Hillary’s Problem, Explained by Technology
The Family Papers #024
By Nicolas Colin (Co-Founder & Director) | The Family
There are different ways to explain politics. One is the popular way: voters are angry; they vote for the opposition; there’s a change of government. Another is the Aaron Sorkin way: voters are angry; their leader makes an inspiring speech; all wrongs are righted.
Neither explanation is really satisfying. We all sense that it is more complicated than that, with many invisible dynamics at work that could maybe explain some odd political phenomena. Why did FDR, the great liberal leader, do so much for the labor movement yet almost nothing for the civil rights movement? Why did once triumphant Democrats lose power for decades from 1968 onwards? And why on Earth did Donald Trump become the 2016 Republican nominee?
The ways in which politicians campaign, win elections and govern change over time. Much depends on factors such as demographics, ideology, leadership, campaign finance, the media, dominant corporate interests, and technology. As these factors evolve over time, the political system shifts from one paradigm to another. Over the course of a career, politicians themselves rarely survive these paradigm shifts. They can be greatly successful in one paradigm, then face insurmountable difficulties in another.
This is what is currently happening to Hillary Clinton. The fact that she grew up in a now fading political paradigm explains a great deal of why she’s not absolutely crushing Donald Trump in opinion polls. What’s the core of Hillary’s problem with the voters? Are there paradigmatic solutions to that problem? And who should she choose as her running mate in that respect?
The Investment Theory of Party Systems
In 1987, political scientists Thomas Ferguson and Joel Rogers published Right Turn: The Decline of the Democrats and the Future of American Politics.
Their book aimed to explain why the Democratic Party had such a hard time winning in the face of Ronald Reagan’s conservative revolution. Times have changed, obviously, as two two-term Democratic presidents — Bill Clinton and Barack Obama—have been elected since. But this book still presents a compelling framework that helps reveal the nature of Hillary’s problem as she faces Donald Trump. This framework is called the “investment theory of party systems.”
As explained by Right Turn’s authors, the US political system is best understood as a two-sided market. On one side are the voters, who provide votes. On the other are investors, who provide all the other resources that are necessary not only to win elections but to extract determined policy outcomes from the complex US political system.
What properly defines American party systems is not blocs of voters but patterns of interest-group alignment and coalitions among major investors.
In sharp contrast to the voter-centered analysis that lies behind older realignment theories, this “investment” approach to the analysis of partisan conflict attempts to incorporate into social-science theory a fact which most election analysis only rarely comes to grip with—that efforts to control the state, by voters or anyone else, cost heavily in time and money. Merely developing views about major issues of public policy, and evaluating the candidates who compete for electoral affections, costs a great deal. Formulating and implementing particular policy initiatives costs even more. Given the background inequalities in wealth, income, information, and access to decision-makers characteristic of most advanced industrial states, as well as the host of “collective action” problems that proliferate within them, these costs weigh particularly heavily on those with modest means. And while organization can compensate for background material inequalities, it itself requires major investments of time and money, and cannot be presumed. As a result, voter control of the state, while not zero, is likely to be uncertain and variable…
As a practical matter, then, the fundamental “market” for political parties in the United States is not individual voters. The real market for political parties is defined by major “investors”—groups of business firms, industrial sectors, or, in some (rare) cases, groups of voters organized collectively. In contrast to most individual voters, such investors generally have good and clear reasons for investing to control the state, and the resources necessary to sustain the costs of such an effort. These major investors define the core of the major parties and are responsible for sending most of the signals to which the rest of the electorate responds.
From the standpoint of such an “investment” theory, the rise and fall of American party systems is thus best analyzed by examining the rise and fall of investors blocs.
And this is exactly what this story is about. Technology—“software eating the world”—has radically changed the American political system from the perspective of investor blocs. Investors have changed, as well as the alliances they seal, the way parties court them, and the resources they invest in that weigh on the system and obtain given policy outcomes.
From the standpoint of Right Turn’s “investment theory”, American modern politics, starting with the 1932 presidential election, can best be told by dividing it into three eras. Each of these eras corresponds to a certain state of things, which in turn determines how campaigns are fought, how policy is implemented and which investors coalesce around a given party. Hillary’s problem is that she learned politics in the Second Era, while we’ve now long entered the Third Era—in which a different kind of politician, more resembling Barack Obama, Bernie Sanders and Donald Trump, thrives.
First Era: Machine Politics and Corporatist Coalitions
In the First Era, the main force at work in the system was a party organization that relied on the infamous political machines. Today’s machines, such as that depicted in the Boss TV series (set in modern day Chicago), are a mere shadow of their former selves. But those of you who’ve watched Boardwalk Empire (set in Atlantic City in the 1930s) are familiar with how political machines used to work in the old days.
Three things should be borne in mind when it comes to understanding political machines. First, they were run by bosses, such as the legendary ‘Boss Tweed’, ruler of Tammany Hall in New York City, Tom Pendergast, who launched Harry Truman’s fateful career in Kansas City, Missouri, and Enoch L. Johnson of Atlantic City, who inspired Boardwalk Empire. Second, political machines relied on the principle of patronage, or the “power to grant political favors”, to bond with individual voters and their community. Third, the old machines were all the more necessary because the welfare state didn’t exist at the time. To find a job and to cope during difficult times, you needed to join the machine and sell your vote (and that of your community) in exchange for favors and material support.
At a larger scale, entire territorial systems were tightly controlled by powerful, inescapable intermediaries whose mission, on behalf of the state, the district, or the city, was to bargain with power players at the federal level. In exchange for delivering votes for the party, local elected officials obtained federal money to facilitate patronage with their constituents as well as non-intrusion by the federal level in their own local business.
The way to aggregate the various local machines at the national level was to form loose electoral coalitions that aggregated different corporations around tailor-made coalition-building policies. The New Deal was just such a corporatist coalition. In November, 1947, the Clifford Memo, a legendary document known by every political strategist well-versed in history, reminded its readers (among them President Harry Truman) that…
… the Democratic Party is an unhappy alliance of Southern conservatives, Western progressives and Big City labor… The success or failure of the Democratic leadership can be precisely measured by its ability to lead enough members of these three misfit groups to the polls on the first Tuesday after the first Monday of November, 1948.
Western progressives supported policies such as the Glass-Steagall Legislation and the setting up of the Securities Exchange Commission (SEC). The labor movement delivered working class votes (blacks as well as whites) in Northern strongholds such as Chicago and Detroit in exchange for labor empowerment and social insurance programs. And Southern conservatives advocated free trade and demanded that they be left alone when it came to their cherished Jim Crow laws.
The opportunistic nature of the New Deal coalition explains why Roosevelt never interfered with civil rights issues—which casts a looming shadow on his legacy. The New Deal coalition was not formed around shared values. Rather it was designed for various corporations to serve their respective best interests. National policies had to be aligned with the interests of enough local machines to form a dominant coalition in the country. In particular, Roosevelt needed the support of the Southern Democratic caucus in the Senate to advance the New Deal’s economic and social agenda. The price to pay was to let Southern states practice segregation at home. There was no way for the federal government to step over those segregationists and their local machines and address the voters directly.
In this First Era, political investment took place at two different levels. At the local level, it took the form of influence (on local newspapers), muscle on the ground (mostly provided by unions), and the leverage of political machines that could bring about votes from all the communities come election day. This quote from Boss makes it clearer:
[Chicago Mayor Anton Cermak] was a bohemian, an immigrant… Working class… He utterly lacked charisma. But he had a gift. He understood people.
He was the first to force the Irish into sharing power with the other ethnicities. His “House for all peoples” he called it. From here [the rooftop of Chicago’s City Hall] he had an uninterrupted view of the whole thing, all 50 wards. North Side, Lincoln Square—the Germans; Northwest, Division and Ashland—the Polonia Triangle, as well as the Czechs and the Jews; West Side—the Italians; South Side—the Blacks; all the rest and in-between the Irish. These were tribes. They hated each other. They fought, maimed, killed and rioted against each other. Cermak weaved a thread through the lot of them and pulled them in forming the first truly dominant political force this country had ever seen.
And he did it because he understood something basic about all people—they want to be led. They want their disputes settled. They want their treaties negotiated, their jobs dispensed, their mutinies punished. And they want their loyalties rewarded. To those who lead them to all they want, they get power. It’s a covenant, unspoken and elemental. When a part fails… it needs to be fixed.
At the national level, investment came from empowered labor groups as well as from large businesses that had an interest in supporting FDR’s agenda, notably as it promoted free trade. As also written in Right Turn:
A new power bloc of capital-intensive industries, investment banks, and internationally oriented commercial banks constituted the basis of the New Deal’s great and virtually unique achievement — its ability to accommodate millions of mobilized workers amidst world depression. Because they were capital-intensive, firms in the bloc were less threatened by labor turbulence and organization. They could thus “afford” a coalition with labor, at a time when the costs of that coalition were, at least by American standards, high. Because most large capital-intensive firms were world, as well as U.S., pace-setters, they stood to gain from global free trade. They therefore allied themselves with leading institutional financiers, whose own minuscule work force presented few sources of tension, and who had supported a more broadly internationalist foreign policy and lower tariffs since the end of World War I. Together, members of this bloc provided the needed support for the two broad policy commitments — liberalism at home, internationalism abroad — centrally identified with the New Deal.
After FDR died in 1945, his heir Harry Truman took over and went on to unexpectedly win the 1948 presidential election. But that same year also marked the time when the New Deal coalition started to weaken, slowly bringing the First Era to its end.
A key factor was the collapse of the coalition’s Southern front. Harry Truman started to break ranks with fellow Democrats South of the Mason-Dixon line when he put an end to segregation in the military. From 1948 onwards, under the pressure of Northern liberals such as Hubert Humphrey of Minnesota and with the help of Southerners such as Lyndon B. Johnson of Texas and Supreme Court Associate Justice Hugo Black, the national Democratic Party increasingly sought to advance the civil rights agenda. The knots that had long tied the coalition together started to unravel.
Facing what they considered betrayal, Southern states saw an opportunity to break their alliance with the labor movement up in the North. They opted for a free riding strategy and started to attract businesses that defied workers’ unions and were eager to open factories in what came to be known as ‘right-to-work’ states. That shift was rendered even easier by the Taft-Hartley Act, enacted by a Republican-dominated Congress in 1947, which made a decisive contribution in weakening the once all-powerful labor movement. As free trade had gained bipartisan support anyway (much against the Robert A. Taft-led protectionist wing of the Republican Party), it was not necessary to bargain for free trade in exchange for union rights anymore. The divorce between Southern conservatives and Northern labor was settled for good.
A second factor was the weakening of the local political machines. In 1947, the aforementioned Clifford Memo detailed how…
… the old “party organization” control is gone forever. Better education, the rise of the mass pressure group, the economic depression of the 30s, the growth of government functions — all these have contributed to the downfall of the organization. Tammany, Hague, Kelley and the rest of the straight party leaders, while still important, are no longer omnipotent, no longer able to determine the issues. For practical political purposes, they are moribund; they cannot be relied on to do the job alone. They have been supplanted in large measure by the pressure groups.
The 1960 presidential election, won by Democrat John F. Kennedy, was the last fought in the era of machine politics and corporatist coalitions. The Kennedy family mostly invested its own money to all but ensure the victory of their favorite son. And the asset that they invested in was the ground organization to consolidate their grip on powerful local political machines such as Richard J. Daley’s in Chicago or the well-oiled political organization of Lyndon B. Johnson, Kennedy’s running mate, in vote-rich Texas.
The 1960 election paved the way for the final collapse of the New Deal coalition. The most dramatic policy of the day, that of civil rights, was not designed to consolidate the New Deal coalition. On the contrary, it directly contributed to breaking it — and Lyndon Johnson knew it all too well, as he famously declared in 1965 that his own administration had “delivered the South to the Republican Party for a long time to come.”
Incidentally, the 1960 presidential election was also the first in which a new breed of media played a prominent role in determining the outcome. As voters watched television, a relative newcomer in their suburban living rooms, they saw John F. Kennedy exude confidence and optimism while his opponent, the anxious Richard Nixon, mostly exuded off-putting sweat.
The role television played in determining Nixon’s narrow defeat in 1960 offered a glimpse at the dynamics of a new era. With television, and the advent of mass media in general, a new way of communicating with the voters emerged. Instead of sealing alliances with intermediary political machines at the periphery, now you could communicate directly with the voters. The rise of mass media contributed to centralizing political investment instead of disseminating it throughout political machines all over the country. It led the US political system into the Second Era of modern politics, that of mass media and big money donors.
Second Era: Mass Media and Big Money
It took time before political operatives realized the power of mass media in circumventing the political machines of the First Era. Television, radio broadcasting and national newspapers weren’t invented in the 1960s, of course. FDR himself had used his famous fireside chats to address a national audience on a weekly basis. Yet instead of using mass media to redraw the political map, he mostly addressed the listeners with the goal of cementing his pre-existing, machine-based coalition. Up through 1960, politicians still had not yet discovered that mass media could have a transformative rather than a marginal effect on coalition building and election winning.
Progress was made with the 1964 presidential election. A few years after the Cuban Missile Crisis, the Cold War and Kennedy’s assassination in 1963 had fueled national sentiment. Advertising agencies on Madison Avenue were in full swing. 1964 was the year when advertising and sound archive legend Tony Schwartz designed the famous “Daisy Ad” to try and picture Barry Goldwater, Lyndon Johnson’s Republican opponent, as a trigger-happy warmonger. Johnson himself was not at his best on TV: ill-at-ease, lacking charisma, trying to project a fake presidential solemnity. But he crushed Goldwater in November of that year and seized the opportunity presented by a national consensus to make historical inroads such as the Civil Rights Act of 1964 and, in the following year, the installation of the Medicare program. You could be forgiven for thinking that the Democratic Party was about to tighten its grip on US politics for several more decades.
That was without counting on a semi-retired Republican veteran who was observing the situation from the sidelines, soon spotting the opportunity of a radically changed political system to retake the stage. Only four years later, in 1968, Richard Nixon won the White House back for the Republican Party. Suddenly, geography counted less. Overcoming his party’s historical weakness in the South, Nixon successfully implemented a so-called Southern strategy, which built on the white backlash against desegregation. Nixon-led Republicans bypassed the local Democratic Party organization in Southern states and courted those conservative Democrats who they invited to join the “silent majority” of disgruntled middle class voters. To address the massive American middle class, they needed mass media. As depicted in The Selling of the President, Nixon and his team became the first to master it.
As the electorate morphed into a mass, as opposed to separate communities tied together by local political machines, the US witnessed the rise of individualism. Individualist values were shared by people as different as the counter-culture activists who rioted on campuses in 1969 and the middle class voters who joined Nixon’s silent majority in 1968 and 1972. Another signal of the rise of individualist values was the unprecedented passion for personal computing, which was described by early computer scientists such as Doug Engelbart as a formidable way of empowering individuals against collective organizations. Almost 30 years before Robert D. Putnam published “Bowling Alone: America’s Declining Social Capital”, American voters had begun to free themselves from the intermediary bodies that had shaped the political system of the previous era.
In turn, the weakening of intermediary bodies and the correlated polarization of the political system between the mass and individuals triggered a chain reaction.
On the left, it prompted the Democratic Party to get rid of its organization’s traditional intermediate layers and to make the voters themselves the sole decision makers in future presidential primaries. The McGovern-Fraser commission designed and imposed the primary system as we know it today, marking the final demise of political machines. From 1972 onwards, collectively organized groups became marginal and elections became about politicians addressing voters directly by way of mass media.
On the right, the rise of individualism inspired fear for the future of capitalism. US business leaders saw intermediary bodies as critical to a well-functioning free-market economy. Among them was Lewis F. Powell, then an informal advisor to the US Chamber of Commerce (soon to become a Supreme Court Associate Justice), who in 1971 went on to write a memorandum titled “Attack on American Free Enterprise System.”
The ‘Powell Memo’ detailed how America’s business interests could use many levers, including mass media, lobbying and university faculty, to impose a business-friendly conservative agenda onto the electorate and the political system as a whole. It prompted a vigorous follow-up reaction from the business community. As detailed by Jonathan Chait in The Big Con, the ‘Powell Memo’ inspired the foundation of many pro-business think tanks as well as the gripping of much of the mass media by conservative interests and the spectacular development of the lobbying sector on K Street in Washington, DC. In turn, the conversion of the conservative right to the Second Era paradigm helped it attract a new breed of investors, big corporate donors. Their money served two purposes: setting the agenda through the conservative idea-and-influence machine, and buying the votes by way of massive exposure on the media, notably television.
While Democrats, somehow misled by left-wing activists, bet on bottom-up grassroots politics, the mastery of the new centralized political system by Republican-leaning political investors helped Republican presidential candidates trounce Democrats for more than 20 years—Jimmy Carter being the sole, brief exception. The Republican strategy for winning elections followed a well-mastered playbook: reliance on core conservative voters, who were mostly recycled Democratic voters from the South; big corporate money to help advance the pro-business agenda in Washington, DC; massive media exposure to sway voters away from the Democratic Party by playing on sensitive issues such as crime (Nixon), taxes and welfare (Reagan), national security and gay marriage (George W. Bush).
The burst of big money in national politics helped scale up that powerful Second Era machine based on television, advertising, K Street lobbying firms, and conservative think tanks. It all contributed to setting a national agenda based on three core principles: strong defense, lower taxes, less government. The size of the political market and the amount of investment increased in impressive proportions, with power concentrated on one side, the investors’ side, while voters were easily influenced and manipulated. Big donor money was enough to set the agenda, secure the votes, win elections and implement pro-business conservative policies.
A key element to understanding Hillary Clinton’s politics is the context in which she entered national politics in the early 1990s. Her problem derives from what she learned during that era and has failed to unlearn ever since.
When the Clintons set foot onto the national stage, they had to play by the book of the time—that of the Second Era. Like their Republican opponents, they had to raise big money from corporate donors, if only because the key was to buy exposure to influence voters through expensive mass media. The Democratic Party organization on the ground couldn’t compete anymore without it. Hence the Clintons’ close ties with Wall Street and the rise of the fundraisers as major political operatives: think, for instance, of Terry McAuliffe (current governor of Virginia) or Rahm Emanuel (former White House chief of staff, now the mayor of Chicago), both former Clinton operatives. Hillary Clinton made those infamous speeches at Goldman Sachs because this is what Democrats had to do in the 1990s to raise big money. Traditional supporting groups such as unions had lost most of their power, so Democrats were reduced to making friends with Wall Street bankers and Hollywood moguls if they wanted to match all-powerful Republicans.
Another thing, though, set the Clintons apart from most donor-courting Democratic politicians. In the 1980s, they realized that they had to counter-attack not only on courting big donors and appearing on television, but also on setting up the national agenda. The New Democrats’ policy agenda was meant to neutralize the Republican central machine’s influence on voters and erect an ideological barrier to stop pro-business conservatives from framing the national conversation. That barrier was a mix of progressive reform and outright moderation. If you were a Democrat in the Republican-dominated Second Era, you could only succeed by being a centrist: this was the key to containing the powerful conservative agenda-setting effort. This legacy explains Hillary’s caution and moderation, which cost her a great deal as she opposed Bernie Sanders in the primary.
To be fair, when he became President, Bill Clinton wanted to do much more than just play defense. His 1993 healthcare reform, which was handled by Hillary herself, was partly designed to reclaim the offensive and build a larger long-term Democratic coalition. Polarization was an immediate consequence of the counter-attack that the Clintons led on behalf of the New Democrats. The Republicans sensed the clear and present danger (just read William Kristol’s 1993 memo on “Defeating President Clinton’s Health Care Proposal”) and responded with unprecedented brutality. As they realized that the Democrats had finally discovered how to become competitive again in the Second Era, they decided to fight not only on the voters’ side, with the impressive rise of a grassroots conservative movement, but also on the investors’ side, with the race to raise even bigger money.
In their rage, Republican leaders notably forced business interest groups to take sides. For instance, as detailed by Jacob S. Hacker and Paul Pierson in American Amnesia, the US Chamber of Commerce was brutally forced by the Republican leadership to relinquish its support for the Clintons’ healthcare reform—under the threat made by elected officials such as Newt Gingrinch or John Boehner that they would deprive the Chamber of its paying members, one company at a time. Agenda-setting was not just a Republican thing anymore. Moderate Democrats now had an attractive political offer, too, as well as the relationship with business investors (Wall Street and Hollywood) to effectively advocate for it. The result of this formidable confrontation between conservative Republicans and New Democrats was increased polarization.
From that point onwards, even mass media became polarized: there was the conservative media on one side (Fox News being the prime example), and the center-left moderate media on the other side. Only the left-wing fringe still tried to organize the national Democratic machine from the bottom-up, only to realize that neither the unions nor any other collectively organized advocacy group could provide money or muscle anymore. No grassroots progressive movement could take on that conservative national machine that was so powerfully fueled by big business investors. That is, none could until we started entering the Third Era.
Third Era: Technology-Driven Politics
The 2004 presidential election, marked by Howard Dean’s technology-driven grassroots campaign in the Democratic primary, was the last election fought in the Second Era. George W. Bush won it easily.
Remember, the entire political history of the Bush family can only be understood if you see them as a pure byproduct of that Second Era: very close to big business interests; extremely good at raising big money; fundamentally uninterested in non-business conservative issues yet willing to play the game of making friends with the NRA or proclaiming themselves strong enemies of abortion. In 2004, George W. Bush handily beat John Kerry with a downright Karl Rove-engineered Second Era playbook: big money, conservative agenda-setting, massive media exposure playing on targeted sensitive issues (national security, the war on terror, gay marriage).
Since then, all signs point towards a radical change of paradigm and the advent of a Third Era in modern US politics—one in which Second Era politicians such as Hillary Clinton have to radically adapt to a new set of rules. In the Third Era, voters have regained power and influence at the expense of corporate investors because they’re empowered by technology such as Facebook, Meetup, and NationBuilder. Like all users on all digital markets, they want to be better served. Only once you serve them well can you seal an alliance with them and access their resources, including money. Indeed with digital technology, you can create a whole user experience that makes it easier to collect large amounts from a multitude of potential voters.
In other words—and I can’t stress this enough—voters have become investors too, and now you have to court them as such. It’s not about collecting money on one side to buy votes on the other side anymore. Rather, it’s about collecting money on both sides and reconsidering what it means to enroll voters. You don’t buy their votes with TV ads anymore. Instead, you make them invest so they have a stake in your campaign’s success and become active in the effort to turn out the vote, which is all the easier as they’re experts at using technology. Indeed what voters invest is more than money. The amounts are small, but the value for money is much higher. There is now such a thing as voter hacking, with multiple metrics that remind us of growth hacking: awareness, engagement, loyalty, advocacy, and… capital.
As voters gain power in what has become a two-tiered investing model, they’ve begun to deprive more traditional investors of their monopoly on financing campaigns and determining election outcomes—just like Airbnb hosts compete with big hotel chains or YouTube contributors compete with massive TV networks. As a result, the war is fought more and more on connecting with the voters rather than on securing wealthy donors and big corporate money. Money is not enough anymore: it still sustains agenda-setting, but it doesn’t buy empowered voters’ engagement—whereas at some point in the Second Era, money was enough to buy votes and win elections.
A first sign of that paradigm shift is that Jeb Bush badly lost the Republican primary, despite massive dominance on the big money investors’ side. Jeb is the living proof that in the two-tiered market that political investing has become, those who focus solely on big donors end up not interesting the voters at all. His campaign was a Second Era venture: he showed investors a prototype they liked, then he built an entire facility with their money, all the while without meeting a single prospective customer. In doing so, he meticulously ignored all rules set up by Steve Blank’s Customer Development Manifesto. And he did so in the context of what we could call the “big donors investment glut”: following Citizens United, too much capital is allocated to Republican candidates without any consideration for actual voters. It enables Second Era candidates such as Jeb Bush to launch campaigns that are in fact prone to failure from the start. It also enables lunatics to stay in the race longer, thus delaying the necessary confrontation with the voters even more.
Another sign of the current paradigm shift, obviously, is Hillary’s recurring problem. Bernie Sanders’s miraculous campaign helped her realize it soon enough to make a change of course possible. But Hillary’s personal campaigning style is still very much Second Era. She’s too moderate and too busy raising big money from business investors. Many voters hate her for that because they are now in command and expect to be courted on the same terms (remember: “Deep down, we all want to be sold”).
A third sign is the success of politicians that are beginning to master the playbook of the Third Era. Bernie Sanders is one of them. He’s been extremely successful with the voters because he started on a niche (the youth and the independents) and relied on that single investor bloc for most of his impressive campaign. Where he fell short was the junction with more traditional investors, which he deliberately chose to ignore.
Another successful politician in the Third Era is President Obama. He is so far the one who found the optimal balance between hacking voters on the one hand and attracting wealthy donors and corporate interests on the other hand. His many innovations when it comes to connecting with voters prove that, because of his unique background and experience, he is the Third Era grandmaster whose lessons will be taught for a long time to come.
Donald Trump is yet another example. Unlike Hillary Clinton, he understands a key lesson of the Third Era: you can’t bear a radical misalignment between what voters want and what big donors want. That misalignment exists on the left, between working class voters and Wall Street donors. It also exists on the right, and Donald Trump was the one who saw it first and used it for his own profit.
True enough, that donors/voters misalignment is what has slowly been destroying the Republican Party for at least one decade. It was manageable when money was all that mattered to win elections: like George W. Bush, you could court big donors, then influence voters, however uninterested they were in your pro-business agenda.
But that misalignment between big donors and the voters is not manageable anymore when voters are suddenly empowered by technology and the gap is so wide between what big donors demand (less taxes, more immigration, free trade) and what really matters to those voters, be they conservative or moderate (less immigration, sustained benefits programs, an end to free trade). If what the voters’s investing bloc expects is in direct contradiction with the national agenda set by big donors, the system reaches the breaking point. Because he was an outsider, Donald Trump understood long before others how disconnected the Republican Party was from its own voters. This was his opportunity to win the primary.
The Trump solution to that disconnection problem has been to break ranks with big donors altogether so as to establish an exclusive connection with the voters, including by going against the Republican mainstream on issues such as health insurance. The New Republic just reminded us that “Trump is racist and demagogic, but he’s also secular and focused on workers, not the Wall Street tycoons and religious right that have driven Republican policy for the past three decades.” Indeed someone should tell Glenn Beck that conservative ideas trend less on Facebook not because Facebook is anti-conservative, but because those ideas are actually the big donors’, not the actual voters’. Wake up Republicans!
Donald Trump is not the first candidate freed from big donors’ influence because he can (more or less) finance his own campaign. Democrat Jon Corzine, a former Goldman Sachs co-CEO, did it in New Jersey. Republican Meg Whitman did it while campaigning for the California governorship. But those situations were different: Corzine was lifted up by Democratic landslides in a blue state; Whitman, on the other hand, was trapped by her own money, never connected with the voters, and lost the election.
As for Donald Trump, it’s too early to tell if he’ll win, but severing ties with donors enabled him to establish strong ties with his core supporters, notably through his masterful use of Twitter. Unlike Jeb Bush’s, the Trump campaign followed the Customer Development playbook. It was eventually built like a successful tech startup (and now it is having difficulties in scaling up).
Key Takeaways
Hillary Clinton’s problem has a very simple explanation. She’s from the Second Era of modern politics. She was wiped out by Obama in 2008 because he was the unexpected early winner of the Third Era.
She is now trying to make a comeback but still is having a hard time converting to what matters in the Third Era. As voters now have the upper hand, she has to behave with them as a tech Entrepreneur would with their users: instead of raising too much money, connect with your early users; instead of going big from day one, do things that don’t scale; instead of adding too many features, focus on one big idea only; instead of being centrist, moderate and, well, boring, don’t be afraid to polarize to the extreme and lead a movement. Donald Trump did it and so did Bernie Sanders.
Obama did it too, twice, with one nice addition: unlike Trump and Sanders, he was looking forward, not backward, which helped him turn a grassroots movement into a powerful election winning machine. When you’ve won the voters’ support in the Third Era, big donors can help make the difference, provided their agenda is aligned with that of the voters. No wonder Silicon Valley is the best corporate base there is in the Third Era: its companies have already sealed an alliance with hundreds of millions of individuals; their agenda is essentially aligned with the interests of ordinary voters.
Where Obama fell short was in enrolling his supporters to weigh on Congress and counter the agenda-setting efforts still fueled by big money. As proved by the failure of Organizing for America, governing is not the same as winning elections: in the latter case, voters now have the upper hand; in the former case, K Street and conservative think tanks still call the shots at the expense of the people’s interest. And we don’t really know what the Third Era paradigm will look like as long as this disconnect persists. In the meantime, voters are enraged when they discover that the policies they voted for are impossible to implement in the current state of Congress. This is another dimension of Hillary’s problem: voters now hate Second Era politicians because they look so obedient to the status quo.
Ferguson and Rogers’s framework is about investing in an infrastructure, and that infrastructure differs depending on the era. In the First Era, it was a distributed infrastructure consisting in local machines. In the Second Era, it was a top-down, centralized infrastructure mostly owned by big donors. In the third era, it’s about building a platform that turns every voter into a potential investor and enables them to weigh on the system. This, by the way, could be a major contribution of CivicTech startups: building that platform and helping the new paradigm find its balance by making the voters more powerful within the policymaking process.
This was a long story, but remembering past history is important as the Third Era will most probably resemble the First Era more than it does the Second—just like Airbnb restores the model of independent inns as opposed to big hotel chains.
The Case For Picking Elizabeth Warren
As for Hillary Clinton, one of her next moves will be to pick a running mate. If you start from the hypothesis that she suffers from being a Second Era politician (too moderate, too tied up with big money), picking the equally moderate, big donor-courting Tim Kaine would be a lethal choice as it would only reinforce her own weaknesses. On the contrary, she should pick Elizabeth Warren, for at least three reasons.
First, as counter-intuitive as it may be, choosing another woman as running mate sends a very powerful message. It would be much like when Bill Clinton chose Al Gore in 1992 because he wanted to send a clear signal: that election was about Southern, young Democratic politicians willing to move the country forward. You could even have two for the price of one.
Second, Hillary’s best opportunity is that, despite her moderation, she’s already divisive: this is the legacy of the polarization she helped trigger with her husband in the 1990s. As a result, she will never conquer Republican voters, nor will she be able to work with Republicans in Congress. This is not because she or Tim Kaine are incapable of reaching out to the other side; rather it is because Republicans are not in a position to be conquered anymore. Her only chance to win broad support is to polarize even more and move left. Bernie Sanders helped her in that respect. But she has to commit to that strategic choice by picking Elizabeth Warren, not Tim Kaine or another boring Wall Street-friendly centrist, as her running mate.
Third, Elizabeth Warren has already proved that she can generate a higher level of engagement on the voters’ side, which is the one that counts the most in the Third Era—as opposed to courting Wall Street bankers, who happen to hate her precisely for that reason. Voters’ investment was not important in the previous eras. In the Second Era, Tim Kaine would have been the reasonable choice. But now software is eating politics, too, and everything’s changed. In the Third Era, choosing Elizabeth Warren as running mate looks like the best way to help Hillary adapt to the new paradigm and eventually solve her problem.
[EDIT — Now that Hillary Clinton has selected Tim Kaine for the VP slot, we’ll have to be content with what he actually brings to the ticket.
As for the problem of having too centrist a ticket in an era of polarized politics, it is now up to Hillary to move left herself so that she’s closer to empowered voters while leaving the center (and big donors) to her “boring” running mate. Will she manage it?]
(This is an issue of TheFamily Papers, a series which covers various areas such as entrepreneurship, strategy, finance, and policy. Thanks to Oussama Ammar, Kyle Hall and Laetitia Vitaud.)
