Saturday, August 16, 2014

Humans Need Not Apply

Worried about the impact of technology on your job security? You should be. This is worth the 15 minutes:

I love the background music, by the way, which is bad news for composers (as explained in the video). Like I've said before, a recession is when technology replaces your neighbour's job; a depression is when technology replaces your job. But maybe you don't do any of the 47% of jobs that will be affected?

Scott Alexander has been writing a lot about the impact of technology (and many other things). His latest post on Robin Williams (yes, there is a connection) states the following about the future impact of technology on our working lives:
This is also the basis of my support for a basic income guarantee. Imagine an employment waterline, gradually rising through higher and higher levels of competence. In the distant past, maybe you could be pretty dumb, have no emotional continence at all, and still live a pretty happy life. As the waterline rises, the skills necessary to support yourself comfortably become higher and higher. Right now most people in the US who can’t get college degrees – which are really hard to get! – are just barely hanging on, and that is absolutely a new development. Soon enough even some of the college-educated won’t be very useful to the system. And so on, until everyone is a burden. 
...By the time I am a burden – it’s possible that I am already, just because I can convince the system to give me money doesn’t mean the system is right to do so, but I expect I certainly will be one before I die – I would like there to be in place a crystal-clear understanding that we were here first and society doesn’t get to make us obsolete without owing us something in return.
By the way, that video was launched on YouTube just three days ago - it has been viewed 1.3 million times already. Looks like it struck a nerve with some folk.

Wednesday, July 30, 2014

An Asymmetry of Possibilities

The folks in Stratfor have given us the best strategic analysis of the Israel/Gaza conflict that I've read in a while:

There is accordingly an asymmetry of possibilities. It is difficult to imagine any evolution, technical, political or economic, that would materially improve Israel's already dominant position, but there are many things that could weaken Israel -- some substantially. Each may appear far-fetched at the moment, but everything in the future seems far-fetched. None is inconceivable. 
It is a rule of politics and business to bargain from strength. Israel is now as strong as it is going to be. ...Israel's major problem is that circumstances always change. Predicting the military capabilities of the Arab and Islamic worlds in 50 years is difficult. Most likely, they will not be weaker than they are today, and a strong argument can be made that at least several of their constituents will be stronger. If in 50 years some or all assume a hostile posture against Israel, Israel will be in trouble.  
Time is not on Israel's side. At some point, something will likely happen to weaken its position, while it is unlikely that anything will happen to strengthen its position. 
The other thing that might happen is that the fragmentation of the sovereign nation-state as the nexus for politics, economics and war will continue and possibly accelerate - even with or without a new Caliphate as envisaged by ISIS in their map pictured above. Henry Dampier worries about the ailing ability of the nation state to wage war:
The critical competitive advantage of the state was in the field of war. Because the state was capable of fielding a large, mass army of capable fighters on short notice, it was able to overwhelm small kingdoms, republics, and city-states that were not capable of doing such a thing reliably. This competitive atmosphere was generated in Europe in part by the continual weakening of the nobility and the papacy, combined with over a century of religious warfare between Christian factions. Consolidating war-making power within fewer hands was adaptive.
But in an age of asymmetric warfare:
Owing to its decline, the nation-state now asks for more in terms of material resources while providing less. Its statistics are becoming unreliable (or perhaps just less reliable than they have been in the past). Its standards provided for trade and finance are becoming antiquated, and too expensive to reform. Its critical advantage in warfare has eroded, and many states have become reliant on private security firms to provide physical security, intelligence, and logistics whereas before they were able to rely on nationalist zeal to provide all of those services at an unusually low price.
Israel isn't the only nation-state for whom circumstances will change in the coming years and decades. Ireland's moment of maximum strength may have passed, but it isn't too late to take our future security more seriously than we do at present.

Monday, July 28, 2014

After Westphalia

With the centenary of the start of World War One upon us, many are noting the similarities and differences between then and now - especially in the context of increasingly violent conflicts in the Middle East and beyond. But to understand the present we might need to look further back - to the Treaty of Westphalia in 1648 - credited by many with the creation of the modern, sovereign state. Why so far back? Because in the age of ISIS, the modern, sovereign state might just be coming to an end. Here's Adrian Pabst on the subject:
The secular settlement of Westphalia is predicated on subsuming all institutions and practices under the absolute sovereignty of state coercion and market commodification. This relentless expansion of bureaucratic control and capitalist accumulation has produced an unprecedented centralisation of power and concentration of wealth, which has in turn created a twin crisis of identity and inequality. So instead of a utopia of infinite progress in the direction of democracy, what is already underway is a resurgence of populism, atavistic nationalism and fascism across large parts of Europe and elsewhere - notably, in Ukraine and in Russia. 
... Among the alternatives to the sovereign power of both national states and global markets are hybrid institutions, overlapping jurisdictions, polycentric authority and forms of multi-level government or governance, which are all marked by disperse and diffuse power structures and degrees of suzerainty that are not captured by modern paradigms of national sovereignty and balance of equal powers. This applies as much to the EU as it does to great powers and their neighbours such as Russia in relation to Ukraine, Belarus or Georgia.
Indeed, it is clear that the historically recent triumph of Liberal Democracy itself was the beneficiary of American idealism writ large as imperial ambition. But as America adjusts to the new realities of a post-Westphalian era, we can anticipate a far more fluid, less fixed world of shifting borders, alliances and power politics. ISIS is only the beginning.

As for Ireland, we might just need to get back in touch with the more atavistic, less politically correct views and ambitions of our own founding fathers if we are to find the ideas and values that will help us navigate the new global realities ahead.

Tuesday, July 22, 2014

All's Well

"Not only will politics certainly disappoint us, but even were it not to, the outcome would be a relatively pitiful one. Political transformation is ‘at best’ a re-ordering of primate dominance hierarchies, which everyone knows won’t actually be for the best — or anything close to it."            Outside In
There's nothing like a holiday abroad to give you a bit of perspective on things. Like, what a lucky place Ireland is compared to the rest of the world. The news abroad was all about Gaza, The Ukraine and Iraq; back home the headlines featured culchie rock stars and skobie seagulls. Oh yes, and a Cabinet re-shuffle. Yep, we're lucky.

Still, I can't help feeling that we won't remain immune from the global tide of events indefinitely - the fact that we are one of the most open economies in the world more or less guarantees that. But even if the headlines are just that - news for a day, of little import for the future - other forces will inevitably shape Ireland's destiny.

There's one I've been reading about a lot: the growing failure of 'post-recession' economies in the developed world to create jobs and provide adequate wages for those who want them - a big problem in Spain, where I was staying. A recent episode of the BBC's Analysis discussed whether we are witnessing 'the end of the pay rise'. The conclusion is fairly optimistic - technological innovation will eventually increase productivity per worker like it did before, with some of the benefits accruing to workers in the form of higher wages (and more jobs), like it did before.

Others are less optimistic: Thomas Wells thinks the rise of the Robot Economy means we need to institute a basic minimum income. Scott Alexander has even figured out a way to pay for it: take all the money wasted on educating people who graduate to unemployment by cutting to the chase and scrapping education, using the money instead to make us all 'trustifarians'. It's a tongue-in-cheek suggestion of course (I think), though his image of folks living in mountain cabins reading Aristotle is sort of appealing, if hopelessly utopian. Of course, the problem with the 'money for not working' solution is that we are currently running that experiment in the form of long-term unemployment and it isn't working all that well for either the unemployed or wider society. There might be a future in which something like Alexander's solution works, but it won't be a democratic future.

Anyway, my conservative leanings make me more inclined to look to the past for solutions rather than to the future. Perhaps we need to 'go medieval' if we want the work-life balance to be one that works for society as a whole, and not just for individuals? The average peasant in 14th century England worked just 150 days a year on account of all the holidays, feast days and week-long celebrations of births, weddings and funerals. I've suggested before that we should have a goal in Ireland of establishing the four day week as a norm, adding bank holidays - and holy days - to the calendar over, say, a 10 year period.

I'd suggest it for consideration to our local politicians only, well, they're on holiday - again. Maybe they've worked out a solution to jobless/wageless recovery and haven't got around to sharing it with us yet?

Image cred: ZH

Monday, June 23, 2014

The Disrupted Recovery

To paraphrase Ronald Reagan:

'A recession is when your neighbour loses his job to disruptive technology; a depression is when you lose your job to disruptive technology'.

The thought came to mind reading Jill Lepore's eloquent (and maybe a little unfair) put down of Clay Christensen's ideas on disruptive innovation. She essentially compares the advocates of disruptive innovation to the disruption caused by ISIS in Iraq. Like I said, a little over the top.

Still, she has a way with words:

Beginning in the eighteenth century, as the intellectual historian Dorothy Ross once pointed out, theories of history became secular; then they started something new—historicism, the idea “that all events in historical time can be explained by prior events in historical time.” Things began looking up. First, there was that, then there was this, and this is better than that. The eighteenth century embraced the idea of progress; the nineteenth century had evolution; the twentieth century had growth and then innovation. Our era has disruption, which, despite its futurism, is atavistic. It’s a theory of history founded on a profound anxiety about financial collapse, an apocalyptic fear of global devastation, and shaky evidence. ...The idea of innovation is the idea of progress stripped of the aspirations of the Enlightenment, scrubbed clean of the horrors of the twentieth century, and relieved of its critics. Disruptive innovation goes further, holding out the hope of salvation against the very damnation it describes: disrupt, and you will be saved.
As far as Lepore is concerned, our uncritical embrace of disruptive innovation is somewhat lacking in evidence or proof that it is, on balance, a good thing. Michael Hennigan (who linked to Lepore) has just finished a five part critique of Ireland's innovation strategy. Or lack thereof. It's a familiar refrain from Michael - our stated ambitions for innovation policy far exceed any real world outcomes (either in terms of indigenous, innovative firms or job creation).

In fairness to Christensen, he's well aware of the risks associated with disruption, and he sees the potential for technological malinvestment as much as for technological investment - especially in a world awash with capital. Nor do I think he would recommend Irish policy makers to put all their eggs in the innovation basket.

The real danger it seems to me is that digital disruption - as opposed to the old-fashioned process of replacing coal with oil, steam with electricity - happens much, much faster so that the 'gains' from disruption are dissipated by the next disruption before they have been embedded by the wider society. The theoretical process of disruption is illustrated below (source):

But what if the area under the curve described as 'Height of New Productivity Gain' is much flatter, quickly turning back below the line as losses return sooner than in the past?

The latest EY report on Ireland's economic prospects sets out some interesting forecasts for job creation to the end of the decade across different sectors. What surprised me was the number of new jobs they are forecasting for retailing. I don't think so. If somewhere like Blackrock is turning into a retail Potemkin Village - thanks mainly to the recession but also to disruptive technology - then the time to 'bank the gains' from innovation just might not be long enough any more.

Maybe we can take consolation from Lepore's conclusion that often it is the incumbents who gain most from technological innovation and not the disrupters:
Disruptive innovation is a theory about why businesses fail. It’s not more than that. It doesn’t explain change. It’s not a law of nature. It’s an artifact of history, an idea, forged in time; it’s the manufacture of a moment of upsetting and edgy uncertainty. Transfixed by change, it’s blind to continuity. It makes a very poor prophet.
We are all incumbents now.

Tuesday, June 17, 2014

Faster History

Twenty five years after Francis Fukuyama proclaimed the end of history, history appears to be speeding up. An interesting perspective from John McGinnis:

There are inherent tensions in liberal democracy that ensure that history continues. By protecting liberties, liberalism prioritizes individuals, while democracy necessarily prioritizes a collective right—the right of a people to govern themselves and impose obligations and indeed trench on the liberties of others. 
In a constitutional republic such as ours, we try to resolve that tension by permitting democracy for ordinary politics while enshrining rights that are beyond majority control. But even here with a constitution that has lasted for two hundred years the mixture is unstable. Just consider current conflict between campaign finance regulation and the First Amendment. Around the world the conflict is truly combustible.
And that's just in the liberal democracies. As for Ukraine, Iraq, Syria, Venezuela, Thailand...

Friday, June 13, 2014

Borrowing Constraints

The ECB is now determined to do everything to assist Europe's small businesses, short of actually helping them, of course. If I could borrow from the ECB at 0.5% I might well be tempted. After all, my chances of developing a product or service that would generate returns higher than 0.5% would be pretty good, even in this economy.

But of course, I can't borrow from the ECB - no SME can. We have to borrow from the banks the ECB is lending to, which introduces a bit of a 'middle man' problem. Indeed, Chris Dillow has debated recently whether we're past the point of needing banks any more in an age of deflation, negative interest  rates and bitcoin. I've speculated about the same thing myself recently.

There may though be a bigger problem than the ECB interbank rate or the role of banks full stop. That problem is the impact lowflation/deflation is having on the real cost of borrowing for businesses. I worked it out yesterday using Central Bank data for new business loan rates (covering the two biggest categories that make up about 90% of all business loans). If we subtract the Harmonised Index of Consumer Prices (HICP) provided by the CSO from the business loan rates we get the chart below:

What's worrying is that real interests have been rising for nearly eighteen months, after a three year period of decline. The bottom line: if the real costs of borrowing for businesses is running at more than twice the rate of growth of the economy, then you would want to be very optimistic - or very foolish - to borrow at those rates, especially if your business is focused on the domestic market (as most invariably are).

I wonder would the ECB consider a loan application?

Tuesday, June 10, 2014

Unimproved Ends

Meet Eugene Goostman.

He isn't real, but he has convinced 33% of people who interacted with him that he's really a 13 year old Ukrainian. The Turing Test has been past apparently. Try it for yourself here.

Does it matter? I'm not so sure. After all, a computer that convinces you it is human is still just a computer. Indeed, the 'news' that computers are better than humans at some things isn't all that surprising. A hammer is better for putting nails in the wall than my fist. That's why we make tools: to help us do more than we could without them.

Sure, IBM's Watson can beat any human at the TV game Jeopardy, but really, so what? I am reminded of Henry David Thoreau's observation that:
"Our inventions are wont to be pretty toys, which distract our attention from serious things. They are but improved means to an unimproved end, an end which it was already but too easy to arrive at."
With socialbots convincing thousands of twitter users to follow them, I can't help feeling that Thoreau would be even less enamored with our own age than he was with his own. We are desperately in need of improved ends, and Eugene doesn't have the answer.

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