeded in fostering the institutional prerequisites of democracy--the give-and-take of parliamentary discourse, protection for minorities, the emancipation of women, a free press, independent courts and universities and trade unions.
The absence of a liberal state has been matched by the absence of a liberal economy. After independence, the prevailing orthodoxy was central planning, often Soviet-inspired. Anti-market, anti-trade, pro-subsidy and pro-regulation, Arab governments strangled their economies. The state pulled the levers of economic power--especially where oil was involved. Where the constraints of post-colonial socialism were lifted, capitalism of the crony, rent-seeking kind took hold, as it did in the later years of Egypt's Hosni Mubarak.
Privatisation was for pals of the government. Virtually no markets were free, barely any world-class companies developed, and clever Arabs who wanted to excel in business or scholarship had to go to America or Europe to do so.
Economic stagnation bred dissatisfaction. Monarchs and presidents-for-life defended themselves with secret police and goons. The mosque became a source of public services and one of the few places where people could gather and hear speeches. Islam was radicalised and the angry men who loathed their rulers came to hate the Western states that backed them.
Meanwhile a vast number of the young grew restless because of unemployment. Thanks to the electronic media, they were increasingly aware that the prospects of their cohort outside the Middle East were far more hopeful. The wonder is not that they took to the streets in the Arab spring, but that they did not do so sooner.
<h3>A lot of ruin</h3>
These wrongs cannot easily or rapidly be put right. Outsiders, who have often been drawn to the region as invaders and occupiers, cannot simply stamp out the jihadist cause or impose prosperity and democracy. That much, at least, should be clear after the disastrous invasion and occupation of Iraq in 2003. Military support--the supply of drones and of a small number of special forces--may help keep the jihadists in Iraq at bay. That help may have to be on permanent call. Even if the new caliphate is unlikely to become a recognisable state, it could for many years produce jihadists able to export terrorism.
But only the Arabs can reverse their civilisational decline, and right now there is little hope of that happening. The extremists offer none. The mantra of the monarchs and the military men is "stability". In a time of chaos, its appeal is understandable, but repression and stagnation are not the solution. They did not work before; indeed they were at the root of the problem.
Even if the Arab awakening is over for the moment, the powerful forces that gave rise to it are still present. The social media which stirred up a revolution in attitudes cannot be uninvented. The men in their palaces and their Western backers need to understand that stability requires reform.
Is that a vain hope? Today the outlook is bloody. But ultimately fanatics devour themselves. Meanwhile, wherever possible, the moderate, secular Sunnis who comprise the majority of Arab Muslims need to make their voices heard. And when their moment comes, they need to cast their minds back to the values that once made the Arab world great.
Education underpinned its primacy in medicine, mathematics, architecture and astronomy. Trade paid for its fabulous metropolises and their spices and silks. And, at its best, the Arab world was a cosmopolitan haven for Jews, Christians and Muslims of many sects, where tolerance fostered creativity and invention.
Pluralism, education, open markets: these were once Arab values and they could be so again. Today, as Sunnis and Shias tear out each others' throats in Iraq and Syria and a former general settles onto his new throne in Egypt, they are tragically distant prospects. But for a people for whom so much has gone so wrong, such values still make up a vision of a better future.
Click <a href="https://subscriptions.economist.com/nwcd">here</a> to subscribe to The Economist

A Civilization That Used To Lead The World Is In Ruins - And Only The Locals Can Rebuild It

A top Democratic senator opens up on why Hillary lost, how Democrats can counter Trump, and why the Russia investigation is just getting started

<h3>From Keynes to "Star Trek" to the modern world.</h3><div class="KonaFilter image-container display-table"><div><div class="image on-image">Star Trek</div></div></div>The shadow of Keynes is never far away when debating economics in science fiction. It is probably because Keynes understood all too well that economics and science fiction were joined at the hip. Their province was the future, in general, and the future of society, in particular. That is why Keynes engaged in a bit of science fiction himself, as a direct rebuke to his fellow Englishman, popular author, inventor of modern science fiction and erstwhile radical, H.G. Wells. To this day, his brief but incredibly prescient article, The Economic Possibilities for our Grandchildren, sets the terms of the debate. In that short opus, published in 1930 (in the opening round of the Great Depression), Keynes observed that what he called ''the economic problem' would be solved in less than a century. In his view, that economic problem, the compulsion to make choices in the face of scarcity, had been humanity's great affair since the beginning of history. Thanks to the miracle of compounding growth, society would soon reach a point where hitherto unfathomable abundance would become the norm rather than the privilege of a few.Keynes had the intuition that human actions, our desires, our wants, our motivations, would be profoundly altered as a result. Overcoming the economic problem would condemn to obsolescence the entire panoply of economic behaviors that shaped our existences. Utility maximization and rational choice in the marketplace would no longer provide a usable premise for the dismal science's computations.<div class="KonaFilter image-container display-table"><div><div class="image on-image"><a href="http://www.flickr.com/photos/3im10/6109751319/">3IM10 via Flickr</a>Keynes got this one right.</div></div></div>The Economic Possibilities of our Grandchildren belongs to science fiction because of that anthropological leap. It very much describes the psychology of science fictional characters such as the forever famous Mr. Spock, whose unflappable logic is only matched by his stoicism and his absolute disregard for earthly pleasures. Economic competition is utterly meaningless to Mr. Spock. He has a much more interesting mission in life, exploring the galaxy. As far as humans are concerned, Keynes' predictions are in fact very close in spirit, if not to the letter, to Star Trek's vision of a plentiful, post-scarcity society - what I call <a href="https://www.inkshares.com/projects/trekonomics">Trekonomics</a>.Even more pointedly, if we take a step back from Hollywood's romance of space travel, with its gizmos and its aliens, we may soon come to the rather disquieting realization that we already live in Keynes', and therefore Star Trek's, cornucopia. It is, however, a local and limited version of it. Economic bliss is just very unevenly distributed, to paraphrase science fiction grandmaster William Gibson.The evidence is all around us. First, over the past three centuries, Europe and North America have escaped the tyranny of nature. This escape from necessity was painstakingly documented by the great economic historian and Nobel laureate Robert Fogel. He coined a term for this process: "techno-physio evolution." Fogel collected data about people's heights and weights over time. He concluded that rising prosperity, brought on by capitalism and the industrial revolution, had negated the worse effects of resource scarcity and adverse natural conditions. The augmentation of human labor by science and machinery had led to unprecedented gains in health and longevity in the West. The same could be observed in today's South Korea, for example, which zoomed from the most abject poverty to one of the most advanced and wealthy countries in the world in less than half a century.But that is not all. At a more basic level, we have indeed solved Keynes' nagging "economic problem," the struggle for subsistence. According to the World Bank and the USDA, in advanced economies, the share of household income devoted to food expenditures (both at home and away from home) is considerably smaller than in poor countries. This chart produced by the Gates Foundation is telling:<div class="KonaFilter image-container display-table"><div><div class="image on-image"><a href="http://www.gatesfoundation.org/who-we-are/resources-and-media/annual-letters-list/annual-letter-2012">Gates Foundation</a></div></div></div>Keep in mind that in the developed world, a good half of food expenditures are in essence discretionary (spent on restaurants and on-the-go snacks). For all intents and purposes, in developed countries Keynes' so-called "economic problem" has been overcome, and then some. The amount of calories available to the average US or UK consumer is well above the daily recommended 2000/day: the cost of maintaining our biophysical functions is now marginal.Food availability and healthy bodies are but proximate indices of the effects of techno-physio evolution. Our current state of plenty, at least in the developed world, goes well beyond nutritional safety. It could be said that the wealth of our nations - public health and public infrastructures, education, safety and good governance - is also a direct consequence of techno-physio evolution. Our cornucopia, however local and unevenly distributed, has even started to transform our most fundamental behaviors. While there is an entire industry devoted to exposing the excesses of the rich and famous, these excesses are by nature very limited. Paroxystic consumption and competitive destruction of wealth are not only frowned upon, but also they are not widespread activities even among the most fortunate. If anything they are legacy behaviors, nothing but symptoms of a profound psychological difficulty to adapt to radically improved economic conditions. All in our programming, millennia of evolution, compel us to struggle for subsistence. Yet, as Keynes suggested, these inherited skills and learned habits are now largely useless.As a consequence of techno-physio evolution, we are witnessing the emergence of properly post-economic behaviors. These include the kind of social activities that have strong positive externalities but are not easily accounted for with the usual metrics and leading indicators. Andrew McAffee and Erik Brynjolfsson have attempted to quantify the economic value of mass online gift-giving such as Wikipedia or Google (whose search results improve as its user base grows, thanks to beneficial network effects). They come up with about $400B per year for the U.S. alone. Another oft-overlooked example is the invention of TeX by mathematician Donald Knuth in 1978. TeX is a free software package that allows computers to correctly render mathematical formulas. By giving it away, Knuth essentially hastened the demise of the scientific publishers' monopoly on the dissemination of knowledge. From the early 80s onwards, anybody with a computer could compose and print their scientific papers, and thus distribute them widely. TeX is at the heart of ArXiv.org, the largest repository of pre-publication scientific articles: every scientist in the world can post their research on ArXiv.org and give and get feedback. In the same vein, the combination of TeX and the internet enabled the rise of open-source, peer-reviewed scientific journals such as PLoS (the Public Library of Science). PLoS went from 138 published articles in 2006, to more than 30,000 in 2014. All the works are published under the Creative Commons License, which allows for free use by third parties with proper authorial attribution. Free software has indeed allowed for an exponential intensification of scientific exchange. Donald Knuth, an unsung hero and benefactor of humanity, could have become a billionaire many times over had he turned TeX into a commercial software product. Instead, he let the benefits of his invention accrue to all. Similarly, but perhaps in a more pedestrian way, the rise of social media has created new spaces for exchange in which competition revolves around the accumulation of followers as social currency. Reputation, the recognition of one's peers, is fast becoming a strategic asset. From the halls of academia to the darkest recesses of Reddit, people from all walks of life now share ideas and products of their imagination in order to establish their worth in the eyes of the world. A parallel, non-monetary economy is developing right in our midst, and we barely notice it as we ourselves are active and engaged participants.These new forms of sociability and of non-monetary exchanges lead to the inescapable conclusion that our species might not require that much re-engineering. Once general automation finally devalues most goods and makes most luxuries uninteresting as status signals, there will still be plenty to compete for. The very definition of status is already shifting towards the more abstract and the more elevated. Instead of collecting objects and financial resources, one will be compelled to accumulate public prestige and beneficial achievements. In time, with Keynes' "economic problem" behind us, we might all become like the richest man in the world, Bill Gates, who lives forever beyond need and thus has the freedom and the drive to change the world for the better. In some small ways, we already are.<a href="https://www.inkshares.com/projects/trekonomics">"Trekonomics" </a><a href="https://www.inkshares.com/projects/trekonomics">by Manu Saadia</a> is currently available for preorder at Inkshares. <div class="margin-top"> <h3>NOW WATCH: <a href="http://www.businessinsider.com/buddhist-matthieu-ricard-real-happiness-2015-7">'The happiest man in the world' explains what makes someone truly happy</a></h3> <div> <div> <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="9zMDZndjrs5y7ocx86mPXQ_Qvqa-hCP0" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div> </div> </div> </div>

We've entered the era of sci-fi economics - as Keynes predicted 85 years ago

Bill Gross just published his latest investment outlook letter, his first since joining Janus Capital in late September. 
The always enigmatic Gross writes about a decades-long stretch without dancing with his wife, which somehow leads into the financial markets. 
As for what Gross sees as his opportunity running an "unconstrained" fund at Janus, "it allows a professional and experienced investment firm like Janus to select the most attractive alternatives across many asset categories while hopefully diminishing the risk of bond and stock bear markets."
Here's the full text:
<h1 class="spaced-bottom-medium border-bottom">You Only Dance Twice</h1>
No marriage ever seems totally complete. There is a missing link in almost all of them. Picture perfection belongs only in fairy tales and when it happens it almost always comes at the end of the story, when the princess kisses her frog prince and they live happily ever after. My 30-year marriage with Sue has been one of those - me the frog and she the princess - but never one of ultimate completion or fulfillment - until now. Happy as we were for all those years, there was always something missing, a trivial last puzzle piece to be sure, but a noticeable one nonetheless, at least to me:
We had never danced!
Although we had figuratively waltzed through those three decades, I had from time to time wondered about the actual dancing. Oh, there had been the perfunctory wedding box-step in front of a gawking audience of 40 or so, but nothing much ever since. Blame it on me or Sue, or both of our reluctances to make fools of ourselves. Yet every so often Sue had hinted of her "disco" years before we had met - the flowing skirts, the Travolta "Stayin' Alive" twirl - and somehow I felt that the missing link must somehow be me. Young Bill, as I explained to her during frequent missed dancing opportunities through the years, had taken ballroom dancing in the fifth grade and had learned to do a pretty fancy "bop" step as well. Yet somehow I never took the final step, the one where you ask your partner to dance!
That all changed on September 2, 2014 - the day Sue asked me to dance! Maybe it was that extra vodka martini on her side of the table, maybe, as she said later that night, it was my "fluffy hair" or maybe it was just the fated last piece of a puzzle coming together on the perimeter of what to me has been a uniquely wonderful marriage. Whatever. We danced!
I must tell you though that this was no ordinary dance. She - the ex-Disco Queen - and I the young student of Arthur Murray, strutted, boogied, discoed with moves that neither of us thought we could ever do - sober or even mildly inebriated. We dipped, we twirled, I even did a bop or two. Travolta would have been proud. We were "Stayin' Alive!" Most of all, however we smiled! Not the perfunctory smile of our self-conscious wedding dance three decades before, but big, huge, free-flowing grins of having fun - real fun on a dance floor!
Midnight came as it does in most fairy tales, but I wondered no more what I had missed in the years before we had met and the 30 years since. My puzzle was complete. Sue had asked me to dance, and it turned out to be just like a fairy tale. Picture perfect.
Picture perfection or fairy tale endings do not describe the global economy or even its financial markets more than five years after its Minsky/Lehman moment. While U.S. bond and equity markets have been thrust into a seemingly safe outer orbit, the same cannot be said for other developed and developing nations. Many economies in turn have entered or are bordering on recessions with limited monetary firepower remaining to promote real growth. The dancing has begun to resemble the last stages of a 1920s marathon with partners clinging to each other in a desperate attempt to keep from falling down. The Charleston is a faded memory from yesteryear and the long ago apparition of the "Great Moderation." What are policy makers, and more to the point, investors to do?
I have the following tough love advice - somewhat resembling the counsel given to me in recent weeks: there is a new financial era. Accept it and modify your behavior accordingly, so that your future is safe, secure, and you look forward to a brighter tomorrow. I will explain.
Financial markets are artificially priced. In the bond market, there is nothing normal about a three year German Bund yielding a "minus" 10 basis points. Similarly, UK Gilts and U.S. Treasurys have in recent years never experienced such low yields and therefore high prices. The same comparison can be applied to stocks. While profits in many cases are at record highs, the discounting of future profit streams by an artificially low interest rate results in corresponding high P/E ratios. Real estate cap rates, which help to price homes and commercial shopping centers, are affected in the same way. While monetary policy with its Quantitative Easing and forward guidance for low future interest rates have salvaged a semblance of growth and job gains - especially in the U.S. - they have brought prosperity forward in the financial markets. If yields can't go much lower, then bond market capital gains are limited. The same logic applies in other asset categories. We have had our Biblical seven years of fat. We must look forward, almost by mathematical necessity, to seven figurative years of leaner: Bonds - 3% to 4% at best, stocks - 5% to 6% on the outside. That may not be enough for your retirement or your kid's college education. It certainly isn't for many private and public pension funds that still have a fairy tale belief in an average 7% to 8% return for the next 10 to 20 years! What do you do?
Well the obvious advice on a personal level: Retire later, save more, accept a revised standard of living. But the financial advice varies with your age and willingness to take risk. Younger investors with a Texas Hold'em "all in" attitude could push all of their chips onto the equity table. Boomers nearing retirement probably cannot afford to. A lengthy bear market could force them permanently out of the game. So, one size does not fit all here. It never has.
What might be applicable for most generations, however, is an "unconstrained strategy" that I managed well for the past few years at PIMCO and which now provides me the opportunity for 100% of my time at Janus. An unconstrained strategy sounds very open-ended, and it is. But it allows a professional and experienced investment firm like Janus to select the most attractive alternatives across many asset categories while hopefully diminishing the risk of bond and stock bear markets. The strategy seeks to protect principal while providing an acceptable return in this low yielding, low returning world that I have just described. Unconstrained investors should expect a shorter average maturity for bonds; an ability to profit from currency movements currently taking place with the euro and the yen fits the description as well; taking advantage of what is known as "optionality" and investing in what I have successfully applied in the past with what is called "structured alpha," would be an important component too. The simple explanation of an unconstrained strategy:
Take your best ideas within the context of a low duration/short maturity portfolio and try to help investors achieve what they consider to be an acceptable return. Watch the fees as well.
Whatever your risk/return persuasion, whether it be stocks, bonds, unconstrained, real estate, or "other," an "intelligent investor" (as initially described by Benjamin Graham in the late 1940s) should be aware that returns almost necessarily cannot equal the magnificent prior decades that some of you might have experienced during my days at PIMCO. But I/we look forward, with the same intensity and "client comes first" attitude that led to my second marriage at Janus. James Bond famously said that "you only live twice." I hope to emulate Mr. Bond as Janus Denver and Janus Newport Beach link hands and ideas to improve your financial balance sheet, and ultimately provide a better life for you and your family. Perhaps you only dance twice too. Sue and I would like that.
-William H. Gross
In addition to his latest investment outlook, Gross also published a letter addressing his move to Janus and why he left PIMCO.
Here's the full text of that letter:
Dear Friends,
Dancing, or better yet as the beginning of my Investment Outlook suggests, being asked to dance, seems to have become an important part of my life over the past month or so. Having first been asked by my wonderful wife, Sue, and now by Dick Weil and Janus from a business standpoint, I write to you today from my desk in a new Janus office in Newport Beach, California. I am excited to be here and to begin a new chapter of my career. Before I get on with the main business of markets and investing in the attached Investment Outlook, I am of course aware that my change of employment has raised a lot of questions. I hope that you will understand that I cannot answer all of your questions, but here is what I can share with you.
Let me address the most obvious question first: Why did I leave PIMCO? Had there been a reasonable way to continue there, I would have stayed to my last breath. I was honored by the trust of the millions of clients and thousands of employees over decades. They have been the center of my life's work. I am very proud of my record there for more than 40 years. PIMCO is a great firm with lots of great people, and Allianz was a fine owner for many years. But slowly and with great hesitation, I came to understand that it was time for me to leave. It happens sometimes to founders! But that is water under the bridge, as they say. I don't plan to address it further. Now let's talk about the future.
The second question on your minds may be "Why Janus?" My first professional loves were markets, investing and competing in that framework. I want to return to a simpler role, completely focused on markets, investment performance and serving my clients. It seems like a good time to turn away from the complexity of helping to run a huge firm. I have had a 20-year relationship with Janus CEO Dick Weil (10 of which include his working for me as PIMCO's Chief Operating Officer). When I asked him whether Janus might provide me with that simple opportunity, he responded with a very enthusiastic "yes" let's dance together. I am excited to work in a true partnership environment with people I trust. I want to help this team succeed. Most importantly, I want to continue to help clients achieve their goals. I am not ready to retire, so here I am.
I am focused on looking ahead. I have met some wonderful people at Janus, and I see great opportunities for the Janus Global Unconstrained Bond strategy. As a brand new strategy it is tiny, certainly compared to anything I have been used to in recent decades. But that opens the door to a lot of new strategies and opportunities to generate outperformance for my new (and hopefully many continuing) clients. I am also looking forward to working with my old friend and Nobel-laureate Myron Scholes on asset allocation and with the existing Janus fundamental, credit-based fixed income team. It is exciting for me, and I hope for you as well.
Although these changes are significant, the most important things have not and will not change. I am competitive as ever, and I expect to win for my clients. You can count on me to deliver my usual global macro insights and hopefully excellent portfolio management in the years ahead. So that's it. I look forward to serving you from my new seat at Janus.
Now, on to my first Janus Investment Outlook.
Sincerely,

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