Andy Grove’s Warning to Silicon Valley
nytimes.com
nytimes.com
Although a valid concern putting "job creation" as a goal for governments can (and in a lot of occurrences in recent history, did) backfire spectacularly.
In the most reductive analogy it creates incentive for the government to create "hole diggers" and "hole fillers" type of jobs that, in aggregate, generate very few useful work while fulfilling this basic goal of job creation.
I believe this "job creation as priority" approach is inferior to both the "laissez-faire" capitalist alternative and the "basic income" social democratic one.
As an example of its dangers it suffices to see the kafkaesque process of fund allocation (and sourcing) for the public funded aerospace industry, both the military procurement (fighter jets, bombers) and the civilian NASA one.
"The War on Infrastructure Decay" doesn't have quite the same ring to it as "The War on Drugs" or "The War on Terror".
Certainly not? These years were known as the "Trente Glorieuses" (glorious thirty) in France.
In retrospect, WW2 had positive economic consequences. But let's not pretend it was a "good" thing.
The economy did do well after the war, but you could also attribute that to delayed purchases as spending money on new homes, automobiles, and all sorts of goods was finally possible. This combined with a much larger labour pool as some women remained in the workforce, while many families who had delayed child-rearing started families and needed to earn and spend to support that. The post-war boom years were marked by a huge reduction of central planning and government spending. Most Keynesians at the time were actually predicting a return to deep recession because of this, and the opposite happened.
Exactly, it's not that big investments are bad, it's that doing them for the sake of providing jobs could mean employing people for the sole purpose of giving them a handout and wasting their time. You might as well just send them a check and let them have their time to raise their kids or... whatever.
I don't think that applies to any other country except the U.S. England, for instance, almost went bankrupt and had to ask for an enormous loan from the U.S [1].
The entirety of the Mashall plan [2], if you only consider the western part of the iron curtain, is definite proof that WWII not only didn't benefit those countries but put those former colonial powers in a position of extreme weakness and external dependency.
Basically the only reason for the U.S. rise from an isolationist country to the superpower it became was due to the distance from the actual fighting and the fact that it had the only intact industry, infrastructure and transportation network of the whole western world.
Wars are great tools for prosperity redistribution from the losers to the winners, and from the parties not involved to the (Eisenhower coined) military industrial complex, but very lousy tools for actual prosperity creation for the same reason the proverbial "broken window" is a fallacy.
[1] https://en.wikipedia.org/wiki/Postwar_Britain#Austerity.2C_1...
Socially we already do that. We have created a gargantuan advertising industry that has zero net material gain for society, whose sole purpose is to redirect dollars already in circulation to their employers. We have dramatically expanded bureaucracy in almost every industry to micromanage risk at the cost of tremendous overhead in the time of human beings spent on it. We maintain many institutions in the service industry more-so because the marginal cost of having all the participants unemployed (and thus hungry, destitute, and dangerous) is worse than just paying them do to work nobody practically would need done if not for the negative impacts of simply dropping people out of the workforce.
But this is entirely the wrong way to approach economics. It is absolutely antithetical to the human condition to start from the presumption that people need to do something for someone else for their life to have meaning. That is where entrepreneurism comes from, and we need more of it going forward, not less, as we systemically eliminate the repetitious work in our lives through technological advancement. To aspire for peak employment is to aspire for the death of aspiration. Rather than seeing a "problem" of unemployment, when the practical cause is derived from the lack of anyone willing to pay people for their time considering the skills that they have, see it as an opportunity. If we have unemployment it means everything worth doing is being done, and we should be trying to enable those who are not needed to keep society running to improve that society through innovation than to fabricate busywork for them to do to keep all the cogs in the machine in tune with one another, even if a large segment of said cogs are redundant.
And probably the best example is how I imagine most people would read that previous sentence - but there is a ton of things I want done! But practically, capitalism does not care what you want, it cares about only what those with the dollars to make their voices heard want. The unemployed should be those free to listen to the wants of people rather than money, rather than those who society condemns to poverty.
We need to see if these Canadian or Finnish proposals show fruit. Because one of the fundamental tenants of basic income - unconditionality, perpetuity - is the keystone of seeing economic growth through its deployment. It is also the halmark of decrying existent forms of welfare in how they incentivize docility and non-participation.
It may have the advantage of being true.
It does not mean that it's the only condition for happiness ( it is necessary but not sufficient ) , but I know of no good assault on this idea. Adam Smith's "to be loved and to be lovely" exists, and is deeply imbedded.
The advertising/media industrial complex problem is much more profound. But in order to propagate criticisms of it you'd sort of need the advertising/media industrial complex to get those ideas out. Still, Adam Curtis documentaries exist, the work of Marshall MacLuhan and Vance Packard and others exist.
Of these, Adam Curtis seems to have taken the thing on most directly. And it was very funny watching "Mad Men" pull its punches.
And it is perfectly possible to deal with advertisement/media through laws and regulations.
E.g. I find that where I live in Norway, much of the informative and quality media exist almost exclusively due to government policy. Either you got the state run broadcaster or quality newspapers which get economic support from government.
The quality newspaper typically don't make a lot of money because they are not shameless sell outs to advertisement and pop culture.
Now for entertaining movies I am happy about the purely commercially driven TV channels, but it is also painstakingly clear that you can run well balanced and insightful journalism easily on primarily profit driven media.
He'd damaged the reporting of American history in a manner to set back the literature for a century. He's set the stage for most of the nonsense American believe.
Of course small papers can maintain some degree of integrity but there's very few voices in mass media that can.
I am very happy if good journalism still exists in Norway. That's great. In America? I'm much less hopeful.
I don't want to research the 200 brands of almond milk or 85 sushi restaurants in my neighborhood -- I want some proxy, however imperfect, for their quality, availability and value. I want someone to come find me and tell me that their milk or restaurant or whatever exists. And as someone who sells things, how am I supposed to make the public aware of the existence of my very good product which nonetheless fills a niche that is well-occupied and not a very important part of people's lives (and therefore unlikely to be discussed unless immediately sought)? How should I best let consumers know that my product is different because of its features, or the craftsmanship, or whatever. Should we all live in universes bounded by the speed of chatter, so that HN's pure market sensibilities can be satisfied? Should I just wait for customers to stumble upon the right keywords to make my product show up in their ad-free search results?
This idea that advertising has no use and exists sort of parasitically is baffling to me. Even more baffling is that it's a meme which routinely nets all the upvotes on a place like HN -- where presumably the commenters are more likely to have actually created and sold valuable things, and therefore, one assumes, would have more than an academic appreciation for how business is done.
It's been said many times before, but the level of discourse around here is retreating rapidly into equal parts academic idealism and Reddit-esque karma-driven populism.
In each, all and every possible sense.
Of course advertising has a use, but without advertising it's not like you would "have to research the 85 sushi restaurants" in your neighbourhood.
Put it this way: I use adblock, I do not watch TV nor go to places which actively advertise. My life is fine, and I don't have to "actively research" anything unless I specifically want to. In fact, compared to people who don't avoid ads, I tend to spend my money a lot better... something to think about.
In either case, they provide broadcasting as well, and in all cases, they are inherent to either the Internet Age or human organization, and do the job better than emotional splurge-purchase decision TV ads ever could.
the problem is that there's a conflict of interest between the seller of a good and the buyer of a good. Every seller wants to claim that their product is better, regardless of actual reality, while every buyer would like to actually know which product is better
As you rightly point out, the buyer doesn't want to do a lot of research to find this out, but.. the problem with advertising is that advertising does not give the consumer a good idea of what is actually best because of the aforementioned conflict of interest.
I think if we are talking about reality, we mostly rely on the law here; E.g. if I go to the corner store and grab a gallon of milk, it probably won't poison me, because there are 'minimum milk' standards (my area has yet to legalize unpasteurized milk for human consumption) So I can buy the cheapest milk in the store, or the milk advertised to target my demographic, and either way, little harm is done. Worst case I spend a little more money than I'd need to.
The right answer to the research problem is something like consumer reports (though really, I think it'd work better if it integrated with cooperative retail... e.g. I'd go to the store and only the top 2-3 products in each catagory are there.)
Aren't you by limiting selection - limiting innovation, the ability of each one buying according to the price and other characteristics he he sees fit?
However, you are probably going to hand that power to someone - there are just too many products to research them all. I am arguing that you are probably better off if you hand that power off to an entity who's only revenue source is you and people like you, than if you hand that choice off to conventional advertising agencies.
The idea that advertisers all claiming to be the best is a detriment to consumers presupposes that we need to live in a world where people only speak about empirical facts. We are all skilled in the art of bullshit detection, and we all have aspirations which can be played to as well -- frankly, life would be dull if we weren't able to attach an undue sense of optimism to a cup of coffee from that new cafe. Advertising succeeds in some part because it pushes buttons which sometimes go unpushed in our daily lives.
I don't know if limiting consumer choice to a few of the massive number of alternatives is the right answer. It's probably not the optimal answer, but it is the current answer. Right now, most consumers are exposed to 2 or 3 brands of a thing, and which two or three brands is controlled through advertising. What sorts of things a consumer is exposed to is also controlled by advertising.
The problem with advertising, from the consumer's point of view is that the people paying for the advertising have interests that conflict with the consumer's interests.
But yes, right now, advertising serves the product discovery function, and the product discovery function is important.
My argument is just that the consumer would be better off if they paid someone to research the available brands and present them with a manageable number of choices, and with interesting new types of products rather than allowing the people selling them stuff to do that. My argument is that organizations structured like consumer reports, that is, organizations that only accept money from the consumers they are doing research for, would have the fewest conflicts of interest, and thus would probably provide better results (for the consumers) on average.
> For this, I would go consult Consumer Reports? And how do I know that Customer Summaries isn't more aligned with my values anyhow?
The consumer, of course, would still need to choose which consumer research group most closely matched their needs and values, which in and of itself is a hard problem. But, I think if done properly, and conflicts of interest avoided, it is an overall better product discovery system than advertising.
Also, you'd clearly need to figure out some way of making it easier. Following the recommendations of the research agency I have hired needs to be as easy for me as following the recommendations of advertisers is for me right now, at least if we are to use this for things like milk.
(Also, the more I think about it, the more I think what I said about integrating it with a store is a bad idea; it introduces conflicts of interest. But it would be the easiest way to reduce the cost in terms of checking with my research company before buying.)
Where's the problem?
Minecraft is basically a cultural icon now, despite having no effective advertising throughout its growth years. It was only after it was already gargantuan that Minecraft Pocket Edition started seeing adverts, primarily because the parent company ran out of ideas of what to do with their money, which is often the motivator for a lot of advertising budgets.
Specific to the games industry, discovery is a problem if consumers both A. have no peer group involved in gaming to get recommendations from and B. have no sources of discovery media (ie, rankings, reviews, etc) to find games themselves. Which I'd definitely say is true - the two largest game stores in the world, Google Play and Steam, have incredibly bad discovery mechanisms built in, and the former's entire market is mostly an appeal to getting on top of said discovery mechanism through psychological manipulation in skinner boxes.
"one bite at the apple" eh?
There are a lot of small companies in America, and a lot of people do businesses under different names. "Was an officer of the company I'm about to buy from involved in shady dealings in the past" is one of those things I'd love to have my consumer research firm research, but it's not something that comes in to play as much as you think, I think. A lot of the games are written by first-timers, or people who's first try flopped because nobody played it (which is similar as to the informational content you are talking about)
So maybe some form of advertising is useful, but it would look totally different if what drove it was consumer benefit and not producer benefit.
There is also the conflation that there is some lost potential when advertising can actually sway you into buying something - but the secret is, if you do not already have the necessary economic pressure upon yourself to seek out goods and services in your interest already, that advertising is actually detrimental because it subverts your internal alignment of values through conditioning causing you to make purchases against your base intentions.
The only aspect of advertising of worth is learning products exist, but I would quite easily argue that - especially in the age of social media - word of mouth informance about goods and services that can benefit your life are much more valuable and reasonable and much less detrimental to personal economics than advertising.
How many people bought smartphones because of a TV ad vs their peers telling and showing them how useful they are?
Since we are getting on this topic, I imagine in the case of the downfall of advertising - however that may happen - people would become sociable again amongst each other about what products are good and useful and which have quality. A thousand years ago you would not have known of the quality of rice from a country away but you would know who is the best and worst blacksmith in town and where to get the best ale. We could easily have that again, enhanced with technology to make it a truly global information market.
The private finance of product placement to cause emotional purchases rather than rational ones, by comparison, is dramatically more inefficient.
To run with your milk example, my wife and I recently learned of Danzeisen Dairy (http://www.danzeisendairy.com); a state-local dairy producer who recently started selling their milk in at our local grocer.
We didn't learn of them through an ad in the local paper, or a TV spot, or display ads on the web. The bottles were just there, in the local grocer.
But before anyone thinks they aren't advertising... the milk was in cutsey little glass bottles, adorned with their logo, the words "Local" - "delivered farm fresh" in retro script, and they "just happened" to be located at eye level on the milk shelf. Not advertising? Ha! ... but it wasn't blatant and obtrusive.
Now instead of 200 brands of almond milk and 85 sushi restaurants to try or ask your friends about, you have 285 companies shoving ads in your face, all insisting they're the "best", when obviously they all can't be.
In fact, having to sort through 285 ads is worse than actually trying 285 products, because the advertisements are completely disconnected from the quality of the actual products.
Offer a good product and people will come back and tell their friends. That's the alternative to advertising, because it's what people will do anyway.
Neither do I. I'll just pick one arbitrarily. It's almond milk. I might even just skip it entirely. I don't even really need milk, if giving up advertising meant I had to drink water that's fine.
I think the issue here is that you're approaching this from a consumerist viewpoint to begin with - it's difficult to explain exactly what's wrong because it's a completely foreign approach.
Maybe we (as society) should start to be less lazy about researching the products we consume instead of letting huge brands with different interests decide for us.
> Beggars do not work, it is said; but then, what is work? A navvy works by swinging a pick. An accountant works by adding up figures. A beggar works by standing out of doors in all weathers and getting varicose veins, bronchitis etc. It is a trade like any other; quite useless, of course — but, then, many reputable trades are quite useless. And as a social type a beggar compares well with scores of others. He is honest compared with the sellers of most patent medicines, high-minded compared with a Sunday newspaper proprietor, amiable compared with a hire-purchase tout-in short, a parasite, but a fairly harmless parasite. He seldom extracts more than a bare living from the community, and, what should justify him according to our ethical ideas, he pays for it over and over in suffering.
EDIT: On a side note, I agreed halfway with what you're writing but the second half of your comment seems a bit more unclear/I'm not sure what you're discussing there. Could you clarify what you mean?
Brings to mind Graeber's article on "bullshit jobs".
Orwell is saying that to see someone suffer is in line with our ethics; someone who suffers can be ethically reasoned to have earned what dues come their way.
Compare the beggar in orwell's quote, if you will, to the injured war veteran who benefits from a fundraiser. He has suffered, so we consider it worthy for him to benefit through community actions.
Why is he worthy of the benefit? Because he suffered. I am not worthy because I have not suffered as he has. The beggar? Suffering.
You are thinking very stringently if you are interpreting the quote as a 'literal' trade, broken toe for dinner for a week
If everyone only used what they needed, we'd all have plenty of resources to dedicate to the communal good.
The injured war veteran, at least according to the official fiction, suffered in the course of benefiting the community. Whether they succeeded is up for debate, but the intent to benefit is seen as evidence that gifts/support/etc. won't "enable" them.
Why do people say this, when they know full well that advertising drives people to buy things, and therefore, drive the economy?
What makes you think it would fall apart at all?
There's a myth out there that we are unconstrained by physical resources. And it has largely been true "since the beginning of time". But that time is quickly coming to an end -- the next big generation shift will be the acceptance of a resource-constrained world imho.
Look at meat consumption. It takes something like 10x as much energy to grow a calorie of meat as it does a calorie of vegetables. If the entire world (or even just the global middle class, if something like that exists) ate as much meat as the developed world, it would be an ecological catastrophe growing all that livestock, disposing of its waste, and fertilizing the grain needed to feed it. And guess what, as the populations of India and China are entering the middle class, they're adopting a taste for meat-heavy diets.
Energy consumption per capita is a pretty good proxy for human development. Whether it's meat or our plastic lawn furniture that we consume from amazon, all of it takes energy to produce. In other words, consumption is another word for energy, and if even a sizable chunk of the world consumed as much as we do in the western world, it would require something like more energy than all proven oil reserves. Clearly that's not going to work.
We can always hope for the deus ex machina ending and say that we'll find salvation in technological progress (whether it's an efficient way to store solar or figuring out fusion or an FTL drive top open up new worlds), but that requires a dangerous amount of hope. It's also the path of inaction -- wait for someone else to deliver salvation.
More realistically, I think consumption is starting to hit physical resource constraints and is inflecting towards the top of the S-curve. The entire global economy since the beginning of time may have been about consuming, but that doesn't mean the party can continue.
Consider the following maximal example: If all of Earth's resources are exhausted (whatever that means, I don't rely on any exact definition), we need to head outwards into space. Because our expansion is limited by the speed of light, we can at most cover a distance
r(t) = c * t
V(t) = (c * t)^3
Cubic growth is much much much much less than exponential growth. In fact, the exponential function can be shown to grow faster than any power function.
If you put a population of flies in a closed container, even with an unlimited food supply, their population will grow and grow until it hits a peak and collapases. We are smarter than flies but to think we are not also constrained by nature is folly?
If we run out of land, we take the sea. If we run out of sea, we take space. And so on.
This answer precludes the very real possibility that the necessary technology advances to "take the sea" or "go into space" don't come in time to be useful. Any plan that includes "things that haven't been invented yet" isn't a real plan, it's wishful thinking.
John B. Calhorn's mouse utopia experiments give some indication of complexity in large communities beyond food resources:
https://en.wikipedia.org/wiki/John_B._Calhoun#Mouse_experime...
https://www.youtube.com/watch?v=0Z760XNy4VM
There was no shortage of food or water or nesting
material. There were no predators. The only adversity was
the limit on space.
Initially the population grew rapidly, doubling every 55
days. The population reached 620 by day 315, after which
the population growth dropped markedly. The last
surviving birth was on day 600. This period between day
315 and day 600 saw a breakdown in social structure and
in normal social behavior. Among the aberrations in
behavior were the following: expulsion of young before
weaning was complete, wounding of young, increase in
homosexual behavior, inability of dominant males to
maintain the defense of their territory and females,
aggressive behavior of females, passivity of non-dominant
males with increased attacks on each other which were
not defended against.[2] After day 600, the social
breakdown continued and the population declined toward
extinction. During this period females ceased to
reproduce. Their male counterparts withdrew completely,
never engaging in courtship or fighting. They ate, drank,
slept, and groomed themselves – all solitary pursuits.
Sleek, healthy coats and an absence of scars
characterized these males. They were dubbed “the
beautiful ones.” Breeding never resumed and behavior
patterns were permanently changed.1. Scientific discovery and innovation. People were all in huge panic in the 17/18/19th century about the ability of our limited amount of land to feed the (exponentially-growing) populace, yet discovery of new methods/technologies increased the hypothetical yield such that the point became moot.
2. We live in a feedback-loop system. In the absence of perverse (and universal) government incentives, society will slow-down as resources become scarce. That is, until point number 1 kicks in again and the cycle starts fresh.
I'm not just pretending, I genuinely don't understand what that means. It kind of sounds like you think consumption beyond bare sustenance is bad and needs to be checked somehow? If I'm understanding correctly, then I disagree with you.
These people wouldn't just hoard their money because there is no ad telling them what to buy...
They'd just be exercising their own agency, rather then cokes, or nikes.
wut?
People see an ad, they're more likely buy that thing. If they don't see an ad, they don't buy that thing.
You think people are still going to be spending their money if they aren't talked into buying things? lol.
The economy grows when people spend money. Disincentivizing people from spending money is a good way to make sure the economy dies.
Always be selling. NO exceptions. Coffee is for closers.
If 1 dollar is spent 5 times a year, that economy has a higher GDP than when that 1 dollar is spent 4 times a year.
Advertising makes sure that money is spent quickly, to increase the GDP by increasing the velocity of money in an economy.
If you get rid of advertising, you slow down the economy.
Do people spend money without advertising?
I would say, yes they do. People have intrinsic wants and needs. Why would I so fulfilling them, because of a lack of extrinsic wants and needs?
Edit: also aren't you just trying to optimise to what is measured. GDP goes up, and that's beneficial because? Greenspan says so?
I get that it's not what you want to hear, but that's your problem to deal with, not mine.
"Wishing and hoping" that advertising doesn't work, doesn't actually make it so. Just because you don't like something, doesn't mean it doesn't work.
The advertising industry is profitable because it's an arms race. Companies have to advertise because their competitors already are doing.
If all industries agreed to limit their ad spending, those trillions could become mere billions overnight, and the marginal revenue decreases would be more than offset by the decreased spending. But such coordination is impossible in a competitive economy, because any defector will reap huge rewards.
But in reality that does not actually matter either. Like I said, there is very little fiscal responsibility in people - at least in the US - predominantly a product of culture. The money people would have spent on random useless object advertised on TV 1 would instead be spent on personal want 2. The practical effect of advertising is that it is simply redirecting dollars that would have gone to those with smaller advertising budgets to those with larger budgets. The trillion dollar industry exists as an arms race where increasing product quality or diversifying is less effective - because people are already broke, and net wealth is declining, you cannot compete honestly as effectively in product anymore. If you try that, you simply lose to the guy who had more advertising out there using psychological techniques to manipulate people into buying the inferior product over yours, and that is where the wishing comes in, people wish people were more rational, but we are not, and constant bombardment of advertising only wastes money to let the fattest cats maintain sales margins.
We aren't arguing whether coke tastes nice, we are arguing whether you need to drink it...
I think you need to reread my comments.
I can agree with that, but I wonder how much it matters, in different scenarios. For example, if instead of hiring someone to cut my lawn (increasing GDP), I cut my lawn myself. Since GDP is lower, is the world therefore a worse place than it might have been?
I still don't understand why a slower economy is a bad thing. Poverty and starvation is definitely a bad thing, climate change is definitely a bad thing, but a slow economy?
Just a tought I have sometimes. Sometime in the future we will need to think another way to measure economic improvement.
If there were no advertising, not many people would know about—let alone buy—video games. But dollar for dollar video games are much better for them than alternatives like drugs.
> not many people would know about—let alone buy—video games
So you are saying in the absence of manipulative ads, kids would be consuming drugs rather than games. I highly doubt that. And from personal experience, my brother is a Minecraft addicted nutter because of peers pushing him towards it, not advertising. I've never seen ads for Minecraft, yet it is one of the most successful video game properties ever.
That said, I think you are totally wrong about this. Just look at surnames: Baker, Smith, Shoemaker, etc. The actual names of people and their families were completely centered around their employment, or more generally, what it was they did all day long. Yes, this was medieval Europe, and conditionals abound, but the same is true in many other cultures too. The surnames of Mehta or Poddar in India relate to accountants.
More generally, you mention that people needing to do something for someone else is not what humans should do. I think this is totally false. Maybe not just 1 person/baron/emperor, but I certainly think people want to be useful to other people in their community. Ok, yes, this is a gaussian curve here, like so many other things, but I would like to think that at 1 std south people still want to help others as a natural condition for mankind.
However, I do agree with you and Adam Smith that people should be mostly doing 'nothing' all day. Most of the work to feed and house people in 1st world countries is 'done.' We can easily give out the bare essentials for life, the issue is distribution, as is claimed by Minimum income folks. Though I agree with you in a mechanical sort of way, that is not the issues. The issue is emotions. Giving people free stuff is not 'fair' for most folk. And that emotional issue of fairness, something I think drives a lot of the reasons behind laws and politics, is the elephant in the room. The question quickly come out of 'why should I work if she gets free stuff all the same?' Do not underestimate the ability for people to 'game the system' either for simply the want to appear more well off than their noisy neighbors. Keeping up on the Jones's is why you see so many new iPhones in very poor areas.
Overall, I think people exist on the bell-curve between selflessness and selfishness. Most folk are 1 std north or south of the average. The real questions are where is that mean relative to Jesus and the Devil and how wide is that std relative to that?
Note: Also, time and again we are told that the standard of living here in the US is far too high for the whole planet to be able to live like us. Nearly all scientists worth listening to say that climate change is real and we have to do something about it. Weather we like it or not, the average living condition here in the US must fall to a level our planet can sustain. Possibly we are seeing this in action already.
The Bakers, Smiths, and Shoemakers were in their own sense entrepreneurs. They ran their own businesses, kept their trade within their families, and profited strictly through the fruits of their own labors rather than a capitalists willingness to give them crumbs of their efforts. Owning your own small business, or having a family owned business, is incredibly divergent from the status quo of employment to international megacorp where everyone you ever meet involved with the company is still just a low level cog in a larger machine.
The Bakers et al saw their prosperity often strictly through their skill and talent. We have normalized that significantly in modern society for better and worse, but the inventive Smith who could improve on his metalcasting skill through ingenuity would reap tremendous benefits in the kingdom. Trying to innovate in shelf stocking at Walmart will get you fired. The ability to dictate ones own destiny like that, even if constrained to the skills passed down from parents, is still providing absolutely useful work being done. The Bakers and Shoemakers existed because of real demand from not only the nobility but their neighbors for their work.
There were few or no unemployed in the era of Smith families formation - if you did not have practical utility to your community you were often discarded. You prayed on the good nature of your own children to keep you around in old age when you were decrepit and could no longer work. Before the Industrial Revolution, the marginal cost of maintaining an individual persons working conditions was enormously high, such that 80% of people at least were working as farmers for thousands of years.
My point is that today we face a crisis not of a lack of resources as those before us would have faced. Today the labor participation rate, which I much prefer to fictitious employment rates, is at a 20 year low and continuing to drop. It is today below the rates we saw when women were en masse entering the workforce in the 70s and 80s. It is dramatically higher for those younger rather than older, predominantly because rather than train and hire new recruits to do the old jobs we either obsolete them or automate them. It is also valuable to consider that even before the rise of working class women, women were serving critical functions in society as caregivers and child rearers, that we have done a lot to professionalize and integrate into that labor force as paid work, so even today the 1:3 people over the age of 16 that are not posting working income are much less likely to be doing work without pay.
If we had this rate of labor participation a thousand, or even two hundred, years ago we would have seen mass famine and social collapse because you needed way more than that ratio of people farming just to feed everyone. We obviously do not have that problem today. Hell, we cannot even fathom an unemployment rate where would actually reasonably see a shortage of anything. Our only concerns when dealing with unemployment is how we would have millions of destitute and homeless, not due to a lack of resources, but because they lack any money to buy them with.
On the standard of living in the US, we can practically see what is happening. I don't believe it is any adjustment for climate change. We still do not give a shit. It is simply globalization, and oligarchic state control. The US did what facists and communists did to a degree with capitalism. We treated it like religion throughout the cold war, and eroded liberty and individual empowerment to hold the ideology sacred. We killed unions and sat idle while global monopolies were formed under our stead, and while our politics enabled the gross transfer of wealth from the middle to the top, and from the middle to foreign markets where the act of producing goods traveled.
On the backs of the vast majority of American wealth falling, the rich have gotten dramatically richer, billions were lifted out of extreme poverty, and nations like Korea, China, Brazil, Mexico, and India have seen the rise of dramatic middle classes in very short spans of time from the wealth we send overseas.
That is economics driving the dissolution of median wealth, not the environment. As long as our economic policy systemically ignores negative externalities like human rights and greenhouse gasses (and it always has, we just did a better job long ago at managing them through collectivism, environmental protection, and workers rights in the era before gargantuan business interests took over most western democracies through amassed wealth <and thus power>).
Actually, we have a dire shortage of non-luxury housing.
Essential to that is how you phrased it - non-luxury. The market for the (relative) rich to buy houses is so large there are over a million of unoccupied homes[1] just to sate the potential choices of the ownership class that can afford them. There is an immense glut of building supply, rather than a shortage of it, just it is all directed to where the money is.
[1]: http://www.mintpressnews.com/empty-homes-outnumber-the-homel...
China is a great extrapolated example of this with their ghost cities[2]. The economic machine of China, using the same capitalistic peak employment model of expectation, has a tremendous civil engineers corps that needs to do something. But China takes some of the worst of capitalism and mixes it with the worst of Marxism and a large dose of totalitarianism, so rather than provide modern living to hundreds of millions there are dozens of cities built without anybody living in them, because nobody can afford to buy housing within them. But the CCP kept building them to keep the workers "busy" and keep the supply chain flowing, because they kept anticipating - in the same way many deceived Americans are - that the prosperity for the masses is coming eventually.
[2]: http://priceonomics.com/surveying-the-ghost-cities-of-china/
This just reflects on my central point - capitalist economic systems do not distribute labor or create supply based on human needs, but human wants. Those without who need have nothing to give capitalism to get their needs back, but those who have to give will have all their wants provided for and more. Not to say capitalism is not the best economic organizational system we have, it just does not align with most peoples common ethics.
By itself that isn't sufficient though. The distribution of wealth is important. If you create more wealth by allocating it all to one individual and none to anybody else then that is not superior to creating a bit less total but having the median wealth across individuals be higher.
"Pyramid-building, earthquakes, even wars may serve to increase wealth, if the education of our statesmen on the principles of the classical economics stands in the way of anything better...If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coalmines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again (the right to do so being obtained, of course, by tendering for leases of the note-bearing territory), there need be no more unemployment and, with the help of the repercussions, the real income of the community, and its capital wealth also, would probably become a good deal greater than it actually is. It would, indeed, be more sensible to build houses and the like; but if there are political and practical difficulties in the way of this, the above would be better than nothing."
Keynes was specifically referring to a community in which the aggregate propensity to consume (spend) is much closer to 1 (spend 100% of wages) than 0 (save 100% of wages):
In actual fact the marginal propensity to consume seems to lie somewhere between these two extremes, though much nearer to unity than to zero; with the result that we have, in a sense, the worst of both worlds, fluctuations in employment being considerable and, at the same time, the increment in investment required to produce full employment being too great to be easily handled.
If Keynes were observing the situation today in the US, he would probably posit that the marginal propensity to consume is closer to 0 for the US as a whole, as "the increase of employment will tend, owing to the effect of diminishing-returns in the short period, to increase the proportion of aggregate income which accrues to the entrepreneurs, whose individual marginal propensity to consume is probably less than the average for the community as a whole." I.e. the rich have a much lower marginal propensity to consume than the poor, so when wealth accretes at the top, the velocity of money slows, and the economy slows.
He would also argue that because we are at the "natural rate of unemployment" of 5%, that government public works "may become a more doubtful proposition as a state of full employment is approached. Furthermore, if our assumption is correct that the marginal propensity to consume falls off steadily as we approach full employment, it follows that it will become more and more troublesome to secure a further given increase of employment by further increasing investment."
The point? We shouldn't be afraid to take a "job creation" stance when necessary - in times of widespread unemployment, when wealth is distributed more equally and the average propensity to consume is closer to parity. But it should be viewed as a tool that needs to be properly used WRT fluctuating economic and political circumstances.
[1] https://www.marxists.org/reference/subject/economics/keynes/...
This is the branch of thinking that should be extended. What exactly should fiscal stimulus _actually_ be building? THAT is the interesting discussion.
We've ruled out burying bottles with banknotes. So, seriously now, what is a truly productive thing for the government to buy?
New water systems? Repaved and widened highways? A super fat information backbone which reaches into every city and town in the nation? What?
Is there ANY category of spending -- ANYTHING AT ALL -- that can put American workers back into a position of global competitiveness?
Human artifacts were built to serve our way of life. Yet our way of life has heretofore been driven by a desire to dominate nature. Science has widened our view, now we know that a complex living biosphere is rare and precious, which implies we should attempt to live with a minimum of artifacts and minimum population, with the primary ambition of the remaining population to ensure the long-term survival of the biosphere, both on earth and beyond earth. I envision a garden planet with several major university cities, unobtrusively integrated with the natural world, and a Spacer community that is also colonization/research focused, but also tasked with protecting the Earth from stray objects.
This is a new "way of life" with new priorities, new beliefs, and new rules. It is no small task to get there from here. But I believe it can be done and moreover, even small steps in that direction would be greatly beneficial to us all, especially in the long-term.
In reality technology makes it possible for less and less people to increase their output and span of what they can control via technology.
Some day a few people will be running large systems that requires only drones, AI's and access to resources to create what today takes millions.
By insisting on keeping humans where technology is much better suited for the job we are damaging our own economy because we are creating an artificial reliance on human capital where it's not needed and thus increasing the price for everyone.
This is obviously a huge problem as more and more people will be making less and less income. The only way to mitigate this is by products being increasingly cheaper something that a job-centric economy is hindering.
We should be honest and admit that the Uber economy is a mirror into this reality where the competition heats up, driving prices down and incomes down until self-driving cars is completely removing incomes for working people.
And if you claim like many do that technology creates more jobs than it produces then you are not only wrong you also need to show what new areas you are expecting the millions of people who are already made obsolete to the job market because of technology.
Society is made up of humans. The economy in your case is the tail wagging the dog.
The problem with your train of thought is that it isn't sustainable. When people get fed up and start burning ubers, the folks betting against people will be the ones finding their backs on he wall.
How many people has the US military killed over the last 10 years? How many US military personnel have been killed? The ratio is on the order of 100:1. (I'm not making any kind of moral judgement about the US military here, just pointing out it's raw effectiveness at a core competency, which is killing without being killed.)
People are not a great bet in the present technological era.
People matter.
So your argument is preaching to the choir not to that which you need to convert which is technological progress.
You are simply confusing what humans need with what humans can expect. Technology is a competitor to humans not just a tool.
My train of thought is exactly sustainable in that it expects technology to take over most jobs instead of ignoring this.
If people start burning uber cars then uber cars will start defend themselves. Again technology is competitor way before we take it into Superintelligence land.
If more people was on my "train" we would be dealing with the problem by introducing something like Unconditional Income.
Technology is like a tsunami, you can try and stop it or try and learn to surf on top of it for as long as possible. I prefer the latter rather than being crushed by the former.
People make laws. People make technology. If we continue down a path of making technology only serve the accumulation of capital, people will course correct the direction of technology.
>In the most reductive analogy it creates incentive for the government to create "hole diggers" and "hole fillers" type of jobs that, in aggregate, generate very few useful work while fulfilling this basic goal of job creation.
>I believe this "job creation as priority" approach is inferior to both the "laissez-faire" capitalist alternative and the "basic income" social democratic one.
There may be another way, that is not mutually exclusive with the other approaches. It may take longer to have an effect but could be also more permanent or effective: supporting and encouraging much more local and small self-employment and small business. (And by encouraging I mean by concrete methods, not just hand waving and "moral support" kind of stuff).
It has the effect of giving the dignity and money you get from work, without the artificial hole-digging-and-filling provided by the government (which method doesn't have the dignity if you know the work is made up just for you).
Gandhi and E. F. Schumacher (Small is Beautiful) were talking about and doing this decades ago.
There are many ways in which it can be done.
-G. Orwell
The Works program was the single most successful employer in this country's history and we replaced it with welfare because "unemployment is low and we don't need it anymore". Stupidity. The US is a prime example of exactly how a government focused on job creation can be a raving success!
More jobs, more wages, more actual money in the economy to displace credit cards and pay down household debt, and improved infrastructure may well see new business opportunities come into existence.
I could only imagine the abuse with a gov't directed jobs program!
Corruption is a human problem, not a government or corporate problem.
Implementing such a program in that way though requires a fair amount of attention. If it ends up not reducing unemployment, that means it is diverting workers from other industries, which doesn't necessarily mean it is a bad program, but it's a different kind of thing.
People doing "useless" jobs might acquire the skills to do other and more useful jobs in the future. Keeping people unemployed has a high cost in the form of loss of skills over time, mental health etc.
If you don't keep things going you might risk losing some people forever as their skills become so obsolete and their motivation and work capacity destroyed.
Companies will usually not higher long term unemployed so that is why many people can get permanently lost to the labour market.
This is likely why I'll likely never be able convince myself to take a break from programming until retirement.
Unless, of course, today's chatbots evolve to write code better than we do. Or at least cheaper.
Alternatively the government could subsidize wages. Agree to pay x% of the wages for certain industries. Which is basically what we already do extensively with tax breaks for companies that create jobs. But that's also not politically popular (with the left.)
As automation replaces more and more of the unskilled workforce, we should just accept it and adopt a basic income.
Maybe. There are still vast pools of unskilled jobs that exist globally. They're vanishing in the US in no small part because our industries are forced to compete with business concerns that can take advantage of what equates to slave labor in less developed parts of the world.
There remains a hell of a lot of fiber needs laying.
One interesting area where HK has been very non laissez faire is in land ownership. Much of the prime real estate belongs to the government and they can raise money by reclaiming some land and selling it off or renting it out. Also works for Monaco where there is no tax but government controls the real estate. You could argue you could use the same model in the Bay Area to an extent - the government grabs some land, licences fancy blocks for tech workers, auctions off the land with planning permission to builders with the money going to the tax pool. Lower taxes and less accom shortage - win win overall apart from some neighbours complaining about their views.
Singapore is more a gateway with Southeast Asia, which certainly has provided it with a great deal of opportunity also, but not nearly to the same extent. I think it would be fair to say to that much of their success is owing to their policy, on a number of fronts.
I also do not mean to say anything about whether Hong Kong has good policy or not. I'm just saying that they would have still been successful regardless, so long as it didn't preclude their role as a trade intermediary. So, even if you were to perfectly recreate all of Hong Kong's policy, you should not expect to get anywhere near the same results. What's generally attributed to the 'genius' of Hong Kong would be much more aptly attributed to dumb luck.
"an economic system in which transactions between private parties are free from government interference such as regulations, privileges, tariffs, and subsidies. "
Then the best implementation I've seen was probably Hong Kong under UK governance. They had pretty much zero tariffs, light regulation, no industrial subsidy. The result was one of the fastest growing countries in the world with zero starvation.
(16% of US GDP/capita in 1960, 76% in 2016
"According to Index of Economic Freedom, Hong Kong has had the highest degree of economic freedom in the world since the inception of the Index in 1995.")
There are a lot ways in which a job centric approach would affect economic policy which doesn't necessarily mean hole diggers. E.g. in my home country Norway it was seen by the social democrats that maintain an industrial base and the jobs that came with that was crucial. That is why strict rules on usage of oil money in budgets were devised to hinder deindustrialization due to inflation and loss of industrial jobs.
When the oil was found, the conservatives in Norway were ready to hand all the work over to foreign companies. Norway had no expertise at all on oil drilling at the time. But the social democratic government decided that we should have our own oil industry and companies. They established schools, research and a state oil company to reach those goals. Some of the rules had similarities to what China has done to build up their industry with e.g. partnership rules. In fact the Chinese came to Norway decades ago to learn about our policies on this area (undoubtedly they went many other places as well). The previous Chinese experience was that foreign companies owned all the industry, knowledge and took all the profits.
The free market reforms in China has undoubtedly produced much prosperity. But it also seem clear to me that China including every other successful country has had some form of industrial policy. None of the successful asian tigers really follow a laissez-faire system. Pundits will argue they could have been more successful if they did, but I am not convinced.
Great post. I'm reminded of the book "Bad Samaritans" by Ha-Joon Chang.
> After growing up watching the benefits of Iraqi oil elude the Iraqi people, a young executive insisted that Norway do things differently.
For initial expansion of industry, I always felt that command and control economy works to an extend. Even the early soviet union was an example of rapid modernisation of an agrarian country to an industrialised one [2]. There are also examples of South Korea and how its government helped make them one of the best in the ship building [3].
To kickstart an industry government involvement is good to keep the pace and for the introduction of interlinked systems necessary for production where none had existed earlier, but there is no question the human cost soviet people had to pay and there is no justification to it. To keep people and companies from becoming complacent, the accountability and the skin-in-the—game feeling that capitalism brings is equally good. Little bit of both is what is good for developing economies and developing industrial sectors but we are still learning on where to draw the line on how much is too much but there is a lot to be learned yet.
[1] : http://www.psmag.com/nature-and-technology/iraqi-vikings-far...
[2] : http://www.voxeu.org/article/stalin-and-soviet-industrialisa...
[3] : http://english.hani.co.kr/arti/english_edition/e_business/72...
If software engineers were oil, India produces the most but unlike China you don't see them producing a Baidu, Alibaba, HTC, Lenovo, Tencent etc. Like you say they have given away their oil to the West by being laissez-faire in IT. It's why there are no Jack Ma, Pony Ma type recognizable names out of India. Instead you see a Nadella and Pichai emerge in the US.
But the same country has done the opposite with its pharma/generic drug sector by being pragmatically protectionist. It's no surprise that some of the richest people in India are now from the pharma sector, which is producing much more sustainable jobs than its IT sector is.
Anecdotally, there is much activity in the startup sector in India and I am willing to bet it won't be long before we start seeing more success stories.
Also software engineering is not a nascent field. It was nascent in the 70's and 80's. All the low hanging fruits are gone. It is very hard to be a the next Sun, or Microsoft or Oracle. In fact India should start looking at more nascent and upcoming fields and try to be leaders in it.
Maybe. My grandfather has a 6th grade education, worked semi-skilled trade labor jobs his entire life, and was able to amass a multi-million dollar fortune through nothing more complicated than buying unused land and occasionally parking cash in certificates of deposit. Admittedly something of an outlier. I mention it only to highlight what was reasonably possible for a working man 50 years ago. This being the case I question the need for new, untried solutions to problems we, as a nation, did not have 50 years ago and that we already know the cause of. Occam's Razor would have me believe the correct course of action would be to incentivize rebooting the manufacturing sector in this country while reinstating the trade tariffs that protected our industries up until the early 90's.
The US can be just as bad - it was just easier to see as an outsider abroad.
How exactly is "basic income" superior to "hole" digging/filling type of jobs? I believe they are one and the same as far as their fundamentals are concerned, i.e. both do not create/add any value on their own to the society/economy.
Actually, I think "hole" digging/filling is superior to "basic income" as it, at least, keeps the person occupied and thus takes care of problems due to "empty mind is devil's workshop". Please correct me if I am wrong.
In short, I think people will do useful work if we just give them the ability to do so. We'd still need schools and such (preferably at no cost to the students) but I think not having to worry about starving would be great for humanity as a whole.
>We'd still need ways to motivate people. I think basic income would be great. ... >I think not having to worry about starving would be great for humanity as a whole.
Motivating a person who is not starving and has no worry about starving in future is a damn difficult job. But maybe I will grant this thing for the sake of argument, because, there may be other things that may still motivate people. e.g. yearning for better lifestyle.
So, I guess, the basic income should be very minimum, in fact, should be minimum possible to keep the person barely alive. Anything more will potentially have "spoiling" effect (failed communism and the British welfare system comes to mind here). No more than minimum required shelter (without any kind of "luxury", including TV, more rooms etc as are given in UK), minimum required raw food with minimum required equipment for preparing the food (no pre cooked fancier food of any kind) and minimum clothes to sustain life (no fancier clothes).
Of course, I am aware that terms like "luxury", "minimum" need more precise definitions. I will make a try -
Minimum required shelter/food/clothes for survival - to find the minimum amount of shelter/food/clothes required for survival one must look at the quantities the people/peasants in African/Asian/European poor countries (e.g. Liberia, India, or Russia) survive. In fact, the basic income should be just sufficient to survive, if required err on the side of less but not an iota more; if we can guarantee this, then I guess the basic income scheme will not corrupt the people, else it will be a recipe for economic/societal disaster and ruin.
Luxury - anything beyond/more the minimum is luxury as far as basic income is concerned.
Edit - added definition of luxury.
Maybe we ought to bring in wealthy people in for experiment. What makes them get up in the morning and work when they could just sleep all day? Why does Bill Gates still care about Microsoft even though it represents an ever decreasing portion of his wealth?
Of course, we will have tons of free riders but that's the price we pay. Also we don't care because any welfare system will have free riders.
The price of what? What positive do we get in return? And how much price? The UK seems to be paying exorbitant price for whatever benefit they claim/perceive to be getting from their flawed welfare programme.
The original passage from Wealth of Nations:
"He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention."
Then again, Smith may well be my One True Scotsman :) Isn;t there a baby in that bathwater?
I do recommend the bookTv ( CSPAN anyway ) presentation of Peter Whybrow on his book "The Well-Tuned Brain".
I think this could be a reasonable conclusion given the increase in the strength of property rights for foreigners ("he intends his own security") and the decrease in transportation costs and time, the two things I assume Smith was reasoning about.
Thats the money quote to me, and so much of what is overlooked when talking about industry and to a large extent, social welfare programs. I wish the overton window included the concept of the costs required to maintain a useful, stable society.
It seems that today's high ranking economists, who are highly influential and defend their intellectual turf aggressively, rely on models which ignore/omit Mr. Grove's industrial policy insights.
US consumers get cheaper manufactured goods if the US economy just simply outsources all orders for these goods to factories in East Asia. And that seems to be about as deep as these economic analyses go.
But where is the economic analysis that recognizes and quantifies the cost of losing so much domestic manufacturing capability?
When I see how long it takes Indiegogo and Kickstarter hardware makers to actually create their finished products -- because they have to travel to China to meet with part suppliers and manufacturers -- I wonder how much US innovation has been crippled by the policies top US economists have confidently articulated and defended for the last 30 or 40 years.
Yeah, it's actually a bit vexing when we lose one of the members of my team periodically for trips to China or Taiwan to deal with new hardware.
"""Poverty rates started to collapse towards the end of the 20th century largely because developing-country growth accelerated, from an average annual rate of 4.3% in 1960-2000 to 6% in 2000-10... China is responsible for three-quarters of the achievement."""[1]
[1] http://www.economist.com/news/leaders/21578665-nearly-1-bill...
When faced with picky eaters, before around 1970, parents all over the USA would use the cliche that "children are starving in China."
You know what happened shortly before 1970? The Great Chinese Famine--where up to 45 million people starved in the span of 3 years.
https://en.wikipedia.org/wiki/Great_Chinese_Famine
I'm not sure how saying facts out loud indicates a value preference.
If you're not familiar enough with American culture to know what I mean, then don't worry about it.
So I wouldn't be quick to rule out the idea that the phrase started with a famine in China.
I am American btw. But I wasn't alive in 1970.
It will not benefit the rest of the world if say the US, collapsed due to severe internal conflict. There has been studies showing that high inequality actually hampers economic growth. Thus inequality in the US is not necessarily to the benefit of poor people elsewhere.
In Thailand you can live in a high rise condo with a gym and maid service and eat out every day and do some traveling for $2000/month. That life style is 8x more expensive in San Francisco. In Argentina before the 2002 crash, the country was very expensive, but it wasn't some luxurious paradise, so it's not just that it's a developing country. AFter the 2002 crash the prices were absurdly cheap. Something just doesn't make sense, and there's an enormous amount of denial that anything's amiss. Prices are a mystical sacred phenomenon it would seem. American companies don't care why prices are cheap, they just build stuff where the prices are cheap and sell it where they are high. They couldn't care less about the mystery, neither could the politicians. It's just the magical mysterious market.
Health care prices are also a mystical sacred phenomenon. Why are they 10x in the U.S what they are in other countries? Other people get sick and die there and are willing to pay whatever money they have to get better. Prices don't necessarily scale with income per capita either. I am sick of pat answers to this question and "just-so" stories. Someone should take some cost accountants and figure out where all the money is actually going for these kinds of things and write some journal articles. It would probably reveal a lot of bizarre and interesting rough edges on the economy and maybe a fair amount of business opportunity.
Some researcher should go look at the cost to build an Intel fab in Taiwan vs the U.S and start asking why. Start with why is it 1/5 the price to build the fab in Taiwan: 1. Because the construction company charges that much. Why? 2. Because the labor is 1/2 and the materials are 1/3. Why? Because the labor's rent is 1/5? Why? Because the land for the apartment building was 1/10 the price? Why? Because there are no mortgages and the land had to be bought with savings from an export business, etc, and follow it all the way down for everything. Depth first search! Piles of fascinating economic nuggets are just sitting there untouched.
In Argentina and most of Latin America for example, most real estate purchases are done with cash. Thus, in order to buy land you have to save for years till you have the full purchase price. The cost of renting is much higher vs the land value. Less credit = lower prices. Profits and savings from productive businesses and wages have much more power in the economy than bank loans.
It's a bit like what happened to higher education in the U.S. We rapidly increased the amount of loans available and the costs skyrocketed. Same goes for the housing bubble. You increase the credit available for houses, the price goes up. You decrease it, the price goes down. This is the game we play with money in this country because everyone will always take our dollars and we can QE as many as we want.
There's a lot of arbitrage of this via buying real estate in foreign countries. Lots of retirees sell their inflated home and buy in Costa Rica and all that money drives up the prices there. We've got the dollar spigot in this country and everyone else in the world has to drink off what leaks out the trade deficit.
It's a global game and the people who have made tons of money off that game go and manufacture stuff in China for impossibly cheap where the leaky dollar spigot has not deluged and import it back to the U.S. This is where the whole export led economy thing comes from. If you are a publicly traded company in the U.S, you get to benefit from the enormous amounts of dollar spigot that floods into the S&P 500 via the banks diversifying after they receiving money from the Fed's purchase of MBSs from the banks, that then get parsimoniously dolled out to factories in Asia and elsewhere by these big companies.
[1] https://en.wikipedia.org/wiki/Tsiolkovsky_rocket_equation
Googling I found:
"Taiwan Semiconductor, the world’s biggest custom-chipmaker, plans record spending on plants and equipment this year. It’s lavishing $12 billion on factories -- more than Intel Corp. has ever spent in a year"
Which looks more like Taiwan being enthusiastic for building tech stuff rather than dirt cheap. I'm recently back from Taiwan and I'm not sure the costs are much lower than rural USA.
Another angle is asking why people are willing to spend so much money to put manufacturing in the US. Skilled workers is part of it. Another is having a low-corruption society, and all the advantages that social capital in general brings. Yet another is having convenient access to the other capital that your company needs to do business with in order to function. Like, if all the sub-components are built in the US, and your sub-component is being sold to US manufacturers, moving your facility offshore means a lot of shipping costs and delays.
A crucial function of markets is in "price discovery". And there are numerous ways in which this can fail. I'm concerned that this is among the more fundamental flaws in market operations as a whole.
Keep digging at this.
I'm active at G+ ("Edward Morbius") and on reddit (https://reddit.com/r/dredmorbius), where I've been thinking about and musing on price, cost, value, and money. Somewhat frightening ground to cover, but fascinating.
I don't claim to have good/better ideas on this issue, but starting a trade war and fighting it to win does not sound very promising, especially since trade wars can develop into, well, plain wars (the decade from 1929 to 1939 had its fair share of protectionism and ended pretty badly.)
Theoretically (very theoretically), a better approach for any two countries, and eventually it might become the only workable approach, is to act to maximize the benefits for the citizens of both countries. How to get there I don't know.
What exactly does victory in a trade war look like?
Free trade unquestionably allows companies to offshore jobs to countries with cheap labor, no environmental regulation, high corruption to enable bribes, or all of the above.
As a consequence, wages stagnate as more and more of the profit accumulates at the top. Those at the top divert a much larger percentage of their wealth into investments, driving a surplus of capital seeking return. Meanwhile wage earners' purchasing power decreases. This trend can be masked for a time, as marginal people drop out of the labor force, older people retire early, the cheap overseas labor gives wiggle room to drop some prices, and other technological advances make some goods cheaper to produce.
In the long term the consumer class is gutted. Capital is misallocated due to lack of investment opportunities, financial volatility increases, and the concentration of wealth enables a handful of people to command a vastly outsized influence on government.
For the record, this was the Gilded Age in the USA where we jumped from financial panic to financial panic and the monopolists and .01% literally decided entire elections in back rooms. The same old arguments have been reborn (free market, regulation strangles business, etc).
I'm pretty sure things will continue to get worse before they get better. It took the fear of Bolsheviks to force change last time.
E.g., even though I'd be the first to say that Samsung is as corrupt as fuck, its fabs aren't exactly spewing toxic gas into the neighborhood (probably not any more than silicon valley companies did in the 60s), and it still (sadly) remains a choice opportunity for job seekers in Korea.
Also you have to factor in that the existence of a strong consumer class in other countries (those pesky workers in Samsung) allows many American companies to hire more people than they could if they only had the American market.
Despite all the hype over outsourcing, the number of Silicon Valley jobs is close to the 2000 highs
http://www.spur.org/sites/default/files/wysiwyg/u168/Screen%...
Silcon Valley job growth has pretty much tracked the rest of the nation https://upload.wikimedia.org/wikipedia/en/8/8e/US_Labor_Forc...
Job creation and destruction is an inescapable part of a dynamic economy.
And given the fact that sending our designs to China to get manufactured is basically the only thing stopping them from going to war with us, I'm not convinced it really makes sense to give up this benefit in order to 'fix' domestic problems that don't really have anything to do with globalization.
Certainly there could be more domestic manufacturing than there is currently, but just because the current system is causing some problems doesn't mean we should discount the benefits.
The concern is there will be a class of highly paid individuals in the US and a class of unemployed (replace with underemployed, low income) because we're sending all our manufacturing jobs overseas.
Grove's argument is whatever benefits you're getting for sending jobs overseas, there's a societal cost (increase inequality), as well as unforeseen future costs when innovation and technical excellence is located elsewhere.
No idea about the rest of your views.
In at least US income distribution, we have also a curious "bump" up the food chain in addition to what a pareto distribution would predict. Isn't that the entire nail on which income inequality hangs?
"Bump" at around $250 k in this chart: https://commons.wikimedia.org/wiki/File:Distribution_of_Annu...
Other have also said that in terms of real, physical , tangible wealth there is no disparity - that all of the stock options and bonus plans have less physical referent than even a paycheck.
That seems to doom us to this state of affairs. Er, it would if the map was the territory, but the fact that this distribution exists implies the existence of forces that cause it. Are we then repeating the error of the Levellers with this?
It will only continue. That is the "long term effect".
This guy is basically telling everyone from the grave to vote Trump, or Trump-like economic policies... but never utter such a thing around these parts!
I know this is going to sound tiring, but: why not Sanders?
* He's not as blatantly evil as Trump.
* He's not at all a bourgeois globalist.
* He's constantly banging on about what trouble the working class and middle class are in.
I don't see why everyone's supposed to consider Trump the default vote for people who care about class issues, since he's actually an objectively terrible candidate.
Grove's outlook also colored by difficulties of semiconductor industry. Asia in addition to having cheap labor, governments would prop up barely profitable fabrication companies as national champions, give them subsidized loans and regulatory favors. American investors & management, perhaps rightly, balked at trying to compete on that front.
This is strictly true, which is one of the reasons I think the onus of long-term thinking has sadly but rightly shifted to regulation over altruism.
Whereas in the past you might have had a titan of industry decide that dumping chemical byproducts of manufacture into the water supply of surrounding farms was "wrong", now the CEO will be voted out if he or she fails to make the profitable choice.
(pdf warning)
http://www2.itif.org/2015-myth-american-manufacturing-renais...
>The U.S. lost its lead in batteries 30 years ago when it stopped making consumer electronics devices.
>Unlike with microprocessors, the U.S. share of lithium-ion battery production is tiny
But now the cutting edge seems to be Tesla's Gigafactory https://en.wikipedia.org/wiki/Gigafactory_1
Mr. Grove acknowledged that it was cheaper and thus more profitable for companies to hire workers and build factories in Asia than in the United States. But in his view, those lower Asian costs masked the high price of offshoring as measured by lost jobs and lost expertise. Silicon Valley misjudged the severity of those losses, he wrote, because of a “misplaced faith in the power of start-ups to create U.S. jobs.”
MBAs and money people look at immediate costs, managers look at engineering costs, lost in the off-shoring debacle is...you actually aren't saving money in the long term.
There are specific exceptions in the case of leveraging specific expertise -- for me, looking for a WinMo optimized two way DH key handshake in assembler, send the code and email Dec 23, receive the results Dec 25, was great. But most outsourcing isn't targeting specifics, it's the generalities and that is a big issue. Costs are masked.
If local=better then perhaps he should have focused on job growth in California and worried about companies that export their growth phase jobs and expertise to other parts of the US - especially underdeveloped parts which won't contribute much back except cheap labor. That's also costing Californians their jobs. What makes Iowa or Arkansas more important than a booming megacity in China?
Recently-ish Germany is also aided by the fact that the rest of the eurozone isn't doing so well economically keeping the euro lower in value than a German currency would be.
The ECB is currently making cheap money available. That's exactly what they're supposed to do and the only thing they can do, to reach their primary objective.
This happens to help Germany economically but I don't see what else the ECB could possibly do that wouldn't help Germany economically.
Also the German Bundesbank - famously paranoid about hyperinflation that definitely occurs any day now and starts the apocalypse - is strongly against the current ECB policy. So clearly the Bundesbank isn't controlling the ECB, not as much as they want to anyway.
In any case focussing on monetary policy alone and maintaining a inflation of 2% can cause issues economically but is nevertheless agreed upon to be good policy. That's why the ECB is independent, to prevent people from influencing or controlling it at times like these. It's operating exactly as designed.
Unless you're entertaining conspiracy theories, I don't see how one could argue that the ECB is controlled by Germany to somehow screw everyone else over for Germany's benefit.
Disclaimer: I'm German.
It's mostly that the government and even unions are comfortable doing things that help companies compete internationally, even if that means that wages might not rise as much for example.
Software seems more robust but I don't trust myself to make predictions.
However I also have working experience in software dev, just in case this prediction doesn't pan out in the long run.
I'm actually going to work on a small business idea (likely SaaS) before my PhD starts, with the aim of scoring a modest source of income.
However, many software architectures have yet to embrace the pipelining and parallel capabilities of today's CPUs... meaning the need for application-specific ICs could be many year away.
For that, broadly, supply new, valuable information. For that, take in available data, manipulate it, and report the new information as the results.
So, with all this data, find where some new, valuable information will make a good, new product/service. Then to have the first good or a much better offering, do use much more powerful data manipulations. For that, the secret is, and the candidates are, object oriented programming, processors with 1000+ cores, processors with clocks at 50 GHz+, new programming languages, new computer architectures exploiting, say, solid state disks addresses as a slower version of main memory, processors communicating with optical instead of electrical signals, quantum processors, massive parallelism of the cloud, original derivations with theorems and proofs in applied math exploiting appropriate advanced prerequisites, and may I have the envelope please [drum roll], and the winner is -- applied math!
Sorry 'bout that. Here the applied math is replacing the current ubiquitous elementary techniques, intuitive heuristics, fitting to large data sets, and copying what was long done manually.
This answer will not serve everyone or please everyone, but IMHO it is the most promising, single path forward.
Breiman was a first class applied mathematician, a student of M. Loeve at Berkeley and later a professor, of, say, statistics, at Berkeley.
So, one way to get valuable information is to take in some data, manipulate it, and report the results. IMHO, by far the best way to get powerful data manipulations is applied math, possibly with some advanced pure math prerequisites.
E.g., some of the best applied math long on the shelves of the research libraries for manipulating data to get valuable information is just astoundingly powerful stuff, and I don't see computer science work in ML and AI as an effective way to compete. E.g., how to do as well as Wiener filtering, linear programming, optimal control without just programming what is already known? Or, if we didn't have the simplex algorithm for linear programming, I don't see the approaches of ML or AI as replacing them. E.g., ML and AI are supposed to be good at games, but their approaches to just a large example of just the two person game of paper, scissors, rock would be very clumsy. Why? The solution is a nice application of linear programming, and that is darned clever. Or, want to assign workers to jobs on a production line. Sure, can try AI type approaches, but there is a super nice, fast, exact algorithm, darned clever, and a long way from ML or AI.
I'm out of school -- got my Ph.D. in applied math, stochastic optimal control.
I'm doing a startup, and the crucial core of the work and its value is some applied math I derived based on some advanced prerequisites.
I've published in AI, but my view is that so far there is nothing in AI that is at all close to actual intelligence as we see it in humans.
Theorems and proofs are a heck of a powerful methodology and tough to beat. For AI, a super big problem is to define in any meaningful way just what the heck intelligence is, say, enough to get started on a solution. That is, we don't really have a problem statement -- the Turing test might be a test on a candidate solution but is, still, not a problem statement. IMHO, once we do get a problem statement, then the most powerful approach will be via applied math.
But you might want to revise this:
> IMHO, might look at ML as based heavily on the Leo Breiman work in random forests and classification and regression trees (CART).
There is a whole lot more to ML than decision forests. We have talked about this before, I suggest that you get started with Vapnik's books. They are not light reading but I can promise you will enjoy them. No seriously, just get those books. In fact his main result is bigger than ML, its a non-asymptotic distribution independent _uniform_ law of large numbers.
ML is now in, what can be described as, a post-Vapnik era, but for someone steeped in probability and functional analysis that is the place to start.
China has used central buying/orders to drive up artificial demand/buying and as a result has a massive over capacity and debt problem that appears to actually be stickier and worse than ours.
I think the best learning is it's better to make a clear choice on the system to allocate resources rather than hybridize it. US Example? Healthcare-- Either go completely public like those in Europe which spend 4-6% of their GDP to cover health or go 100% provide and move government out of it . These hybrid systems have us spending 20% of our income on healthcare so we get the worst of both worlds.
That type of protectionism may work domestically but it means that American companies cannot compete overseas if they are being undercut on price.
It looks like technology will fix the problem in time. American companies will start manufacturing in the US but there will be no jobs, just automation.
The focus should really be: how can we increase the intelligence of the average worker so they can compete in the new economy and not just "live life on basic income" or "get an overseas job waiting to be automated".
The problem with running everything with simple money is that it is like running a body on doped water alone. I can't even say blood because money is one dimensional and blood has many useful components.
I think something like Ethereum is going in the right decentralized and high-tech direction. If we can have a common information platform then we can wire up our systems to be more decentralized and also have the capability to do holistic calculation and goals as well as evolve the system.
So I think having society integrate common information platform is key to turning this from a bunch of monopoly games into more like a wired game of Eve Online, or at least something where we can keep track of more than one stat ($) per entity.
The article skipped what he meant by "priorities" and "forces". Presumbly, it's not forcing companies to make up jobs, but by things like lowering employment transaction costs and making the people more valuable.
Education is the obvious one, but it needs to be education that actually does make one more valuable. Also make sure the people are healthy. Better infrastructure - pretty much all those "government" things.
Had Intel outsourced the manufacturing of their memory chips during their "scale-up" phase, it's conceivable that they may have established more "partners" and less "competitors"... similar to what Apple has accomplished today with iPhone manufacturing.
It's a badly needed basic function.
But surely a GreaseMonkey script should be able to do the job too?
Jobs for the uneducated are disappearing and saying "well lets just educate everyone" is not enough. I'm racking my brain trying to come up with ways that tech can solve that problem but it seems like an upward battle (e.g. Uber makes anyone a cab driver, but in a few years, will fire all those people when automated cabs hit the road).
But at least in America, public consciousness is still fixated around this Cold War illusion of the American Dream that necessitates a 4-year college education. America seems to prize entrepreneurialism, only when it's the white-collar, Mark Zuckerberg variety because of the promise of fantastic wealth; people running their own businesses in plumbing, home repairs etc. don't get anywhere close to that level of respect.
To some extent, technology-based solutions are already in play, with hundreds of thousands of people using online resources to learn web development and other skills. The vast majority however are learning these skills to simply keep up with the needs of their job or the job market, as with shorter average job stints these days, employers won't find it worth their while to provide or pay for that type of training.
It's common to see negative opinions of manufacturing jobs here and on other tech sites. I've worked in one the UK, doing 12 hour long day and night shifts (as a lab tech; I now have a PhD). It was long and hard work, being on your feet around a huge complex collecting samples from all the stages in production and then analysing them to strict deadlines. But you know what, I had greater job satisfaction from doing that than any other job to date, including the position I have now at a university. When I left the factory gates at the end of a shift, I was done, and could head home and relax in the knowledge that I'd done a good job, done my bit to keep the site and production running, and made a small but net positive contribution to the world. And got paid a decent wage for it. And working on a site with a big workforce can be very friendly environment with a lots of camaraderie with everyone working to the same goal to keep production running. You can have a lot of fun while on the job, while also working hard. As a software developer in acadaemia, and I suspect for many software developers in general, work never ends. When I leave work, the unfinished problems and backlog of untackled problems don't go away, which when coupled with deadlines and team communication, admin etc., can lead to significant amounts of stress and unhappiness and depression which I never encountered before. I suspect the lack of physical activity also contributes. And working in an open plan office with everyone plugged into headphones and on IM all day is much less social; at times I think it's like working with zombies!
In the UK, factory workers have strong legal requirements for safe working conditions, limits on hours, union representation if desired, and a host of other protections. The US has less strong employment protections, but I understand health and safety rules and maximum work hours etc. are decent. But would people want to work in a modern purpose-built manufacturing facility in the US? Hell, yes. Working on something like that can give real meaning and purpose to one's life, to be doing something real that actually contributes something physical to the world. Even if you're a small cog in a giant machine. As you head out of the factory gates and see the stream of lorries heading out loaded with product, you know that without your work that shift, they wouldn't be going, and that can give you genuine satisfaction. Ask the millions of people who lost their factory jobs to offshoring if they would go back for an answer with real meaning. I strongly suspect you'd have a majority vote yes.
I know this might not be a popular opinion, but I'll say it anyway. Manufacturing is what made the UK and the US into industrial powerhouses, which lead directly to the prosperity and quality of life we have enjoyed for decades, and its rapid decline has lead to a steep decline of both for many people, and a whole host of social problems. While the idea that a service economy will take over has been strongly pushed on both sides of the pond, it's obvious to anyone with an ounce of common sense that this isn't self sustaining; these are not wealth-creating industries since unlike manufacturing, they only transfer existing wealth around.
Sweatshops exist in China, but the top electronics manufacturers (mostly Taiwan-owned) have relatively good conditions.