#336 Policies to Address Tech Tsunami. Socialism? No. National Security.

19 Sunday May 2019

Posted by Jordan Abel in Economics, Gov't Policy, Tech Tsunami

Periodically I write a “sense check” to assess whether in the next few years, a revolution in the US is still possible or whether the entire exercise is based on a statistical aberration — i.e., a roughly 50-year cycle between major upheavals in the US. With all that’s happened lately in Washington, I wrote a special sense check, Entry #332.

This entry is a “wrap” to the technology tsunami series, at least for a while. The format for this entry is conversational. The character, Sandy (comments in quotes) is an ardent Trump and NRA supporter who has appeared in previous entries. Like virtually all the characters that appear in this blog, Sandy is patterned after someone I know with very similar characteristics. The entire technology tsunami series, including this entry is available as a eBook. (19 05 19 Tech Tsunami Booklet)

Sandy: “I don’t buy all this BS that some so-called technology tsunami could wreck the US economy. Stuff like that only happens in socialist countries. Look at what happened in Venezuela.”

True that Venezuela was the richest country in South America and then tanked economically. The reason they went into free fall was not becasue of socialism but because of bad economic policies.

“Hold on Bubba. I’m telling you those kind of economic problems are what happens to all socialist countries. If you don’t believe me look at what happened to the economies of Cuba and to Russia. You know I’m right. Admit it.”

You are right that Cuba and Russia have suffered economically. But in the most diplomatic terms, you’re wrong about why. Let’s not confuse communism, which is more political, with socialism, which is more related to economic policy.

“Communism, socialism. They’re the same thing to me. I know one thing for sure. You can’t have all those socialist policies and still have a democracy.”

Like I said, let’s not confuse socialism and communism. There are many countries you might label as being socialist that are democracies. All the Nordic countries, for example, have many government-controlled social programs. Other countries in Europe, including Germany, have some degree of what you’re labeling as socialism. Even Canada. Yet, all those countries are democracies.

“Well, what about Greece? They had all those government programs and they went under. Italy almost went under. Call them what you want. I’m telling you government programs are what causes these countries to go under.”

OK, then let’s add one more country to the list of countries that almost went under. In fact, this country has come close to going under twice in the last hundred years. Want to guess which country?

“Probably a trick question. Who?”

The United States. We came within a hair’s breadth of the economy going into free fall in 1932 and 2008.

“I’ll tell you why. Because of the Democrats. They’re the problem. Democrats FDR and Obama were coming into office when the economy tanked. Democrats are always the problem.”

Could you please put away the Sean Hannity/Rush Limbaugh drivel and look at this issue objectively. Bad government policies under the Hoover and Bush 43 administrations created most of the problems. Notice that I said most of the problems, not all. If you want to later, we can discuss which economic policies were the primary causes. But for now, my point is without sound government policies to counteract the coming technology tsunami, the country is likely to be faced with another economic crisis.

“When you say crisis, are you suggesting unemployment could shoot up to 20 to 25% and real wages fall, just like during the Great Depression?”

Yes. If you don’t think technology can have a devastating impact, look at what’s happened to companies and employment in industries where disruptive technology was introduced.

“You mean like the coal industry? I hate to laugh but I understand even the Coal Mining Museum gets some electricity from solar panels on its roof. Anyway, technology and economics have killed the industry. Unemployment in the coal industry is what, maybe only 40-50% of what it was just 25-30 years ago?”

Now you understand why strategic planning and good government policy are so important? I hope you also have somne appreciation of the risk associated with bad government policy. Bad policy presents a real risk to the US economy and the country’s future as a democracy.

“Gee, I never looked at government policy quite that way. The real impact of government is not whether Democrats or Republicans are in power. The real impact is whether government makes policies that can sustain the well-being of the country. And, you know what? Overturning Roe v. Wade seems far less important than these other issues.”

Sandy, I’m proud of you. If more people had your attitude, the country could start to make real progress in implementing policies to counteract the coming technology tsunami.

“I think I get it. What you’re suggesting is not just more government intervention, but government intervention to avoid a economic catastrophe. Really, the need to address the coming tech tsunami is more a national security issue.”

Now, if only the Trump Administration and some key people in Congress would “get it” like Sandy.

#334 Could a Change in Semantics Break the Ideologue Logjam? More about Cost of Preparing for the Tech Tsunami.

05 Sunday May 2019

Posted by Jordan Abel in Economics, Education Issues, Gov't Policy, Societal Issues, Tech Tsunami

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This week’s Entry continues the series about preparing for the upcoming “technology tsunami” that will have a major impact on the US economy. The series starts Entry #319.

Arguments against society-wide programs – healthcare, education, climate change – claim that such programs are too expensive. Taxpayers cannot afford these programs.

There is a kernel of truth to that claim. Such programs have considerable start-up costs and the payback is often a few years out. Sometimes the payback is a decade or two later.

Of course, the idea of having delayed payback does not apply when the same “too expensive” group decides to make business or personal Investments. Nor does the logic apply when this group is evaluating the performance of coaches for favorite college or professional sports teams. Why coaches? Surely everyone knows it takes time to build a solid sports team. Give the coach at least five years to perform and demonstrate his or her worth.

More seriously, the question is, “Is society willing to take the risk of not investing in programs that will have a sustained, if delayed, return on investment? As an example of a similar personal-level decision is whether to delay needed maintenance on your house or car. Delaying can result in some immediate cash savings. However, the decision to delay is a two-edge sword. The repairs are needed and by waiting the severity and cost of repairs likely will be much higher. While delaying maintenance may seem to be a savings in the short-term, the decision to delay is not really savings at all, but additional cost. To paraphrase an old TV commercial, pay me now or pay me more later.

How does “pay me now or pay me more later” apply to the education of people who will be displaced by the technology tsunami? Let’s say the cost of educating those displaced averages $25,000 per person, roughly equal to 2 years cost of tuition, books and fees at a community college and even some state universities. In addition to the cost of education, let’s assume those being retrained receive a salary of about $50,000 per year. For the two years, the total cost for retraining would be about $125,000 per person.

The $125,000 cost per person seems extraordinarily high until one calculates the cost of not retraining. What is the cost not to retrain?

Assume the median age of the person being retrained is 45 years old, which means the person has 20 to 25 years left before retirement. Without retraining for the post technology-tsunami world, the person may be unemployable, and therefore, receive assistance for the next 25 years of his or her working career. In addition, the person would receive some form of assistance for another 10 to 15 years after reaching retirement age. Total time not working and receiving assistance…and not paying taxes? A total of 35-40 years.

If the person receives just $10,000 per year assistance, which is on the very low side, the cost of assistance for a person previously employed but now displaced, would be at least $400,000. Thus, the cost of not retraining is more than 3x the cost of 2-year training – tuition, fees, books and salary of $50,000 per year. Oops, we’re not finished. The person on assistance and not employed, would also not pay income taxes as well no withholding for FICA and no withholding for Medicare.

So which is smarter? Pay now to retrain the person displaced by the technology tsunami or pay more than 3x as much later (constant dollars) to have the person on assistance his or her entire life and never again paying income taxes or contributing to the cost of Social Security or Medicare?

The ROI to retrain workers is positive for workers in their 50’s and even early 60’s when all the costs are included. In addition to society saving money by retraining workers, having an employed workforce with more disposable income will increase consumer consumption, increase overall GDP and with some tweaks, to the tax structure, increase family wealth.

Despite the obvious benefits, for some reason “return on investment” does not yet seem to be part of most discussions about broad social programs, whether the discussion in Washington or in many state capitals. I am always personally baffled why Republicans focus on immediate cost and ignore “return on investment” logic for social programs, yet use the very same ROI logic for personal and/or business investment decisions. Guys, voters are not completely stupid. ROI is a concept that voters can understand.

To break the ideologue logjam, maybe such programs need to be positioned with Republicans as “business Investments” and not “social programs.” To mollify Republican critics of these programs, maybe recipients of the proposed technology-tsunami education program should be required to pay a minimum tax of say 1.0% of gross income per year for up to 10 years following completion of the retraining. The minimum tax would allow Republicans to claim assistance recipients have some “skin in the game.”

Democrats would do well to position technology-tsunami retraining, the Green New Deal, Medicare for all and other ideas, not as social programs, and especially not as “socialist programs,” but position as Investments that will help increase US GDP. Democrats should also agree that every wage-earner has to pay some income tax, even if it’s only $100 per year.

Some of the changes in positioning should be considered more semantic than substantive. However, the changes could allow Republicans and Democrats to claim some type of victory and begin to work more closely together. The changes would also thwart some of the statements by conservative talking heads implying that about half the population pays no tax. These talking heads only state “income tax” and make no mention of people paying sales tax, property taxes, fees and many other related taxes. (FYI, the percentage is remarkably flat by quartile of income paid for all types of taxes.)

Will the rhetoric change and Republicans and Democrats begin working together soon – at least agree to retrain workers to be displaced by the technology tsunami? Maybe start working together before the Revenge Revolution? As long as Trump is controlling the Republican Party, there is no hope. Republicans have demonstrated repeatedly a willingness to prostitute themselves for whatever the Donald demands, however contrary those demands are to long-held Republican principles.

Democrats, however, have a great opportunity for 2020 to begin repositioning arguments that many so-called “socialist programs” are really business Investments with positive ROI.

Should we be hopeful? Let’s see what happens. Stay tuned.

#331 Solution to Diversity? Economics, Not Gov’t Intervention.

14 Sunday Apr 2019

Posted by Jordan Abel in Common Sense Policies, Education Issues, Gov't Policy, Tech Tsunami

≈ Leave a comment

Readers: this blog is set in the future (sometime after the year 2020). Each entry assumes there has been a 5th revolution in the US — the Revenge Revolution. More about the Revenge Revolution and author, How the 5th US Revolution Begins and About the Author. Occasionally I do a “sense check” about the likelihood of a Revenge Revolution. Entry #318 is the most recent “sense check.” One more note — sometimes I write about another topic that does not quite fit the theme of the blog. Those comments are available on the page titled “JRD Thoughts and Comments.”

Entry #319 begins a series describing the coming technology tsunami (#319), and how the US should prepare. Last week’s Entry #330, outlined reasons why diversity will be important to prepare for…and then capitalize on…the coming technology tsunami. The entry also noted that some conventional ways of creating diversity — school busing, for example — are fraught with problems and have significant potential downsides.

Diversity seems best accomplished on its own. Our neighbors, within a stone’s throw or two, include families from at least four countries. Within this group, there are at least five religions. All that in a suburban environment.

How did such diversity occur? With government intervention? With housing subsidies? “No” to both questions. The diversity evolved from economics…and attitude.

Granted our neighborhood is a bit more affluent than most but affluence may result in less, rather than more diversity. In Entry #330, I described observations from a 5-day visit to a well-known retirement community in Florida. When leaving the community, my wife and I both remarked we had seen no blacks, no Hispanics — yes, this was Florida — one Asian, and no one from the Middle East. We also both commented while we had a lovely time visiting our friends, we wouldn’t want to live there.

So what strategy can help stimulate diversity? Throughout the technology tsunami series I’ve stressed education as a key. Education opens the mind to new ideas, both academic and societal. And for the vast majority of people, education also provides a chance to improve economic status.

Education for this discussion consists of four major stages, or chunks:

Primary education — i.e., “readin’, writin’ and ‘rithmatic” — and some social skills
Secondary education — middle school and high school
University or Advanced Technical Training
Continuing education – following initial employment and continuing throughout one’s career

For primary and secondary education, the public has consistently supported taxpayer funding. While some changes to the primary and secondary curriculum might be required for the technology tsunami, the key to preparing for the coming technology tsunami seems to lie in Stage 3 — College, Advanced Technical Training — and Stage 4 — on-going training once in the workforce.

Currently, only a small percentage of the population can afford securing a college degree or advanced technical training certificate without financial assistance. Even with scholarships or reduced tuition, many students need loans. Terms of these loans are often onerous, saddling graduates with years of debt, which in turn reduce their opportunity to save for buying a house and/or to start saving for their children’s education. (For more about the problems with people paying off loans, or thinking they have paid off loans, see 19 04 13 Student Loan Repayment Issues and Problems)

Maybe the solution to the how-to-finance-advanced-education conundrum is easier than we think. Why not take the same approach to financing education that seems to work well for medical coverage in all industrialized countries…other than the US (so far). Allow students to attend a home-state university at little or no charge for a specified period — say five (5) years. Extend the no-charge time period if a student works.

Like universal health care, offer a “private,” additional-cost option. Under this option, students could attend an out-of-state university or private college/university. Tuition and other costs would be set by the institution. The private institution could still offer financial aid to students.

Technical trade schools could have the same option. Attend state-run technical schools at no charge with the option to attend private-technical or trade schools.

Technical/trade schools would need to meet one hurdle not currently required — accreditation. Accreditation would sharply reduce considerable fraud among private technical/trade schools — Trump University being but one example. The accreditation process would be similar to that used for academic institutions.

And please don’t view subjecting the trade/technical schools to accreditation as government overreach. Educational institutions need some form of regulation. A market-based system will not work because, by the time the student understands the school is not providing adequate education, the student has wasted several years and is saddled with significant debt.

What about people who do not want additional education or who are not mentally capable? We’re not living in Lake Woebegone where all students are above-average.

A portion of the student population will not pursue additional education and a percentage of those will not even graduate from high school. While some low-skill jobs likely will continue to exist, people in those jobs should earn a minimum wage that allows them to live above the poverty line.

Policies to address this lower-education group are separate from policies to prepare the US society for the coming technology tsunami. The goal of the “tsunami series” in this blog is to outline approaches that will increase significantly the percentage of the population that is skilled adequately to thrive in a technology-based economy.

What about the education outlined in Stage 4? Ongoing education seems to be in a black hole where: (i) there is no existing infrastructure supporting such education…and none planned; (ii) no one in state or Federal government seems to be responsible for on-going Abbott Costello education; (iii) there is no coordinated effort by private industry and/or trade groups. Policies for on-going education seem to have evolved from the Abbott and Costello routine of “Who’s on First?” Just who’s in charge of continuing education?

Logically you’d think private companies would want to maintain an educated workforce. But because of lack of restrictions…or penalties…re relocation, many US companies operate as if they have no responsibility to spend money to provide continuing education to their workforce. When the workforce skills become dated, a company, with little or no penalty, can close shop and move to another location. The new location will be selected based on which state or city is offering the most incentives, including training the new workforce.

Taxpayers at both ends – the location where the company left and the new location – get stiffed while the company management and shareholders benefit. (For more about the impact of how companies can adversely affect a community, and not suffer any consequences, see Entry #86, “Is North Carolina a Stealin’ State?” and Entry #87. There are several other entries as well that address similar issues.)

As far as addressing the issues of ongoing education, that deserves a separate entry, which will be number #332.

Note: within hours of publishing this blog entry, received the 04/14/2019 edition of the Charlotte Observer. A front-page article discussed whether eliminating certain zoning restrictions — banning single-family zoning, e.g. — would help stimulate diversity. My short answer is “No.” Tweaking of zoning regulations for single-families is different than wholesale banning, which is likely to have major negative consequences for attracting higher-income families to remain in the city limits. Link to article, 19 04 14 CLT Observer re Zoning Changes for Diversity.

#330 Is Diversity a Key Component of Preparing for the Technology Tsunami?

06 Saturday Apr 2019

Posted by Jordan Abel in Common Sense Policies, Education Issues, Gov't Policy, Societal Issues, Tech Tsunami

≈ Leave a comment

Entry #319 begins a series describing the coming technology tsunami (#319), and how the US should prepare. Part of the preparation is understanding and appreciating other countries and cultures. How do people in other countries/cultures think, behave, and interact with others? Developing this understanding will help prepare the United States for how to respond when other countries attempt to use technology against us in the future.

As technology has evolved from sailing ships to ocean liners to airplanes to communications via satellite, the world has become smaller. Earlier this week, I was reminded how small the world has become with advances in technology. A chain of communications started when I emailed a business colleague, congratulating her on more than 20 years operating a consulting firm.

Her response, which I received the next morning, thanked me for the note…and also indicated she was responding from a hut in the middle of the Amazon rainforest. A couple of back-and-forth emails explained she had access to some solar power and a slow-speed satellite link. The link was fast enough to allow sending a picture of a rather large tarantula meandering on the deck surrounding her hut.

While my business colleague was experiencing diversity in the Amazon rainforest by working with indigenous people, what about experiencing diversity at home – in the city where you live? In your neighborhood? And does experiencing diversity even matter? Well, yes, I think diversity does matter if the US is to develop an effective strategy to capitalize on the coming technology tsunami rather than being overwhelmed by the technology tsunami.

A key component of preparing for the technology tsunami is education…and education for all age cohorts. Part of that education includes learning about and really understanding other cultures. Ideally that understanding is gained on the ground in the local country. Unlike my business colleague, few families, however, can afford to travel worldwide and experience these cultures firsthand. What’s an alternative? A great way to start is trying to understand cultures in your immediate locale. Most urban areas in the US have pockets of different ethnic groups and cultures.

What happens when your locale is not diverse? When everyone in your locale looks and speaks the same? Does the lack of diversity really matter? Homogeneity may be comforting but it runs the risk of stifling creativity. Homogeneity is also a breeding ground for “group think.” Make no mistake, overcoming the threats of technology tsunami will require significant creativity.

Recently my wife and I visited some longtime friends who moved to a well-known retirement community in Florida. Their house is lovely, and in the larger community the grounds well-maintained and almost every shopping need and service is nearby. Our host jokingly referred to the development as a “reservation.” He also noted liking to stay on the reservation and avoiding the real world, which he considered not always pleasant.

Another friend, whom we met for coffee, had lived and worked on the “reservation” but later moved to a nearby location. He noted how virtually every aspect of life in the retirement community was managed, including hiring doctors in the clinics who fit a “Marcus Welby” profile.

During our stay, which included golf, multiple restaurants, shopping and extensive travel by golf cart, neither of us saw any blacks, Hispanics or members of virtually any non-western European ethnic group. Only one member of a golf group that I was in, which included several foursomes, was Asian.

So, back to the question – “Does diversity really matter in preparing for the technology tsunami?” Does living in a sanitized bubble really matter, especially for people who are retired? Do the retirees really care about the coming technology tsunami? And does the rest of society care what retirees think?

My vote – living in a sanitized bubble is not good for society, even for retirees. Most retirees living in the bubble have children and grandchildren. Why Gramps may be technology challenged and/or a curmudgeon, Gramps still has some influence on the grandchildren. And Gramps still votes. And we know Gramps mostly watches Fox News, which seemed to be the channel of choice virtually everywhere we went on the reservation.

The technology tsunami will be a major threat to Gramps children and grandchildren. Without an effective US response, sustained economic growth will become nearly impossible. To create an economy that can capitalize on the technology tsunami…and not be overrun by it…will require a range of thinking from people of different cultures.

If you don’t believe diversity and creativity are linked, take a look at the mix of faculty and students at say the Media Lab at MIT. Then take a close look at the range of highly innovative ideas and products emerging from the lab. Living in a bubble, whether physically or politically, lessens the opportunity for creative thinking.

Diversity can be accomplished a number of different ways. Ideally, diversity evolves on its own without any intervention. For example, in the eight houses in our neighborhood that I pass on the way to get coffee, there are families from at least four countries. And the eight houses include families practicing at least five different religions. An even more diverse population exists in the apartments that I pass closer to the coffee shop. That cultural/religious mix happened on its own.

Forcing such a diverse mix is problematic and smacks of too much government intervention. However we…societal we…can Implement policies that encourage more diversity….and we can also prohibit policies that intentionally discourage diversity.

What about policies that encourage diversity in schools? How should diversity in schools accomplished? A seemingly obvious solution is busing. While busing might make create a diverse classroom, busing has many negatives, including excessive cost and excessive travel time for many students. Another downside of busing not often discussed is the risk that businesses may decide not to locate in a school district where busing is mandated. The longer-term effect of not attracting businesses and staff is a lower tax base and slower economic growth for the school district.

A policy that discourages diversity is charter schools. North Carolina is an example of this strategy, although not necessarily representative of all states with charter schools.

In North Carolina, charter schools: (i) receive taxpayer funding; (ii) select students, although the charter schools claim admission is open to all who “qualify”; (iii) are not subject to the same rules and/or oversight as public schools. Recently, the North Carolina legislature passed a law requiring all teachers in North Carolina to secure a North Carolina license. Teachers licensed to teach in other states still need to pass the North Carolina test because the test in another state “might not be as rigorous” as in North Carolina. All teachers…oops all teachers except those in charter schools…are subject to the license requirement. Thus, any teacher relocating to North Carolina is effectively incentivized to avoid the hassle of getting a NC teachers license required for a public school and instead, teach at a charter school. In addition to not needing a license, teacher pay at a charter school is not subject to the same guidelines as at a public school.

The continued negative policies of the North Carolina legislature to erode the value of public education is one of the reasons I wrote blog Entries #324 and #325, which outline why banning charter schools is a necessary component of preparing for the technology tsunami. Still, banning charter schools still does not solve the diversity issue. And busing kids to create diversity has too far many negatives.

What’s the solution to more diversity in schools and society? Economics and attitude. More to come.

#324 Why Charter Schools Should Be Eliminated: Extra Cost to Taxpayers and More (1of2)

16 Saturday Feb 2019

Posted by Jordan Abel in Affordable Solutions, Gov't Policy, Societal Issues, Tech Tsunami

≈ Leave a comment

Readers: this blog is set in the future (sometime after the year 2020). Each entry assumes there has been a 5th revolution in the US — the Revenge Revolution. More about the Revenge Revolution and author, How the 5th US Revolution Begins and About the Author. Many entries are formatted as conversations. Occasionally I do a “sense check” about the likelihood of a Revenge Revolution. Entry #318 is the most recent “sense check.” One more note — sometimes I write about another topic that does not quite fit the theme of the blog. Those comments are available on the page titled “JRD Thoughts and Comments.”

In the entry describing the coming technology tsunami (#319), I suggested a way to help mitigate the impact of the inevitable tsunami was increasing support for public education. A major step toward achieving that goal would be prohibiting publicly funded charter schools…and publicly funded vouchers for private schools.

So what’s the problem with charter schools? Why insist on publicly run schools? The private sector always accomplishes a task more efficiently and effectively than the public sector. Besides public education is broken and needs to be fixed. More support for public schools sounds like more socialism. Well, supporters of charter schools, if public education is socialism, then what would you call public support of private institutions through tax breaks and lower tax rates…try calling it by its real name, “welfare for the wealthy.”

First, most everyone agrees certain aspects of public education need to be fixed. But maybe what needs to be fixed is not what advocates of more publicly funded charter schools claim needs to be fixed.

Public education per se is not the problem. What makes any school a good educational institution, whether public or private, is not the source of funding, not the school building, not how much money is spent on fancy support materials, not how good the sports team are…and a host of often discussed other “nice-to-have” items. What makes a good educational institution is commitment by all involved – students, faculty, parents and community. Education truly requires a community effort.

Look at schools where students get a great education and you will find a community supporting that educational institution. I agree that families which opt for charter schools may be more committed to education than other families. But why do we…again the proverbial ‘societal we’…allow communities to “evolve” – maybe “dissolve” is more appropriate characterization – to a point where there is a lack of commitment to public education?

Charter schools do not help a community rebuild its commitment to quality education for all students. In fact, charter schools do just the opposite. Charter schools further erode a community’s commitment to quality education for all by diverting mental support and tax-dollar support to privately run schools.

The idea of having a “specialized school” or certain education track is a good one. Both can be accomplished within the public school system. While the term might not be politically correct today, I was part of a group that for four years of high school had all “accelerated classes,” other than physical education. As far as I know, the “accelerated” classes were based strictly on merit and anyone meeting the academic requirements was eligible.

New York City and other urban areas have long had schools specializing in certain academic fields. These schools have been open to all students in the system who met certain criteria. Thus, if a community wanted a more-specialized “charter-like” school, there’s no reason why such a school could not be created within the exiting school system – many systems have “magnet” schools that operate within the larger public system.

A key aspect of charter schools not often discussed is the lack of scrutiny. Charter schools receive public funds, yet are not subject to the same oversight as public schools. Why? The answer is simple…but the answer should not be accepted by taxpayers. The lack of scrutiny is by the design of ownership groups of charter schools. The lack of scrutiny allows charter-school owners to avoid many of the rules required of public schools.

The theme of the charter-school owners? Just give us public money but don’t ask how we spend it. Stating the incredibly obvious, charter schools are another version of efforts by the political far right to privatize major portions of the government and with privatization, minimize, if not eliminate public scrutiny.

A second key aspect of charter schools not often discussed is the true cost. Proponents of charter schools may claim the cost for operating a charter school is the same or less than a public school. The “proof” of the same-as or lower-cost claim is that charter schools receive only a certain amount from the state and do not charge tuition. But do charter schools really cost less?

Let’s look at some costs. A very high percentage of the cost of education is fixed, or semi-fixed. Fixed/semi-fixed costs do not vary with changes in volume. As an example, think of your own house. Fixed costs for the house are the mortgage payment, taxes, maintenance, utilities and similar expenses.

Say there are two parents and three children living in the house. Then one child heads off to college. Now there’s an extra bedroom not being used. So does the family just pack up and move to a smaller house?

No, the family stays in the house. And the mortgage payment is the same; the major maintenance expenses are the same; the cost for heat, electricity, water, internet is the just about the same whether five people or four people live in the house. If you were calculating the cost per person to live in the house, the cost per person would be lower for five people compared to four people. While some other costs do vary with the number of people – food, e.g., — the overall cost per person in higher for four people than for five.

The same cost structure applies in education. What are primary fixed costs in education – teachers’ salaries, administrative overhead, building maintenance, utilities, much of the food-service staff and some other items. Thus, if say 20-25% of the students of a public school transfer to a charter school (think of the one child going off to college), most of the expenses for the public school remain the same.

But how are public schools funded? While the formula can vary by state or locale, many public schools are funded based on a payment per student. So if students leave for charter schools, the payment to the public school is reduced because of fewer students. The money follows the students so money that was formerly paid to public school is diverted to a charter school. While the number of students in the public school has declined, the costs for educating students did not decline as much as the loss of funding to the charter school.

So how is the loss of funding made up? Where does the extra money come from? Two sources: (i) taxpayers, state and/or local, who end up having to increase the amount of funding per student for public schools…and by default also charter schools; (ii) cutbacks of expenses at the school level. Students end up getting short-changed as less money is available to spend for supplies, extracurricular activities, teachers’ aides, and maintenance. As maintenance is deferred over time, the building and infrastructure deteriorate. Eventually repairs and/or building a new facility end up costing even more than the deferred maintenance…another hit to taxpayers.

I did a rough calculation about the increased cost to taxpayers of charter schools. The estimates need to be refined with more analysis. Say 25% of the students transferred from public schools to publicly funded charter schools. Under this scenario, the cost per student for taxpayers would not go down, as some proponents of charter schools claim; the cost per student would not remain the same as other proponents claim; the cost per student would increase 20-25%.

Where is the added cost coming from? With the creation of charter schools, a parallel overhead cost system is also created. Rather than one “superintendent”, there are now two – one for public schools and one for charter schools. Rather than one principal for a given school, there are now two because a second school was added. Rather than one building, there are now two. In addition, there are more teachers.

How does the public school manage with lower funding? The number of teachers for core topics remains about the same. What the public schools end up eliminating are teachers for what some people label as “non-essential” topics – art, music, Phys Ed…and oh, yes, those nurses and other health-care workers in the school system.

What is the motive behind charter schools? Why support a system that costs taxpayers more when there are no demonstrable benefits? Yes, some charter schools are more successful at increasing graduation rates. But many…and possibly more…are not.

With these uneven statistics, why not tweak the public school system to provide more specialized schools as many urban areas have for decades? The underlying reasons why charter schools are supported? (Stay tuned. More to come.)

#323 Turning Point and a Really Bad-Hair Week for the Donald

28 Monday Jan 2019

Posted by Jordan Abel in Economics, Gov't Policy, Possible Solutions, Societal Issues

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Readers: this blog is set in the future (sometime after the year 2020). Each entry assumes there has been a 5th revolution in the US — the Revenge Revolution. More about the Revenge Revolution and author, How the 5th US Revolution Begins and About the Author. Many entries are formatted as conversations. Occasionally I do a “sense check” about the likelihood of a Revenge Revolution. Entry #318 is the most recent “sense check.” One more note — sometimes I write about another topic that does not quite fit the theme of the blog. Those comments are available on the page titled “JRD Thoughts and Comments.”

Regular readers know I try to avoid getting hung up on daily/weekly events. The purpose of this blog is to analyze if and how long-term patterns might contribute to a post-2020 revolution in the US, aka the Revenge Revolution. However, events this past week seem to be beyond the usual “Beltway noise.” The week’s events could help change the trajectory of politics in Washington. “C’mon,” you say. “A heady week but not that heady.” I think that heady. Read on.

Key events during the week: (i) Michael Cohen, Trump’s long-time lawyer and now convicted felon, proposed delaying his volunteer testimony before the House Oversight Committee. One day after the announced delay, the House Intelligence Committee issued a summons for Cohen to appear; (ii) Roger Stone, long-time associate of Trump’s and known dirty trickster for approaching 50 years, was arrested on a number of charges related to the 2016 presidential campaign. More charges are expected; (iii) Trump and Senate Majority Leader Mitch McConnell caved and agreed to end the government shutdown of more than 35 days; (iv) Rudy Giuliani’s continued to disclose suspicious events previously denied. In addition to Rudy’s babbling, an article in the New York Times indicated one or more members of the Trump campaign met with the Russians at least 100 times before inauguration.

A fifth, less publicized event, was the appearance of Paul Manafort, Trump’s 2016 campaign chair, at a hearing to determine if an additional 10 years should be added to Manafort’ s existing prison sentence. The prosecution charged that Manafort intentionally withheld relevant information about sharing data with the Russians. The judge delayed the decision.

The events, if considered individually are interesting, but not necessarily significant. When combined the events, at least in my view, represent a major shift in power in Washington. The federal government is no longer controlled by the Bully-in-the-Oval-Office as Republicans in the House and Senate cowered. Power in Washington took a turn back toward the people.

As a result of pressure from constituents and some Republican senators, Mitch McConnell came out of hiding and convinced Trump that he should agree to reopen the government. The House and Senate then passed bills and Trump signed…with no guarantee there would be a wall at the southern border. While the agreement to open is limited to three weeks…and despite Trump’s huffing and puffing and threats to blow the house down if he doesn’t get his wall…pressure from constituents likely will prevent another shutdown

How do these events tie together? The key seems to be Republicans in the Senate are starting to show some backbone. Until a few weeks ago, Trump had free reign to do whatever he wanted. He felt immune from impeachment because of a Republican controlled House and Senate. Well, no more and no doubt this week Trump felt the noose tighten around his neck.

Start with Cohen. When testifying Cohen has nothing to lose and everything to gain by telling all. There’s a chance Mueller et al will again recommend a shorter sentence. Based on comments from several members of the committee, as much of Cohen’s testimony as possible will be made public.

Next we have Roger Stone. While defiant after his arrest and claiming loyalty to Trump, Stone may end up behaving like many of Trump associates already indicted as a result of the Muller probe – and flip. When the reality of a likely long prison sentence sets in – and for Stone it effectively could be a life sentence according to several former Federal prosecutors – Stone may drop the “never-tell-on-Trump” boast and decide saving the Donald is less important than trying to save his personal life.

The arrest of Stone leaves but a few people in Trump’s inner-circle not indicted. Steve Bannon may be next on Mueller’s list. Bannon will be quickly discredited by Trump, providing incentive for Bannon to flip – if he hasn’t already. The group remaining to be indicted is all in Trump’s family. Junior and Jared look like shoe-in’s for an indictment. And the odds for Ivana are better than 50:50.

So, who in the family might flip? If you’re a Trump family member, covering up for the Donald is high risk. When all the dust settles, especially after investigations and prosecutions by the Southern District of NY, the State of NY, and the IRS…along with a likely plethora of civil suits by condo owners, contractors, etc…there likely won’t be any money left in the Trump piggy bank.

So, if I’m a family member, let me consider my alternatives. If I refuse to cooperate with Muller, I go to jail and when a get out, I’ll probably get little or no money. Or, I can cooperate with Mueller et al and maybe avoid jail time. Mmm, which one should I choose?

As far as Trump, he’s acting like most bullies. When confronted with a tough opponent, the bluster goes away and the bully caves. And for Trump-the-Bully, his nemesis is not some physical tough guy. His nemesis is an older woman (by a few years) who’s raised five (5) kids. The past few weeks Nancy Pelosi treated Trump the same way she probably treated one of her kids, when a two-year old and throwing a tantrum. She hung tough and the kid folded.

What may be the final mental straw for Trump, however, the adoring, brain-washed base of supporters is shrinking. The 35-day government shutdown started shedding light on how Trump was willing to screw over the working class to save face over a physical wall. Many people now understand a Trump-style wall would do significant harm to the environment and offer little protection against illegal immigration and shipments of illegal drugs. Based on reports I’ve read, 85-90% of the illicit drugs enter the US through monitored ports of entry.

While the information from Mueller probe could…and probably should…lead to impeachment proceedings, Trump also faces another hurdle that seems to trump (pun intended) most presidents seeking re-election – “It’s the economy, stupid.”

The US has experienced an exceptionally long period of economic growth. The growth started under president Obama following efforts through the Federal Reserve to kick-start the economy following the financial crisis at the end of the Bush Administration. While the current economy appears strong based on certain indicators – unemployment rate and some increases in wages, e.g. – there are many soft spots.

The problem facing the Trump Administration is how to counter an economic downturn. Normally, monetary policy is the first step – the Federal Reserve lowers interest rates to stimulate borrowing and investment. This option is almost off the table since interest rates remain near historic lows. Fiscal policy follows with an increase in government spending (and the deficit) for such high-employment projects as road building/repairs. Oops, the deficit is climbing while the economy is strong so this is a limited option. Why is the deficit climbing? Because of the Trump tax cut. (I’ll save a longer discussion on the economy for another entry.)

There is a solution. While the solution is an enigma to current Trump Republicans, I have a feeling that over the next few years many of these Republicans will support the solution. What can be done? Raise taxes and redistribute income through a number of different means. And no, the approach isn’t classic socialism. The approach is called Keynesian economics. If you don’t think it works and is necessary for a stable society, then ask your parents or grandparents to tell family stories about what life was like during the Great Depression. If no one in the family has stories, then there are lots of books and movies. I’m not suggesting we’re headed for another Great Depression but there are few options left for countering a recession. (And, FYI, higher taxes did not slow growth in the 1990’s under president Clinton or in the 1950’s under Eisenhower.)

So, what does the Donald do? In the face of all the problems, he resigns to avoid being indicted. Remember, the Donald is a bully. Bullies cut and run when faced with a difficult situation. Even if he doesn’t resign, he doesn’t seek reelection…maybe because his bone spurs start to act up.

What about the Revenge Revolution? Still going to happen or will these events prevent it? Still going to happen. There’s a group that supported Trump that still feels screwed. First they felt screwed by the establishment and now screwed by Trump. If the Democrats in the House can begin to pass legislation that will help mitigate some of the inequities, real and perceived, then there will be significant pressure on the Senate to support the legislation. Such legislation will help mitigate the intensity of the Revenge Revolution.

The Revenge Revolution will be more cultural, although expect some bloodshed. For reference think of the cultural changes in the 1960’s and early 1970’s. We’re going to see another sea-change in society. Lots of issues to address – managing contributions to climate change, reducing income inequity, improving public education for all ages, implementing universal medical care, and more. To get an idea of the changes ahead, all we have to do is look at the mix of incoming members of the House. That group is more like America’s future and that group is going to force the 5^th US revolution and societal changes.

#320 Personal Experience Developing AI and Implications for Skills and Employment

08 Tuesday Jan 2019

Posted by Jordan Abel in Education Issues, Gov't Policy, Societal Issues, Tech Tsunami

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Occasionally I do a “sense check” about the likelihood of a Revenge Revolution. Entry #318 is the most recent “sense check.” One more note — sometimes I write about another topic that does not quite fit the theme of the blog. Those comments are available on the page titled “JRD Thoughts and Comments” as well as “Tech Tsunami”, which has more articles about how technology might affect US…and add a dimension to the Revenge Revolution.

Background to Technology Tsunami series focuses on how implementation of technology may change the family earnings structure in the US.

In “Technology Tsunami” (Entry #319) I noted that with the increased use of artificial intelligence, many current workers will need to increase skills in order to remain employed. But just what is artificial intelligence? And how can it be used? To make AI more concrete and less abstract, thought it might be interesting to allocate the next couple of entries to describing some personal experience developing AI and what happened as a result.today

First, let’s go back to define just what constitutes artificial intelligence, or AI? (Readers, please keep in mind this is not an article for an academic journal. The article is aimed at trying to help the general populace understand more about what AI is and how it might affect the workforce.)

The term “artificial intelligence,” which was first used in the 1950’s, seems to be applied to an ever-increasing range of computer-based applications. Much of AI we hear about today has been developed by applying to very large data bases sophisticated multiple regressions (regressions look for an association between one action/word and another). The algorithms that result become the foundation for software to support an AI application. What has expanded the use of AI is the availability of very large databases and much more computing power. However, as demonstrated by this example, a useful and effective AI program can be developed without an overly large database and/or staff.

A question associated with AI, “When AI is implemented, will people be replaced?” Yes, but people have always been replaced with the introduction of new technology. Farm hands were replaced by tractors and mechanical harvesting equipment. The printing press replaced scribes. The telegraph replaced the Pony Express. Trains replaced stage coaches. Cars replaced buggies…and endless other examples.

In the current wave of AI, the jobs that seem most vulnerable in the near-term are ones that involve repetition. Jobs where running a software program or using robot could perform most or all of the task. Such jobs might be assembling parts, loading/unloading shelves, providing certain types of information (clerks, including law clerks could be replaced by a more sophisticated Siri, for example), completing forms or completing some basic analysis (proof reading, financial analysis, etc.), steering vehicles and similar jobs.

The list of vulnerable jobs is quite lengthy and includes a considerable number of white-collar positions. For example, when General Motors announced in fall 2018 the intent to close five plants in the US/Canada, more white-collar workers were affected than assembly workers.

OK, how about a real-world example. In 1980…yes, that was many moons ago…I transferred to headquarters of Buick Division of General Motors. One of the staffs I managed was responsible for forecasting sales – short and long-term. The short-term forecast – 180 days – was used to set production schedules at assembly plants and suppliers.

When I arrived, the accuracy of the forecast was abysmal. Even though Buick had been in business about 75 years, it was not uncommon for forecast sales for the current month to miss actual sales by 30-40%…sometimes 50%. Such a variance made it extremely difficult to manage inventory. The forecast/actual discrepancies also caused frustrations with Buick dealers because arrival dates for cars ordered varied widely from the original schedule, which in turn frustrated customers.

To increase the accuracy of the forecast, we developed an application of AI. The AI-based forecast consisted of three key estimates: (i) industry sales; (ii) mix of sales by category – % small cars, % mid-size cars, % full-size, % SUV’s, etc. – within the industry; (iii) Buick % share within the general categories.

Unlike today, at the time most assembly plants were limited to a few models with little variation in size. Further, changing the production mix at an assembly plant could be time consuming and costly.

Buick’s solution to this dilemma (and common in the industry) was to “force” the dealers to take the mix of cars produced. Further, there was little recognition of differences in consumer preference by region of the country. Dealers in New England, where smaller cars were preferred, would end up with mix of small/large cars very similar to the dealers in say Texas, where larger cars were preferred. “Encouraging” dealers to take the production mix required the field staff to spend considerable time with the dealer and often involved some type of costly incentive – free financing, extra cash per car, etc. Dealers would then have to try to steer customers to these “unwanted” cars.

The solution to fixing the problem was conceptually simple: (i) a more accurate forecast; (ii) allowing dealers to order what cars they wanted. Improving the accuracy of the forecast was the critical first step. Doing so required building a math model that would predict more accurately upcoming changes in demand.

Previous sales forecasts had been based on changes in the rate of actual sales. Basing the forecast on “lagging indicators” – sales the past few months – is akin to trying to drive a car by looking only in the rearview mirror. Doing so reduces one’s speed and increases the chance of making a serious error. The previous method of forecasting was always “catching up” to changes in demand rather than being ahead of the curve.

Developing the AI model was remarkably easy – or so it seems now. We ran regressions of historical sales data for the industry as well as Buick. Fortunately, the auto companies had been reporting monthly sales for many years, so the data base was credible. The results of the regressions yielded useful, seasonal patterns. We also analyzed the shift in mix of sales over time. This helped determine if sales of smaller cars were increasing faster or slower than say mid-size or luxury cars. Another task was estimating how many people were switching from cars to what were then early-version SUV’s.

Finally, we had to determine Buick’s likely share of each category. At the time the overall car market was shifting to smaller cars. While Buick had competitive smaller car entries, it was more successful in larger cars. The effect of the shift in consumer preference was profound. Even though in a given month Buick could gain in market share in every major industry category compared to the previous year, that same month could show Buick’s overall share had declined compared to a year ago. That phenomenon was always fun to try to explain. “Yes, we gained market share in every category…but, no we lost market share overall.”

Within about one year of starting the AI model, the US industry experienced a major economic downturn and vehicle sales took a nosedive. The AI model helped Buick management begin to make more informed decisions about setting production schedules and marketing plans. With the implementation of the AI-model, the accuracy of the forecast improved markedly. Rather than a variance of 30-40% between actual and forecast for a given month, the variance fell to less than 5%. The improvement helped smooth production schedules, reduce short-term layoffs and/or overtime at Buick and suppliers and made lead-times for deliveries to dealers much more accurate.

The increased forecast accuracy allowed Buick to migrate to what is called a “free-expression” forecast and production schedule. Dealers were allowed much more freedom to order the number and model of cars they wanted.

The decision to migrate to “free-expression” forecast/production caused great angst among staff members tied to the old “dealers-will-order-what-we-tell-them” system. In the end, however, most everyone became a convert because the overall production volume and mix were about what the dealers wanted.

Other benefits of the AI forecast model? The field staff was able to spend more time helping dealers with marketing programs, working on customer satisfaction and finding ways to improve profitability. The dealers then started to order more cars from Buick because the turnover rate improved. In the three-year period following implementation of the AI model, Buick increased market share more than any other manufacturer, domestic or foreign. While not all the gain in market share can be attributed to the AI model, the number of new products Buick introduced during the same period was limited, so most of the gain in market share came from “non-product” activities.

What happened to employment? Buick reduced the number of field offices from 26 to 20. Buick also started a call center to increase contact with dealers located outside urban areas. The non-urban dealers still received some personal visits, but less frequently.

Use of AI also changed the skills required of the office staff. To be effective in the new environment, staff members needed more skills in math, statistics, economics and marketing. If today’s computing power were available then, we could have cut the staff in half, possibly more. Even skills of and the number of senior managers would have been affected. At the retirement party of a key sales executive, who’d grown up in the days of gut-feel and seat-of-the-pants forecasts, the retiring executive told me – after several drinks – “I never understood what you were talking about, but I trusted you.” I appreciated the compliment but was a bit taken aback by the admission.

Does this example help us look ahead for what might happen when more AI is implemented? I think so. What did this rather simple application of artificial intelligence help Buick accomplish?

+ Increased sales
+ Increased market share
+ Increased profits
+ Increased customer satisfaction (dealer and buyer)
– Reduced employment
– Higher skills required of employees

If you’re a shareholder and/or your compensation is tied to profits, you will view the results of implementing the AI program as positive. If you’re an employee whose job was eliminated and/or you were unable to learn the additional skills required, you will view the AI program as negative. The inherent conflict between perspectives, unless we quickly start to manage more effectively, will likely be another contributing factor to the Revenge Revolution.

(In the next entry, another real-world example of using AI – an early application of consumer profiling. While the profiling was not as sophisticated as done today by Google, Facebook, Amazon and many others, the effort allowed Buick to spend marketing dollars more effectively. We’ll also address why it is important that the output of AI programs is understood and trusted. )

#319 Technology Tsunami Headed toward US Shores

01 Tuesday Jan 2019

Posted by Jordan Abel in Causes of the Revolution, Economics, Gov't Policy, Possible Solutions, Tech Tsunami

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Background to Technology Tsunami Series. Thought it might be worthwhile to take a break from all the craziness in Washington and discuss other issues that likely will contribute to the Revenge Revolution. A key issue that seems to be getting less attention than it deserves….maybe because of all the noise emanating from the Trump White House…is how the implementation of technology will change the family earnings structure in the US.

We’ve seen some of the changes already, with the reduction in manufacturing jobs and the stagnation of wages for a large segment of the population. In my view the changes so far are just a small taste of what is to come. The next several blog entries…and I don’t know how many at this point…will focus on what I’m labeling the coming “technology tsunami.” The first of the entries, which follows, is a bit long but tries to set the stage.

There are already numerous early warning signs of the tsunami. An example – the announcement by General Motors in November 2018 of its intent to close five (5) plants in North America. Another warning sign is a story in the New York Times about a robotic arm playing the piano. While a robot playing a piano may seem like a bit of a novelty, think about the implications. The more dexterous robots become, the more robots can perform tasks of people who are highly skilled. Robots in warehouses and welding or painting in cars/trucks are commonplace. Those tasks are fairly straight forward compared to cooking or performing surgery or a host of other tasks.

As noted in this entry, over the centuries societies have coped with implementation of new technologies. Some societies have adopted new technologies and succeeded; others did not adopt new technologies and fell behind. An example — in 1910, GDP per capita in Argentina was about 80% of US GDP per capita. By 2010, 100 years later, GDP per capita in Argentina had fallen to about 30% of US GDP per capita.

Adopting successfully is very difficult. There are a couple of interesting books about adopting new technologies that we’ll discuss in a later entry. For now let’s get started. As you read, keep in mind how the disruption caused by adopting new technologies might compound societal problems currently facing the US. Numerous factors point to another revolution in the US – the technology tsunami could accelerate the Revenge Revolution and make it worse. And, yes, Mrs. Lincoln, enjoy the play.

Entry Begins

After General Motors announced plans to close five (5) plants in North America (November 2018), I was asked by several friends and colleagues for my opinion of the merits of the decision. While I had no inside information, based on my experience at GM and additional analysis, I concluded GM made the correct decision and should be congratulated.

To explain my logic in more detail, I wrote a couple of informal articles and published links on Facebook. The articles included the term “technology tsunami,” which I thought might help explain some of GM’s rationale for closing the plants…and why GM’s decision might portend what’s ahead for other companies. (GM had additional reasons for the closings. Links to articles on Tech Tsunami page.)

Reaction to the term “technology tsunami” seemed to beg for more explanation. So, here goes. I selected the term “technology tsunami” because the characteristics of a tsunami seemed to be a good proxy for how the wave of artificial intelligence (AI), increased use of robots, implementation of the blockchain, and other technologies will affect employment in the US. The effect will not be limited to the manufacturing and some service sectors but include many white-collar professionals (GM, for example, laid off more salaried white-collar staff, than hourly manufacturing workers.)

First let’s look at the sequence of a tsunami. The start is often an earthquake or volcanic eruption deep in the ocean. The energy from that quake is transferred in the form of a series of powerful ocean waves. In the open ocean, the change in the wave pattern caused by the earthquake is not necessarily apparent. To the naked eye, tsunami waves appear relatively normal.

The strength of the waves becomes more apparent as waves move closer to shore. As the waves start to come ashore, the waves are compressed. The more gradual the slope of the shoreline, the more compression.

And there is not just one wave that is compressed and hits the shore, but a series of waves. The waves are powerful and of such height that virtually everything at or near the shoreline is completely destroyed. The waves continue inland, causing significant damage. A tsunami usually is more powerful and destructive than the surge associated with a hurricane.

An usual characteristic of a tsunami is how it affects the waterline preceding its arrival. As the tsunami gets closer to shore, the water at shore’s edge recedes. The shoreline looks as if there is an exaggerated low tide. This phenomenon might last several minutes. Then, the waterline changes quickly and drastically as repeated high and powerful waves come ashore, destroying virtually everything.

With that picture in mind, let’s examine how a technology tsunami might affect employment in the US. In my view, the earthquake has already occurred that will cause the technology tsunami. The energy from that quake has been transferred to form of a series of large and destructive waves. And those waves are headed toward the US shore. Warning signs of the tsunami are becoming more evident at the shoreline as the waterline has begun receding.

The US shoreline is filled with people. Many at the shore still work in manufacturing and service industries. However, few at the shore seem to understand the implication of the receding water line and even fewer take action to avoid the pending disaster. As the waves roll closer to shore, the beach remains filled with people.

In the next few moments – for this analysis consider next “few moments” as next “few years” – the pending disaster becomes apparent. The waterline begins moving ashore rapidly as the first of a series of giant waves becomes visible. The people at the shore – those with limited education and skills – try to escape, but it is too late and waves overwhelm them.

The powerful waves continue inland, destroying many long-standing structures, once thought invincible. Much is lost and chaos ensues for those who survive.

Am I overreacting to the potential impact of a technology tsunami? Is a technology tsunami even possible? Or, as a couple of people have suggested, am I being like “Chicken Little”?

My concern about a technology tsunami has less to do with whether AI will become smarter than humans and more to do with the potential impact on the stability of society. How many lower-skilled, semi-skilled and even skilled blue and white-collar jobs will technology replace?

Trying to stop implementation of technology is foolhardy. Depending on when such a stop-technology approach was implemented, today we might be travelling by horse and buggy and living without electricity, telephones, tv/radio, computers, internet, etc.

And yes, I agree that societies have survived major technology disruptions in the past. But transitions to new technologies have rarely, if ever, been smooth. Even worse, countries that did not transition to new technologies became also-rans.

During the technology tsunami, what is likely to happen to societal stability in the US? How will people react who are replaced by technology? As middle-class jobs continue to be eliminated…and many new jobs are at lower pay, if available at all…will people sit idly by? (When formulating your answer don’t be misled by the unemployment rates in recent months. Look at constant-dollar median incomes over time compared to GDP per capital. Income has not kept up with productivity. Also significant wealth has transferred toward the very top. The longer-term trend is a much smaller middle class with less wealth accumulation.)

If a technology tsunami seems possible, then what are we…societal we…doing to prevent a likely social upheaval that follows the tsunami? As best I can tell, we are doing nothing of substance. Policies of the Trump Administration seem to be focused on preventing adoption and even overturning technology rather than planning how to manage the transition.

In a way, the logic for why we should prepare for a technology tsunami is similar to the logic of why we should make efforts to prevent further global warming. Who’s right about the cause of accelerated global warming does not matter. If global-warming deniers are correct and man has contributed virtually nothing to global warming, the consequences are the same…and the consequences are not good. By doing something, then there’s a chance to reduce the negative effects.

Since we have a good idea of the effect of a technology tsunami, how do we start preparing? Maybe the first step should be to look at the 1930’s. In response to widespread unemployment (at least 25%), reduced net worth among most families, and no clear prospect for an economic turnaround, FDR and Congress implemented programs to create jobs. Creating jobs had a twofold effect: (i) putting money into people’s pockets so they could begin buying again; (ii) allowing families to regain self-respect.

One can argue about the efficacy of specific New Deal programs. However, there should be little argument that these programs helped bring stability back to US society.

Part of the New Deal not often discussed is the effort to increase participation in public education. During the 1930’s, many grammar and high schools were built and students encouraged to complete high school.

The efforts resulted in a sharp increase in the percentage of the population graduating from high school. The increase in percent graduating from high school continued until the 1970’s when the rates plateaued.[1]

Emphasis on education continued after WWII with the GI Bill of Rights and then with availability of low-cost loans encouraging more students from lower- and middle-income families to attend college.

The lesson of these programs for today? Existing and emerging technologies require more math/analytical skills to utilize capabilities of the technologies. With the need for more math/analytic skills…and the risk of becoming an also-ran country by not adopting the technologies…what actions do we take? How does US society get more people educated, especially those on the shore unaware of the pending technology tsunami?

Following are some ideas. You’ll likely look at the list and say, “What’s so innovative about the list? I’ve heard these ideas before.” And, you’re right. The ideas are not new…but you know what? We’re not implementing them, and in some cases we seem to be regressing.

The list is intended to start the discussion:

Help society understand that expenses for public education are investments, not merely costs. Investments may take time to payback but result in a benefit that spans generations.
Increase pay for…and respect for teachers. Make the qualifications and salaries for teachers competitive with, and possibly slightly above, the private sector.
Reinstitute more technical training in high schools. Almost everyone agrees not everyone is suited for college. Not attending college does not mean one does not have valuable skills. Far from it. The public schools should provide everyone an opportunity for training in how to use, leverage and maintain technology skills. At one time “technical training” was common in high schools. Time for it to return.
Make loans for college affordable with a provision to “earn-out” the loan over a reasonable period. Unlike today, make compliance for the earn-out provision easy to understand and execute. Provide assistance to the participant – not everyone is an expert at filling out government paperwork. Encourage people to become teachers. Don’t discourage them with onerous penalties for slight mistakes in completing paperwork.
Cut back, or eliminate private charter schools. Yes, all organizations need fixing over time. Public education is no exception. But charter schools are not necessary to fix problems in public education. Charter schools destroy the very foundation of public education…and operate with far less accountability. The trend toward charters needs to stop and charters eliminated.
Create meaningful education programs for older workers. The claim by some that “I’m too old to learn” is an excuse, not a reason. My experience has been many older people are embarrassed to ask for help. When assistance is framed the right way, it is rare that someone turns down the opportunity to learn. We…again societal we…need to be flexible in how we approach teaching students, whether the student prospect is in grammar school or a grandparent.
Implement meaningful education programs and works-skills programs in prisons. Incarceration is incredibly expensive. While different studies include different amounts for overhead and other costs, the least amount of cost per year to incarcerate someone is roughly the same as tuition, room and board at a state university. In many studies, the cost is multiples higher than tuition, room and board. Incarceration without rehabilitation is wasted money. Educating prisoners and having prisoners do meaningful work while incarcerated seems to be “common sense.”

How do we implement some of these ideas? More in the next article. Stay tuned.

[1] 120 Years of American Education: a Statistical Portrait, US Department of Education, 1993.

Links to articles re GM Plant Closings

#318 Tipping Point on the Donald: Fingernails Are Too Long

23 Sunday Dec 2018

Posted by Jordan Abel in Causes of the Revolution, Gov't Policy, Sense Check

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Readers: this blog is set in the future (sometime after the year 2020). Each entry assumes there has been a 5th revolution in the US — the Revenge Revolution. More about the Revenge Revolution and author, Entry #1. Many entries are formatted as conversations. Characters appear in a number of entries, with many entries building on previous conversations.

Occasionally I do a “sense check” about the likelihood of a Revenge Revolution. Entry #318 is a “sense check.” One more note — sometimes I write about another topic that does not quite fit the theme of the blog. Those comments are in the page titled “JRD Thoughts and Comments.“

When I started this blog more than five (5) years ago, two guidelines I set were key: (i) avoid spending too much time on political or economic events occurring in the previous week or two; (ii) avoid overreacting to such events. Throughout writing the blog I’ve tried to keep such events in proper perspective and also tried to frame the events in the context of the underlying premise of the blog – sometime after 2020 the US would experience a 5^th revolution, which I labeled the “Revenge Revolution.”

Trying to avoid overreacting is borne out by history. Revolutions seem to be caused by events over time. However, a few events during a short period of time, or even one event, can tip the scales, triggering the populace to say, “Enough, already. Throw the bum(s) out. Time for a change!”

Although we rarely think about it, such trigger points happen in our everyday lives. A simple example is one day you look at your fingernails and think they’re too long. And with that realization, most of us feel an urgent need to take action and file the nails. Obviously the fingernails didn’t grow all at once. The fingernails grew a little bit every day and then, suddenly, the fingernails seemed too long.

This phenomenon is described by the Theory of Just Noticeable Difference, (JND). While JND is usually applied to more physical measures – e.g., length of fingernails – the theory seems to apply to less tangible measures as well. For many people, Trump’s behavior the past couple of weeks has been akin to a “fingernails-too-long” moment.

Just why would people think that way? Let’s take a quick review of events of the past couple of weeks. The list is not necessarily in chronological order.

Michael Cohen, long-time Trump lawyer and “fixer” of problems, was sentenced to three (3) years in prison for what the judge called a “veritable smorgasbord of criminal conduct.” Earlier in 2018 Cohen’s offices were raided by the FBI. Cohen eventually became a cooperating witness against Trump in investigations by Mueller and the Southern District of NY. A partial list of crimes by Cohen has been disclosed. One crime of public interest, although one that eventually might prove to be a “lesser” crime, was for payments made immediately preceding the election to two women with whom Trump had affairs. The payments were a violation of campaign laws.
National Enquirer, owned by American Media, Inc. CEO, David Pecker, admitted working with Cohen to help squash negative news about Trump immediately preceding the election. AMI was funneling money to cover a payment to at least one of the women. AMI’s involvement violated campaign finance laws.
Michael Flynn, former Marine Corps general and former National Security Advisor to Trump, was anticipating no jail time at his sentencing. The judge chose to ignore the recommendations of the Special Counsel and dressed down the general in the court proceeding, indicating Flynn would be smart to ask for a delay in sentencing and agree to continue cooperating with Special Counsel for the next six (6) months. Even then the judge told Flynn he was subject to incarceration. Flynn was selected by Trump over widespread objections of the intelligence community.
Matthew Whittaker, Acting Attorney General, refused to recuse himself from any involvement in the Mueller probe. Whittaker, who had been a regular on Fox News criticizing the investigation before being appointed by Trump, was strongly encouraged by the Ethics Office to recuse himself. Whittaker ignored the advice. In addition, there is some question whether his appointment was legal and whether certain actions taken by Justice Department under his appointment would be legal. The nominee to become the permanent head of Justice has been equally critical of the Mueller investigation and appears to have been chosen for that reason.
Ryan Zinke, head of Dep’t of Interior, resigned. Zinke is subject of at least five ongoing investigations for various crimes.
Trump Foundation agreed to dissolve after a lawsuit by the State of New York Attorney General claiming “…shocking pattern of illegality.” Based on claims presented by the State AG, it appears Trump and several members of the Trump family could face significant civil fines and possible criminal indictments.
John Kelly, Trump’s chief of staff and former Marine Corps general, was fired by Trump. Kelly’s replacement – Mick Mulvaney. Mulvaney, a former representative from South Carolina, is currently Director of Office of Management and Budget. Mulvaney supposedly will function as chief of staff and run OMB. The practical effect is Trump has no chief of staff to manage schedules or try to coordinate legislation with Congress. How long will Mulvaney last? Mulvaney once called Trump’s views on a border wall and immigration “simplistic” and “absurd and almost childish.” Mulvaney added a physical barrier would not stop undocumented immigrants from crossing the Mexican border and ranchers at the border say they don’t need a fence.
James Mattis, former Marine Corps 4-star, resigned as head of Dep’t of Defense. For Mattis the “fingernails-too-long” moment was Trump not seeking advice of the military and intelligence community before announcing, via Twitter, that the US would withdraw troops from Syria and probably withdraw half the forces from Afghanistan. The arbitrary decision on Syria shocked people in the US military, Congress and US allies. Since DOD was established in 1947, Mattis is the first head to resign in protest. If you have not read the letter of resignation, please do so. 18 12 21 Mattis Letter of Resignation NYT
Trump Administration lifted sanctions on a Russian oligarch, Oleg V. Deripaska, who has close ties to Putin and Manafort.
Putin publically praised Trump for his decisions re Syria and lifting sanctions on the Russian oligarch. (Sort of makes you wonder whose camp Trump is in, doesn’t it?)
Trump, in a highly unusual public meeting in the White House, attempted to negotiate with Senator Charles Schumer of NY (top Democrat in Senate) and Representative Nancy Pelosi (incoming Speaker of the House) about a budget resolution that would continue to fund the Federal government. During the negotiations, Trump demanded that $5.0 billion be included for part of Trump’s Mexican border wall. If the $5.0 billion were not included, Trump declared in front of rolling cameras that he would be “”proud to shut down the government for border security.” The Senate passed a bill that included additional funding for border security but not a wall. The House, still under Paul Ryan, passed a bill that included funding for a wall. The House bill then forced the bill back to the Senate which refused to fund the wall. Trump then flip-flopped and tried to blame Democrats for the subsequent shutdown what he claimed he would be “proud” to do.
Trump, after claiming that he was responsible for gains in the stock market, then blamed the Federal Reserve chairman for causing the largest percentage loss in value in any December since 1931. To “correct the problem,” Trump indicated he would fire Federal Reserve Chairman Jerome Powell, whom Trump appointed earlier in 2018 after firing Janet Yeltin.

There are probably more events but these are the ones that came to mind…with no further research. Yikes!! Any one of these events would have been a major scandal in a “normal” administration.

What do these events mean for the likelihood of a Revenge Revolution? If we were living during the era of the Wild West, I’d say, “Add another notch to your gun.”

I’ve not conducted a survey that would be considered scientifically valid. However, after listening to a number of people on the left, center and right, I get the sense that many have reached a “fingernails-too-long” moment…and some corrective action needs to be taken. Interesting, even some on the far right seem frustrated, but maybe for a different reason. They might sense that adults could start taking back Washington.

One far-right person that I deal with (data points of one are dangerous except in Washington), suggested he would use armed force to defend his property against any government action. I had limited time and did not dig deeper into what he considered intrusive government action. Nor did I take time to remind him the only reason he can claim ownership of property is…well, because of the legal structure established by the government. I’ll explain that role of government to him on another day.

So where are we? Many people seem to think Trump is so out of control that he needs to be removed from office. And what does that attitude mean for the likelihood of a Revenge Revolution? When I started the blog in 2013, the chances of a Revenge Revolution by the early 2020’s were at the very most 50 (yes):50 (no). Over time the odds seemed to have increased gradually. Now the odds have increased to 75 (yes): 25 (no) – at a minimum. And, without much effort, I could be talked into raising the odds to 90 (yes): 10 (no). It is truly a scary time.

If you’d like to read more about how a Revenge Revolution might get started, take a look at Entries #1-#8. (E-book version of the entries, How the 5th US Revolution Begins and About the Author). These were my initial blog entries. I recently reread and the entries seem OK. If you are interested in how Trump might be “taken out” – impeached or physically removed from office – try Entries #244-#257. For a PDF e-book, DOWNLOAD Who Took Out the Donald #244-#257. These entries were written in summer 2017. The general content still seems plausible.

Thanks for your time. Comments welcome.

#315 How Technology-Induced Disruptions Impact Societies (#4 in Series)

23 Friday Nov 2018

Posted by Jordan Abel in Economics, Gov't Policy, Societal Issues

≈ Leave a comment

Readers: this blog is set in the future (sometime after the year 2020). Each entry assumes there has been a 5th revolution in the US — the Revenge Revolution. More about the Revenge Revolution and author, Entry #1. Most entries are formatted as conversations. Characters appear in a number of entries, with many entries building on previous conversations.

Occasionally I do a “sense check.” Auditing one’s own work is problematic but I try to be objective. Entries #300 and #301 are the most recent standard “sense checks.” Entries (#310-#313) broke from conversation format.

Scene: Jordan’s office, Washington, DC. Continuing conversation with Gelly, Jordan’s assistant. Conversation began Entry #308.

Jordan: “OK, Gelly, got my coffee refill. Ready to talk more about how societies cope with technology-induced disruptions?”

Gelly: “Yes, but as a reminder, keep it simple, please. I’m just trying to understand the basics. Not trying to become a PhD candidate.”

Jordan: “Not to worry. Besides, I’m not a PhD.”

Gelly: “Maybe not but you have lots of study time…and a bunch of experience in the real world using economics stuff. Remember, KISS, okay?”

Jordan: “Let’s go back and look at how artificial intelligence (AI) is being used. Another example is your iPhone. Ask Siri a question.”

Gelly: “Siri has artificial intelligence? And I thought she lived in my iPhone. OK, ‘Hey, Siri, what was the score of last week’s Michigan-Indiana football game?’”

Jordan: “When Siri tells you Michigan beat Indiana, that’s a form of AI.”

Gelly: “I understand that part…I think. Siri hears the question, does a quick search of available databases, finds the answer, and then repeats the score. That easy enough to understand. Not saying easy to make happen, just easy to understand.”

Jordan: “You’re right, not easy to make happen. Now ask Siri to tell you a joke.”

Gelly: “How does she do that?”

Jordan: “When the question is more abstract, like ‘Tell me a joke,’ it’s the same procedure as looking for the score of the football game. However, for more abstract questions, sometimes the answer is reasonable and sometimes the answer is off the wall. Remember that AI is more effective when parameters of the task are defined. The Michigan-Indiana score is quite specific. So is picking up boxes, which we talked about earlier. Accuracy of AI also improves as more information is added to the database and algorithms refined.”

Phone Gelly: “So for Siri, Alexa and their siblings, they’re best at providing quick access to available information. At the same time, the working stiffs most affected by Siri and siblings are people employed to provide information. The example might seem a bit dated but as a kid I remember being able to pick up the phone and have the operator get someone’s number, right?”

Jordan: “Right. Another example is society’s need for newspapers. For a couple of centuries newspapers were a primary source of information for all kinds of activities. People used to buy a paper for say just the sports section. That need has changed. Siri just told you the score of the Michigan-Indiana game. And, if you wanted, you could get real-time updates on your smart phone. Even if the game is not broadcast in your viewing area, you can ge an app on your phone to watch the highlights of the game and a bunch of other games as well.”

Legal Clerk Gelly: “What about AI replacing some functions of what lawyers do, or at least law clerks do? Same with some portion of information gathered when visiting a doctor. Seems as if a lot of people could be replaced, or maybe have been replaced already by some form of Siri and siblings. What about using AI for tasks that are a lot more complicated than say picking up boxes or searching a database?”

Jordan: “You mean like people who used to paint cars or weld frames or even lay bricks being replaced by robots?”

Gelly: “Yes, but also tasks that seems even more complicated…like sewing clothes. You might not appreciate it but there are lots of steps in sewing. Lots of turning fabric and moving it back-and-forth. Making even simple clothes requires a lot of steps and precise hand-eye coordination. It’s not easy.”

Sewing Machine Jordan: “Well, some clothes are already being made 100% or nearly 100% by machines. And over time, machines will make clothes that require more steps.”

Gelly: “That’s what I still don’t understand. What does happen to all those people in low-cost countries that are making clothes? If they lose their jobs, what happens? By the way, has anyone ever studies what happened to all those telephone operators, or guys that were painting cars?”

Jordan: “Your concern is spot on. What does happen? Unfortunately, the people who are most negatively affected by a disruptive technology, AI or otherwise, have little or no recourse when their job is eliminated. If they’re lucky, some get a handshake and severance pay but in developing countries, these people are SOL.”

Poor Person Gelly: “Another case of the working stiff getting screwed?”

Jordan: “The key for the country is whether the leadership begins adopting new technology and creating new jobs. If not, the country will continue to fall behind.”

Gelly: “How often do these technology disruptions happen? Seems like much faster today.”

Jordan: “Faster today…maybe. But we forget some of the objects or equipment we consider mundane today were really technology disruptions when introduced.”

Gelly: “You mean like the printing press, telegraph, the tractor and combine?”

Jordan: “Think about what was introduced between say 1850-1950. Electricity, cars, planes, trains, repeating rifles, motion pictures, radio, television…and that list doesn’t include any medical advances. So whether change is faster now is debatable. But the same problem exists – what do you do with people replaced by technology?”

Gelly: “OK, what does happen to society? I remember you talking one time about Argentina and the US having roughly the same GDP per capita in 1900. Then 100 or so years later GDP per capita in the US was almost 4x Argentina. Argentina fell way behind.”

Turtleneck Jordan: “Excellent example. I’m impressed you remembered.”

Gelly: “Thank you. Now, what happens in these countries?”

Jordan: “Remember when we first started to talk about the patterns of revolutions in the US?”

Gelly: “You found that there was a pattern of a revolution roughly every 50 years.”

Jordan: “The word ‘roughly’ is the key. Major changes in societal behavior do not follow some precise timeline. People who want to develop a more predictive model are always disappointed in how squishy the approach is.”

Gelly: “There seems to be a reasonable pattern for revolutions. Is there some kind of pattern or technology disruptions?”

Jordan: “There seems to be but the problem is trying to figure out if and how other factors affect the cycle.”

dude-with-question Gelly: “Now I’m starting to get even more confused. What happened to KISS…keep it simple, stupid?”

Jordan: “Let me say after technology moves out of the lab and first becomes commercially viable, there’s a period of very rapid growth in companies and countries that use the technology. After a while the growth associated with the technology slows and, eventually, the technology and companies mature and decline.”

Gelly: “OK, a new technology is introduced, companies grows fast, and then decline. How long is the cycle?”

Jordan: “Without any of these other interruptions, 50 years more or less like a reasonable number. Keep in mind, if the data about revolutions are squishy, data for technology cycles are really squishy. I think there’s a pattern but the timeline for that pattern likely varies.”

Gelly: “Have you got a couple of examples. What about the auto industry? You know a lot about that? What about computers?”

Jordan: “What about another break, then we’ll talk more. I promise to try to keep it simple. As I said, the data and cycles are a bit messy.”

(Continued)

usrevolution5

~ USA Headed for a 5th Revolution! Why?

Category Archives: Gov’t Policy

#336 Policies to Address Tech Tsunami. Socialism? No. National Security.

#334 Could a Change in Semantics Break the Ideologue Logjam? More about Cost of Preparing for the Tech Tsunami.

#331 Solution to Diversity? Economics, Not Gov’t Intervention.

#330 Is Diversity a Key Component of Preparing for the Technology Tsunami?

#324 Why Charter Schools Should Be Eliminated: Extra Cost to Taxpayers and More (1of2)

#323 Turning Point and a Really Bad-Hair Week for the Donald

#320 Personal Experience Developing AI and Implications for Skills and Employment

#319 Technology Tsunami Headed toward US Shores

#318 Tipping Point on the Donald: Fingernails Are Too Long

#315 How Technology-Induced Disruptions Impact Societies (#4 in Series)