The End of Employment – Eternal 20%+ Unemployment

Theses are some inconclusive thoughts I’ve been having lately, not a manifesto. They are somewhat re-inspired by Francine Hardaway’s recent write-up on the subject.

Industrial efficiencies are increasing exponentially, and are rising much faster than human productivity. It is now economically beneficial for factories in China to replace laborers with machines and computers, even when the workers are paid only dollars a day. This mirrors the job stagnation in the United States, where companies are finding they do not need as many employees as they once did, and competition for jobs requiring less skill overwhelms diminishing openings.

In the radical future, goods will be manufactured cheaply in our homes and neighborhoods. Computers will drive, design, harvest, and manage resources, even improve themselves, better than humans could. The need for “less skilled” labor will evaporate rapidly as we become both masters and slaves of terrifyingly efficient technology. We will have the real possibility of every human living for 500 years almost entirely supported by machines that can cater to our every need. Depending on your constitution, that could sound like paradise or hell – but we are already partially there and the next 50 years will be an era of staggering change in that direction.  The other possibility is continuing on the trend we are now, where a large portion of our population is becoming less employable and wealth is becoming unhealthily concentrated.

There are a few shorter term consequences to the wane of lesser skilled jobs:

1. The demand for unskilled labor has plummeted such that it greatly undershoots the supply — now and forever. We must learn to deal with the significant portion of the population that will always be unemployable in anything other than unskilled labor due to a lack of training, education, intelligence, discipline, interest, or other reason. There will be no recovery in jobs for these people, and while 20%+ employment could become the norm, it will exceed 50% for this group. Those exact numbers are arbitrary, but I think they are in the ballpark.

2. With less need to pay employees while generating wealth, that wealth increasingly flows to the few who can exploit these new technologies and efficiencies – the managers and investors in companies. A very small team can now design, produce, and distribute almost any product, and should that product be successful, most of the profits will go to that small team and their investors instead of being widely dispersed to factory workers, store owners, distributors, salespeople, and other shrinking economic actors.

3. Employment is declining as the primary distributor of wealth to support the middle class, and thereby the consumer economy. Employment really only served that purpose for the seventy or so years of manual-based industrial expansion, and there is no reason to expect it will happen again. We’ve all heard the story of Henry Ford generously paying his workers so they could one day afford his cars. Every year that goes by, he would need fewer and fewer workers to run his factories, and we could hardly expect companies to endlessly employ people they do not need.

What can we do? Truthfully, I have no solution to prevent the world from falling back into a medieval dichotomy of oligarchs and the economically detached masses. Here’s a few non-conclusive thoughts:

Education

It is to everyone’s benefit to bring as many people as possible into the skilled labor pool. Heavy investment in education is a no brainer. Unfortunately, simply increasing funding is not the answer – we already invest a lot in education by world standards and are still failing.

Taxes

In the past, generating wealth required heavy investment in people, and we could expect some of that wealth to trickle down to employees. While generating wealth still requires people, it now requires many fewer and therefore much less distribution of that wealth. Without employment, the only way to ensure our society isn’t undermined by poor, unemployed, dissatisfied masses, and to maintain the middle class necessary to drive our economy, is to tax the wealth and somehow make sure there is some proportional benefit to everyone.

Distribution of Wealth

Somehow we need to make sure we don’t have starving or unnecessarily sick people living in the streets, and instead have strong happy societies. In any implementation, this inherently involves a transfer of wealth from those who generate it to those who can not – “conservatives” must learn to face this unpleasant fact – the recent short-lived phenomenon of a job-based middle class is fading.

We could directly feed, house, treat, and clothe those who can not work, however that approach has the fundamental problem of undermining basic societal bonds and incentives. There is a perverse incentive to avoid self-sufficiency and economic entanglement. And how do we decide who gets subsidies? If some is not working, is it because they can’t or would prefer to live on the dole? When you try to transfer wealth to the unskilled, it’s often the skilled who exploit the system. Whether or not to help those who don’t help themselves depends on whether they can’t or won’t. This false distinction is fundamental to the battle between so-called conservatives and liberals in America. The distinction is false because both groups exist along a broad scale, but it is extremely difficult to know where someone lies and how much subsidy they should receive.

We can also increase government spending, but that always turns into a bureaucratic nightmare of inefficiency and corruption.

Another option might be to simply tax and distribute a portion of wealth evenly regardless of need, much as the conservative Sarah Palin territory Alaska and the United Arab Emirates do with their oil wealth. This is a clear, simple, fair distribution of wealth. Because of it’s fairness and lack of social engineering, it is less likely to undermine market economic incentives to work. You might argue it’s unfair to those who generate the wealth, but ultimately more wealth may be generated from a society with money to spend and the world will be a happier, more stable place for the rich to live in.

Relax

As a society, we are rapidly approaching a point where we could all be healthy and happy if we can find a way to marshall our resources. That’s a good thing. This is not a zero-sum game. Somehow, we need to find a new way for everyone to benefit from and contribute to economic growth, because we do not have the need for 6 billion employees.

 

US Debt Should Be Downgraded – Rip Off This Band-aid

Does anyone remember what caused the financial crises a few years ago? Basically, junk debt was sold as high quality debt largely because rating agencies didn’t do their job, and when the emptiness of that debt became apparent, enormous wealth evaporated.

This sounds familiar in the current crises of US fiscal policy. The definition of a AAA rating on bonds is that they have “virtually no risk of default.”  Does anyone really believe this is true of the US? Debt is approaching 100% of GDP from under 40% just 20 years ago, influential political groups are threatening to choose default over losing their political battles, and our entitlement programs are outrageously unsustainable. While the US has a good chance of recovering from these threats, there is certainly a significant risk of eventual default, and getting away with lying to world markets about this default is a dangerous game.

US debt should be downgraded so that markets can adjust. Piling false credibility on a shaky foundation makes collapse both more likely and more catastrophic. Downgrading US debt now would be painful, but beneficial in the long run. It would force more reasonable diversification of the world’s wealth among commodities and debt markets, and it would force major changes in the US fiscal policy which ultimately could earn a legitimate and sound AAA rating.

I predict the current rating will hold, but purely for political and self-interested reasons of the rating agencies – just as they did with real estate debt in the first decade of this century. When there is no consequence for taking bad risks, markets fail to account for them and debtors fail to to adjust. Ratings exist to measure and communicate risk, not to preserve wealth and stabilize markets. We already saw what happens when they are used for that purpose.

The US should absolutely not default, however S&P and Moody’s should downgrade America’s debt.

 

Small Violin Plays: TechCrunch Criticised by Microsoft-employed Blogger

Arrington calls Obasanjo a moron

Somebody pull Arrington away from the keyboard.  Welcome to the age of the Twitter-cation, when minor celebrities can show their human side by publicly grandstanding about who is a bigger moron.

Expect general silence about this entertaining meltdown from the silicon valley digerati, many of whom pant at Michael Arrington’s every word. Most will be loathe to risk Arrington’s annoyance, since a shout-out on the TechCrunch blog is seen as a key PR turning point for a struggling startup. (The truth is TechCrunch can generate a lot of clicks and a half day of high visibility to entrepreneurial geekdom, but most of the new “users” will be valley news junkies afraid of not knowing about the next big thing and any link-love will be temporal as you’ll be on the second page in less than a day.  It’s good PR, but will not change a company’s prospects.)

TechCrunch, for the 99.9% of the world who have never heard of it, is a tech startup blog. The content is high volume, often interesting, usually opinionated, frequently critical, and heavily focused on social media. Stinging criticism of startups is often presented with god-like certainty. The criticisms are sometimes valid, and sometimes seem personal. Such is the right of a blogger.

Michael Arrington, the TechCrunch blogger, caused general LOLing today by continuing his earlier lashing out about Dare Obasanjo, a far less visible blogger, for poking at TechCrunch for being too negative on the influences of economic capitulation on startup-dom.  Arrington accuses him of representing Microsoft’s attempts to discredit TechCrunch, despite the fact that, although Obasanjo is a Microsoft-ee, his blog does not seem to be Microsoft focused.

See for yourself.   My favorite:

@MossyBlog settled down, gave it some thought, and I still think you’re a moron. and oh yeah, I just uninstalled silverlight. jerk.

The story goes like this:

  1. Hotshot blogger criticizes lots of companies, says their technology is inadequate or predicts failure.
  2. Blogger employed by Microsoft uses his personal blog to criticize said hotshot blogger for being negative.
  3. Hotshot blogger upset that he was criticized and makes a scene about evil Microsoft conspiracy to crush him.
  4. Companies that hotshot blogger criticized scratch chin.
  5. Hotshot blogger uninstalls Silverlight.

UPDATE:  Arrington cancels Microsoft coverage:

TechCrunch Microsoft asked us to live stream a Ballmer talk after the PDC. Accepted last week, just canceled. We have better things to cover.

Michael Arrington about 5m ago via web

Take that Ballmer!

Sarah Palin Lies About Her Beliefs – How to Tell

It doesn’t take a CIA trained interrogator to see that Sarah Palin is lying about her beliefs.  She has a clear-as-day liar’s tell.  Her neck tenses briefly as she closes in on a fib, and she closes her eyes, smirks tensely, and bobbles her head uncomfortably as she tells it.

In some way this means she is honest.  Her soul and her heart do not want to lie and her unconscious struggles to stop her, but loses.  Her cerebral ambition, and the pressure from her coaches, compel her to deception.

Watch this video from 1:09 to 1:15, first with no sound and then with sound. When you are done, watch the whole video if you like to see how different she looks when she isn’t lying.

(I tried to use YouTube params to have it play just that time period, but I couldn’t get it to work. Fixes appreciated.)

Please send me other examples of Palin’s liar’s tells if you find them. (I’m not interested hearing about her lies – those are covered elsewhere.)

Chinese monitor Tom-Skype chat

From a recent article on Ars Technica forwarded to me by my mother:

In a joint report between ONI Asia and the Information Welfare Monitor, author Nart Villeneuve details evidence that China not only monitors and logs text chat, but also targets specific users for further monitoring.

The article was based on a publication entitled BREACHING TRUST: An analysis of surveillance and security practices on China’s TOM-Skype platform.

Like it or not, it is the policy of the Chinese government to monitor whichever communications they want, and to respond in whatever way they want.  All Chinese know this.  There is no promise of privacy to breach.  This applies to communications with an endpoint in China, in a state cooperating with China, or any location managed by a Chinese or sympathetic company.

The real story here is that eBay is unlikely to end its relationship with Tom Online because the Chinese government would retaliate by crippling all eBay services inside China.  This is the same sort of leverage that prevents CNN and FoxNews from overly negative reporting on China, and forced Yahoo to reveal the identity of a high profile dissenter several years back.

The Chinese government uses its powers to hurt the interests of uncooperative entities.  Anyone who does business with the Chinese government, Chinese companies, within China, or travels to China subjects themselves to strong-arm tactics by the Chinese government and is therefor a de facto collaborator with the Chinese government.  That does not mean you should not do any of the above – the Chinese government is not all bad – but there should be no misunderstanding about what you are doing.

Other facts you should not be shocked to hear:

  • All instant messages (Yahoo, AIM, MSN, ICQ) are monitored and censored.
  • All message boards are monitored and censored.
  • All emails are monitored.
  • All SMS messages are monitored.
  • Phone calls can be monitored.
  • Mobile phones can be located and tracked.
  • All call records are available to the Chinese state.
  • Many mobile phones can be transformed into a transmitting listening device by sending a signal over the network.  (This occurs in the United States as well.)
  • With the combination of location tracking and call records, the Chinese government can easily tell who you are meeting with, where and when you are meeting, who you are communicating with, and what you are saying.  Anyone working against the interests of the Chinese state, its allies, or agents, can easily be discovered along with their network of collaborators.
  • Hotel rooms, business offices, homes, and any locations that arouse suspicion are routinely monitored with bugs.
  • Hotel and airplane travel records are stored centrally and accessible to the Chinese state.

There is no expectation of privacy from the state in China.  The Chinese state does not respect the privacy of communications, homes, or businesses.

Tom Online is the Chinese partner of eBay (which owns Skype,) and distributes a modified version of Skype for China.  There is no reason I know of to use the Tom Online version, unless you wish to subject yourself to monitoring.

Anyone inside or outside China wishing to make sure all of their communications are not subject to Chinese monitoring should use a secure tunnel with a server outside China, and avoid communication that passes through resources tainted by Chinese access.

If you have ssh on your computer and have access to a Unix account outside of China, the following command will create such tunnel:

ssh -qTfnNC -D 9999 [user]@[host]

You must then proxy communications through the host initiating the tunnel.

Does craigslist have a Case?

Regardless of your opinion of the ethics involved in either party’s conduct, craigslist’s case against Ebay seems to be based entirely on the fact that they feel betrayed.  There is no doubt in my mind that Ebay behaved poorly and manipulatively gained the trust of Craig Newmark and Jim Buckmaster and has been trying to stab them in the back ever since.  However that does not mean that Ebay will lose any rights they may have to acquire more of craigslist.  I’m going to attempt a layman’s analysis.  You guessed it, I’m not a lawyer – I just play one in my blog.

craigslist’s claim is that Ebay backed a cement truck over the feel-good intentions they layed out during “negotiations.”  I put “negotiations” in quotes because it appears as if craigslist had no say in what actually happened, despite the appearance that they were an actor in the talks between the former shareholder and Ebay.  This is apparent because Ebay ultimately purchased an option without the involvement of craigslist, and craigslist executed the option without objection.  At that time, craigslist was not yet comfortable with the acquisition.  Why then would they have gone along with the purchase if they actually had veto rights over the transaction?  It appears that while the former shareholder and craigslist made efforts to have an agreeable sale, that was really just out of the generosity of the former shareholder – a generosity which ultimately ran out when a multi-million dollar check was handed to him.

If I’m wrong and craigslist grudgingly went along with the sale, even with the power to stop it, then Craig and Jim were seriously hoodwinked by far more savvy professional business people.  Perhaps at the time Craig and Jim did not understand how companies, and public companies in particular, work.  Board members and executives turn over rapidly and are pushed around and out by demanding shareholders.  If the people running the show are turning down money because they made some vague oral promises to some company they invested in, shareholders will apply pressure and those executives will change course or be disposed of.  Any feel-good vibe does not mean a thing when transacting with a large company, and you believe any such vague promise at your peril.

Warren Buffet likes the saying “only invest in companies that an idiot could run, because eventually one will.”  A corollary might be, only enter into business transactions where it is still to your advantage if your partner becomes your adversary.

The craigslist motion is an interesting read, but it feels more like an appeal to good taste than a legal proceeding.  Based on that feeling, and a lack of substantial concrete violations, my intuition is that they have a weak legal case and are therefore making their case to the public.  They will succeed in temporarily getting Ebay off the board, stopping the deceptive advertising, recovering some damages, and perhaps limiting some shareholder request rights, but any economically valuable shareholder rights are unlikely to be terminated.  My sense is some powerful shareholder options are the real target here, but the private nature of the companies leave that unclear.  I have positive, but mixed feelings about craigslist and the way it is operated, but like Craig and Jim, I think an Ebay acquisition would be detrimental to the public.  Unfortunately, unless there are antitrust issues (which are extremely difficult to prove,) public interest is not the basis for decisions in these sorts of civil proceedings.

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