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.

 

Pennsylvania alcohol – Live free and or die in PA

In Pennsylvania:

  • you can’t buy wine or liquor in a beer store
  • you can only buy wine and liquor in a state run monopoly shop
  • there are beer stores (they call them distributor shops,) but you can’t buy less than a case (24) of beer in a beer store
  • if you want a six pack, you can only get it “take out” in a bar, at a hefty margin

Before I start ranting about what an imposition on freedom this is, I’ll say this has some pretty interesting (but unintended) positive effects.  First, lots of people go to bars since it’s such a pain to get beer otherwise, and you might as well sit down and drink it instead of take the $1 discount you usually get for taking the beer home.  Second, there are these tiny little box bars in random places in quiet suburban neighborhoods that basically serve as beer corner stores.  These spots are a neat community development.  As often happens, good things come from bad things.  Great relationships, realizations, and renewed communities can rise out of natural disasters.  Of course, that doesn’t get me praying for typhoons.

Americans often like to connect economic freedom with political and personal freedom.  When Russia and China open their economies, they will ultimately be forced to open their political system – or so the theory went 20 years ago.  We know it’s not that simple now, but let’s take a look these Pennsylvania liquor laws for an interesting contrast.

You can buy beer, baijiu (Chinese rice vodka-ish drink,) and cigarettes (not to mention beetlenut and bootleg DVDs) on literally any corner in China.  You can open your beer in the store, walk down the street, wave to a policeman, and take the subway – all sipping your beverage.  Not that I’m a lush, but that sounds like freedom to me.  Economic freedom means anyone can sell me beer in any reasonable location.  Personal freedom means I can take that beer and drink it where I want to, as long as I don’t get wasted and start bothering people.  Political freedom means nobody wants to take that right away from me.  The first time you walk down a street with a beer in your hand on a lazy Sunday afternoon, you feel slightly awkward but oddly liberated by this simple pleasure.  By the time you get back to the “land of the free,” you start wondering where you feel more free – totalitarian China or the USA.

Why is the law in PA so insane?  I’m guessing it’s a decendent of the temperance movement.  Now, as with most laws, there is an entrenched economic interest rolling in dough that will fight tooth and nail to stop rational reforms.  According to my favorite source of mostly accurate data, Wikipedia, the state run liquor stores rake in $1.6 billion, while the state’s other hand happily collects an 18% liquor tax and 6% sales tax on top of that staggering number.   Of course the state liquor board is a monopoly, so it does not pass their volume discounts or efficiencies of scale to consumers.  In fact, stores in neighboring states that don’t get volume discounts sell to consumers for up to 40% cheaper, but it’s illegal to bring those to PA.

Well, it’s taxes so it goes to running state services, you say.  Sure, but you can be certain that so much money flowing through such a draconian institution does not go untapped by those in the know.

Other entrenched interests include the “beer distributors” which are those stores where you can only buy 24 packs.   They’ve got a nice monopoly on reasonably priced beer sales, and consumers are forced to buy from them in quantity.  Bars also make a nice business selling one-zies and siz-packs to those not looking to throw a superbowl party, but who want to sit down with a beer and watch the hockey game.

What’s worse, the county where Pittsburgh resides adds an additional 10% tax on liquor.  Boy do these taxes add up!   That money is supposed to fund the Port Authority which operates the public transportation system.  Let’s see what we are getting for that money on the bus system, which is all I’ve used at this point:

  •  Zoned pricing
  • $2.00 starting rate for a ride one way on one bus
  • $2.50 for a ride with a one time use transfer – if you ride three buses, it’s $2.50 + $2.00

and compare that to San Francisco, the second most expensive housing market in the country (Pittsburgh is the fourth cheapest)

  • $1.50 for unlimited bus rides for 1.5 hours

Conclusion?  There’s something very, very fishy going on in Pennsylvania liquor industry.  There is clearly a lot of money at stake, and nothing pisses me off more than mobsters raking in cash at the expense of my freedom.

Plaxo Data Loss

I’ve found Plaxo to be a very cool tool. It keeps people’s contact info up to date and serves as a nice online repository and backup for my contact data. However keeping track of contact data is hard enough without having data loss.

Unfortunately, I have started to see random contacts and data fields disappearing when using Plaxo. This may or may not be related to using their new “de-duper,” which merges duplicate records. The de-duper seems to be generally careful about making mistakes, but that doesn’t mean it doesn’t. The lost data seems to be sparse and random – not enough that you notice right away, but eventually you just don’t find something you knew was there.

I’ve restored my Mac Address Book from a backup before de-duping and the records are there. The only software I can blame is Plaxo. I have seen a references (see comments) to similar problems.

Anyone with a similar experience?

Who is paying e-rewards?

I have been a member of e-rewards for a while now.  They e-mail me offers to make $5 to $15 in funny money in exchange for answering mind-numbing surveys.  The funny money compensation can be easily converted into gift certificates and loyalty program points.

Every once in a while I actually torture myself and answer one of their surveys.  I don’t know why.  Maybe it makes me feel important.  Maybe it makes me feel better about my own failures.

Anyway, they are truly horrendous.  I’ve got to wonder if the venture money pits that hire these guys even look at how the surveys are done.  They are a lesson in outsourcing – always check up on what you’re buying – you might end up with a company like e-rewards.  In fact, the business folks at e-rewards may well be brilliant, as they seem to have marquee customers and partners.  Unfortunately, business people seems to be all they have.

Here is a screenshot of the latest question I stumbled over.  Needless to say, I don’t use my brightest brain-hours for this waste of time, so I spent more time balancing my algebra than answering the question.  Would you do any better?  Are there developers really this inept that they can’t think of a better way to ask this question?  (Hint: Yes you need to calculate everything yourself – no clever javascript helpers allowed.)

Worst Survey Question Ever - e-rewards

This is just the beginning of how awful these surveys are.  The software asked me at least 10 times in a row about the range of revenue my company has.  (How many ways are there to say $0?)  Often it asks multiple checkbox questions like “which of these are brands do you know?”.  Then you get to answer the cartesian product of all the brands you checked with 20+ poorly worded questions – one per painfully slow un-Ajaxified screen load.  Often the questions require more thought about how to fill in the many small text fields than about how to answer.

Of course, if you’re in it for the funny money, you quickly learn to check only as few options as it will let you.  Check more and you’ll be there for hours.

I’ve said enough.  The screen shot speaks for itself.  I’ll even leave out the ironies of this sort of a customer research company having such a bad end user experience.

If anyone has the connections to make a better e-rewards happen, contact me.  We’ll be up and running in a few months.  Selling against e-rewards would just be too easy.