Tech

The Shape of the Future?

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Historian Niall Ferguson cites “the most succinct statement I’ve yet seen of the “massive enduring social and economic change post-pandemic” hypothesis.”

Offices>>Remote Work
NFL, NBA>>Esports
Movie Theaters>>Streaming
TV News>>YouTube stars
College>>ISAs, MOOCs
K-12>>Internet homeschooling
Corporate journalism>>Citizen journalism
EU/EEC>>27 sovereign states

I’m surprised he didn’t also include Stores>>Home delivery.

Of course, the degree to which these changes happen and are sustained will be largely a matter of how long the coronavirus pandemic lasts and how definitively it is suppressed.  But even if coronavirus continues as a recurrent plague, none of these trends are likely to be absolute.  For example: Offices>>Remote work…my own experience with  new-business initiatives, both in existing corporations and in startups, suggests that there really is a lot of advantage in the in-person human interaction. Some of these never would have gotten started in the first place unless such interaction had taken place.  And, of course, there are a lot of things that can’t be done at home, including most manufacturing and all construction work. Ditto transportation.  And I’m not sure what TV News>>YouTube stars has to do with coronavirus or other epidemics, given that neither modality need involve person-to-person contact.

Assuming that coronavirus is largely or completely suppressed, what are the long-term effects likely to be?  Are there now so many people who will have been exposed to the convenience of on-line grocery shopping that they will feel little need to visit physical grocery stores?  Will spending half a day at the mall ever again be a thing?  Will people want to be densely packed into a movie theater or will they just decide that streaming movies at home (especially with large screens that I bet a lot of people are buying under the current circumstances) is just as good and a lot cheaper?  How about airline travel (or sea travel) for vacations?

Colleges..traditionally, the on-campus college experience was (at least supposed to be valued) for free discussion and interaction with professors.  Yet much of this has already been suppressed, both via giant lecture classes and by fear of creating offense.  College was also valued for its social opportunities, especially those involving dating and mating and the finding of spouses.  Yet reports indicate that this has become pretty awkward due to the administrative sex police and their frequent condemnation of people (especially men) with no form of due process.  Plus, people are now getting married a lot later, so the pressure to find someone during one’s college years is less-strong than it used to be.

In his tweet, Niall Ferguson also makes the excellent point that “I’d be more persuaded if there were evidence of comparable changes after the (much more lethal) 1918-19 influenza pandemic.”  Although media influence in those days was much less comprehensive and continuous; also, many alternatives that exist today (such as work-from-home as opposed to work-at-the-office) really weren’t feasible in those days.

Thoughts?

Supply Chain Management in a Time of Crisis

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GE Healthcare, which is ramping up ventilator production, is using 3-D printing both to make parts directly and to make molds for injection molding.  However, the chief engineer for advanced manufacturing at Healthcare says that some of the 3D-printing companies he has been talking to are shut down due to government edicts that deemed their work nonessential.

It sounds like they will get around this barrier…“We have a map of all the companies that have excess capacity, and so we’ll divert whatever print work we need to whatever company has got the ability right now, on top of the equipment we have at GE”…but I expect that there is going to be a lot of this sort of thing. There is no way that local or state officials can understand the supply chain dependencies that exist between a seemingly-minor local business and a major national priority somewhere up a level or two (or more) in the product structure. In some cases, all it might take is a letter from the top-tier manufacturer certifying the importance of the work the supplier is doing, but in many cases I suspect that the only rapid solutions will require Federal involvement.

Crisis Remote Working: What Will be the Long-Term Effects?

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A lot of people…office workers, students…are going to be getting their first experience of remote working, and a lot of organizations are going to be getting either their first experience or a greatly expanded experience in managing this kind of work.  What will be the long-term effects of this?…will people eagerly return to their brick-and-mortar working environment as soon as it is safely possible?

Certainly, there are a lot of workers who would welcome the opportunity to avoid their daily commutes.  And there are a lot of employers who would be happy to save a lot of money on office space.

And there are surely some parents who would welcome the opportunity to keep their kids at home…there are also more than a few who have arranged their lives and their work schedules around the assumption that their kids will be in school for several hours every weekday.

Many of the remote working experiences are surely going to be suboptimal, however, given that there has been little if any leadtime to prepare systems, content, and procedures.

So what do you think?..a return to things the way they were, or permanent change?

Wages, Employment, and Productivity

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I think President Trump is quite sincere about his oft-stated desire to drive up the wages of low-income workers…especially young and non-college workers…and he does seem to be having some success at this quest.  It has struck me for a while that while this is a very good thing from the standpoint of the overall society, it is also likely to pressure business profit margins, with possible consequences for the stock market as well as for Fed policy.

Yesterday the WSJ noted that “wages for 20- to 24-year olds are increasing twice as fast as for other workers…Overall job satisfaction in 2018 was the highest since 1994.”  At the same time, “90% of blue-collar businesses report operating with unfilled positions, and 29% say this has made them reduce output or turn down business.  Rising wages together with sluggish productivity growth are crimping corporate profits.  Between the fourth quarter of 2014 and the second quarter of 2019, profits for nonfinancial corporations  declined 17% and 46% for manufacturers.   The article quotes the Conference Board:  “The US will not be able to maintain its current standard of living unless the US government acts to significantly increase immigration, improve labor force participation, and, together with employees, raise labor productivity growth.”  To which the WSJ writer adds:  “Maybe the only short-term fix is to increase legal immigration–unless Americans want to see their living standards decline and more jobs exported.”

Higher wages do of course drive productivity improvement…the US has been a pioneer in the mechanization of work in large part because it has been a high-wage country, and that mechanization has helped to enable further wage increases.  This doesn’t always require any new inventions:  there are always productivity tools available that will make sense to a business that is paying $25/hour for labor but would not make sense to one paying $15/hour.  The process isn’t instantaneous, though.

Concerning immigration as a solution to labor shortages: commentators sometimes lose sight of the fact that GDP per capita matters for broad-based prosperity, not just absolute GDP.  And the only way to increase GDP per capita is through productivity improvements and higher labor force participation rates.  Increasing the raw number of workers doesn’t do this.

The Conference Board statement appears to put a lot of emphasis on things that the government should do, and the WSJ emphasizes more (legal) immigration.  Some increases in legal immigration may well be a good idea…as would increases in American fertility rates…but the main issues, I think, are productivity and the labor force participation rate.  The actual productivity numbers don’t reflect all the talk about (and even the realities of) robotics and AI.  Maybe this is largely just a matter of implementation lags, maybe it reflects increasing bureaucratization and ‘compliance’ costs throughout our economy.

My concern is that margin pressure may lead (in conjunction with other factors, like already-high valuations) to a sharp stock-market decline, which could have electoral implications.  Such decline might also lead to many deferrals of productivity-improving investments.  Alternatively, Fed concerns about rising wage rates as a possible signal of incipient inflation could lead the central bank to increase interest rates excessively as a preventative.

And any electoral result which substantially increases Democratic party power could lead to massive upsurges in legal and illegal immigration, with consequent wage pressures, demoralizing many workers who are now on an positive track and deferring the need for productivity investments.  Any attempt to deal with such wage pressures by establishing high Federal-level minimum wages would add much rigidity to the systems, creating problems of many kinds.

Discuss, if you feel so inclined.

The Roaring Twenties, Revisited

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Here’s a piece that mentions some of the technological, social, and economic trends that were important in the 1920s, and goes on to discuss seven tipping points that the author thinks will be key in the 2020s.