08 December 2013

Isaac Singer's Revenge

Thomas Friedman's column today impels me to work out some ideas that have been bubbling away for some time.

Let's start with a sig from the archives,
Like everything else in technology, the cost of starting a startup has decreased dramatically. Now it's so low that it has disappeared into the noise. The main cost of starting a Web-based startup is food and rent. Which means it doesn't cost much more to start a company than to be a total slacker.
-- Paul Graham/2005

Nearly a decade ago, Graham defined in the new era of the sewing machine. While the sewing machine enabled industrialists to build factories, it also forced (pre safety net; and post, of course) women into slave wage piece work at home. These days, the cheap PC with 16gig, i7,and SSD is much like the sewing machine of 1850: anyone can build a web site. Or, with an R/RStudio installation, claim to be a high-powered quant. And, since anyone can, it's an exercise of low value, and most of the profit redounds to those few who can ensnare the many who do the work. Say hello to Oliver Twist; "More? Not on my watch, buddy. Keep typing, that ACA mod is due today and important people need their healthcare". Have to find some way to scrounge up $3,000/month for a cheap flat in that City By The Bay. I mean, California could demand all those starry eyed, but welfare dependent, tweens to spend 20 hours a week maintaining the DMV in exchange for the coin to pay for the latte`. Imprisoned drug dealers make the license plates, hungry tween coders run the agency. Birds of a feather, and all that. I wonder whether the Indians could still compete with jail labor? Just a thought.

Here's the difference between today's software "entrepreneur" and Hewlett and Packard in the 1950s (read up the Wiki piece):
Of the many projects they worked on, their very first financially successful product was a precision audio oscillator, the Model HP200A. Their innovation was the use of a small incandescent light bulb (known as a "pilot light") as a temperature dependent resistor in a critical portion of the circuit, the negative feedback loop which stabilized the amplitude of the output sinusoidal waveform. This allowed them to sell the Model 200A for $54.40 when competitors were selling less stable oscillators for over $200. The Model 200 series of generators continued until at least 1972 as the 200AB, still tube-based but improved in design through the years.

Real engineering, making a real product that had constructive usefulness. Today's tweens make twitter and instagram and sundry diverting entertainments. Could there be a greater gulf? I think not. But twitter and instagram are the sort of toys that one can make with little capital and little intelligence. Kind of like sewing blouses. Hewlett and Packard were Stanford EEs, for crying out loud. Today's generic tween is a PHP hacker who never took a math or database course, assuming said tween even spent time in higher education. Most of the tweens disparage education, if you scratch their very thin surfaces. One in 10,000,000 get to be Zuck (who may have cadged the whole thing from Those Other Guys).

Which brings us to the misguided, as he usually is, Friedman.
We're now in an era in which globalization and the information technology revolution have merged to drastically shrink what was the basis of our middle class for so many years: the "high-wage, middle-skilled" job.

Yes, but, this happened as a result of policy decisions, not the least of which was the "opening" of Chinese labor to American corporations. Economists of the micro- persuasion (and quants, who mostly work to maximize revenue for their corporation), mostly (always?) argue that the field is ignorant, and rightly so, of value judgment. Whatever the math says is the right answer, even if the answer is that oligarchs get 99.44% of wealth and the rest of the society starves in their service. Adam Smith (the real one) didn't agree, by the way. The difference between 1776 (when Smith's most famous book was written) and today is that the oligarchs have the NSA, et al, protecting them from the guillotine.

What Friedman, either out of ignorance or deceptive intent, doesn't talk about is that all of the human condition is relative. The USofA, post World War II, had a blue collar middle class because policy made it possible. After all, the war ended the Depression (thus proving the point that massive government spending will lift an economy out of collapse, a fact which disturbs the Right Wingnuts), and was still within the life experience of most of the country's citizens. The laissez faire policies which led to The Great Depression could have been allowed to return. They weren't, and until 1973 when the Arabs had enough of Israel and its enabler (us), life went well.

Time for another quote.
As mass production has to be accompanied by mass consumption; mass consumption, in turn, implies a distribution of wealth -- not of existing wealth, but of wealth as it is currently produced -- to provide men with buying power equal to the amount of goods and services offered by the nation's economic machinery.
-- Marriner Eccles

That quote has permanent place at the start of one version of this endeavor, and it is key to both quant and policy. It is key to quant because it refutes the nihilism of the quant ethos. It is key to policy because it provides the logical foundation for equitable decision making; you don't miss your water until the well runs dry, and you don't feel hungry until you've killed the golden goose. In both cases, the goal is growth of the society and economy without having to resort to the guillotine.

So, Friedman continues,
In today's hyperconnected world without walls -- when more Indians, Chinese, computers, robots and software can perform more average blue-collar and white-collar jobs -- the only high-wage jobs are increasingly high-skill jobs.

Wherein he blithely ignores a key factor in the collapse of the American white collar middle class: the invasion of cheap Indian (and others, to be fair) white collar labor. Tom, old sot, you can't have it both ways. Especially in just one sentence. I guess The Times doesn't edit your copy? Moreover, the number of high-wage/high-skill jobs is necessarily limited, since they're the explicit result of pyramiding the workforce. To put it plainly: more high-skill workers will only drive down the value of high-skill work while relentless automation diminishes the number required. Remember what the Indians are doing to us? D'oh!!!!!

In any case, there was only one Einstein. Establishing an educational system which winnows out the participants, until there's just an Einstein, leaving the rest to starve can't win in the long run. That's North Korea, in case anyone's still not getting the point. And more than a few white-flight suburban gated housing tracts; "so glad to get away from all those SNAWT".

He then goes on to quote one Andreas Schleicher, who runs the PISA (Program for International Student Assessment)
"Since the link between skills, jobs and growth is becoming ever tighter, it will be harder and harder for governments to address inequalities through redistribution"

Which is exactly wrong. Education, as well as innate intelligence and height and weight and beauty, is all relative. Telling kids that getting some level of education is the key to comfortable adulthood is just a lie when there isn't demonstrated demand for such skills (all that Arab Spring). The 20-somethings hoping to score the next instagram know that already, hanging out in those Bay Area coffee shops, furiously sewing away on their laptops. "Just one more blouse..." The cure for maldistribution is... wait for it... a theory of distribution which is inclusive rather than the Right Wing's exclusive. Robinson Cano` just got $240 million (over ten years) from the Mariners. Is that sufficient justification for middle schools to institute bayesball as top of the required curriculum? Not even the nuttiest of the Right Wingnuts would go that far (Codd, I hope so).

The real world of production has less and less demand for increasing high skill as automation continues on its exponential expansion. There was a time when one had to be a grizzled EE in order to design a cpu. Today? You just need to know a bit about EDA Lego machines. In a nutshell, it really has devolved to Lucy on the assembly line (if that doesn't sound familiar, do the search), with the exception of the folks who make the tools. The number who make the tools (and need the high-skills) is vastly smaller than those who use the tools (and don't need the high-skills, or get the big wages); as it always is in a Social Darwinist world. As Graham observed, not much of anything is needed to make a toy program.

There is a canary, at least one. It is called Apple, which has long since abandoned making computers as its modus vivendi. Some are convinced that it can't continue to grow revenue and profit by catering only to the 10% (or thereabouts) of the US/EU. Others believe it will score a deal with China Mobile. Even if the deal happens, on even generous (to Apple) terms, China's long adopted strategy of currency manipulation (I know, some Really Important Pundits insist that doesn't happen) may make for a Phyrric victory. It's by no means sure that there are enough Chinese who can afford a $700 phone to make much difference even if the deal happens. It's easy to grow 10%/annum when you're small; not so easy when you've eaten nearly the entire planet.

Finally, we get to the Supremes. You can (if you've not yet) read up Vaughan-Nichols' piece here. He's in the 'patents on software is stupid' crowd, as am I. The notion of software, and worse, business method, patents is destructive. If the Floundering Fathers wanted abstract ideas patentable, they would have said so. Algorithms were a known entity at the time, so don't prattle on about modern times.

In sum: patents grant to the smart (or, as often, lucky) an effective perpetual monopoly on some construct. The length of this perpetuity has been lengthened by Congress many times since the Founding (not that Congress bowed to pressure or anything, of course). Congress has done even worse with copyright, of course. Walt's heirs will own Mickey until we blow up the planet. Carving out high living by law (which is to say, policy) to the few won't help get us out of collapse; it will just accelerate the call for the guillotine. The data show us how Western economies were constructed when they did well, at the macro and household levels. The intelligent approach is to build such a construction.

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