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  • Archive for the 'Business' Category

    Robots of the Week: Replacing Cashiers in Grocery Stores and Cafeterias

    Posted by David Foster on 22nd July 2017 (All posts by )

    Eliminating checkout lines via automatic object recognition: IMAGR and Mashgin.

    (Technically, these are artificial intelligence systems but probably shouldn’t really count as ‘robots’ since they respond to the physical world but don’t manipulate it)

    Posted in Business, Tech | 11 Comments »

    Summer Re-run: Granny Clarke

    Posted by Sgt. Mom on 10th July 2017 (All posts by )

    (A summer rerun from my other blog – a diverting reminiscence of California and Old Hollywood)

    Granny Clarke was the mother of my mothers’ dearest friend from the time that JP, my next-youngest brother and I were small children, before my sister Pippy was born, and my parents were living in a tiny rented cottage in the hills part of Beverly Hills – a house on a dirt road, with the surrounding area abundant in nothing much else but chaparral, eucalypts and rattlesnakes. Mom and her friend, who was eventually of such closeness that we called her “Auntie Mary” met when Mom began to attend services at a Lutheran congregation in West Hollywood, rather than endure the long drive to Pasadena and the ancestral congregation at Trinity Lutheran in Pasadena.
    Auntie Mary Hammond was a little older than Mom, with four sons, each more strapping than the other, in spite of Auntie Mary’s wistful hopes for one of them to have been a girl. The oldest were teenagers, the youngest slightly younger than JP . . . although Paulie was as large and boisterous as his older brothers and appeared to be more my contemporary. They lived all together with Auntie Mary Hammonds’ mother, Granny Clarke, in a townhouse in West Hollywood, an intriguing house built on a steeply sloping street, up a flight of stairs from the concrete sidewalk, with only a tiny garden at one side, and the constant background noise and bustle of the city all around, not the quiet wilderness of the hills, which JP and I were more used to. But there was one thing we had in common with Paulie and his brothers— an immigrant grandparent with a curious accent and a long career in domestic service in Southern California.
    Read the rest of this entry »

    Posted in Business, Customer Service, Film, History, Personal Narrative | 7 Comments »

    Why Does This Happen?

    Posted by Jonathan on 6th July 2017 (All posts by )

    Skype used to be the premier VOIP app (long before we called such things apps). It always had a crummy user interface but call quality was excellent and users put up with the rough edges. However, since Microsoft bought Skype call quality has declined, seemingly steadily. There are frequent software updates that don’t improve the user experience and sometimes introduce new problems. With its Skype updates on Windows MSFT forces you to opt out a la Java from having your browser configuration hijacked. Calls get dropped more than they used to. Calls that don’t go through are much more frequent. Bandwidth now seems to affect call quality even though it was once possible to use Skype easily over dialup Internet connections.

    This morning I tried to make a Skype call on my mobile and found there had been another upgrade, forcing me to waste minutes selecting a new background color and dismissing what’s-new pages and trying to find my contacts list, which is all I ever want to do. I don’t want to invite my contacts to use Skype, I don’t care about inserting GIFs into chats, I don’t care about the Skype community. I care about good, consistent call quality, about having my list of phone numbers propagate automatically to laptop or phone when I update the list, about having a Skype number for incoming calls, and about easy management of occasional conferences and international calls. I used to care about video calling but I gave up since good alternatives appeared. If Skype could restore its past high call quality I could happily put up with the other hassles. If Skype could also improve its UI in a few obvious ways I would be thrilled. It never happens. Why not?

    A company with a great product conspicuously fails to improve that product and it starts to lag competing products. Or a big company buys a small company and ruins its main product. MSFT’s management is no doubt part of the problem here but the pattern is familiar. Why is it familiar? You might think the smart people running MSFT would know better. Perhaps they don’t, perhaps this is a more difficult problem than it appears to be. Or perhaps something else is going on.

    Discuss.

    Posted in Business, Management, Organizational Analysis, Tech | 20 Comments »

    Summer Rerun: Selling New Concepts can be Challenging

    Posted by David Foster on 6th July 2017 (All posts by )

    Via Maggie’s Farm, here’s a Bob Newhart skit from 1970. Bob plays the role of an 1890s-style venture capitalist, talking on the phone with inventor Herman Hollerith, who is trying to explain the merits of punched card technology.

    LINK

    Related: Father, Son & Co., the biography of long-time IBM CEO Thomas Watson Jr, is the best business autobiography I’ve read. I reviewed it here.

    Posted in Advertising, Book Notes, Business, History, Media, Tech | 1 Comment »

    Summer Rerun: Leaving (Several Trillion) on the Table

    Posted by David Foster on 22nd June 2017 (All posts by )

    (Over at Ricochet, James Pethokoukis has a post/thread on French president Macron’s call for American scientists and engineers to move to France.  In comments, someone asked John Walker (cofounder of Autodesk) whether Macron could lure him to France “as part of a Silicon Valley Rhone or Loire?”  Walker’s response is also in the comments.  Also, this post from 2006/2009 about some earlier efforts at top-down technology-industry planning in Europe seemed relevant, so I linked it there as well.)

    The invention of the transistor was an event of tremendous economic importance. Although there was already a substantial electronics industry, based on the vacuum tube, the transistor gave the field a powerful shot of adrenaline and brought about the creation of vast amounts of new wealth.

    As almost everyone knows, the transistor was invented by John Bardeen, Walter Brattain, and William Shockley, all researchers at Bell Laboratories, in 1946. But a recent article in Spectrum suggests that the true history of the transistor is more complex…and interesting not only from the standpoint of the history of technology, but also from the standpoint of economic policy.

    The story begins in Germany, during World War II. Owing to short-sighted decisions by the Nazi leadership, Germany’s position in radar technology had fallen behind the capabilities of Britain and of the United States. (Reacting to the prospect of airborne radar, Herman Goering had said “My pilots do not need a cinema on board!”)

    But by 1943, even the dullest Nazi could see the advantages that the Allies were obtaining from radar. In February of that year, Goering ordered an intensification of radar research efforts. One of the scientists assigned to radar research was Herbert Matare, who had been an electronics experimenter as a teenager and had gone on the earn a doctorate.

    A key issue in military radar was the need for shorter wavelengths–which allowed for better target resolution (such as the ability to pick up the periscope of a submerged submarine) and also facilitated the miniaturization of radar equipment. Vacuum tube diodes (diode: a device that allows electricity to travel only in one direction) did not work well at these wavelengths, because the distance between the electrodes in the tube was too large. Matare was working with an alternative: crystal rectifiers similar to those he had tinkered with as a teenager.

    In the course of this work, he noticed that when configured in a certain way, a device made of germanium could do more that provide a one-way gate: it could amplify. A small signal could control a more powerful current. In principle, the vacuum tube–fragile, bulky, power-hungry, and hot-running–could be replaced with devices of this type.

    Focused on his war work, Matare did not have time to pursue the possibilities of his invention. (And very fortunately, he and his colleagues in German science and industry never came close to matching the Allied achievements in radar.) After the war, Matare moved to Paris and went to work for a Westinghouse subsidiary, Compagnie des Freins et Signaux Westinghouse. There he met Heinrich Welker, another German, a theoretical physicist who, remarkably, had also developed a transistor-like device, and the two men began working together on understanding the technology and its potential. After they began obtaining consistent results, in 1948, they contacted the director of the PTT, the French government agency responsible for posts and telecommunications. He was too busy to come by for a demonstration. But after the announcement of the transistor by Bell Labs in July of that year, there was a sudden upsurge of interest in the Welker/Heinrich project, and the PTT minister found time to visit the lab. He urged them to apply for a French patent on the device and also suggested that they call it by a slightly different name: the transistron. By 1949, the device was in limited commercial use: first as an amplifier on the Paris-Limoges telephone line, and later on the lines running from France to Algiers.

    The Spectrum article tells what happened next: not much. But the French government and Westinghouse failed to capitalize on the technical advantages in semiconductors that they then appeared to have. After Hiroshima, nuclear physics had emerged as the dominant scientific discipline in the public mind, and nuclear power was widely heralded as the wave of the future. France became enchanted with pursuing the nuclear genie unbottled in the 1940s, while ignorant of its promising transistron.

    Read the rest of this entry »

    Posted in Big Government, Business, Europe, France, Germany, Tech, USA | 4 Comments »

    The Apprentices

    Posted by David Foster on 17th June 2017 (All posts by )

    If anyone would like to discuss President Trump’s proposal for an expanded role for apprenticeship programs in America…and related broader issues of workforce training and skills development…this is the place.  Some useful links:

    Trump’s remarks on signing the executive order

    Text of the executive order

    Comments by Ivanka Trump and Labor Secretary Alex Acosta

    Existing Federal regulations re apprenticeship programs

    (There are also state regulations)

    Thoughts?

    Posted in Business, Economics & Finance, Trump, USA | 12 Comments »

    Patterns of Prejudice in Legal-Industry Hiring

    Posted by David Foster on 12th June 2017 (All posts by )

    In a study summarized here, two sociologists sent 316 law firms résumés with identical and impressive work and academic credentials, but different cues about social class. The study found that men who fit a profile identified by the researchers as “upper-class origins”…by listing hobbies like sailing and listening to classical music had a callback rate 12 times higher than those of men who signaled working-class origins, for example by mentioning country music and track and field sports.

    For comparison, the callback ratio between those profiled as “upper class men” versus “upper class women” was 4X.  Yet “lower class women” received callbacks at almost 5X the rate of “lower class men,” and at 1.6X the rate of “upper class women”!

    I’m not sure the metric used by the researchers really distinguishes economic class…there are a lot of very-well-off people who like country music…but rather some class archetype that exists in the minds of some people, evidently including those people involved in hiring at the subject law firms.  (I also wonder how many of these law firm people actually listen to classical music on any kind of basis, rather than just using it for an “our sort of person” filter)  It seems to me that regional/geographical prejudice (against southerners and rural people) and ethnic prejudice (against people of Scots-Irish background) are influencing these hiring decision-makers.

    Here are links for the abstract of the study, a presentation that summarizes the results,  and the complete paper.

    Posted in Business, Law, Management, USA | 29 Comments »

    The Internet Rewards Crazy (Rerun)

    Posted by Jonathan on 20th May 2017 (All posts by )

    (This is a reposting of a post from five years ago. I think it holds up pretty well. The Internet seems to be changing human society in significant ways which are not yet entirely clear. Perhaps the nature of what is happening will become a topic of systematic research.)

    —-

    Crazy, overconfident; the opposite of the judicious, scientific, skeptical temperament.

    Extreme opinions.

    Stubborn.

    Bombastic.

    The opposite of thoughtful.

    Read the rest of this entry »

    Posted in Business, Human Behavior, Internet, Society, Systems Analysis | 13 Comments »

    Worthwhile Reading – Science and Technology Edition

    Posted by David Foster on 15th May 2017 (All posts by )

    It seems that octopuses have the ability to edit their RNA dynamically.

    An interesting piece on FDA regulation and medical device innovation.

    Zymergen has automated part of the drug discovery process via a combination of robotics and machine learning.

    Was big data analytics (more specifically, excess faith in same) a major cause of Hillary Clinton’s electoral loss?

    Is there an artificial intelligence misinformation epidemic?

    Cotton spinning – a quintessential technology of the Industrial Revolution – returns to England.

    But to what degree will spinning, as well as weaving, cutting, and sewing, be replaced by 3d printing of clothing?

    James L Taylor Manufacturing, a 106-year-old company making clamps and other woodworking tools sold to producers of furniture, flooring, and cabinets, recently introduced a robotic nester…it replaces the work of a human nester who “snatches boards coming off a conveyer belt in random lengths, hastily rearranges them so that each row of one to five pieces is so long, and bundles the rows into a stack.” One mill in Mississippi placed an urgent order for 3 of these (at $115K each) with the explanation: “I have eight nesters and four of them just called in sick.”

    What is especially interesting about this is that the robotics system was not developed by hiring consultants from MIT or Silicon Valley; the company’s chief engineer (also part-owner of the company) designed the machine himself and wrote the 7000 lines of C++ code to run it.  Reminds me of the cucumber sorting machine developed by a Japanese guy to help out on his parents’ cucumber farm..although that system was developed for the family’s own use rather than as a saleable product as with the robotic nester.

    Posted in Business, Entrepreneurship, Health Care, Medicine, Tech | 6 Comments »

    Worthwhile Reading

    Posted by David Foster on 4th May 2017 (All posts by )

    Roger Simon:  Will Fascism come to America through its colleges and universities?

    Case in point:  Brooklyn College

    Also from Roger Simon:  Roots of Liberal/Progressive Rage

    Joel Hirsch:  The Gulag and the Islamists

    In 1711, the Spectator had some positive things to say about merchants–not a common opinion among the smart set in that place and time.  (Original article here.)

    Thoughts about the archetype of the American farm boy and the present-day hostility of elitist ‘progressives’ toward people who fit this archetype:

    Then it hit me. The new American myth, carefully constructed by the SJWs and their ilk, is that farmers are stupid. Mechanics are dumb. Plumbers only ply their trade because they are too stupid to take gender studies courses. And since they are all idiots, of course their children must be idiots too. Indeed, they are all far too stupid to be permitted a say in how their own lives are run.

    Related to the above:  The roots of campus progressivism’s madness

    Posted in Academia, Business, Civil Liberties, Civil Society, Islam, Leftism, USA | 20 Comments »

    Worthwhile Visiting

    Posted by David Foster on 15th April 2017 (All posts by )

    The National Museum of Industrial History is located on the site of the former Bethlehem Steel complex.  Most of the original buildings are derelict or partly torn-down, but the above array of blast furnaces and supporting equipment has been preserved.

    Suggested musical accompaniment for a visit to the place that was Bethlehem Steel…features a different company and a slightly different geography, but basically the same sad story.

    Posted in Business, Capitalism, History, Management, Tech, Unions, USA | 16 Comments »

    How to Sell NCR Cash Registers in 1917

    Posted by David Foster on 9th April 2017 (All posts by )

    An interesting and well-done video

    Posted in Business, Marketing, Tech, USA, Video | 7 Comments »

    Worthwhile Reading

    Posted by David Foster on 7th April 2017 (All posts by )

    Jamie Dimon of JP Morgan is, IMO, one of the more thoughtful of the financial industry CEO’s.  In his annual letter to shareholders, he devotes considerable space to the current situation of the United States–our assets, our problems, and potential paths for improvement.  The public policy section of the letter starts on page 32.

    My view of several issues is different from Mr Dimon’s, but I think the letter is well worth reading and thinking about.

    (Disclosure:  I’m a JPM investor)

    Posted in Business, Capitalism, Economics & Finance, Education, Entrepreneurship, Immigration, USA | 13 Comments »

    Mid-Life Crisis and Alternate Universes

    Posted by Carl from Chicago on 25th March 2017 (All posts by )

    One of my favorite Onion jokes of all time is “Alternate-Universe James Hetfield Named Taco Bell Employee of the Month“. This genius post encapsulates the randomness of the world we live in, since the likelihood of James Hetfield being a guy who does odd jobs, plays guitar in a basement, and loves metal is so much infinitely higher than the odds are that he becomes a rich superstar as the singer of Metallica.

    This philosophical view is somewhat similar to Taleb’s theories in “The Black Swan” and his other books where, if you did your life over and over, you would get vastly different results and individuals attribute too much of their luck and good fortune to their specific actions and experience. We are all dealing with the “Survivor’s paradox”, where those who did well get to tell their tale and those who didn’t fare so well are essentially erased from the common consciousness.

    I saw this car down in my garage in Portland and thought to myself “This is the alternate universe for Carl” which is to just keep my prior job and old way of life and buy a shiny new expensive car (this is a Bentley, I would have bought a new BWM 7 Series, but who’s counting) as a distraction. That would have been a fine life, a life I understood, and the car purchase would have been a modest but visible change and distraction from what was otherwise a quite predictable path.

    Instead, however, I changed everything, by moving jobs and careers and physically relocating away from my entire ecosystem of family and friends to the Pacific Northwest. This was a vast change, much larger than cosmetically purchasing a new conspicuous automobile. Starting a new job forced me to change everything, from the way I listened and studied, to the way I interacted with the environment around me. I went from walking to work to commuting by car (like 90% of the world) which is a primary negative, although at least I have been listening to podcasts which turn that driving time which was initially pure frustration into at least a positive learning experience.

    Read the rest of this entry »

    Posted in Business, Economics & Finance, Personal Narrative | 10 Comments »

    Free Trade with a Hostile Mercantilist Empire?

    Posted by Kevin Villani on 14th March 2017 (All posts by )

    2017 marks the 200 year anniversary of David Ricardo’s publication on the theory of comparative advantage that underlies the economic case for free trade. Several years later Frederic Bastiat wrote the satirical Candle Maker’s Petition debunking the arguments in favor of protectionism. This was an ironic choice, as candle makers were politically protected by the Founding Fathers as necessary for the Revolutionary War. These protections lasted several centuries, and in 2016 Senator Chuck Schumer sought it re-instated on grounds of unfair competition from China.

    President Trump’s trade representative economist Peter Navarro is making both the political and economic case against free trade with China, which he considers a mercantilist trader with military ambitions hostile to the U.S.

    Navarro’s political case is an update of that faced by the Founders regarding candle making. China is viewed as pursuing a trading strategy to accumulate wealth and technical know-how to challenge the U.S. militarily in the South China Sea and globally. China’s mercantilist trade practices result in huge export surpluses with the U.S. He argues that China uses this advantage to weaken America’s industrial base and future defensive capability.

    While economists can’t reject this political concern out of hand, it does seem several decades premature given the relative size of the two countries’ navies. At present the US could quickly secure sources of supply for military purposes, and protectionism tends to linger for decades or even centuries.

    The second case against free trade with a mercantilist trader relates mostly to the loss of jobs due to “unfair” competition, i.e., not due to inherent comparative economic advantages as much as political subsidies, in China’s case a purportedly cheapened currency and weak labor and environmental protections. The standard argument is that such trade generally benefits consumers at the expense of high cost producers, resulting in a less political more fair distribution of consumption as well as a higher overall level. Read the rest of this entry »

    Posted in Big Government, Business, China, Economics & Finance, International Affairs, Japan, Markets and Trading, Politics, Public Finance, Trump | 11 Comments »

    Dodd-Frank, Obamacare grew out of same faulty reasoning

    Posted by Kevin Villani on 6th March 2017 (All posts by )

    The current partisan war over the Dodd-Frank Act is just one dispute in a broader ideological divide about the government’s role in industry. This dispute, which has deep historical roots, includes a similar battle over Obamacare. The common disagreement at issue with both laws — now in the cross hairs of a GOP-controlled Washington — is the extent to which politicians should subsidize their constituents indirectly through regulation of private companies.

    The Affordable Care Act governing health insurers was about 1,000 pages, and Dodd-Frank governing most other financial institutions was more than twice that. Both stopped short of nationalizing their respective industry, instead generating more than 10 pages of regulation for every one page of legislation, although many view nationalization as an eventual but inevitable consequence, particularly for health care.

    The distinction between public control and public ownership is the primary distinction between the competing mid-20th-century ideologies of fascism and communism. In contemporary terminology, this distinction is between crony capitalism and nationalization, neither of which can be reconciled with competition and freedom of choice.
    Read the rest of this entry »

    Posted in Big Government, Business, Capitalism, Crony Capitalism, Economics & Finance, Health Care, Obama, Political Philosophy, Public Finance, Systems Analysis | 10 Comments »

    The Boom/Bust Cycle Isn’t about Emotion

    Posted by Kevin Villani on 27th February 2017 (All posts by )

    My first experience with manias was in the 1950’s. As a pre-schooler, I was dragged along to the Filene’s Basement annual designer dress sale. Thousands of women of all types and sizes pressed against the glass doors opening into the subway station. Within minutes of the doors opening, these “maniacs” cleared all the racks and, holding armfuls of dresses, began stripping to their slips. That’s when I panicked.

    Looking back, those women acted rationally. There was a limited supply of deeply discounted dresses available on a first come basis. They traded among themselves to get the right size and their most desired dress. Buyer’s remorse was cushioned by Filene’s liberal return policy.

    The premise of U.S. financial regulation is that actors within private markets are irrational, but the evidence shows that it’s not maniacal, illogical behavior that sends markets into freefall.

    Great Depression and Recession

    Now in its seventh edition, Manias, Panics and Crashes: A History of Financial Crises, Charles Kindleberger’s seminal work provides the narrative that underlies virtually all public financial protection and regulation: First, the irrational exuberance of individuals transforms into “mob psychology” and fuels an asset bubble. Then, when the exuberance of a few turns to fear, the mob panics and overreacts, causing a crash that brings down both solvent and insolvent financial institutions.

    In his memoir, the former Federal Reserve Bank President and Treasury Secretary Timothy Geithner, who was at the epicenter of the last crisis, concluded, “It began with a mania — the widespread belief that devastating financial crises were a thing of the past, that future recessions would be mild, that gravity-defying home prices would never crash to earth.”  

    Most U.S. federal financial regulation originates from the Great Depression and the subsequent introduction of federal deposit insurance provided by the Federal Deposit Insurance Corporation (FDIC), which was established in 1933 to protect “small” savers. All prior state attempts to provide insurance failed. Because there were no effective, non-politicized regulations that could prevent the moral hazard of insured banks and savings institutions taking on excessive risks, an extensive regulatory infrastructure was put in place.

    Rational Actors

    Now, the U.S. has about 100 financial regulators, including those in the U.S. Treasury and the Securities and Exchange Commission (SEC), the FDIC, and the Fed. With near-universal deposit insurance, bank runs have become a rarity, but systemic crises have occurred more frequently. It is incontestable that big bubbles eventually burst, asset prices crash, and financial crises ensue. What causes the bubbles to inflate to systemic proportions, and to ultimately burst, is more contentious.

    At the time of Kindleberger’s analysis, individuals were assumed to be rational. The latest edition of his book, written after the 2008 financial crisis, postulates numerous theories about mob psychology (mania) that could lead rational individuals to produce irrational markets, but these ideas are all rather lame.

    Read the rest of this entry »

    Posted in Big Government, Business, Capitalism, Economics & Finance, Human Behavior, Markets and Trading, Public Finance, Real Estate, Systems Analysis, Tradeoffs | 9 Comments »

    Worthwhile Reading

    Posted by David Foster on 10th February 2017 (All posts by )

    How the 16th century invented social media

    Virginia Postrel thinks that now is the time for big-box stores to embrace the 19th century

    Is it possible to make American mate again?

    Related to the above:  mapping the geographical patterns of romantic anxiety and avoidance

    Maybe also related:  sex doesn’t sell anymore, activism does

    PC oppression and why Trump won

    Theory and practice: an interesting Assistant Village Idiot post from 2010

    Learning about effective selling from a surfer dude

    Here’s a guy who says: I help create the automated technologies that are taking jobs…and I feel guilty about it

    After discussing his concerns about automation-driven job losses, he goes on to say “I feel even worse when I hear misleading statements about the source of the problem. Blaming China and NAFTA is a convenient deflection, but denial will only make the wrenching employment dislocation for millions all the more painful.”

    I’ve seen this assertion–“offshoring doesn’t matter because Robots”–and it doesn’t make a whole lot of sense to me.  It should be obvious that both factors play a role; there’s no need for a single-variable explanation.  (Actually, offshoring-driven job losses and automation-driven job losses are somewhat less than additive in their effect, since automation generally makes US-based production more relatively attractive.)

    Here’s an argument that the next big blue-collar job is coding.

    What if we regarded code not as a high-stakes, sexy affair, but the equivalent of skilled work at a Chrysler plant? Among other things, it would change training for programming jobs—and who gets encouraged to pursue them. As my friend Anil Dash, a technology thinker and entrepreneur, notes, teachers and businesses would spend less time urging kids to do expensive four-year computer-­science degrees and instead introduce more code at the vocational level in high school….Across the country, people are seizing this opportunity, particularly in states hit hardest by deindustrialization. In Kentucky, mining veteran Rusty Justice decided that code could replace coal. He cofounded Bit Source, a code shop that builds its workforce by retraining coal miners as programmers. Enthusiasm is sky high: Justice got 950 applications for his first 11 positions. Miners, it turns out, are accustomed to deep focus, team play, and working with complex engineering tech. “Coal miners are really technology workers who get dirty,” Justice says.

    I’m reminded of two things that Peter Drucker said in his 1969 book The Age of Discontinuity.  In attacking what he called ‘the diploma curtain’, he wrote “By denying opportunity to those without higher education, we are denying access to contribution and performance to a large number of people of superior ability, intelligence, and capacity to achieve.”

    But also, Drucker wrote, in his discussion of the Knowledge Economy:

    The knowledge worker of today…is not the successor to the ‘free professional’ of 1750 or 1900.  He is the successor to the employee of yesterday, the manual worker, skilled or unskilled…This hidden conflict between the knowledge workers view of himself as a ‘professional’ and the social reality in which he is the upgraded and well-paid successor to the skilled worker of yesterday, underlies the disenchantment of so many highly educated young people with the jobs available to them…They expect to be ‘intellectuals.’  And the find that they are just ‘staff.’

    Indeed, many jobs that have been thought of as ‘professional’ and ‘white collar’…programming, financial analysis, even engineering…are increasingly subject to many of the stresses traditionally associated with ‘blue collar’ jobs, such as layoffs and cyclical unemployment.  As a higher % of the corporate cost structure becomes concentrated in jobs which are not direct labor, it is almost inevitable that these jobs will be hit increasingly when financial problems make themselves felt.

    Drucker’s second point, which I think is very astute, is somewhat orthogonal to the coal-miners-becoming-coders piece, and probably deserves it own post for discussion.  Regarding the question of non-college-educated people becoming programmers (of which there has long already been a fair amount), the degree to which succeeds is to some degree coupled with the whole question of h-1b visa policy, and trade policy in general as it relates to offshoring of services.

    Posted in Business, Civil Liberties, Deep Thoughts, Education, Leftism, Marketing, Media, Tech | 11 Comments »

    Uncle Henry, Charlie Kellstadt, and Donald Trump

    Posted by David Foster on 24th January 2017 (All posts by )

    As President Trump has focused on persuading certain specific companies to increase their US employment (or at least to refrain from decreasing it as much as originally planned), concerns have been raised about his ability to operate above the level of the single case and to think in terms of framing general policies.  I do share this concern to a certain extent.

    But I’m also reminded of Peter Drucker’s story about two old-line merchants.

    The first of these, called “Uncle Henry” by those who knew him, was the founder and owner of a large and succesful department store. When Drucker met him, he was already in his eighties. Uncle Henry was a businessman who did things by intuition more than by formal analysis, and his own son Irving, a Harvard B-School graduate, was appalled at “the unsystematic and unscientific way the store was being run.”

    Drucker remembers his conversations with Uncle Henry. “He would tell stories constantly, always to do with a late consignment of ladies’ hats, or a shipment of mismatched umbrellas, or the notions counter. His stories would drive me up the wall. But gradually I learned to listen, at least with one ear. For surprisingly enough he always leaped to a generalization from the farrago of anecdotes and stocking sizes and color promotions in lieu of markdowns for mismatched umbrellas.”

    Drucker also knew another leading merchant, Charles Kellstadt (who had once run Sears.) Kellstadt and Drucker served together on a Department of Defense advisory board (on procurement policy), and Kellstadt told “the same kind of stories Uncle Henry had told.” Drucker says that his fellow board members “suffered greatly from his interminable and apparently pointless anecdotes.”

    On one occasion, a “whiz kid” (this was during the McNamara era) was presenting a proposal for a radically new approach to defense pricing policy. Kellstadt “began to tell a story of the bargain basement in the store in Chillicothe, Ohio, where he had held his first managerial job, and of some problem there with the cup sizes of women’s bras. he would stop every few sentences and ask the bewildered Assistant Secretary a quesion about bras, then go on. Finally, the Assistant Secretary said, “You don’t understand Mr. Kellstadt; I’m talking about concepts.” “So am I,” said Charlie, quite indignant, and went on. Ten minutes later all of us on the board realized that he had demolished the entire proposal by showing us that it was far too complex, made far too many assumptions, and contains far too many ifs, buts, and whens.” After the meeting, another board member (dean of a major engineering school) said admiringly, “Charlie, that was a virtuoso performance. but why did you have to drag in the cup sizes of the bras in your bargain basement forty years ago?” Drucker reports that Charlie was surprised by the question: “How else can I see a problem in my mind’s eye?”

    Read the rest of this entry »

    Posted in Business, Deep Thoughts, Management, Trump | 6 Comments »

    The Ballpoint Pen as an Economic Case Study

    Posted by David Foster on 20th January 2017 (All posts by )

    Chinese Premier Li Keqiang has lamented China’s inability to “make ballpoint pens with a smooth writing function.” After five years of research, a state-owned steel company now says it can.

    WSJ notes that 80% of the world’s ballpoint pens are made in China…but that thus far, China has not been making all of the pen’s components.  Specifically:

    The tip of a high-quality ballpoint demands metal work involving high-precision machinery and very hard, ultrathin steel plates. So 90% of pens made in China have imported tips. China’s leaders want “self-sufficiency,” in pens as in semiconductors. Now they claim they’ll have it.

    This little story is interesting from at least three angles.

    First–as the WSJ story points out, China’s desire to control the entire ballpoint pen supply chain indicates that their leaders still value economic autarky, and that Chinese leadership denunciation of President Trump on grounds of his insufficient respect for free trade carry more than a whiff of hypocrisy.

    Second–the ballpoint pen example makes the point that the apparent simplicity of a product does not necessarily reflect the complexity or lack thereof involved in manufacturing it.  American economic commentators often fail to grasp this point when they assert that America’s future must lie in producing “advanced high-technology products.”

    Third–the example should also clarify the point that the highest value in a product supply chain does not necessarily lie in the assembly of the final product.  The final product assembly is usually the most visible part of the supply chain, but very often the creation of components that go into that chain involves more complexity and requires more skill than the final assembly process itself.  It’s considerably more difficult to make integrated circuits, for example, than to assemble those chips onto circuit boards and to assemble the boards into a plastic or metal case.

    Posted in Business, China, Economics & Finance, Tech, USA | 44 Comments »

    The End of Accounting Book Review – Part One

    Posted by Carl from Chicago on 8th January 2017 (All posts by )

    Recently I read an excellent book called “The End of Accounting and the Path Forward for Investors and Managers” by Baruch Lev and Feng Gu. I highly recommend this book for investors, analysts, accountants, and those with a general interest in business. The book is very well written and researched in that it:

    1. Describes the current situation in depth
    2. Aligns the situation across an historical context and with relevant research
    3. Makes specific recommendations about how to improve the situation

    If you’d like to read more about this topic on your own (will help to frame out these posts), here is an excellent Wall Street Journal article titled “The End of Accounting” (if the link doesn’t work because you don’t have a subscription you can probably find it elsewhere on the internet). Here is a link from Accounting Today and an interview with the author from CFO magazine.

    The first post in this series is going to be my personal insights and journey in the area of accounting information, financial and investor relations analysts. This context is relevant because I, too, have seen the problems that the authors outline in the series and come up with my own “hacks” to attempt to gain better information and insights.

    I started out my career as an accountant, and I used to help create the footnotes that you see at the end of the financial reports. This wasn’t creative work per se – you would start with last year’s footnote as a template and insert new numbers, unless it was a new requirement, in which case it was a lot of work and we would turn to specialists. At that time (20+ years ago) there were only a few footnotes and the financial statements themselves weren’t that long; you would be able to read from the Chairman and CEO’s letter all the way through to the last footnote in a couple of hours.

    This was also before the internet; we would go into the company library and look at microfiche sometimes to do research or you’d pull up the hard (printed) copy from the files. At that point an annual report was also somewhat of a marketing document; companies put a lot of thought into the cover, for instance.

    At various points in the history of accounting there has been a focus on the balance sheet (assets and liabilities), the income statement (earnings per share and price / earnings ratio) and on cash flows (cash generated from the business). Each of these views are important and have their merits and their drawbacks. The statements were generally the “GAAP” view which focused on financial statement presentation and used taxes at official rates (many companies pay almost nothing in taxes in actuality by deferring them indefinitely) and held assets at historical costs. Both of these assumptions made the financial statements less useful for certain types of companies and industries.

    Read the rest of this entry »

    Posted in Book Notes, Business, Capitalism, Economics & Finance | 3 Comments »

    Jargon, Proverbs, and Memes

    Posted by David Foster on 7th January 2017 (All posts by )

    Texan99, writing at Grim’s Hall, discusses the ‘thick fog of buzzwords’ that pervades the educational arena in this country. My comment is that buzzwords and jargon are worst in education, government, and the ‘nonprofit’ world, but increasingly are also pervading the world of business and having a malign effect therein. Many of the posts I see on LinkedIn, for example, represent attempts by people who have never had a creative idea or insight in their lives to posture a deep thinkers and business intellectuals by maximizing their use of the buzzwords du jour.

    Sarah Hoyt draws a distinction between memes and proverbs:

    Of all the ways people have come up with to avoid thinking, I like memes the most.  They are so ridiculously easy to fall into.  You see the words, you see the picture and you go “ah ah, that’s so true.” Even when on a minute’s reflection it makes no sense whatsoever…I think in a way it follows the same pattern that proverbs followed in more ancient cultures…While proverbs were ways not to have to think or short cuts around thinking, they weren’t, by themselves, pernicious…Proverbs are in a way, the encoding of societal wisdom into short cuts to lead people into ways that have worked before…Memes are similar, but you have to remove societal wisdom and put in “the commanding forces of culture and mass media”.  RTWT

    Andre Beaufre, who in 1940 was a young captain on the French General Staff (later a general, he commanded the French contingent in the Suez attack) commented on his impressions when he first breathed the refined air at the General Staff level:

    I saw very quickly that our seniors were primarily concerned with forms of drafting. Every memorandum had to be perfect, written in a concise, impersonal style, and conforming to a logical and faultless plan–but so abstract that it had to be read several times before one could find out what it was about…”I have the honour to inform you that I have decided…I envisage…I attach some importance to the fact that…” Actually no one decided more than the barest minimum, and what indeed was decided was pretty trivial.

    Entirely consistent with Beaufre’s observation was a interchange between the artists Picasso and Matisse which took place in the midst of the collapse of 1940:

    Matisse: But what about our generals, what are they doing?

    Picasso:  Our generals? They’re the masters at the Ecole des Beaux Arts!

    …ie, men possessed by the same rote formulae and absence of observation and obsessive traditionalism as the academic artists.

    The decline in clarity of writing and speaking presages nothing good.  Confucius pointed out that “If language be not in accordance with the truth of things, affairs cannot be carried on to success.”

    See my earlier post When Formalism Kills and the ensuing discussion thread.

    Posted in Academia, Business, Deep Thoughts | 5 Comments »

    This is Why We Can’t Make Nice Things

    Posted by David Foster on 30th December 2016 (All posts by )

    A positive review of General Electric stock points out that the company is less exposed to the oil market than it was prior to the Baker Hughes spinoff…and then goes on to say:

    Gone too is the iconic firm’s appliances business, which was sold to Chinese firm Haier. This is really a progression of the economic cycle. While folks like President-elect Donald Trump and financial provocateur Peter Schiff lament that Americans just don’t make stuff anymore, at a certain point, advanced economies should outsource physical work to less-advanced countries. It’s not so much a matter of ability as it is financial efficiency.

    Does this writer believe that GE should also divest the jet engine business, the power generation business, and the transportation (locomotive) business?  All of these businesses make physical things, and make substantial amounts of those physical things in the US.

    The idea that manufacturing is devoid of intellectual content and hence unworthy of advanced economies is fallacious and has done serious harm–see my post Faux Manufacturing Nostalgia.  Happily, this attitude has turned around substantially since I wrote the linked post..to the point that manufacturing is being practically over-romanticized…but islands of the “who needs it?” view still exist.

    GE’s reasoning for divesting Appliance seems to have been centered on a desire to focus the company on business-to-business markets rather than consumer markets and, and also, I think, on a perception that there was not sufficient room in the appliance world for product differentiation and a technology edge.  “Technology edge,” rightly understood, includes the complexity/difficulty of manufacturing something, not just the intellectual property embedded in the product itself.  It certainly did not reflect any conclusion that manufacturing is inherently a low-value function.

    It would be silly to argue that a computer programmer in a bank is a “knowledge worker” and a programmer in manufacturing is not.  It would be equally silly to argue that a bank branch manager is inherently performing a more highly-skilled job than a shift supervisor in a factory, or that a first-level customer service rep for Amazon is performing a more advanced kind of work than an assembly line worker, or that an operations research expert doing inventory studies for a manufacturing firm is less of a knowledge worker than his equivalent doing inventory studies for Target.  But this is implicitly the argument that many of the ‘we don’t need manufacturing here’ crew have been making.

    This dismissive attitude toward a vast and complex industry which supports millions of people represents one more example of the constellation of attitudes against which many people rebelled when choosing to vote for Donald Trump.

    Posted in Business, Economics & Finance, Tech | 7 Comments »

    Technology and Offshoring

    Posted by David Foster on 9th December 2016 (All posts by )

    Thought question: If Henry Ford had been able to have the Model T manufactured in Mexico by people making 50 cents a day…and with no need for the assembly line and related productivity-improving technology…would that have been equivalent, in terms of its economic, social, and political consequences, to making it in Detroit on the assembly line with workers making $5.00/day and a 10:1 reduction in unit labor content?

    Posted in Business, Economics & Finance, Tech | 28 Comments »

    Overdrawn

    Posted by Sgt. Mom on 6th December 2016 (All posts by )

    I was kind of intrigued by last week’s Buzzfeed article, attempting to whip up the internet mob for the purpose of going after Chip and Joanna Gaines, who have a hugely popular home renovation show on the HGTV channel, and cannily have never said a word on the show regarding their more or less mainstream Christian beliefs, or their attendance at a mega-church where the pastor apparently is on the record as having expressed disapproval of the concept of the institution of formal marriage being anything other than that of a man and a woman. (Note: I’ve never watched the show myself, although my daughter has. Blondie avers that Joanna Gaines is a one-note designer; her thing is shabby chic. All to the good, since that is my own preference, well-mixed with Laura Ashley comfortable country antique seasoned with a splash of William Morris/Craftsman. And … well, most people have items of décor and large furniture of which they are fond … who the heck clears the deck and redecorates every year or so, in response to the fashion of the moment? Only the very wealthy and socially insecure, I surmise.)

    More power to them – the Gainses and their redecorating business; not the internet lynch mob, always ready to be whipped up to a fine frothing frenzy. Really, this early 21st century is increasingly resembling the 16th, in the ruthless search for the ritual burning at stake by officials or by the annoyingly self-appointed for individuals who refuse to give lip-service to the prevailing social/political orthodoxies. Read the rest of this entry »

    Posted in Business, Civil Society, Conservatism, Current Events, Diversions, Human Behavior | 13 Comments »