I have just finished watching "The Battle of Britain", an old (1969) film I first saw when I was young, and it reminded me of David McBrien, a colleague and a good friend of my father's. By strange coincidence, he died exactly 12 years ago to the day. He flew Spitfires for the RAF during the war, though in all the years I knew him he never once talked about his experiences. He was a wonderful physician, and a stand up no-nonsense man who took no guff from anyone, particularly my father who tended to browbeat people to get his way. David would have none of it. He and Hilary were very kind to my father after my mother passed away in 1989, and I am enormously grateful to them both. His words "... don't you know", which he often used at the end of a sentence to emphasize a point he was making, sound as clear in my head as they did when I was a teenager. He was, without doubt, one of "The Greatest Generation".
Tuesday, December 24, 2013
Monday, December 23, 2013
The 215
There has been a great deal of confusion about what the programs actually did and why they might be if concern. It seems that one of the most controversial is that covered by Section 215 of the 2001 Patriot Act which allows for the bulk (and seemingly indiscriminate) collection of telephone meta-data. The administration maintained that 'no one was listening to your phone calls' which is true, but that rather misses the point. Social network analysis tools reveal a great deal from just this kind of connection data.
In addition to seeing if an individual has ties to a known terrorist, structural equivalence can likely help identify people in terrorist cells. What's more concerning though is the potential to use role equivalence to identify similar looking network structures; having a network that is structurally similar to a terrorist cell doesn't make it one. Data-mining this kind of information helps by adding richness to the analysis. While it is probably true that no singe act of terror has been thwarted as a direct result of the use of this data, it seems within the realms of possibility that the 215 program added something to the bigger picture.
So, the question should probably not be "do we discontinue the program?" but rather "how do we safeguard the information and the potential insights it generates from mis-use, either by government and politicians, or other parties (for example hackers, leakers, or even foreign governments)?"
One idea floated recently is that the data be kept by a private consortium of the telcos. This makes me more uncomfortable than having the government hold it. First, the private sector will be even less motivated than the government to invest adequately in safeguards to prevent misuse of the information. Indeed they may even be tempted to exploit it for commercial ends; after all, having not just their own telephone subscribers' data but the entire country's in a single database has enormous commercial potential.
My vote would be to create a special branch of the judiciary whose role would be the safeguarding and oversight of this data. Expanding the role of the judiciary has some appeal given widespread suspicion of the executive branch and the state of disarray in the legislative branch.
Saturday, December 21, 2013
Perverse Incentives
"£6 billion in total was paid out to staff in incentive pay at a time when total shareholder return was down 34% and dividend payments totaled only £2.7 billion." (The Salz Review). Incentive bonuses paid to Barclays' 60 top earners in 2011 allegedly exceeded total dividends paid to shareholders.
First this makes a mockery of the notion of 'residual claimants', the firm's owners, being appropriately rewarded for the risk they take that the firm might go broke, risks that the more richly rewarded employees don't share.
And it also suggests a problem with the more practical side of principal agent theory which has focused on creating incentive structures that align the interests of employees with those of owners. Here they clearly aren't; employees are benefiting substantially at the expense of owners, and doing so by taking enormous risks (e.g., the London Whale) that increase shareholders' risk and reduce shareholders' rewards.
Something, as Hamlet noted, is rotten in the State of Denmark.
First this makes a mockery of the notion of 'residual claimants', the firm's owners, being appropriately rewarded for the risk they take that the firm might go broke, risks that the more richly rewarded employees don't share.
And it also suggests a problem with the more practical side of principal agent theory which has focused on creating incentive structures that align the interests of employees with those of owners. Here they clearly aren't; employees are benefiting substantially at the expense of owners, and doing so by taking enormous risks (e.g., the London Whale) that increase shareholders' risk and reduce shareholders' rewards.
Something, as Hamlet noted, is rotten in the State of Denmark.
An anachronistic obsession
Every day on every new station, from local to national, we hear what the Dow Jones Industrial Average is doing; and it's an increasingly pointless anachronism.
Once, the Dow was a barometer of the economy - by which is generally meant the US domestic economy. A rising Dow meant firms were doing better, they were investing, and creating jobs. And when people were flush they were spending and US firms benefited.
But that time has gone; there is no longer a strong correlation between the profits of the 30 Dow companies and the US domestic economy. Over half the Dow 30 earn derive most of their revenues overseas. And those that manufacture do so mostly outside the US. So sales and profits (and share prices) can rise when domestic spending falls as long as they are rising globally, or while costs are being trimmed by off-shoring.
While not as telegenic (nor as frequently updated, a key factor for the 24x7 media), employment statistics and median wage rates are a better indicator of domestic economic prosperity.
Once, the Dow was a barometer of the economy - by which is generally meant the US domestic economy. A rising Dow meant firms were doing better, they were investing, and creating jobs. And when people were flush they were spending and US firms benefited.
But that time has gone; there is no longer a strong correlation between the profits of the 30 Dow companies and the US domestic economy. Over half the Dow 30 earn derive most of their revenues overseas. And those that manufacture do so mostly outside the US. So sales and profits (and share prices) can rise when domestic spending falls as long as they are rising globally, or while costs are being trimmed by off-shoring.
While not as telegenic (nor as frequently updated, a key factor for the 24x7 media), employment statistics and median wage rates are a better indicator of domestic economic prosperity.
Changes
The President, in his pre-Christmas press conference, talked vaguely of 'changes' in 2014. I predict one of those will be Kathleen Sebelius stepping down; perhaps to spend more time with her family.
Saturday, October 5, 2013
From supply chains to supply fibres
3D printing will transform supply chains.
Two factors limit the degree to which manufacturing firms can outsource parts of their production process. One is the cost of moving the parts from outsourced production to assembly and the other is complexity. This post deals with the first.
The first iteration of outsourcing involved specifying to the sub-contractor all the details of the unit they were to build. The sub-contractor made the part and shipped it to the firm who'd ordered it. The second iteration pushed some of the design work onto the sub-contractor. The outsourcing firm specified the properties and interface requirements, but the details of how this was to be achieved is left to the sub-contractor who designs and builds the part and then ships it back. In both cases the economic viability depends in part on the cost of shipping the manufactured part. Shipping is a transaction cost and in the TCE framework the higher the transaction cost, the less likley it is that firms will outsource that activity.
3D printing changes that component of the transaction costs dramatically. Instead of shipping back a part, the subcontractor ships back a series of bits that control the outsourcing firm's 3D printer. The cost of sending bits is negligible compared to the cost of shipping parts and so a TCE based prediction is that 3D printing will greatly increase out-sourcing and reduce vertical integration. We will have gone from chains full of physical items linking buyers and suppliers to a web of fibers filled with bits and bytes.
Two factors limit the degree to which manufacturing firms can outsource parts of their production process. One is the cost of moving the parts from outsourced production to assembly and the other is complexity. This post deals with the first.
The first iteration of outsourcing involved specifying to the sub-contractor all the details of the unit they were to build. The sub-contractor made the part and shipped it to the firm who'd ordered it. The second iteration pushed some of the design work onto the sub-contractor. The outsourcing firm specified the properties and interface requirements, but the details of how this was to be achieved is left to the sub-contractor who designs and builds the part and then ships it back. In both cases the economic viability depends in part on the cost of shipping the manufactured part. Shipping is a transaction cost and in the TCE framework the higher the transaction cost, the less likley it is that firms will outsource that activity.
3D printing changes that component of the transaction costs dramatically. Instead of shipping back a part, the subcontractor ships back a series of bits that control the outsourcing firm's 3D printer. The cost of sending bits is negligible compared to the cost of shipping parts and so a TCE based prediction is that 3D printing will greatly increase out-sourcing and reduce vertical integration. We will have gone from chains full of physical items linking buyers and suppliers to a web of fibers filled with bits and bytes.
Tuesday, September 10, 2013
Gales of Creative Destruction
HBS professor Clayton Christensen has written about disruptive technologies sweeping away incumbents; and that's what many suggest is happening in education at the moment. The Internet has changed the cost of information delivery and the breadth of content to which we now have access. I noted a few weeks ago that we are in an era of ferment, and as Michael Tushman (also at HBS) pointed out, that could mean that technological change either obsoletes or complements prevailing academic technologies - technology here used in its broadest sense.
What makes higher education slightly different from Christensen's model is that there appears, oddly, to be less constraint, particularly in public institutions, than in business (though plenty of inertia). Christensen noted that incumbents were hamstrung by the need to meet the demands of their existing customers who would vote with their feet (not to mention their wallets) if those firms failed to deliver improvements in their current product set. Since their customers were themselves generally pursuing incremental improvements, they weren't interested in more radical, though initially lower performing, alternatives. It was new product categories that were driving suppliers to change, and new entrant suppliers were better able to meet those needs than incumbent suppliers.
Does this model fit education? Not that well, actually, for two reasons. First, what is being asked for hasn't really changed. Students still want what they've always wanted; a good eduction. Whether educators and students share a view on what "a good education" means is another matter, to which I'll return in a moment. The second is that educational institutions, particularly those that are state assisted, can afford, ironically, to be less responsive to demand than business firms, first because they are accountable to tax payers who are generally disinterested in education (except when the bill falls due), as well as to fee paying students, and second because students, for the moment, really have no where else to go. Of course that's changing, but in the mean time, state assisted institutions of higher education are less constrained than Christensen's disk drive makers.
This means schools are in a position to undertake bold and potentially risky new experiments, something that commercial organizations generally find it hard to do; or they could do nothing. If they take the latter option, the future will shape them rather than the other way round.
What seems evident in the debate over the future of higher education is a conspicuous lack of clarity as to what higher education is actually supposed to be doing. Universities fulfill three roles; they create new knowledge, they pass current knowledge on to students (often toward somewhat unspecified ends) and they confer credentials.
While we take for granted that this is what universities do, it is not the only institutional arrangement by which these tasks might be achieved in society. Nor need they necessarily all be done by a single kind of institution: the current model is up for grabs. Before the printing press, universities, and in particular the lecture, were a key element of information transmission from those with knowledge to whose who needed it. (It's worth remembering however, that apprenticeship was another means by which knowledge was transmitted).
The in-person lecture has persisted despite the fact that technology has for some time offered alternatives; the Open University in Britain started broadcasting lectures in the early 1960s, and today the YouTube video has the potential could make university lecturing a thing of the past. Local universities may be condemned to the same fate as repertory theater, overwhelmed by the Hollywood star system, huge production budgets, and the most talented and photogenic silver screen personalities. Clearly, if lecturing was what made an for a quality education, all but a few brand name institution are doomed.
But that's not what I believe university should be; and here's where my views as an educator and those of my students may differ. I want everyone to come out of their college experience as independent thinkers, as motivated, curious learners. But what many students want, and for good reason, is the piece of paper that will get them the higher paying job that in turn will allow them to pay back their oppressive student loans. The return on investment to careful inquisitive thinking may be years down the road, while a set of tools and a marketable skill have big near-term returns.
Which brings me finally to the question of what society more broadly wants from higher education. I disagree with Margaret Thatcher's free market notion that 'there is no such thing as society'. We have ample evidence, for example in the 2008 financial crisis, that free markets don't always generate outcomes that are broadly beneficial. As a society, we collectively agree on certain things we would like to see that may not be outcomes the free market would generate, and enact laws to make those things a reality. We allocate resources to provide public goods like a universal mail service that the market under-provides. We have for a long time accepted as a society we should provide resources to do the fundamental research that the market does not provide.The question we are now dealing with is how much should education, the 'forming of young minds' be left to the market and how much should it be something we provide collectively as a society.
Left to the market we will likely get bifurcation into a small number of elite institutions with well known brands like Harvard, Stanford and Yale, and then a MOOC based model that looks a little like the University of Phoenix. The elite schools will continue to provide the highly personal service to very wealthy families, the "wealth management" end of the business to use a banking analogy. These not so fortunate, will get a much cheaper but highly standardized mass produced product with off-shore call centers, and not a person in sight. I'm exaggerating somewhat but the general point I think is sound.
Two market segments, a handful of highly differentiated, expensive providers, and the cost leaders. It's likely that the elite schools, while not necessarily getting into the cost leadership segment directly—not because they couldn't, but because of the potential impact on their brand—will nevertheless want to monopolize the supply of content to those public institutions or private firms that do cater to the 'mass market'. The educational outcomes, the student 'product' that emerges from each of these segments will be very different.
The question that we collectively need to consider is will this market driven outcome best serve our cultural and economic needs in the longer term? Do we want higher education to go the same way as retail banking? The choices were make now are important because once the current institutions are dismantled, and the young academic they currently train are no longer produced, putting the system back together will be much harder than taking it apart.
What makes higher education slightly different from Christensen's model is that there appears, oddly, to be less constraint, particularly in public institutions, than in business (though plenty of inertia). Christensen noted that incumbents were hamstrung by the need to meet the demands of their existing customers who would vote with their feet (not to mention their wallets) if those firms failed to deliver improvements in their current product set. Since their customers were themselves generally pursuing incremental improvements, they weren't interested in more radical, though initially lower performing, alternatives. It was new product categories that were driving suppliers to change, and new entrant suppliers were better able to meet those needs than incumbent suppliers.
Does this model fit education? Not that well, actually, for two reasons. First, what is being asked for hasn't really changed. Students still want what they've always wanted; a good eduction. Whether educators and students share a view on what "a good education" means is another matter, to which I'll return in a moment. The second is that educational institutions, particularly those that are state assisted, can afford, ironically, to be less responsive to demand than business firms, first because they are accountable to tax payers who are generally disinterested in education (except when the bill falls due), as well as to fee paying students, and second because students, for the moment, really have no where else to go. Of course that's changing, but in the mean time, state assisted institutions of higher education are less constrained than Christensen's disk drive makers.
This means schools are in a position to undertake bold and potentially risky new experiments, something that commercial organizations generally find it hard to do; or they could do nothing. If they take the latter option, the future will shape them rather than the other way round.
What seems evident in the debate over the future of higher education is a conspicuous lack of clarity as to what higher education is actually supposed to be doing. Universities fulfill three roles; they create new knowledge, they pass current knowledge on to students (often toward somewhat unspecified ends) and they confer credentials.
While we take for granted that this is what universities do, it is not the only institutional arrangement by which these tasks might be achieved in society. Nor need they necessarily all be done by a single kind of institution: the current model is up for grabs. Before the printing press, universities, and in particular the lecture, were a key element of information transmission from those with knowledge to whose who needed it. (It's worth remembering however, that apprenticeship was another means by which knowledge was transmitted).
The in-person lecture has persisted despite the fact that technology has for some time offered alternatives; the Open University in Britain started broadcasting lectures in the early 1960s, and today the YouTube video has the potential could make university lecturing a thing of the past. Local universities may be condemned to the same fate as repertory theater, overwhelmed by the Hollywood star system, huge production budgets, and the most talented and photogenic silver screen personalities. Clearly, if lecturing was what made an for a quality education, all but a few brand name institution are doomed.
But that's not what I believe university should be; and here's where my views as an educator and those of my students may differ. I want everyone to come out of their college experience as independent thinkers, as motivated, curious learners. But what many students want, and for good reason, is the piece of paper that will get them the higher paying job that in turn will allow them to pay back their oppressive student loans. The return on investment to careful inquisitive thinking may be years down the road, while a set of tools and a marketable skill have big near-term returns.
Which brings me finally to the question of what society more broadly wants from higher education. I disagree with Margaret Thatcher's free market notion that 'there is no such thing as society'. We have ample evidence, for example in the 2008 financial crisis, that free markets don't always generate outcomes that are broadly beneficial. As a society, we collectively agree on certain things we would like to see that may not be outcomes the free market would generate, and enact laws to make those things a reality. We allocate resources to provide public goods like a universal mail service that the market under-provides. We have for a long time accepted as a society we should provide resources to do the fundamental research that the market does not provide.The question we are now dealing with is how much should education, the 'forming of young minds' be left to the market and how much should it be something we provide collectively as a society.
Left to the market we will likely get bifurcation into a small number of elite institutions with well known brands like Harvard, Stanford and Yale, and then a MOOC based model that looks a little like the University of Phoenix. The elite schools will continue to provide the highly personal service to very wealthy families, the "wealth management" end of the business to use a banking analogy. These not so fortunate, will get a much cheaper but highly standardized mass produced product with off-shore call centers, and not a person in sight. I'm exaggerating somewhat but the general point I think is sound.
Two market segments, a handful of highly differentiated, expensive providers, and the cost leaders. It's likely that the elite schools, while not necessarily getting into the cost leadership segment directly—not because they couldn't, but because of the potential impact on their brand—will nevertheless want to monopolize the supply of content to those public institutions or private firms that do cater to the 'mass market'. The educational outcomes, the student 'product' that emerges from each of these segments will be very different.
The question that we collectively need to consider is will this market driven outcome best serve our cultural and economic needs in the longer term? Do we want higher education to go the same way as retail banking? The choices were make now are important because once the current institutions are dismantled, and the young academic they currently train are no longer produced, putting the system back together will be much harder than taking it apart.
Tuesday, July 30, 2013
Innovation in education
Michael Tushman has written about the era of ferment, that period of time just after a major technological change that leads to paradigm shift. That's exactly where higher education is today. The internet has made possible a wide variety of alternatives to the traditional classroom model but it will take several years, perhaps a generation, before we see clear 'winners' emerging and a new standard or paradigm for higher-ed.
Higher education, to use Michael Porter's five forces framework, has been content to relax behind huge entry barriers; the high cost of getting a PhD and the limited supply of new faculty, not to mention the issue of brand, reputation and industry self-accreditation makes it hard if not impossible for for new entrants. When was the last time you heard of a new conventional brick and mortar university being established? And that's supported fairly high prices, regardless of whether the cost is borne by the student, the taxpayer, or some combination of both.
The threat comes not from new entrants using the existing model but from substitution. Potential competitors are not going to be institutions full of professors with PhDs and doctoral candidates/TAs but internet start-ups coming from the technology space, who are buying the content they need and innovating the delivery system.
Solutions like Udacity may only impart 50% as much knowledge as traditional universities; but their ability to potentially do so for orders of magnitude lower cost (and to some extent commensurately lower prices to consumers of education) may not be something current educators like, but may meet both a market need and a broader societal one too.
Higher education, to use Michael Porter's five forces framework, has been content to relax behind huge entry barriers; the high cost of getting a PhD and the limited supply of new faculty, not to mention the issue of brand, reputation and industry self-accreditation makes it hard if not impossible for for new entrants. When was the last time you heard of a new conventional brick and mortar university being established? And that's supported fairly high prices, regardless of whether the cost is borne by the student, the taxpayer, or some combination of both.
The threat comes not from new entrants using the existing model but from substitution. Potential competitors are not going to be institutions full of professors with PhDs and doctoral candidates/TAs but internet start-ups coming from the technology space, who are buying the content they need and innovating the delivery system.
Solutions like Udacity may only impart 50% as much knowledge as traditional universities; but their ability to potentially do so for orders of magnitude lower cost (and to some extent commensurately lower prices to consumers of education) may not be something current educators like, but may meet both a market need and a broader societal one too.
Friday, July 12, 2013
Democracy
Democracy seems to be difficult. Hand-wringing abounds after what some see as the failure of the Arab Spring. Yet nearly a quarter century after the collapse of the Berlin Wall, most of the former states USSR are struggling to make it work, while Russia has reverted to something George Orwell would recognize.
Perhaps it's a something-for-nothing mentality; we all want freedom and a say in how things are run but don't even want to spent the time paying attention, far less getting involved. It's a collective action thing. The effort to keep up is greater than the marginal reward from doing so. Yet failing to hold elected officials accountable opens the door for those for whom their efforts are more than amply rewarded to set the agenda and control the outcomes. Getting money out of politics is only have the battle. The citizenry has to get and remain involved.
It also requires compromise and willingness to work constructively for the good of society as a whole, not just ones own interest groups. When 'the other side' wins an election, things won't go the way we want. But for democracy to work requires both that those who lost accept that they aren't' going to get what they wanted. The obstructionist approach take by House Republicans create dysfunctional government. The secularists recent coup in Egypt is worse. But equally it means the winner has a responsibility not to go for broke. Winners shouldn't expect to get everything they want either; elected officials are responsible for every member of society, not just those who elected them.
Perhaps it's a something-for-nothing mentality; we all want freedom and a say in how things are run but don't even want to spent the time paying attention, far less getting involved. It's a collective action thing. The effort to keep up is greater than the marginal reward from doing so. Yet failing to hold elected officials accountable opens the door for those for whom their efforts are more than amply rewarded to set the agenda and control the outcomes. Getting money out of politics is only have the battle. The citizenry has to get and remain involved.
It also requires compromise and willingness to work constructively for the good of society as a whole, not just ones own interest groups. When 'the other side' wins an election, things won't go the way we want. But for democracy to work requires both that those who lost accept that they aren't' going to get what they wanted. The obstructionist approach take by House Republicans create dysfunctional government. The secularists recent coup in Egypt is worse. But equally it means the winner has a responsibility not to go for broke. Winners shouldn't expect to get everything they want either; elected officials are responsible for every member of society, not just those who elected them.
Atrophy
Early reports suggested that the pilots on Asiana flight 214 didn't check their air speed on their final approach because they thought the that plane's automated systems were taking care of that. (Is it still astonishing that only three people out of over three hundred on board perished in this terrible accident).
In the discussions following the crash, several experts have noted the issue of pilots losing their touch as electronics do more and more of the flying. While this is clearly of concern to air travelers, it is possibly the thin end of the wedge of a bigger problem that will affect a lot more people; I'm thinking here about Google's driver-less car.
I'd love to have a car that drove itself (and me) to the office. I could get a lot of work done in those two and a half hours (each way). But software isn't, and those who create it aren't, perfect, and there will be situations in which a pilot or a driver may have to take back control from the auto-pilot.
There are to issues here. First, if pilots and drivers don't get the hours under their belts they may not become sufficiently skilled to act decisively and appropriately to avoid an accident.
Second, we need to thing carefully about designing machines that are too complex and unstable that they can only be operated with a computer intermediary. Modern fly-by-wire jet fighters, the F-117 in particular, are like this; they are so aerodynamically unstable that without computers to continually monitor plane's motion and apply minute but critical adjustment to the the control services, it would fall out of the sky; human pilots simply couldn't response fast enough and in the right way to keep the machine aloft. Imagine if we started building cars that we couldn't drive without technological assistance to control them.
In fact we probably we have already. From power assisted brakes and the simple end of the spectrum, to the Prius' fly-by-wire throttle at the other, we're already moving determinedly down that path. Remember all the kerfuffle about the Prius' throttle jamming open? That doesn't augur well for a fully automated, self-driving car. Do we want the most efficient (high value, low cost) possible system that works 99.9% of the time, while risking calamity in the 0.1% of the time it fails?
Returning to a related theme, that's exactly what we've done with our food supply and our manufacturing supply chain. So the answer is probably "yes".
In the discussions following the crash, several experts have noted the issue of pilots losing their touch as electronics do more and more of the flying. While this is clearly of concern to air travelers, it is possibly the thin end of the wedge of a bigger problem that will affect a lot more people; I'm thinking here about Google's driver-less car.
I'd love to have a car that drove itself (and me) to the office. I could get a lot of work done in those two and a half hours (each way). But software isn't, and those who create it aren't, perfect, and there will be situations in which a pilot or a driver may have to take back control from the auto-pilot.
There are to issues here. First, if pilots and drivers don't get the hours under their belts they may not become sufficiently skilled to act decisively and appropriately to avoid an accident.
Second, we need to thing carefully about designing machines that are too complex and unstable that they can only be operated with a computer intermediary. Modern fly-by-wire jet fighters, the F-117 in particular, are like this; they are so aerodynamically unstable that without computers to continually monitor plane's motion and apply minute but critical adjustment to the the control services, it would fall out of the sky; human pilots simply couldn't response fast enough and in the right way to keep the machine aloft. Imagine if we started building cars that we couldn't drive without technological assistance to control them.
In fact we probably we have already. From power assisted brakes and the simple end of the spectrum, to the Prius' fly-by-wire throttle at the other, we're already moving determinedly down that path. Remember all the kerfuffle about the Prius' throttle jamming open? That doesn't augur well for a fully automated, self-driving car. Do we want the most efficient (high value, low cost) possible system that works 99.9% of the time, while risking calamity in the 0.1% of the time it fails?
Returning to a related theme, that's exactly what we've done with our food supply and our manufacturing supply chain. So the answer is probably "yes".
Thursday, July 4, 2013
Credit card metality
Credit cards, a fairly recent invention, provide us with enormous convenience at the point of purchase. But there are both proximate and distal by-products. First, as consumers the act of buying and the act of paying are now temporally separated and become distinct. We make a bunch of purchases without worrying much about paying for each individually, and then face the inevitability of paying for all of them (no picking and choosing now) later on.
This creates a sense of normality in this separation of buying and paying that carries over into the legislative process. Lawmakers are happy to vote for programs, for which they have not really felt any obligation to pay, at least for at the time they vote for the bill.
Its exacerbated in California by two thing; ballot initiatives and redistribution. The ballot initiative means that people with less skin in the game can impose their "buy now pay later" mentality on everyone else. And since in the process the 'who pays' it generally a larger number than 'who benefits', we have in effect redistribution. Calling the imposition of taxes on all Californians to pay for one tiny town's pet project - a turtle tunnel for example - the provision of a public good is stretching the concept. In all likelihood, most wouldn’t agree and so the 'public' who benefit isn't really what economist think of as 'the public' (i.e. everyone).
Of course the corollary is that only the lowest common denominator get funded, and that isn't really desirable either.
This creates a sense of normality in this separation of buying and paying that carries over into the legislative process. Lawmakers are happy to vote for programs, for which they have not really felt any obligation to pay, at least for at the time they vote for the bill.
Its exacerbated in California by two thing; ballot initiatives and redistribution. The ballot initiative means that people with less skin in the game can impose their "buy now pay later" mentality on everyone else. And since in the process the 'who pays' it generally a larger number than 'who benefits', we have in effect redistribution. Calling the imposition of taxes on all Californians to pay for one tiny town's pet project - a turtle tunnel for example - the provision of a public good is stretching the concept. In all likelihood, most wouldn’t agree and so the 'public' who benefit isn't really what economist think of as 'the public' (i.e. everyone).
Of course the corollary is that only the lowest common denominator get funded, and that isn't really desirable either.
Wednesday, July 3, 2013
Education and banking
When I was 15 my grandmother decided it was time I had a bank account. But in order to accomplish this, I had to put on a suit and tie and be interviewed by manager of the local branch of the Midland Bank to see if I was a suitable customer for one the the UK's most august institutions.In the 1960s and 70s one had a personal relationship with the branch manager.
Fast forward 40 years. Now it's off-share call centres, internet self service banking, telephone menu systems and literally no way to talk to the local branch manager on the phone; HSBC which bought Midland in the 1990s publishes only a central toll free number.
Unless that is, you are wealthy. If you're part of the 1% then you have a personal wealth manager,and tailored personal service.
Education is in danger to going the same way. John Henessy, Stanford's president has said:
“while the gold standard of small in-person classes led by great instructors...”
“…the gold standard is, by its nature, expensive. So it is, in my mind, the ideal educational opportunity for the really best students for the institutions
that can afford to provide that together with families. But it can’t be the entire solution given the cost of education in the U.S.”
“As a country we are simply trying to support too many universities. Nationally we may not be able to afford as many research institutions going forward.”
That looks to me like a two tier solution; small classes for the super rich, and MOOCs for everyone else.
That's not how I envision widespread access to quality higher education.
Fast forward 40 years. Now it's off-share call centres, internet self service banking, telephone menu systems and literally no way to talk to the local branch manager on the phone; HSBC which bought Midland in the 1990s publishes only a central toll free number.
Unless that is, you are wealthy. If you're part of the 1% then you have a personal wealth manager,and tailored personal service.
Education is in danger to going the same way. John Henessy, Stanford's president has said:
“while the gold standard of small in-person classes led by great instructors...”
“…the gold standard is, by its nature, expensive. So it is, in my mind, the ideal educational opportunity for the really best students for the institutions
that can afford to provide that together with families. But it can’t be the entire solution given the cost of education in the U.S.”
“As a country we are simply trying to support too many universities. Nationally we may not be able to afford as many research institutions going forward.”
That looks to me like a two tier solution; small classes for the super rich, and MOOCs for everyone else.
That's not how I envision widespread access to quality higher education.
Three cornered hat
One thing that should I think be borne in mind is that there are really three groups in contention (literally) in Egypt, rather than the two sided tug of war most of us are used to. Of course on the ground it's undoubtedly more nuanced than that, but three major blocks is the largest simplification possible; two is too few.
There is the secular opposition, there is the Brotherhood and then there is the old Mubarak establishment, including the army. That makes the picture more complicated than right vs. left, Suni vs. Shia, secular vs. religious. And that's before one considered the interests of external parties like the US...
We live in interesting times.
There is the secular opposition, there is the Brotherhood and then there is the old Mubarak establishment, including the army. That makes the picture more complicated than right vs. left, Suni vs. Shia, secular vs. religious. And that's before one considered the interests of external parties like the US...
We live in interesting times.
Coup d'etat
The army's leadership gave Morsi an ultimatum. He thought they were bluffing and called them: they weren't.
The road ahead is unclear; but two ugly possibilities loom. First, the army were fairly slow to relinquish power after the Arab Spring two years ago. For obvious reasons, they may be far slower this time round.
Second, the Muslim Brotherhood will have gotten the message that they can't hope to achieve their political aims though the ballot box and I'm certain will resort to violence. That will make returning to economic growth even harder.
The road ahead is unclear; but two ugly possibilities loom. First, the army were fairly slow to relinquish power after the Arab Spring two years ago. For obvious reasons, they may be far slower this time round.
Second, the Muslim Brotherhood will have gotten the message that they can't hope to achieve their political aims though the ballot box and I'm certain will resort to violence. That will make returning to economic growth even harder.
Monday, July 1, 2013
I didn't see that one coming.
The rebellion seems to be a coalescing of economic, secular and Mubarak establishment concerns. They are asking for a do-over of the election. It's a pity that the secularists, central to the Arab Spring that unseated Mubarak, couldn't have gotten their act together before last year's election; they made a pretty dismal showing. On the other hand, they may have - somewhat naively - believed Morsi when he promised not to turn Egypt into an Islamic state. They now risk coming across as spoilers who couldn't accept the results of the democratic process. The signal that sends is disastrous: "everyone needs to renounce violence and embrace democracy; except when we don't like the result".
Even the brightest future looks fairly grim. Morsi will be ousted, the generals plan will lead to an election probably next year, hopefully a more broadly representative government installed, and the constitution amended to purge of the religious extremists' power grab. But the unrest has turned from a debate about policy to one of faith and that's terrible news for any hopes of compromise. Having failed ultimately failed by peaceful means to get its way, the Brotherhood could well resort to violence and acts of terror to further its aims; that won't be good for Egypt, for the Middle East or the rest of the world.
Sunday, June 16, 2013
Gun Control
First, assault rifles aren't really the problem. The number of shootings in which these weapons are involved pales in comparison to the number involving regular semi-automatic handguns and revolvers. Assault rifles are much harder to conceal than handguns making them suited mainly to deranged (probably suicidal) lunatics. Yes it looks like the weapons carried by the military and law enforcement, but it's not fully automatic so it's still just a rifle. What is looks like, and why that matters, I will return to later.
Magazine capacity is more of an issue; when the shooter has to stop to replace an empty magazine, there is an opening to tackle (or more likely shoot) him (or her, though very rarely 'her'). The longer the shooter can continue his rampage without changing magazines the more people he will likely injure or kill. But a Glock 17 holds 17 rounds, and is quickly changed out for a fresh magazine. The left's mantra about banning assault rifles misses the point and undermines more serious proposals.
The the second issue, and the one nobody seems comfortable talking about is cultural. This morning, a woman was held up a knife point by an attacker who had managed to get into her car. She bravely tackled the assailant who fled. Then, according to ABC news and the local police 'Baker took matters into her own hands: "I didn't mean to run him over - I was just trying to stop him so he didn't hurt anybody else" she told reporters.
There are two thing here that give me pause. First, she ran the assailant over with her car. This could not possibly be construed as an accident. Doing so involved pointing the vehicle towards him, and pressing the accelerator. Had he died (and there was no way she could have know that he wouldn't), this would, in other circumstances, have been a case of vehicular manslaughter or second degree murder.
But more troubling still, and this points of the wider cultural issue, was the (female) anchor's comment at the end of the piece: "She made a lot of Texans proud, this morning. I like how she said 'she messed with the wrong witch' ".
There were a variety of courses of action Dorothy Baker might have taken after her attacker fled, other than pursuing him and then running him over. But apparently vigilante justice, old testament eye for and eye vengeance, is the one that anchors, and presumably by implication audiences, want to see. That seems to me to be a more fundamental problem than whether or not private citizens are allowed to own a rifle.
The commercial success of AR-15 style weapons owes something to good marketing; after all, owing a tool used by professionals is a tried and tested marketing message and works as well for guns as for power tools. But the other part of the wider issue is society's willingness to treat the marketing of guns as if they were no different than drills or diapers.
It seem to me that we don't have a gun problem; we have a gun-culture problem.
Wednesday, June 5, 2013
Scandals? What scandals?
Not sure whether it's just that I've not being paying close enough attention, but there does seem to be some bias in the media. Not the kind Fox "News" whines on about in its characteristically hypocritical way, but a fact free myopia, a propensity to chase after a shiny object; even when the object isn't actually shiny.
All the news channels have been talking about the three 'scandals' swirling about the current administration. What exactly makes them scandals - apart from the fact the the media likes a scandal and seems to have been taken for (another) ride by the politicians?
IRS
This is the most likely candidate for something that might qualify as a 'scandal', and a public inquiry to establish what went on is certainly in order. However, it is premature to suggest - as of course Fox routinely insinuates - that the White House ordered political targeting of right-wing groups. And there is another point the media (and many Democrats) seem to have forgotten, which is that it was the Republican money laundering machine spearheaded by Karl Rove that invented the shenanigans of exploiting 501c(3) 'social welfare' organizations as a means of hiding the names of their political fund raising donors. Have they all forgotten Stephen Colbert's ground-breaking exposé into the way in which the tax code can be misused for political ends? If I were looking for clues of this kind of abuse of the tax system, I'd start by looking for links to Karl Rove; which seems to me to be pretty much what the IRS did. For the 'outraged' right to suggest that the IRS be even handed is a bit like telling the police raid everyone's homes, even though only a few have bags in the yard label 'swag'. If it looks like a duck and quacks like a duck, that seems to be a good place to start duck hunting.
Subpoena of journalists' telephone records
Not clear to me how this is a 'scandal' when warrant-less wire tapping wasn't. At least a judicial process was followed. And the same hypocrites who exposed Valerie Plame's identity as an employee of the CIA for blatantly political ends, simultaneously defended Bush/Cheney's preposterous assertions of national security to cover their administrations political backsides, and cheered when leakers were vigorously pursued, are now saying that this administration is out of order for trying to prevent the press revealing information that could compromise national security? Why are we calling it a scandal? I fear it may be because Fox started banging the drum and the other outlets were afraid of being accused of bias for not getting on the band wagon. Of course it's interesting that journalists are upset when their phone records are legally obtained, but not when citizens phones are listened to without a warrant.
Benghazi
Since day one, this has never been a scandal. How it got that label is a remarkable testimony to Fox' and the House Republicans' ability to make something out of nothing for political gain. That Ambassador Christopher Stevens and three other people died is a tragedy. Stevens was new to the post and by all accounts doing a fantastic job reaching out to the Libyan people. But what makes this a scandal rather than a tragedy? When boiled down to their main themes, the accusations are:
1) That the State Department ignored information that a terrorist attack was in preparation (much like Bush, Cheney and Rice were ignorant of what was about to happen before 911), and did not provide adequate security for the Ambassador and his staff.
2) That the administration's military response, once the attack was underway, was inept and inadequate; this despite the fact the military top brass (whose pronouncements are taken as gospel by Fox "News" - that is until they no longer support Fox's political narrative) and the (Republican) Secretary of Defense all explained patiently that everything that could reasonably have been done in the circumstances was done.1
3) That there was a 'cover-up' after the event. The 'cover-up' is really about two things; the initial lack of information during and immediately after the attack, when the spontaneous protest explanation appeared plausible and the later attempts by the administration to avoid labeling the incident an act of terror. The allegedly scandalous point here is the latter; when it was becoming clearer that the attack was organized and premeditated, why did the administration ask Susan Rice to propagate spontaneous protest explanation? There seem to be two reasons: first, as the Republicans suggest, it was to avoid disrupting the Democratic narrative that they had been successful in the 'war on terror' symbolized in particular by the finding and killing of ABL. But as manipulative as this seems, those making the accusation should look in the mirror, since they too are spinning the truth for politic gain; and that, regrettably, is politics. The second explanation (and the two aren't mutually exclusive) is that this portrayal of events is consistent with this administration's efforts to avoid inflaming anti-American sentiment provoked by labeling every act of violence an act of terror. This stance (with which, not surprisingly, I agree) was re-articulated in the President's recent speech on use of UAVs (drones).
So, three not-really-scandals that the media has been complicit in keeping on the boil. That Fox "News" is up there I understand; but the so called serious media? Why are they drinking the cool-aid too?
1. In Britain many years ago, the knee-jerk reaction to activities the brainless right (a sub-class of the right) took exception to was "Nuke the bastards". I admit to being a little surprised not to hear that any more, at least no since' I've been living in the US. One explanation might be that the line is uttered only by those for whom it's really not a realistic option. When you do control a boat load of hydrogen bombs, and 'nuking the bastards' really is an option, it's no longer a joking matter.
All the news channels have been talking about the three 'scandals' swirling about the current administration. What exactly makes them scandals - apart from the fact the the media likes a scandal and seems to have been taken for (another) ride by the politicians?
IRS
This is the most likely candidate for something that might qualify as a 'scandal', and a public inquiry to establish what went on is certainly in order. However, it is premature to suggest - as of course Fox routinely insinuates - that the White House ordered political targeting of right-wing groups. And there is another point the media (and many Democrats) seem to have forgotten, which is that it was the Republican money laundering machine spearheaded by Karl Rove that invented the shenanigans of exploiting 501c(3) 'social welfare' organizations as a means of hiding the names of their political fund raising donors. Have they all forgotten Stephen Colbert's ground-breaking exposé into the way in which the tax code can be misused for political ends? If I were looking for clues of this kind of abuse of the tax system, I'd start by looking for links to Karl Rove; which seems to me to be pretty much what the IRS did. For the 'outraged' right to suggest that the IRS be even handed is a bit like telling the police raid everyone's homes, even though only a few have bags in the yard label 'swag'. If it looks like a duck and quacks like a duck, that seems to be a good place to start duck hunting.
Subpoena of journalists' telephone records
Not clear to me how this is a 'scandal' when warrant-less wire tapping wasn't. At least a judicial process was followed. And the same hypocrites who exposed Valerie Plame's identity as an employee of the CIA for blatantly political ends, simultaneously defended Bush/Cheney's preposterous assertions of national security to cover their administrations political backsides, and cheered when leakers were vigorously pursued, are now saying that this administration is out of order for trying to prevent the press revealing information that could compromise national security? Why are we calling it a scandal? I fear it may be because Fox started banging the drum and the other outlets were afraid of being accused of bias for not getting on the band wagon. Of course it's interesting that journalists are upset when their phone records are legally obtained, but not when citizens phones are listened to without a warrant.
Benghazi
Since day one, this has never been a scandal. How it got that label is a remarkable testimony to Fox' and the House Republicans' ability to make something out of nothing for political gain. That Ambassador Christopher Stevens and three other people died is a tragedy. Stevens was new to the post and by all accounts doing a fantastic job reaching out to the Libyan people. But what makes this a scandal rather than a tragedy? When boiled down to their main themes, the accusations are:
1) That the State Department ignored information that a terrorist attack was in preparation (much like Bush, Cheney and Rice were ignorant of what was about to happen before 911), and did not provide adequate security for the Ambassador and his staff.
2) That the administration's military response, once the attack was underway, was inept and inadequate; this despite the fact the military top brass (whose pronouncements are taken as gospel by Fox "News" - that is until they no longer support Fox's political narrative) and the (Republican) Secretary of Defense all explained patiently that everything that could reasonably have been done in the circumstances was done.1
3) That there was a 'cover-up' after the event. The 'cover-up' is really about two things; the initial lack of information during and immediately after the attack, when the spontaneous protest explanation appeared plausible and the later attempts by the administration to avoid labeling the incident an act of terror. The allegedly scandalous point here is the latter; when it was becoming clearer that the attack was organized and premeditated, why did the administration ask Susan Rice to propagate spontaneous protest explanation? There seem to be two reasons: first, as the Republicans suggest, it was to avoid disrupting the Democratic narrative that they had been successful in the 'war on terror' symbolized in particular by the finding and killing of ABL. But as manipulative as this seems, those making the accusation should look in the mirror, since they too are spinning the truth for politic gain; and that, regrettably, is politics. The second explanation (and the two aren't mutually exclusive) is that this portrayal of events is consistent with this administration's efforts to avoid inflaming anti-American sentiment provoked by labeling every act of violence an act of terror. This stance (with which, not surprisingly, I agree) was re-articulated in the President's recent speech on use of UAVs (drones).
So, three not-really-scandals that the media has been complicit in keeping on the boil. That Fox "News" is up there I understand; but the so called serious media? Why are they drinking the cool-aid too?
1. In Britain many years ago, the knee-jerk reaction to activities the brainless right (a sub-class of the right) took exception to was "Nuke the bastards". I admit to being a little surprised not to hear that any more, at least no since' I've been living in the US. One explanation might be that the line is uttered only by those for whom it's really not a realistic option. When you do control a boat load of hydrogen bombs, and 'nuking the bastards' really is an option, it's no longer a joking matter.
Saturday, May 25, 2013
edX's Innovative Business Model (Analogy #2)
In this Chronicle of Higher Ed piece, Anant Agarwal explained the two flavors of edX' business model. In the 'supported' model the client institutions pays $250k up front and then 30% of all student fees for the course over that amount. In the second, the 'self-service' model the upfront fee is $50k with the client institution surrendering 50% of all student fees beyond that.
Imagine that model in the context of the textbook publishing industry.
McGraw Hill owns the rights to a well know text such as Hill & Jones "Strategic Management". It decides to sell "Strategic Management" to universities liek SJSU. It charges half the initial cost of developing the book (any one-time fees to author, focus groups, reviewers stipends, any other fixed fees to copy editors, etc) and then takes 30% of gross sales thereafter. Or on a chapter by chapter basis, charging 10% of the books development cost, and then taking 50% of grow sales for each chapter used.
Now that's a deal most publishing companies would love to get.
Imagine that model in the context of the textbook publishing industry.
McGraw Hill owns the rights to a well know text such as Hill & Jones "Strategic Management". It decides to sell "Strategic Management" to universities liek SJSU. It charges half the initial cost of developing the book (any one-time fees to author, focus groups, reviewers stipends, any other fixed fees to copy editors, etc) and then takes 30% of gross sales thereafter. Or on a chapter by chapter basis, charging 10% of the books development cost, and then taking 50% of grow sales for each chapter used.
Now that's a deal most publishing companies would love to get.
edX's Innovative Business Model (Analogy #1)
In this Chronicle of Higher Ed piece, Anant Agarwal explained the two flavors of edX' business model. In the 'supported' model the client institutions pays $250k up front and then 30% of all student fees for the course over that amount. In the second, the 'self-service' model the upfront fee is $50k with the client institution surrendering 50% of all student fees beyond that.
Imagine that model in the context of the music industry.
EMI owns the rights to a well know band like Pink Floyd. It decides to sell "Dark Side of the Moon" (1973) to stores like Amazon or WalMart. It charges them half the initial cost of making the album (cost of the studio time, fixed fees to the engineers and producers, etc) and then takes 30% of gross sales thereafter. Or on a track by track basis, charging 10% of the album's initial recording cost, and then taking 50% of grow sales for each track sold.
Now that's a deal most recording companies would love to get.
Imagine that model in the context of the music industry.
EMI owns the rights to a well know band like Pink Floyd. It decides to sell "Dark Side of the Moon" (1973) to stores like Amazon or WalMart. It charges them half the initial cost of making the album (cost of the studio time, fixed fees to the engineers and producers, etc) and then takes 30% of gross sales thereafter. Or on a track by track basis, charging 10% of the album's initial recording cost, and then taking 50% of grow sales for each track sold.
Now that's a deal most recording companies would love to get.
Wednesday, May 22, 2013
Apple's Cook
Tim Cook testified before Congress today to explain Apple's aggressive use of the 'opportunities' created by inconsistencies between different countries' tax codes to avoid paying US federal taxes. Much as Mitt Romney did before the election, he claimed that it would be irresponsible for Apple not to exploit them. But he also maintained that Apple "liked simple" which these arrangement were patently not, and that it hadn't contravened either the letter of the law (quite probably true) nor the spirit of the law (a patently absurd claim, since this implies that Congress intended for tax law to afford corporations the opportunity to pay less federal income tax).
Of course, it is conceivable that the lobbyists and the proposers of tax legislation did indeed intend for the tax code to leave more money in corporate coffers while appearing, for the purposes of public relations, to do the opposite.
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