Nick Hanauer's TED Talk on Job Creation and Why TED Held It Back

Nick Hanauer, TED and the Debate About Job Creation

In March 2012, Seattle entrepreneur and venture capitalist Nick Hanauer gave a short TED talk arguing that rich people like him do not create jobs; customers do. TED chose not to post the talk on its website, and the decision quickly turned into an accusation that TED had "banned" a billionaire for criticising inequality.

The fuller story is more nuanced. TED said it had problems with the talk and considered it too partisan for its home page, but the video was published on YouTube, and in 2014 TED invited Hanauer back and featured a longer talk on the same theme. Below we look at who Hanauer is, what he actually argued, why TED held the first talk back, and how his ideas have held up in the economic debate since.

Who is Nick Hanauer?

Hanauer was born in 1959 and grew up in the Seattle area, where his family ran the Pacific Coast Feather Company, a bedding business he later helped lead. In the 1990s he became the first investor in Amazon from outside Jeff Bezos's family and advised the company until 2000. He also founded the online advertising firm Avenue A Media, which, as aQuantive, Microsoft bought in 2007 for about $6.4 billion, and he co-founded the venture firm Second Avenue Partners.

That background is what made his message unusual. Hanauer describes himself as one of the very wealthy, yet he has spent more than a decade arguing that rising inequality is bad for the economy and, in the end, for people like him. With writer Eric Liu he has published books including The True Patriot (2007) and The Gardens of Democracy (2011), and in 2015 he founded Civic Ventures, a Seattle policy organisation. He also hosts the podcast Pitchfork Economics.

What Hanauer argued: customers, not the rich, create jobs

The core of the 2012 talk is a simple chain of reasoning. Businesses do not hire people out of generosity, or because their owners are rich. They hire when there are more customers than they can serve. Customers, in turn, are mostly ordinary working people, and they can only buy things if they have money to spend.

From there, Hanauer argued that tax cuts aimed at the wealthy are a weak way to create jobs. A billionaire does not buy a thousand times more cars, meals or haircuts than a middle-class family, so concentrating income at the top leaves less spending power in the economy as a whole. Put more money in the hands of the middle class, he said, and demand rises, businesses expand and hiring follows.

Hanauer and Liu call this view "middle-out economics", as a counterpoint to "trickle-down" theories that emphasise lower taxes on high earners and investors. Hanauer also appeared in Robert Reich's 2013 documentary Inequality for All making the same case.

From talk to policy

Hanauer has tried to turn these ideas into law. In 2013 he and labour organiser David Rolf backed a campaign in SeaTac, Washington, that produced the first $15 minimum wage in the United States. He then sat on the Seattle advisory group whose recommendations led the city to adopt a $15 minimum wage in 2014, and he was the largest funder of a 2016 state ballot measure that raised Washington's minimum wage and required paid sick leave.

In June 2014 he wrote a widely read essay for Politico Magazine titled "The Pitchforks Are Coming… For Us Plutocrats", warning fellow billionaires that extreme inequality has historically led to unrest. In December 2014 he followed up with an essay, also republished by PBS NewsHour, on overtime pay. He pointed out that the salary threshold for mandatory overtime had eroded so far that only about 11 percent of salaried workers qualified, and he urged President Obama to raise it to $69,000 by executive action. He ended with a wry plea for readers to contact the White House on his behalf, joking that he was starting to run out of customers.

Why TED held back the 2012 talk

TED records far more talks than it features on its website, and it decides which ones to promote. In Hanauer's case, curator Chris Anderson said TED liked the talk and shared many of its views, but saw several problems with it, and described it as explicitly partisan at a time close to a US presidential election. Critics pointed out that TED had featured other talks with political themes, and the decision was widely reported as censorship.

A few facts are worth keeping straight:

The 2012 talk was not deleted. It was published on YouTube and remains viewable there.
TED did not ban Hanauer as a speaker. In August 2014 it invited him to give a new, longer talk, "Beware, fellow plutocrats, the pitchforks are coming", recorded at a TEDSalon in New York and featured on TED's site.
TED published its own account of the dispute. Anderson wrote that the new talk was "honest, surprising and important", and that he and Hanauer were both bad at holding grudges.

So the headline that TED "banned this billionaire" overstated what happened. A more accurate summary is that TED initially declined to promote one talk, faced a backlash, and later featured Hanauer prominently.

Is Hanauer right? What economists say

Hanauer's central point, that demand matters for hiring, is not controversial in itself. Most economists agree that businesses expand when they expect sales to grow, and that weak consumer spending can hold back employment, especially during downturns. The disagreement is about how far that insight goes and which policies follow from it.

Supporters of supply-side thinking reply that investment, entrepreneurship and capital also create jobs. Somebody has to fund a new factory or start-up before customers can buy its products, and taxes can affect those decisions. Many economists see demand and supply as working together rather than as rival explanations.

The minimum wage, Hanauer's signature cause, is a good example of how mixed the evidence can be:

A University of Washington team studying Seattle found that one step of the increase, to $13 an hour in 2016, raised hourly pay but led employers to cut hours, leaving many low-wage workers earning slightly less per month on average. A follow-up found that experienced workers gained, while newer workers saw little change.
Other research, going back to the famous 1994 study by David Card and Alan Krueger, has found little or no job loss from moderate increases, and some reviews argue that negative findings are overstated by publication bias.
The Congressional Budget Office estimated in 2019 that a federal $15 minimum wage would raise pay for up to 27 million workers and lift about 1.3 million people out of poverty, but could also cost around 1.3 million jobs, with a wide range of uncertainty.

In short, Hanauer's argument is a serious position in a live debate, not a settled truth and not a fringe idea. The strongest form of it is that a healthy middle class is a foundation of a healthy economy, a point many economists across the spectrum would accept.

Why this story still matters

More than a decade on, the debate Hanauer helped push into the mainstream is still running. Several US states and cities now have minimum wages at or above $15, overtime rules have been revisited more than once, and "middle-out" language has been taken up by politicians. Hanauer himself continues to campaign, most recently proposing a much higher national minimum wage.

The TED episode is also a useful lesson about how stories spread online. "Banned for telling the truth" is a powerful headline, but the record shows a more ordinary editorial dispute that ended with both sides making peace. You can judge Hanauer's economics on their merits, and keep the history accurate, at the same time.

Sources: TED Blog: How did Nick Hanauer get onto TED's home page?; TED: Beware, fellow plutocrats, the pitchforks are coming (2014); PBS NewsHour: This is why the middle class can't get ahead (Nick Hanauer, 2014); Wikipedia: Nick Hanauer; Wikipedia: Minimum wage in the United States. Story first circulated via True Activist.

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