Processing the U.S Election

Like a lot of people, I’m still trying to process the U.S. presidential election results and understand what it means for the future. Writing this is part of that process.

Before delving into the results and how they were achieved, I want to make it clear that I’m not a big fan of Hillary Clinton. While she certainly represented less risk than Donald Trump, that reduced risk comes from more of the same which clearly isn’t working well for a part of the U.S. population. I’m quite sympathetic to the idea that a non-politician or Washington outsider is required to change how things are done. Read Republic Lost for some insight into how things now are very broken.

Additionally, I very strongly dislike the trend towards recurring political families. Hereditary privilege is a cancer in all forms – the world moved forward when we removed ruling families. This trend also smacks of cronyism and the power of brand over substance. In Canada, we’ve seen this trend with the election of Justin Trudeau, the son of a Prime Minister from 32 years ago. In the last federal election, I very seriously considered not voting for the Liberal Party despite my general support of their policies just because of the stink of a new class of ‘ruling families’.

When reading the rest of this, please understand that it doesn’t come from a place of being angry or sad that Hillary Clinton lost.

It seems that there were three high level concerns, desires or ideas that drove the election’s outcome:

  1. A general dislike for Hillary Clinton. I don’t know how much of this is sexism or the result of years of anti-Clinton messaging. I’m not going to say anything else about this.
  2. Enormous, and legitimate, dissatisfaction from the middle to low-end of the economic spectrum. Globalism and technological change have left these people behind.
  3. Racism. Both real and as a scapegoat for #2.

I don’t know the ratio to which these three ideas affected the outcome. 33-33-33? 10-45-45? To whatever extent the reason was #1, it is not a long term problem. Hillary Clinton won’t run next time. #2 and #3 are real, structural problems that present a risk to the future.

It is very clear that some part of the Trump vote was driven by pure racism. It’s hardly a representative sample but it is unreasonable to say that racism played no role given some of the incidents that have happened in the last few days:

It’s impossible to rationalize with or about this kind of hate and irrational behavior. I’m not going to even try other than to say it makes me sad and angry that there are still human beings alive in 2016 that feel this type of behavior is acceptable.

What scares me, is the interplay between #2 and #3.

I do believe there is a legitimate case to make that the low-skilled and uneducated (not lazy, not unintelligent) worker has a right to be angry. Globalism has moved jobs to other countries with lower employment standards and technology has contributed to fewer low skilled jobs even when the manufacturing remains in rich countries. Canada faces a very similar problem. In Ontario, the country’s equivalent of the rust belt, hundreds of thousands of good paying manufacturing jobs have disappeared. The small town and city I grew up near have experienced this and I fear that they are, in part, still surviving on the wages earned and homes bought many years ago. [In these particular cases, the in-flux of retired farmers who were able to do very well on increased land values has also reduced the effects of fewer manufacturing jobs] Despite the loss in high paying manufacturing jobs, it does seem that the effect on the population in Ontario has been less severe than in the U.S. – I’ll get back to that later.

Let’s assume for a minute that racism played no role in Trump winning the election and that these disaffected workers voted to get good jobs back. That, indeed, is a big part of what Trump focused on and promised to do. He promised to accomplish this by renegotiating NAFTA, by labeling China a currency manipulator and by applying tariffs to imported products.

The problem is that none of this will work – certainly not in a time frame that will matter to his presidency.

Even if these measures are successful in motivating companies to move production back to the U.S. these types of changes take years, maybe decades. Think through the time line:

  • Policy and law changes such as tariffs or renegotiating NAFTA make it more profitable to build products in the U.S. At best, these changes make it into law in one year.
  • Once these changes are in effect, companies start seeing changes to their bottom line and this motivates thinking about changing where they build products. It will take a year for this to really hit most companies (yearly results). Some companies may feel the impact in a quarter or two. So realistically, most companies won’t start thinking about making changes until 6 months to a year after the impact starts.
  • Presumably, the changes make it more profitable to manufacture in the U.S. Now the company needs to balance the loss in profit against the cost of building new manufacturing plants. To simplify, let’s say the law changes make it $1000 cheaper to build a car in the U.S. and the cost to build a new assembly plant is $1B. This means 1M cars can be built at the existing plant before the bottom line impact makes it a good business decision to build a new plant. Let’s call this 2 years.
  • Once the decision is made to build a new plant, it takes years to plan and build a large manufacturing plant. Free land has to be located and a new supply chain created. 5 years?

Add that up – it’s nearly a decade. Just like it took decades for manufacturing to move out of the U.S., for practical reasons, it will take decades for it to move back even if the financial incentives are in-place.

The march of technology must also be considered. Modern manufacturing takes much few employees than it used to. Any newly created U.S. manufacturing capacity will need fewer people than the plants currently operating in other countries because these new plants will have the latest technology. In a perfect world where the incentives align to drive all the lost manufacturing back to the U.S., far fewer people will get good jobs out of this than the jobs that have been lost.

And the loss of jobs for low skilled workers is only going to get worse. Consider the effect that just one new technology, self driving vehicles is going to have. There are roughly 3.5 million professional truck drivers and 233K taxi cab drivers in the U.S. As for profit businesses, I believe these sectors are going to aggressively switch to self-driving vehicles as soon as the business case makes sense. To do not do so will put the laggards out of business. Additionally, a transportation company doesn’t have a sentimental attachment or ‘like’ driving the way consumers do.

So, policy changes cannot drive manufacturing jobs back to the U.S. in a time horizon that benefits an 8-year Trump presidency. And what manufacturing is incentivized back to the U.S. will employ far fewer people than it did when it left. Technological advancements are about to put new groups of workers into the same situation as workers from the manufacturing sector. Finally, new manufacturing capacity is unlikely to be built in the northern areas where it previously existed because the plants that moved to the southern U.S. already pay much less than the northern, unionized plants they replaced.

In summary, there is no chance of Trump keeping his promise to return good, high paying jobs to the justifiably angry people he committed to.

This is where I get scared and it involves the interplay with #3 – Racism.

When Trump fails to deliver relief to the people who cried out for change by voting for him, these people are going to be angry. The confidence in the institutions that hold society together will be further undermined and someone, something or some group will be the scapegoat. I don’t know if Trump himself will blame ‘the liberals’, or foreign governments, or the Republican establishment that loves trade, or the immigrants – but someone will. And given that racism was used by Trump to stir up the support that won him the presidency, I believe there is a good chance it will also be the driving factor in which group gets will be the scapegoat. Fear of the ‘other’ is something that just comes to our species too easily.

What could bring relief to the people affected negatively by globalism and technological change? Sadly, it’s pretty much the opposite of what Trump has promised and the affected people bought into.

Trump has promised huge tax cuts and changes to school systems. Let’s take each of those in turn. Less tax revenue means fewer resources for the government to effectively help these people. This will reduce what little social safety net the U.S. does have and put people in even more desperate situations. On the school front, allowing ‘choice’ sounds like a common sense thing to do but the only people who have the ability to make choices on where their children go to school are the reasonably well off. Choice in this context means more movement of wealthier students to better schools which will further reduce the attention, quality and funding for the children who need it the most to get out of the hole their parent’s find themselves in for no fault of their own.

I mentioned earlier that Ontario, Canada’s rust belt equivalent, has also experienced a decimation of manufacturing jobs. However, the impact here has been much less dramatic and I think it points in the direction of a solution to the problems at hand [1].

Canada has a free public health system. Manufacturing workers who have lost their jobs aren’t watching their friends and families lose their homes to high medical bills or worrying that it could be them next. They may not be happy that they aren’t making high union wages anymore but that’s a far better situation than being on the street.

Secondly, Ontario has a great K-12 public school system (#4 on that report vs. U.S. at 23) and great Universities which are much more affordable than their U.S. equivalents. Yes, it’s expensive to run a strong public school system. Ontario’s teachers are among the highest paid in the OECD. As a taxpayer who could easily afford to send my children to private school if I wanted to, I have no problems paying for this level of public education. In general, I believe private schools to be a net negative on society. Taking the wealthy people who have the time and money to influence politics out of the public school system results in less time and money going into the public school system. It’s a death spiral.

Public health care, good public education and other social safety nets mean that not all hope is lost for manufacturing workers who have lost their high paying jobs. If they weren’t over extended, lower paying service jobs can continue to pay the mortgage and losing health insurance isn’t a concern either. At the same time, they don’t feel like their children are stuck in the same situation. Their children can get a good K-12 education and even a good college or university education on a much lower family income.

Believing that your children will have it better than you is a powerful motivator. It’s enough that while the affected people are not happy about no longer being able to afford a cottage or boat, they aren’t crying for a revolution or looking for scapegoats either.

In summary, the U.S. now has:

This is a slow burning wick on the way to a powder keg. It’s scary.

[1] – Please don’t read this as a Canada vs. U.S. thing. We have lots of our own problems but it’s insane not to look around the world to see how other countries are dealing with this problem.

Social network privacy settings

From How to Lose Your Job on Your Own Time:

Personal disclosure is the norm on social networking sites. But the Pew study included an unexpected finding: Teenagers have the most sophisticated understanding of privacy controls on these sites, and they are far less likely than adults to permit their profiles to be visible to anyone and everyone.

If you are a teenager, restricting public access to your profile has the nice effect of restricting your parents access to your social network data. I suspect lots of teenagers have pictures from parties and other activities that they don’t want their parents to see. This makes me wonder how much the use of privacy controls by teenagers has to do with a desire for more privacy in a general sense versus hiding from mom and dad.

Teenagers are also much more under the control of other authority figures than most adults are. Teachers are a good example of this situation. It is dangerous to speak negatively about your teacher when there is no way to know that they are not following your online activities.

Monitoring how these same teenagers change their privacy settings as they mature and become more independent would be a very interesting study.

Pinker on violence

Yesterday Andrew posted an entry about a TED presentation called A brief history of violence by Steven Pinker. Take a look at his post and watch the video. The video is only 20 minutes long. In short, the presentation offers data that refutes the idea that the human race was more peaceful in the past.

At around the 9:50 mark Pinker mentions that people link the ease by which a specific incident of something can be recalled with the perceived probability that it will occur. For many years I have avoided watching local newscasts for exactly this reason. When half of the newscast talks about car crashes and the other half talks about bad things happening at local schools one can’t help but think that car travel is very dangerous and that there are ‘bad’ people everywhere.

The right to attach

Hooking up by Tim Wu presents an idea on how to increase the competition around wireless (cellular) devices.

The firms already control what phones or devices reach Americans; 95% of cell phones are sold by the wireless carriers themselves. They strictly control phone design, blocking features that might threaten their revenue, like timers that keep track of how many minutes you’ve used each month.

The right to attach is a simple concept, and it has worked powerfully in other markets. For example, in the wired telephone world Carterfone rules are what made it possible to market answering machines, fax machines and the modems that sparked the Internet revolution.

A couple of books

Picture of booksI recently finished reading a couple of books which I think are worth pointing out to others.

The first is The World Is Flat: A brief history of the twenty-first century by Thomas L. Friedman. At 571 pages this a relatively long book. The first two hundred and thirty pages explain what the author means by “the world is flat” and describe the “ten forces that flattened the world”. The basic idea is that modern telecommunications and economic liberation has brought people all over the world closer together than ever before. On the surface this is a pretty obvious observation but the true impact of it only becomes apparent with deeper investigation. The author spent a great deal of time interviewing people in both developing and established economies in an attempt to understand the effects of these changes. The topics discussed range from software outsourcing to India to Walmart’s global supply chain. Subsequent chapters discuss the role of individuals, companies and countries in a flat world. In a way the world as outlined in this book is scary, especially if you are a knowledge worker but this book is as much about the opportunities created in a flat world as it is the negative consequences. A lot of time is spent describing what types of jobs are not as prone to flat world competition and more importantly, describing the key attributes required for success in those jobs that will face new competition. This is perhaps one of the more enlightening aspects of the book. In short, The World Is Flat covers something that is changing the world at a pace much faster than most people are aware of. If you have or are planning a knowledge based career you owe it to yourself to read this book. Even if you have a job that does not lend itself to global competition read the book anyway. On a final note I have a renewed appreciation for the importance of the education system to the continued economic success and growth of society.

The second book I want to talk about is On Intelligence by Jeff Hawkins. Hawkins is a very successful technology entrepreneur who has a long standing obsession with figuring out how the human brain works. This is not a book about biology although biology does necessarily creep in at some points. The goal of On Intelligence is to put forward a model of how the brain works and what intelligence is. The first portion describes some of the traditional techniques associated with artificial intelligence such as neural nets and offers an opinion on why these approaches failed. Later chapters discuss the role of memory and go on to explain that memory and prediction form the core of intelligence. Perhaps the most interesting aspect of the book is the idea that there is a single ‘cortical algorithm’ which is used by the brain for such diverse tasks as vision processing and locomotion. This is a very interesting read and at only two hundred and thirty-five pages it doesn’t take long.

Starting at the top

Hello, Young Workers: One Way to Reach the Top Is to Start There

Lost in the argument over whether young people today know how to work, however, is the mounting evidence produced by labor economists of just how important it is for current graduates to ignore the old-school advice of trying to get ahead by working one’s way up the ladder. Instead, it seems, graduates should try to do exactly the thing the older generation bemoans — aim for the top.

The recent evidence shows quite clearly that in today’s economy starting at the bottom is a recipe for being underpaid for a long time to come. Graduates’ first jobs have an inordinate impact on their career path and their “future income stream,” as economists refer to a person’s earnings over a lifetime.

Network neutrality: Where analogies fail

I find it interesting that so much of the discussion surrounding net neutrality centers around analogies to other aspects of the modern world. A lot of these analogies are related to the transportation of goods. Courier companies such as UPS and Fedex as well as the highway network in general are the most common examples. In one of the first articles on net neutrality, Saving the Net, Doc Searls argues that the transport analogy is a major impediment to the pro-neutrality side and offers a competing analogy. This post is not about which analogy is better, it is about the problems which occur when using any analogy to discuss a complex topic.

It is easy to understand why people use analogies to discuss complex topics like net neutrality. By allowing knowledge and understanding from one area to be applied to something new, analogies are essentially a way of simplifying the world. Like any simplification, there is always some detail lost.

Analogy is a poor tool for reasoning, but a good analogy can be very effective in developing intuition.
— Barbara Simons and Jim Horning
(Communications of the ACM, Sept 2005, Inside Risks)

The very fact that analogies apply old information to new situations should give us pause in using analogy as a reasoning tool.

To see an example of this problem one only needs to examine what is perhaps the most common analogy used by the anti-neutrality folks. The analogy in question relates to the fact that UPS and other courier companies offer high priority service (overnight) as well as normal service without the negative consequences the pro-neutrality crowd fears.

In order for a courier company to begin to offer overnight package delivery, the company must add new capacity to its delivery operations. For example, a company that ships packages by truck will need to add aircraft to its operations to support cross-continent overnight delivery. Once these aircraft are in place it does not make economic sense to fly them lightly loaded. Instead, the courier company will begin to fill the remainder of the space in the planes with lower priority packages. This has the benefit of reducing the courier’s costs by reducing the number of trucks that are necessary. There is also another unintentional benefit. Although some customers have not paid for overnight delivery, the additional high speed capacity greatly increases the chance they will get that level of service anyway. As the volume of high priority packages grows, the courier’s overall operations must also grow in high priority capacity.

Compare the above situation to packet prioritization on the Internet. Unlike the courier company example, adding a high priority service does not require that the bandwidth provider add new capacity to its operations. There is no way to make light go faster. Packet prioritization simply gives the marked packets first crack at the existing capacity. Assuming the network is properly provisioned (not heavily loaded) the difference in service quality between high and low priority packets is very low, probably unnoticeable.

There is also the issue of reverse economic incentives. In order for customers who are paying for high priority service to notice an improvement the network must be congested. This creates the strange situation where allowing the network to become congested (not upgrading) could result in more customers paying for high priority service and thus increasing the bandwidth provider’s profits.

[Before anyone complains, I realize there are other aspects to network QoS such as number of hops in a path etc. I am not attempting to explain all aspects of network operations.]

On the surface, the analogy between high priority package shipment and high priority packet delivery seems like a good one. Upon closer examination, simple physical limitations show these two worlds to have very different operational characteristics and completely opposite unintentional side effects.

The point of this post is not to argue about the exact details of packet forwarding or courier company operations. The point is that centering the discussion about complex topics like network neutrality around analogies to other systems is foolish. The lost detail results in uninformed decisions.

Network neutrality: The cell network

From Newsforge, Today’s cell phone system argues for retaining network neutrality.

Consider the closed, anti-innovation system that is the cell phone network. Do you want the Internet to be like that? Is that best solution for the rest of the economy and society in general?

James Glass (not his real name) is the owner of a company currently trying to navigate the minefield of running a third-party service on the cell phone networks. He is writing the article pseudonymously because the cell phone companies have the power and freedom to crush his company by blocking it from their networks.