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  • Archive for the 'Business' Category

    A Truly Courageous Business Decision

    Posted by David Foster on 7th April 2019 (All posts by )

    Today marks the 55th anniversary of IBM’s announcement of the System/360 line…which made obsolete virtually all of its then-existing products.  The 360 line established a common architecture for machines of widely-differing price and performance characteristics, with the individual product implementations of this architecture differing considerably.  The goal was compatibility, so that customers could upgrade without extensive rewriting of programs.  Consolidating IBM’s diverse computer systems into this single system architecture was a bold decision; truly, a bet-the-company decision: in the end, it paid off, with devastating consequences for the ‘Seven Dwarfs’ who were IBM’s competitors at the time…but the implementation was frighteningly stressful.  A good article on the project recently appeared in IEEE Spectrum.

    Tom Watson Jr, who ran IBM during this time period, discusses the 360 project extensively in his superb memoir, Father, Son, and Co.  I reviewed it here–highly recommended.

    Posted in Book Notes, Business, Management, Tech | 21 Comments »

    The Internet Rewards Crazy (Rerun)

    Posted by Jonathan on 25th March 2019 (All posts by )

    (This is a reposting of posts from two and seven years ago. Unhappily, this post’s themes are more relevant than ever. The Internet seems to be changing human social relations, business, politics and civil society in significant ways not all of which are clear. Perhaps the nature of what is happening will be better understood with time.)

    —-

    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 | 5 Comments »

    Freezing in the Dark

    Posted by David Foster on 2nd March 2019 (All posts by )

    There has been much concern about possible hacking of the power grid by Russia, China, and others.  Here we have a segment from Rachel Maddow, inspired by a threat analysis from the US Intelligence Community.  From the analysis:

    China has the ability to launch cyber attacks that cause localized, temporary disruptive effects on critical infrastructure–such as disruption of a natural gas pipeline for days to weeks–in the United States. Russia has the ability to execute cyber attacks in the United States that generate localized, temporary disruptive effects on critical infrastructure.

    Maddow:  It’s like negative 50 degrees in the Dakotas right now. What would happen if Russia killed the power today?  What would happen if all the natural gas lines that service Sioux Falls just poof on the coldest day in recent memories?

    What would happen?  Nothing good.  These are serious threats, and I doubt that Russia and China are or will continue to be the only entities able to conduct such cyberattacks.  And there is also plenty of risk for non-cyber attacks…physical-world sabotage…which could have similarly malign impact on energy infrastructure.

    But we don’t need to wait for a foreign adversary or domestic terrorist organization to cripple our energy infrastructure.  We can quite effectively do it to ourselves.

    In late January, it was very cold in Minnesota.  And there wasn’t a lot of wind.  Natural gas, also, was in short supply, as a result of pipeline capacity constraints.  Xcel Energy urged its gas customers to turn down thermostats and water heaters, and to use electric heaters as necessary.  The electricity was coming from primarily coal plants (40 GW) and natural gas plants (about 23 GW)–the gas plants, of course, are also dependent on pipeline capacity.

    Also in Minnesota, here’s a large solar farm covered with snow.  Wonder if it’s melted or been swept off yet?  And here’s a cautionary story from Germany, where long, still, and dim winters do not mix well with wind and solar power generation.

    Solar and wind in most parts of the US are now small enough in proportion to overall grid capacity that shortfalls can be made up by the other sources.  What happens if they come to represent the majority of the grid’s power capacity–not to mention the exclusive source of capacity, as demanded by some?

    It may be feasible to store a few hours of electricity without driving costs out of sight…but what about the situation in which wind and solar are underperforming for several days in a row?  Interconnection of sources and demands over a wide area (geographical diversity) can help, but is by no means a comprehensive solution. So far, the gas, coal, and hydro plants have been there to kick in where necessary.

    Almost every day, there are assertions that new solar is cheaper than its fossil-fuel equivalents.  This may be true in some areas if you ignore the need to match supply and demand on an instantaneous basis.  But if the fossil-fuel plants are there to handle only those periods when wind, solar, and limited battery storage aren’t sufficient to meet demand, then the total energy production against which their capital cost is charged will be much lower, and hence, the cost per unit will go up. (See the California Duck Must Die for a nice visual portrayal of how widespread solar adoption has changed the load curve for the other sources.)  In some states with net metering, a home or business owner can sell excess power to the grid when loads are low and buy it back at the same unit price when loads are at their maximum. This becomes especially problematic when “renewables” become a major part of the mix.  Unless incentives are intelligently crafted–unlikely, given politics–“renewable” sources will effectively be subsidized by conventional sources and potentially make the construction and maintenance of those conventional sources impossible.  See If Solar and Wind Are So Cheap, Why Do They Make Electricity So Expensive?

    Read the rest of this entry »

    Posted in Big Government, Business, Crony Capitalism, Current Events, Energy & Power Generation, Environment, Europe, Germany, Russia, Tech | 41 Comments »

    Peak Stupid

    Posted by Sgt. Mom on 25th February 2019 (All posts by )

    No, I don’t think will ever reach Peak Stupid; just as we will probably never reach Peak Oil, either – since there appears to be an inexhaustible supply of the former, and more of the latter than the gloom’n’doom crowd apparently thought. But Deity on a Trisket, the farrago of Stupid on display just this past week is just plain mind-blowing. And I read a lot of history, so it’s not a total surprise to me that individually and en masse, humans are capable of the spectacularly moronic; things like Tulip Mania in 17th century Holland, pursuance of the Flat Earth theory after trips into space, and the Billy Jack movie series, not to mention the whole disco era in general.
    So the Jussie Smallett supposed hate-crime on the below-freezing streets of Chicago on the coldest day of the year thus far (hey, it’s only February, I am confident that the remaining ten months of 2019 will bring us ever more bountiful levels of stupidity) has fallen completely apart – much as the intelligent and logical portion of the blogosphere had predicted upon being made aware of the specifics. Yes, a planned – with an astounding level of stupidity even for an actor – hate crime, intended to leverage a pay raise, and garner oodles of that sweet, sweet milk of sympathy for a victim. And the National Establishment Mainstream fell for it, hook, line, sinker and whatever else in an appealing sob story, not to mention quantities of gullible media celebrities, and gullible political celebrities. Oopsie. The most decent of them appear to have the nous to be resoundingly pissed with Mr. Smolett over how their sympathies were exploited. The indecent are lying low and doubtless waiting for the next shiny, flashy supposed hate crime to bubble up to the top of that pond of scum which appears to be our national thought leaders. Live and learn, people – there exists a long, long, long history of faked hate crimes. The most recent of which happened not two weeks previously, with the Covington Catholic students. Memories are short in the National Establishment Media gene pool; measured in hours, I would guess. Possibly this is a variety of genetic defect. Read the rest of this entry »

    Posted in Architecture, Business, Chicagoania, Conservatism, Crime and Punishment, Current Events, History, Human Behavior, Just Unbelievable, Leftism, Media, Military Affairs, The Press | 6 Comments »

    A Robot of the Week, Revisited

    Posted by David Foster on 20th February 2019 (All posts by )

    In a robots of the week post a while back, I mentioned two companies that are attempting to automate the apparel-production process. Recently, one of these companies, Softwear Automation, announced that its Sewbot product is now also available on a rental basis under the banner Sewbot as a Service.  (SaaS, playing off the acronym for the currently-hot field of Software as a Service.)  From the SaaS announcement:

    From 1994 to 2005, the United States lost more than 900,000 textile and apparel jobs to offshoring.

    Fast-forward to 2018. The pendulum is swinging back and textiles are returning as lean, highly automated, environmentally conscious production facilities. Within the last six years, there have been significant announcements by foreign-owned textile companies investing in the United States, with site selection choices clustered in the Southeast including the first Chinese owned Cut Make Trim factory in Arkansas.

    Despite this industry reversal, the seamstresses are not returning. While the knowledge can be shared to upskill workers, people don’t have the  desire to work in a traditional textile factory.

    To solve this and accelerate the growth of US based textile manufacturing, Softwear Automation is announcing SEWBOTS-as-a-Service, a rental lease service to allow manufacturers, brands, and retailers to source and manufacture here in the US at a lower cost than outsourcing and with greater predictability and quality. While we understand the benefits of “Made in America”, the focus of this program is to offer US textile manufacturing more control, greater margin, faster turn times and less inventory.

    The rental rate for Sewbot is quoted as starting at $5000/month, which comes to $55/shift for a three-shift operation.Softwear is also now offering production-rate estimates for various kinds of textile products. For microfiber towels, a single operator supervising 6 robots can make 2880 towels in an 8-hour shift, compared with 223 towels for a single operator performing traditional manual activities.   Other product types which the company sees as suitable for Sewbot automation include mattress covers, pillows, automotive floormats, t-shirts, and shoes (uppers).

    Most aspects of the apparel supply chain have long been highly automated: indeed, the mechanization of spinning and weaving was the hallmark of the Industrial Revolution.  The sewing process, however, has remained stubbornly labor-intensive, largely because the flexible nature of fabric makes it hard to handle mechanically.  Softwear Automation’s solution involves the use of machine vision for precise fabric positioning.  This article at IEEE Spectrum explains a little bit about how it works.

    Depending on how well these systems turn out to work in practice, and how the technology evolves, they may turn out to be not only the robots of the week, but the robots of the year or even the decade.  Apparel-making is a vast industry, concentrated in nations which are not-so-well-off economically, and employs a large number of people. A high level of automation would likely result in much of this production being relocated closer to the markets, thus saving transportation costs and shortening supply cycles.  The consequences for countries like China, Bangladesh, and Sri Lanka could be pretty unpleasant.  For the US, the onshoring of the work would seem clearly to be beneficial.

    I don’t know enough about the industry to analyze the economics of Sewbot vs low-wage-country production in any depth, but back-of-the envelope for one product type (the towels) suggests that on a pure direct labor cost per unit basis, a US-based Sewbot can still be undercut by human labor rates below about $4/hour.  (Calculated using the rental rate:  for many companies, purchase may offer better economics.)  But production isn’t the only factor in the product cost equation, of course, and in many situations proximity to end markets will be of considerable value: especially simpler inventory control and faster response to style changes. And a Made in the USA label is surely worth at least something.  Also, the economics may be different for some of the other product types…for the t-shirts, the company is citing a unit cost of $.33 for US-based production using  Sewbot…this compares with something around $.22 for a country such as Bangladesh, and is probably cheaper than China at the current wage rates.

    Read the rest of this entry »

    Posted in Business, China, India, International Affairs, Tech, USA, Vietnam | 6 Comments »

    Even Smart People Get It Wrong Sometimes

    Posted by David Foster on 7th February 2019 (All posts by )

    Economist Art Laffer:

    “China is a huge plus to the U.S. because without China there is no Walmart, and without Walmart there is no middle class or lower class prosperity in America.”

    Actually, the US was known for broad-based prosperity long before either Walmart or China was a significant factor.  It was really only in the 1980s that Walmart’s expansion really took off…and it was then by no means as China-dependent as it has more recently become.  Indeed, starting in 1984 and extending at least through the early 1990s, Walmart was a strong supporter of the Crafted with Pride in the USA campaign, which was launched by textile entrepreneur Roger Milliken, among others.

    China’s presence in the global marketplace was greatly expanded by the Permanent Normal Trade Relations bill, which was signed by President Clinton in October 2000, as well as by China’s own economic-liberalization policies.  (Some data on the growth of Chinese exports over time, here)

    Real mean US household income, which is effectively a measure of price levels as well as wages/salaries, grew from $71773 in 1985 to $93887 in 2000.  Fifteen years later, in 2015, it had risen to only $95887.  (2017 dollars)

    Real median household income  grew from $51455 in 1985 to $59938 in fifteen years later, in 2000. In 2015, this indicator had actually declined to $58476.  (It grew to $61372 by 2017)

    There are a lot of factors that affect an economy, of course, and it would be unfair to conclude that the slowdown in American household income growth was caused by the vast expansion of trade with China.  Maybe it would have been even worse without Chinese imports and exports?

    National Review writer Robet VerBruggen cites “research” suggesting that “consumers save hundreds of billions of dollars per year thanks to expanded trade with China, and six-figure sums for every manufacturing job lost.  (Tucker) Carlson may be right that cheap junk from China doesn’t make us happy in any fundamental way, but it would put serious strains on family budgets if all that junk got expensive again.”

    Maybe. But I doubt if the strains would really be all that serious over time. If manufacturers did not have vast reservoirs of low-wage labor available for production of a particular product, then the incentives to improve productivity when making that product with high-wage labor would be greatly increased. Capital investment that makes no sense when you are paying workers $1.50/hour may make great sense when you have to pay $15/hour.  Furthermore, product designs themselves can often be changed in minor ways to make them more manufacturable; again, this would help reduce the cost impact of domestic or other high-wage-country manufacturing.

    I doubt if the strains on family budgets resulting from such changes in production-labor costs would have anywhere near the impact that has resulted from dysfunctional public schools (resulting in a need to pay for private schooling or move to a pricier neighborhood), unreasonable constraints on home-building, and out-of-control administrative and facilities spending by universities, coupled with irresponsible marketing of degree programs and student loans by same.

    One thing that has definitely been beneficial about China’s export trade is the drastic reduction in poverty in that country; this reduction is indeed something that we should all celebrate.  I suspect, however, that given economic liberalization, China could probably be doing just as well or almost as well with an economic approach that is not so extreme in its trade orientation but more focused on satisfying domestic demand…and this would probably be much more sustainable for them in the long run.

    Also, here are some additional links on US wage trends for anyone who’s interested:

    Read the rest of this entry »

    Posted in Business, China, Economics & Finance, Tech, USA | 29 Comments »

    Financial Markets Commentary

    Posted by David Foster on 30th January 2019 (All posts by )

    John Hussman on valuations

    The saga of Broker Joe, from 2007

    Posted in Business, Economics & Finance, Markets and Trading | 7 Comments »

    Worthwhile Reading

    Posted by David Foster on 27th January 2019 (All posts by )

    Why do journalists love twitter and hate blogging?

    The legacy of China’s Confucian bureaucracy.  Related:  my previous post on the costs of formalism and credentialism.

    Stroking egos does nothing for students — raising expectation does.

    Magic and Politics.

    Related to the above:  Witches: the new woke heroines.

    Legos, marketing, and gender.  “In 1981,” says a woman who as a child was pictured in a Legos ad back then, “LEGOs were ‘Universal Building Sets’ and that’s exactly what they were…for boys and girls. Toys are supposed to foster creativity. But nowadays, it seems that a lot more toys already have messages built into them before a child even opens the pink or blue package.”

    What will be the economic impact of China’s increasing emphasis on economic control and preferential treatment for state-run enterprises?

    What is the fastest the US economy can grow?

    Midnight at the Gemba. Kevin Meyer visits the night shift at the medical-device molding plant he was running.

    Posted in Blogging, Business, Capitalism, China, Culture, Economics & Finance, Management, Media, Religion | 12 Comments »

    2018 Reading

    Posted by David Foster on 14th January 2019 (All posts by )

    Some books that I read and liked over the last year…

    The Future is History, Masha Gessen.  Russia during the last days of Communism, during the transitional age, and under Putinism, viewed through the personal stories of numerous individuals.

    On Tangled Paths, Theodor Fontane.  The author has been called “The Jane Austen of Germany.”  In this novel,  it is the *male* protagonist who is under pressure to marry into money to save his family from financial disaster.  Good character development and a vivid portrayal of Berlin in the 1870s

    The Bounty:  The True Story of the Mutiny on the Bounty, Caroline Alexander.  The famous mutiny, the events leading up to it, and its aftermath.  A much more favorable interpretation of Captain Bligh’s character than the usual view.

    Red Star Under the Baltic, Victor Korzh.  Memoirs of a Soviet submarine commander who served in a little-known theater of WWII.  The author writes largely from an engineering perspective, and in addition to combat episodes he describes the remarkable efforts that were necessary to keep the submarine in operating condition–including such things as repurposing the bow thruster drives, while at sea, to replace the failed stern thruster drive system.

    A Pocketful of Stars and other books in the Applied Topology series by Margaret Ball, which I reviewed here.  Don’t let the Applied Topology tag scare you off; no math is required to read and enjoy.

    Born Fighting:  How the Scotts-Irish shaped America, James Webb.  Some interesting history and perspectives.  It’s worthwhile to read this book in conjunction with Thomas Sowell’s Black Rednecks and White Liberals.

    A Vagabond Journey Around the World, Harry Franck.  In 1904, this recent college graduate decided to travel around the world starting with no money at all.  (He modified this plan to carry enough cash to pay for photographic supples.)  Very interesting, though long.  Franck made and wrote about numerous other trips, including a 1930s visit to the Soviet Union which he documented in A Vagabond in Sovietland.

    A World on Edge:  The End of the Great War and the Dawn of a New Age, Daniel Schoenpflug.  The author paints the environment in the immediate aftermath of the War by telling the stories of individuals ranging from Harry Truman, Ferdinand Foch, Crown Prince Willhelm of Prussia, Arnold Schönberg, Kathe Kollwitz, Walter Gropius, and Ho Chi Min to many lesser-known individuals such as a former sailor of the German Navy and a Cossack woman named Marina Yurlova.

    Tragedy & Challenge:  An Inside View of UK Engineering’s Decline, Tom Brown.  The problems and fate of British manufacturing companies, as seen by an individual with extensive experience as an executive and board member.  There’s a review here.

    The Tyrant’s Daughter, J C Carleson.  Fifteen-year-old Laila lived a privileged life in her unnamed Middle Eastern country, where her father was absolute ruler.  Then he was killed in a coup, and she escapes with her mother and brother to a suburb of Washington DC…where she faces both the problems of fitting in at her new school and the haunting question of whether her father was indeed the monster that he is portrayed by the American news media.  This is positioned as a YA (teenager)  book, but is IMO also good reading for adults.  The author is a former CIA agent.

    The Theme is Freedom, John Dos Passos.  A collection of essays by this “Lost Generation” writer.  I quoted his observations about some of his Leftist comrades of the 1920s, here.

    Several more, which I may review individually and/or in a future batch.

    I’m currently reading a novel of the American Revolution called Celia Garth, which I learned about from a discussion at Bookworm.  It was highly recommended by Sgt Mom, among others.  I’m really liking it so far.

    Posted in Arts & Letters, Book Notes, Business, Civil Liberties, Europe, History, Management, Russia, War and Peace | 29 Comments »

    Sneaky Robots and Robotic Bureaucrats

    Posted by David Foster on 10th January 2019 (All posts by )

    An artificial intelligence program was assigned the task of turning satellite images into street maps.  It was graded by comparing reconstructed images (reconstructed from the map) and comparing them with the original; also, by the clarity of the street map.  The grades were used by the program to continually improved its performance.

    But what the program sneakily learned to do was to encode details of the original image into the street map, in a manner invisible to humans, thereby optimizing its grade on the reconstructed image…independently of how well the street map…which was the actual desired product…actually reflected the original image.

    Humans, also, often respond to incentives in ways very different from those expected by the designers of those incentives…as many creators of sales commission plans and manufacturing bonus plans have discovered.  Bureaucracies, especially, tend to respond to the measurements placed on them in ways that are not consistent with the interests of the larger organization or society that they are supposed to be serving.  See Stupidity, Communist-Style and Capitalist-Style and The Reductio ad Absurdum of Bureaucratic Liberalism.

    Posted in Big Government, Business, Deep Thoughts, Management, Russia, Tech | 1 Comment »

    Quote of the Day

    Posted by Jonathan on 10th December 2018 (All posts by )

    Rush Limbaugh on Dec. 7:

    Donald Trump arrived, the way I hear this Tillerson sound bite, Trump arrives knowing what he wants to do. He doesn’t arrive unsure and he’s not gonna admit that who doesn’t know what to do because he’s not from this world. He’s there, and he has a specific agenda that everybody that elected him knows what it is: Make America Great Again.
     
    Sadly, he hasn’t done a lot on that agenda. He hasn’t built the wall yet. We haven’t repealed and replaced Obamacare. There’s a lot of things in the Trump agenda that have not happened yet. But that’s not what Tillerson’s talking about. Tillerson’s talking about some guy comes in and says, “This is what I want to happen.” And your typical Washington bureaucrat or CEO bureaucrat will say, “Well, where’s the memo? Where’s the plan? Where’s the blueprint?”
     
    Trump said, “There’s no blueprint. Just do it! This is what I want to happen. This is what I want.”
     
    “Well, uh, you know, you shouldn’t do it that way.”
     
    “I don’t care what you — just make it happen.” Trump is one of these, this is how he’s worked, “make it happen.” If he’s talking to Jared, if he’s talking to Trump Jr. or Eric or Ivanka, “This is what I want, make it happen.” That’s not how Washington works. Washington works on things not happening. The whole point of bureaucracy is to not do such that it looks like you’re getting things done. There might not be any need for you after you finish. So everything’s never done. Of course Trump’s gonna have compatibility problems with that.

    [emphasis added]

    Posted in Big Government, Business, Politics, Quotations, Systems Analysis, Trump | 14 Comments »

    A Retrotech Adventure

    Posted by David Foster on 2nd December 2018 (All posts by )

    The Essex Steam Train and Riverboat leases 22 miles of railroad track from the state of Connecticut, and owns several steam and diesel locomotives plus various rolling stock. They operate regular passenger excursions plus seasonal specials.  Essex also offers a training and experience program for people who would like to learn a little bit about operating a steam locomotive.  Being interested in steam power, I signed up.

    The program includes some written material to be reviewed at home, a group classroom session of about an hour, and then an individual hour operating a locomotive under the guidance of an experienced engineer.

    On arriving, I was surprised at the scale of the operation.  Although I was there in the off season (early November), judging by the parking lot and the number of railcars the place must be quite busy during prime months.  First was the class, which covers safety rules and basic steam locomotive principles.  It was taught by the railroad’s machinist, who described himself as the “spare parts department.”  Next was a group visit to the locomotive cab to familiarize ourselves with the layout of controls and indicators.

    For our group, the locomotive was #40, a Mikado type built in 1920.  (The name “Mikado” became popular because an early batch of locomotives of this type was sold to the Japanese Railways.)  #40 started its life hauling logs and lumber in the West, then pulled passenger and freight trains in North Carolina until it was retired circa 1950…purchased by the Essex for restoration in 1977.  The locomotive has a rated boiler pressure of 180 psi and can generate a tractive effort of 35,000 pounds.

    On a steam locomotive, the cutoff point of steam admission to the cylinders can be controlled by the engineer.  Early cutoff lets the steam do more of its work expansively, improving fuel economy at the cost of some reduction in power.  The reverser sets the cutoff point as well as controlling the direction of travel–while the reversers on early locomotives were manually-operated and required considerable strength to operate (and sometimes led to broken arms), the reverser on #40 is a fingertip control, using air pressure to do the hard work.

    It was a drizzly and somewhat chilly day, but very comfortable in the locomotive cab. (The boiler backhead is very hot, do not touch!)  Basic controls and indicators include the throttle, the reverser, the boiler pressure gauge, the injectors, the boiler water glass, and the brakes with their associated pressure gauges.

    Read the rest of this entry »

    Posted in Business, Energy & Power Generation, History, Tech, USA | 4 Comments »

    What Will be the Fate of Brick & Mortar Retail?

    Posted by David Foster on 24th November 2018 (All posts by )

    The traditional retail industry, and the real-estate operations that provide space for it, are not, for the most part, doing too well these days.  Billions of dollars that would once–not long ago–have been purchased in a local physical space are now purchased online and shipped from a warehouse that may be hundreds or thousands of miles away.  Many services, too, that would formerly have been obtained in a local location are now obtained online…travel agencies, for example, have been largely supplanted by online services.

    So, here’s a question to think about:  What kinds of businesses are likely to continue to require local presence, and perhaps even to increase in their local presence needs?

    And what kind of businesses are currently major users of local space, but are likely to need a lot less in the future?

    An example in the first category would surely be restaurants/bars.

    An example in the second category would be, IMO, branch banks.

    Your thoughts?

    Posted in Business, Real Estate, Tech, USA | 72 Comments »

    A Critique of Electronic Health Records Systems

    Posted by David Foster on 22nd November 2018 (All posts by )

    …with extension to other kinds of application software.

    At the New Yorker, of all place:  Why Doctors Hate Their Computers.

    See also this 2012 article in the Atlantic.

    [Jonathan adds: See also this 2009 Chicago Boyz post and discussion.]

    Posted in Big Government, Business, Medicine, Tech | 8 Comments »

    Coupling

    Posted by David Foster on 15th November 2018 (All posts by )

    (No, this post is not about sex…sorry. Nor is it about electrical engineering, though it might at first give that impression.)

    The often-interesting General Electric blog has an article about drones, linked to a cloud-based AI platform, which are used to inspect power lines and detect incipient problems–for example, vegetation which is threatening to encroach on the lines and short them out, or a transformer with a tendency to overheat.  The article mentions a 2003 event in which an encounter between an overgrown tree branch and a sagging power line resulted in a wide-area blackout that affected 50 million people.

    The inspection drone sounds like a very useful and productivity-improving tool: obviously, inspecting thousands of miles of power lines is nontrivial job. But the deeper issue, IMO, is the fact that one problem in one place can propagate over such a wide area and affect such a vast number of people.  Power system designers and the people who operate these systems are certainly aware of the need to minimize fault propagation:  circuit breakers and fuses, network analysis tools,  and the technologies of protective relaying were developed, by GE among others, precisely for reasons of fault localization.  But experience shows that large-scale fault propagation still sometimes does take place.

    This problem is not limited to electrical systems.  The mention of the tree-branch-caused 2003 blackout reminded me of a passage from the historian Hendrik Willem Van Loon:

    Unfortunately in the year 1914 the whole world was one large international workshop. A strike in the Argentine was apt to cause suffering in Berlin. A raise in the price of certain raw materials in London might spell disaster to tens of thousands of long-suffering Chinese coolies who had never even heard of the existence of the big city on the Thames. The invention of some obscure Privat-Dozent in a third-rate German university would often force dozens of Chilean banks to close their doors, while bad management on the part of an old commercial house in Gothenburg might deprive hundreds of little boys and girls in Australia of a chance to go to college.

    This probably overstates the interconnectedness of the global economy as it existed in 1914, but would fit our present-day global economy very well.  (The author was talking about the origins of WWI, which he blamed largely on economic interconnectedness…not correct, IMO, but the war was largely caused, or at least reached the scale that it did, because of another type of interconnectedness…in the shape of alliances.)

    Read the rest of this entry »

    Posted in Big Government, Business, Capitalism, Deep Thoughts, Economics & Finance, Energy & Power Generation, Human Behavior, International Affairs, Trump, War and Peace | 18 Comments »

    Tariffs, Trade, and the British Corn Laws

    Posted by David Foster on 8th October 2018 (All posts by )

    Stuart Schneiderman linked an article by Robert Samuelson on the 1846 British repeal of the tariffs on food imports, which further linked an Economist article arguing that:

    With the repeal of the tariffs, instituted to protect British corn farmers, liberal economic policies ascended. Free trade, free enterprise, free markets and limited government became the rule. And the world has not been the same since.  (Schneiderman’s summary)

    To me, it is highly questionable how much the elimination of tariffs had to do with limited government and internal free enterprise. The view that the British 1846 action was economically a very good thing for almost everybody is, however, generally accepted.  From the Economist article:

    The case for getting rid of British tariffs on imported grain was not a dry argument about economic efficiency. It was a mass movement, one in which well-to-do liberal thinkers and progressive businessmen fought alongside the poor against the landowners who, by supporting tariffs on imports, kept up the price of grain…When liberals set up the Anti-Corn Law League to organise protests, petitions and public lectures they did so in the spirit of the Anti-Slavery League, and in the same noble name: freedom. The barriers the league sought to remove did not merely keep people from their cake—bad though such barriers were, and strongly though they were resented. They were barriers that held them back, and which set people against each other. Tearing them down would not just increase the wealth of all. It would bring to an end, James Wilson believed, the “jealousies, animosities and heartburnings between individuals and classes…and…between this country and all others.”

    Again, this is all mostly generally-accepted thinking.  But Stuart’s post and the links reminded me of something I read–oddly enough, in a 1910 book on railroad history.  The author (Angus Sinclair) describes the transition to steel rails (from cast iron) and the heavier trains they enabled, and then discusses the political-economic impact of this transition:

    The invention of cheap methods of making steel rails has exerted a tremendous effect upon railroad transportation, and has created social revolutions in certain part of the world…It threw many farms in New England and along the Atlantic seaboard out of cultivation; it caused a semi-revolution in farming business in the British Isles, and strongly affected the condition and fortunes of millions of people in other countries.  Irish peasants used to go in thousands to England and Scotland to work in the harvesting of grain crops and thereby earned enough money to pay the rent of their small holdings.  Steel rails and Consolidation locomotives stopped the cultivation of so many wheat fields in the British Isles that the help of the Irish worker was no longer needed…

    The woes of Ireland were merely the preliminary manifestations of hardships inflicted through the grim ordeal of competition worked out by our cheapened  methods of land transportation.  (The heavier locomotive enabled by steel rails) is steadily forcing more grain raising farms of Europe out of cultivation and is raising a demand for protection against cheap land, just as our politicians have so long urged the necessity for protection against the cheap labor of Europe.

    About 60 years ago Great Britain abolished all duties on grain…By curious reasoning the statesmen believed that this policy would not only make the British Isles the manufacturers of the world, but that it would increase the prosperity of the agricultural communities as well.  The first thirty years’ experience of free corn did not seriously  challenge the correctness of the free trade theory, for more of the American wheat lands were yet unbroken prairie or virgin forests, and our steel rail makers and locomotive builders were merely getting ready…In 1858 the rate per bushel of wheat from Chicago to New York was 38.61 cents.  The rate today is 11.4 cents…

    The effect of that cheapening of transportation in the United States has been very disastrous to Great Britain, for during the last thirty years there had been a shrinkage of 3,000,000 acres in wheat and another of 750,000 acres in green crops; an enormous amount of land had reverted to pasturage…and the number of cultivators of the soil  had declined 600,000 in thirty years–1,000,000 in fifty years.

    That is a high price to pay for the devotion to a theory which fails to work out as expected.

    Read the rest of this entry »

    Posted in Britain, Business, Capitalism, Economics & Finance, History, Ireland, Libertarianism, Taxes, Transportation, USA | 36 Comments »

    Amazon at $15

    Posted by David Foster on 2nd October 2018 (All posts by )

    Amazon is raising the minimum hourly wage for its workers to $15…this includes Whole Foods, it’s not totally clear whether or not it includes contract employees, though I’d assume it does.  Jeff Bezos has also encouraged his competitors to do the same, and indicated that Amazon will lobby for an increase in the Federal minimum wage.

    For discussion:  What will be the impact of this Amazon decision on the retail industry, on American business generally, and on American consumers?

    Posted in Business, Economics & Finance | 35 Comments »

    Humor…Machine and Human

    Posted by David Foster on 23rd September 2018 (All posts by )

    There have been some articles lately, in Financial Times and The Wall Street Journal for example, concerning efforts to give Artificial Intelligence systems something resembling a simulated sense of humor.

    Interesting research, perhaps, but at this juncture I’m less concerned above providing a sense of humor for AI systems than maintaining a sense of humor for human beings.  Several professional comedians have commented about the increasing difficulty of doing comedy in an environment of hysterical political correctness.  But even more important is the degree to which fear of denunciation and mobbing seems to be affecting personal life and workplace behavior.

    Effective organizations, at least in this country, have tended to involve a certain level of easy interaction–including kidding around–among people.  What happens when we lose this?

    I suspect that the productivity impact, although hard to measure directly, will be quite significant.  As will the impact on the happiness and mental health of individual humans.

    Posted in Business, Deep Thoughts, Human Behavior, Leftism, Management | 9 Comments »

    Quote of the Day

    Posted by Jonathan on 20th September 2018 (All posts by )

    “Of course they make a ton of money, they’re a non profit.”

    (Said by a friend who used to work for a nonprofit organization.)

    Posted in Business, Quotations | 6 Comments »

    Indy-Writing Scene; 2018

    Posted by Sgt. Mom on 18th September 2018 (All posts by )

    The indy-author scene is not the only thing which has radically changed over the last decade; just the one that I know the best, through having the great good fortune to start as an indy author just when it was economically and technologically possible. It used to be that there were two means of being a published author. There was the traditional and most-respected way, through submission to a publishing house – which, if you were fortunate enough to catch the eye and favor of an editor, meant a contract and an advance, maybe a spot on the much-vaunted New York Times best-seller list. This was a method which – according to the old-timers – worked fairly well, up until a certain point. Some writers who have been around in the game for a long time say that when publishing houses began viewing books as commodities like cereal brands and ‘pushing’ certain brands with favored places on the aisles and endcaps, and treating authors as interchangeable widgets – that’s when the traditional model began to falter. Other experts say that it began when tax law changed to make it expensive to retain inventory in a warehouse. It was no longer profitable to maintain a goodly stock of mid-list authors with regular, if modest sales. Mainstream publishing shifted to pretty much the mindset of Hollywood movie producers, putting all their bets on a straight diet of blockbusters and nothing but blockbusters.
    Read the rest of this entry »

    Posted in Arts & Letters, Book Notes, Business, Diversions, Entrepreneurship, Internet, Marketing | 13 Comments »

    Making iPhones in the USA?

    Posted by David Foster on 12th September 2018 (All posts by )

    Trump’s proposed tariff increase on Chinese imports would affect Apple products including the Apple Watch, though apparently not the iPhone itself.  Here is Apple’s response.

    And from President Trump:

    Apple prices may increase because of the massive Tariffs we may be imposing on China – but there is an easy solution where there would be ZERO tax, and indeed a tax incentive. Make your products in the United States instead of China. Start building new plants now. Exciting!

    There has been much discussion for some time about the economic feasibility of building Apple products–especially the iPhone–in the United States, and considerable new commentary in the wake of the tariff controversy.  In 2011, then-President Obama asked Steve Jobs what it would take to make iPhones in the US.  Steve’s response was that, basically, the problems were more about skill levels and cultural factors–in particular, he is said to have mentioned a need for 30,000 manufacturing engineers.

    This strikes me as a very improbable requirement.  Manufacturing engineers are the people who design and improve manufacturing processes:  I can’t imagine why you would need 30,000 of them for all of Apple’s product lines combined, let alone for the iPhone alone.  (It’s possible that the term “manufacturing engineers” was a misquote of what Jobs actually said, or the Jobs was speaking very loosely–indeed, he apparently went on to say that the people in question could be educated in trade schools.  Maybe he meant toolmakers…although also, 30,000 toolmakers sounds like an awful lot for iPhone or indeed all of Apple…or shift supervisors, or something of the sort.

    There was a Quora discussion in 2016 on the topic:  How much would an iPhone cost if Apple were forced to make it in America?  Out of all the responses, which were of various quality, Forbes chose in January of this year to reprint one that seems to me to be rather extreme:  In the $30,000 to $100,000 range…assuming it could be made at all.

    The author quotes Apple CEO Tim Cook on the skills gap between China and the US:

    … the reason is because of the skill … and the quantity of skill in one location … and the type of skill it is. The products we do require really advanced tooling. And the precision that you have to have in tooling and working with the materials that we do are state-of-the-art. And the tooling skill is very deep here.

    In the U.S. you could have a meeting of tooling engineers and I’m not sure we could fill the room. In China you could fill multiple football fields.

    The author says:

    Tooling engineering is a highly skilled position that requires years of training and experience. It is an “analog” type skill that combines artisanal craftsmanship with precision engineering skills. And as Mr. Cook alludes to later in the talk, the Chinese have developed and scaled these skills over the last three decades while the U.S. and other countries have gone the other direction and de-emphasized them.

    (The author also talks about the fact that the iPhone supply chain is now largely centered in the Far East, which is true–but “moving iPhone manufacturing to the US” does not imply that every single component or subcomponent or raw-material element in the periodic table would need to come from the US.)

    It is certainly true that the US over the past couple of decades has deemphasized manufacturing-related skill sets:  but I doubt seriously that the problem is so severe as to make the US manufacturing of a product like iPhone infeasible.  After all, cars and trucks are made in the US, and they involve quite a lot of production engineering and tooling.  Airplanes and jet engines, too, are made here, and I’d expect that the production engineering challenges for a GE or P&W jet engine equal or exceed anything involved with making an iPhone.  And there are plenty of other products and components manufactured in the US as well.

    Read the rest of this entry »

    Posted in Business, China, Trump | 36 Comments »

    Change

    Posted by Jonathan on 7th September 2018 (All posts by )

    A CFTC report explains that open interest in long-dated NYMEX West Texas Intermediate crude oil futures continues a long-term decline.

    Jessica Summers on Bloomberg:

    That’s because oil extraction has become more efficient in tight oil fields compared to conventional wells and producers have more flexibility in turning on and off the taps in response to oil prices.
     
    The increasing amount of crude coming in from tight oil in portfolios of production firms has left them with less crude to sell five or more years forward, reducing their need for long-dated futures contracts, according to the study. U.S. weekly production has skyrocketed to 11 million barrels a day, the highest level on record, according to Energy Information Administration data.

    Posted in Business, Energy & Power Generation, Markets and Trading | 6 Comments »

    China, Taiwan, and the Third World

    Posted by David Foster on 28th August 2018 (All posts by )

    China has been making many investments in third-world countries, often in exchange for resource concessions.  There is growing concern that some of these projects leave the host country with too much debt–indeed, last December, Sri Lanka sold control of its port of Hambantota to a Chinese state-owned company after falling behind in repaying $1.5 billion in loans from Beijing.  Further such situations seem likely.  (See interesting article about Chinese investment in Malaysia here.)

    China has also been accused of using aid and investment funds to influence other countries’ policies toward Taiwan, an accusation that they unsurprisingly deny…and Taiwan is now down to only one diplomatic ally in Africa, the kingdom of eSwatini  (prevously known as Swaziland.)  El Salvador, too, has recently dropped diplomatic ties with Taiwan.

    See also my recent post about Chinese influence efforts targeted at other nations, including the limiting of US film content and the firing of an American employee of Marriott for liking a tweet which offended the regime.

     

     

    Posted in Business, China, Economics & Finance, Transportation | 10 Comments »

    The Question the WSJ Didn’t Ask

    Posted by David Foster on 13th August 2018 (All posts by )

    The Wall Street Journal, on its editorial page, writes about a company called Standard Textile, whose economic viability is apparently being threatened by the 25% tariffs on imports of its main production input:  a type of fabric sourced from China and known as greige, which I believe is basically the fabric as it comes off the loom, unfinished and un-dyed.  The company is especially concerned because finished products from China which compete with its own products are tariffed at only 6.7%.   WSJ uses this example to argue that Trump is all wrong on tariffs, and does so in the rather superior manner (the title of the piece is ‘a looming trade lesson’) which is common among those who ascribe any objections to absolutely free trade as based on nothing but economic ignorance or political demagoguery.

    I will stipulate that it seems rather dumb to tariff raw materials and intermediate goods at a higher level than finished products made from these inputs.  But..is it really true that greige fabrics are available only from China?  A few minutes of searching suggests that they are available from India, and from at least some US suppliers.  Maybe there is some particular variant of the products that is only made by a specific Chinese supplier, or maybe Standard has negotiated such a great deal with their supplier that no one else will match the price–it would be interesting to know.

    The big question that the WSJ didn’t ask is:  Why is this fabric (if it is truly unavailable in the US) not manufactured here?  Textile manufacturing is not generally a labor-intensive activity, it is very different on this measure from the transformation of the textiles into apparel and other finished products.  It was one of the first industrial activities to be mechanized, and automation in this field has advanced steadily over a couple of centuries.  Moreover, textile manufacturing uses significant amounts of power, and I’ve read about Chinese firms that moved to the US specifically because the electricity was cheaper and more reliable.  So the usual arguments about why a particular item needs to be made in China or other non-US setting…labor costs, less-stringent environmental restrictions…don’t seem to really apply here.

    Most likely, greige manufacturers tend to locate in Asia and other non-US locations because that is where their customers are…’customers’ here referring not to end consumers but to apparel manufacturers and others who buy the material as an input to their own processes…and geographical proximity is of value in being able to fill orders rapidly and without excessive shipping costs.  So this is an example of how supply chains are interconnected, and how losing one industry in a chain tends to pull other industries away also.  The same point has also been demonstrated in consumer electronics manufacturing, where the supply chain is now so centered in Asia, especially China, as to make it difficult for a company to produce these products in the US even if they want to.  (And ‘supply chain’ in this sense does not include physical products, it also includes certain services.  I have been told by the CEO of a medical electronics startup that she would find it difficult to manufacture in the US due to absence of certain specialized services; I believe she mentioned RF test facilities)

    A serious analysis of America’s trade situation should involve more than quoting David Ricardo and lecturing people about their supposed economic ignorance.  The WSJ article would have been more intellectually-honest and more useful had it also given examples of American manufacturers who are benefitting from the modified tariffs; these examples certainly exist.

    Best of luck to Standard Textile.  Hopefully, (a) the tariffs, if they remain in place, will be adjusted to level the rate between imported fabric and imported finished goods, and (b) US manufacturers of this fabric will come into being.

    Posted in Business, China, Miscellaneous, Tech, Trump, USA | 20 Comments »

    CON Does Seem Like an Appropriate Acronym

    Posted by David Foster on 5th August 2018 (All posts by )

    Thirty-five states and the District of Columbia currently impose certificate-of-need (CON) restrictions on the provision of healthcare. These rules require providers to first seek permission before they may open or expand their practices or purchase certain devices or new technologies. The applicant must prove that the community “needs” the new or expanded service, and existing providers are invited to challenge a would-be competitor’s application.

    …from a Mercatus article on healthcare “Certificates of Need”, linked by The Advice Goddess.

    In most other industries, collusion of providers in order to keep supply down–and, hence, prices up–is considered an antitrust violation and can carry heavy civil and criminal penalties.

    Does anyone see any legitimate public-policy rationale for the requirement for the CONs in healthcare?

    Posted in Big Government, Business, Health Care | 20 Comments »