All Commentary
Wednesday, July 25, 2018

How Kylie Jenner Is Changing the Face of Entrepreneurship

A 20-year-old near-billionaire without a college degree is in the process of dismantling decades worth of bunk economic theories crafted by those long on degrees, but short on common sense.

Entrepreneur Kylie Jenner started Kylie Cosmetics two years ago with a $29 lip kit, and as Forbes reports, “has sold more than $630 million worth of makeup since.” Jenner owns 100 percent of a company that Forbes conservatively estimates is worth $800 million. Jenner is on track to become the youngest self-made billionaire ever.

Kylie Jenner Epitomizes the Modern Entrepreneur

Even more exciting is how Jenner did it. Her sizable net worth isn’t an effect of a large company with copious amounts of human and physical infrastructure. The latter helps explain why she owns 100 percent of it. Start-up costs were low. She has just seven full-time and five part-time employees. Manufacturing and packaging, along with sales and fulfillment, are all outsourced.

Jenner’s story will upend much of what was already worthless economic theory, including the broadly held view that growth causes inflation.

The path to a billion is smoother in the age of social media. As Jenner explained it to Forbes, “I have such easy access to my fans and customers.” Unlike past entrepreneurial endeavors reliant on immense costs related to marketing, Jenner’s got that taken care of through her 115 million Instagram followers and a Snapchat following that exceeds Instagram. Simply stated, the feverish investment and subsequent economic growth that brought us the Internet has rendered the productivity of the individuals who understand it exponentially greater than what prevailed before. 

This is a major reason why I argue in my new book, The End of Work, that Millennials will be the richest generation in the history of the richest nation in the history of the world. That is, until Jenner’s generation eclipses the Millennials. The young understand the technology best.

After that, and without a hint of hyperbole, Jenner’s story will upend much of what was already worthless economic theory, including the broadly held view inside the economics profession that growth causes inflation. No. Investment powers growth, and as Kylie Cosmetics reminds us, it leads to technological advances that reduce the cost of starting and running a business along with the cost for consumers when it comes to buying from said business.

But this piece is not about the never serious Phillips Curve. Today’s column will briefly focus on the deficit hawks, demographic worriers, and anti-inequality thumbsuckers whose emotions increasingly blur the policy discussion. Rest assured that this isn’t a Democrat versus Republican thing. Goodness, both sides are well populated by those who write from the proverbial fetal position as they offer up their various scenarios of doom that have long been loudly mocked by market signals.

There’s No Real Reason for Doom and Gloom

First up are the deficit hawks. One could conservatively fill many Rose Bowls with this crowd. Deficit hawks (they can be found among politicians, pundits, and everywhere one looks within the electorate) tell us that the national debt of $20 trillion, along with unfunded liabilities of the Social Security and Medicare variety (thus bringing what Treasury owes into the hundreds of trillions) promise to bring the U.S. to “national fiscal ruin.”

Funny about all this gloom is that markets have long disagreed. Amid breathless predictions of fiscal doom from the chattering classes, the investors with actual skin in the game have continued to line up in order to buy U.S. debt.

Jenner’s lightning-fast path to wealth tells us why forward-looking investors aren’t worried about looming “national fiscal ruin.”

To be clear, none of what’s been said should be construed as a defense of all the federal waste. Readers will find none of that here simply because the waste is sick-inducing. Think about all the advances in health care, transportation, and media that haven’t taken place so that Congress could destroy so much of the wealth always and everywhere produced in the private sector. Thought of in terms of Jenner, absent all this waste it’s safe to say that Instagram and Snapchat would already be old news from a technology standpoint.

The main thing here is that the spending is the problem, while the borrowing amounts to a distinction without a difference. Either way, the wealth is consumed in non-market fashion to our detriment. Debt is accounting. That’s it. And the debt is going to be very easy for Treasury to pay back as evidenced by the interest rate investors charge Treasury to borrow.

Jenner’s lightning-fast path to wealth tells us why forward-looking investors aren’t worried about looming “national fiscal ruin.” The taxable wealth that will be created in the future is going to make present wealth look quite small by comparison, thus shrinking the relative size of national debt with it.

Demographics worriers tie looming “national fiscal ruin” to a slower pace of baby-making in the U.S. Given their static view of the human capacity to produce, they fear that a shortfall when it comes babies will not only make paying off the federal debt an impossibility, but that this same lack of babies foretells much slower growth in the future. Demographics worriers are Phillips Curve alarmists turned inside out. Both sides presume that the U.S. is an economic island as opposed to being a very integrated part of a global whole.

Technology Is Changing Everything, and That’s a Good Thing

Back to reality, birthrates don’t matter. If anything, they’ll go lower in the developed world alongside rising growth. Jenner’s story tells us why. Though she’s based in California, her social media presence quite literally has her everywhere. Technology means that she can access the world’s labor force and the world’s production capacity, all from her mother’s kitchen table.

Technology means the talented can reach more and more people with fewer and fewer people in their employ, and with fewer and fewer dollars.

Years ago, and in a variety of other columns mocking the conceit of demographics worriers, it was noted here that, in modern times, Jeff Bezos could start Amazon in a retirement community so connected are the world’s producers. Jenner’s achievements vivify the previous truth. Technology means the talented can reach more and more people with fewer and fewer people in their employ, and with fewer and fewer dollars. This is called productivity, and it’s something the demographics worriers never considered as they predicted (and predict) doom.

Which brings us to inequality. Members of the right laughably claim it results from a low Fed funds rate and “crony capitalism,” while members of the left claim it results from policies that impoverish the masses to the betterment of the very few. They’re both hopeless. Jenner’s immense wealth is a reminder that technology is the happy driver of surging inequality as the talented are able to meet the needs of more and more people. 

Inequality is a happy effect of the “death of distance,” and it’s excitedly going to grow in exponentially greater and faster fashion so long as the gloomy on each side don’t use their favorite tool (policy) to lay a wet blanket on what’s brilliant.

For now, readers should cheer Kylie Jenner. This will sicken members of the economics profession, but her rise (and that of others like her) is set to discredit decades worth of their theories.

Reprinted from Forbes.

  • John Tamny is Director of the Center for Economic Freedom at FreedomWorks, a senior economic adviser to Toreador Research & Trading, and editor of RealClearMarkets.