A billionaire explains the middle class

On Mon, 29 Dec 2014 07:11:44 -0800, Larry Jaques





I think you guys are 'way too pessimistic about the American economy, and 'way too optimistic about the Chinese.
This is a long story, but the Chinese have been too slow to adopt international standards of quality -- sewing a straight line on a Louis Vuitton handbag is not a measure of manufacturing quality. And now they're facing much higher transportation costs and a steep rise in wages, with the Lewis Turning Point looming ahead. Like the Japanese before them, they're losing their edge on cost, but without the Japanese reputation for quality.
I talked with a Chinese representative of their tool-and-die industry in Atlanta last month. I asked them if they could make decent D2 steel yet. "Just barely," he said. Which puts them at a competitive parity with the West...in about 1950.
The long-term goal for China is to be globally competitive at competitive, not cut-rate, prices. They're hoping to accomplish market-share inroads before their costs rise too much. So far, they're not doing very well at that, in automobiles, industrial equipment, and so on. There are factories in China turning out good products but they're almost always run by Western companies, who are putting up with horrible productivity in order to gain the labor-cost savings. That will go away. Now their goal is to ride it out as the Chinese domestic consumer market expands. Their economy *must* become more consumption-based, or they're going to lose much of their export market as their costs increase.
Meantime, US manufacturing has settled into a low but sustainable percentage of our GDP. It's projected to grow in dollars, and slightly in percentage of GDP, in coming years. The rest of our economy is perking along mostly on services, and the labor-multiplier effect of manufacturing is sufficient to sustain pretty good growth.
Our economy is doing well. It's employment that's at risk, largely because of steady improvents in our productivity -- read "automation." This will become a bigger social problem and we will have to address it. But the solution will be much happier than you guys are imagining. There is nothing in the economic dynamics that suggest we're going to become a third-world country.
--
Ed Huntress

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On Monday, December 29, 2014 12:20:51 PM UTC-5, Ed Huntress wrote:

And I think you are just as wrong in you assesment.

The Japanese had no reputation for quality at the end of WWII.

We are not going to become a third world country, but we are going to be in the same league as China, Japan, and Korea. Which is a step down from where we were at the end of WWII.
Dan

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On Mon, 29 Dec 2014 14:14:49 -0800 (PST), " snipped-for-privacy@krl.org"

Your opinion is noted. <g> _The Economist_ disagrees with you. So do many other economists:
http://tinyurl.com/ky6x8ap

Thanks to W. Edwards Deming, they woke up fast, and set a new quality standard for the world. The Chinese are still mostly bottom-feeding in international markets.

Not likely. We have an innovative vitality that only South Korea can match. And they haven't been at it long enough to see how sustainable it is. In Japan, it's already largely kaput. China isn't yet out of the starting gate in that department.
--
Ed Huntress

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On Monday, December 29, 2014 6:26:01 PM UTC-5, Ed Huntress wrote:

As I read it the Economist just says that China will still be behing the U.S. twenty years from now. But what will be the situation in say forty years?

So what do you think of the Chinese Stealth Planes?

And you expect this to remain the same for forty years?

You are an optimist.
Dan

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On Mon, 29 Dec 2014 19:15:21 -0800 (PST), " snipped-for-privacy@krl.org"

Predicting 40 years ahead is beyond my pay scale.

I haven't paid attention. If they're anything like the Soviets were, their war machines are unlikely to have any positive fallout for their economy, nor to represent what they can do on a human economic scale.
But I don't know what their planes are like.

I just can't project that far ahead.

Not usually. But in this case, yes, I'm optimistic that our economy will do quite well.
I hope the Chinese economy does well, too. An equal trading partner would be very good for both of us.
--
Ed Huntress

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On 12/29/2014 8:10 PM, Ed Huntress wrote: thread getting too long...snip

It's not rocket science. It's simple math. The first order approximation to ANYTHING is to assume the current trend continues at the same slope. If you don't like the trend, saying you can't predict is not helpful. The correct course of action is to decide where you want to be in 40 years and take affirmative action NOW to point the trend in the direction you want. Any correction is better than none. Watch the result. If conditions change, or you picked wrong, just reassess the situation and adjust the vector. You must anticipate your competition will to whatever they think necessary to readjust the trend back to their preferred direction. The wind will change direction. You must keep a firm hand on the tiller.
In a sea of independent democratic (and non democratic) societies, or on a smaller scale, the US congress, you can't get agreement on anything. Can't get a majority vote on positive change, but you can sure get enough votes to kill any and all proposals. There ain't no leadership with cojones plus a willingness to admit they were wrong and the authority correct the course continuously in real time without continued infighting for control of the tiller.
Another result of multiple societies competing for dominance is that any change by one results in a knee-jerk cascade of changes to the forces on the vector. The system is rather sensitive to small changes in initial conditions. There are a bunch of societies wanting to control the vector to their advantage.
I've heard it said that if you're behind a wreck on the racetrack, head for the crash. You don't know where the cars will head, but you can be pretty sure they won't be where they are now and you might get out alive. Some action, any reasoned action, is statistically better than none.
If it were me, I'd put Snow White in charge of the economy. She's got at least seven people she can trust. That alone puts her miles ahead of anybody else you could name. Learning all about economics from scratch is far easier than getting seven economists to agree.
I'd also assign Santa Claus to her team. He's very good at nosing around to see who's naughty and who's nice. He's also got high-volume manufacturing and distribution experience well tuned to understand and respond to demand down to the individual. And a propaganda machine second to none. Few even realize there's a birthday in the mix.
Merry Christmas to all and to all a zzzzzzzzzzzzzzzzzzzzzzzzzz
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On Tuesday, December 30, 2014 3:08:14 AM UTC-5, mike wrote:

n
The problem is... it is not anything less, either.

New York Times Economist Paul Krugman wrote this in September 2, 2009 about the 2008 economic crisis:
"Few economists saw our current crisis coming, but this predictive failure was the least of the field's problems. More important was the profession's blindness to the very possibility of catastrophic failures in a market econ omy. During the golden years, financial economists came to believe that mar kets were inherently stable -- indeed, that stocks and other assets were al ways priced just right. There was nothing in the prevailing models suggesti ng the possibility of the kind of collapse that happened last year. Meanwhi le, macroeconomists were divided in their views.
-- http://www.nytimes.com/2009/09/06/magazine/06Economic-t.html?pagewanted =all&_r=0

Same to ya, but I had a rotten Christmas. Too much trouble with the gf. ;(
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On 12/30/2014 6:41 AM, snipped-for-privacy@hotmail.com wrote:

Understanding economy may not matter. Might be as simple as the aftermath of some terrorist act.

It's been said that, if you can make a fist, a gf is superfluous. If you can't make a fist, that's probably the least of the things you can't make and the gf is still superfluous. High five...other hand please. ;-)
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He needs to maintain his open hand in order to repeatedly slap himself on the forehead at his own stupidity, mike. As to the other hand, who knows where that thumb has been...
Now let's stop giving these jerks airtime, OK?
--
Poverty is easy. It's Charity and Chastity that are hard.
--anon
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On 12/31/2014 9:24 AM, Larry Jaques wrote:

I'm rather enjoying the speculation. Sure beats all the drive-by namecalling that happens in most threads. Kinda like yours 4 lines up.
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Gee, Larry normally is the happy drunk and clueless comedian. I finally see he gets all hostile and Lashes out just because somebody mentions what the ir lady friend says.
(he must have had a mighty rotten holiday season this time around)
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Decide first which trend you're going to follow. Ir it's changes in GDP growth rates, in 40 years Americans will all be rich and the Chinese won't have a pot to pee in.
'Not likely. It is not simple math. It's immensely complex.

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On 12/30/2014 7:03 AM, Ed Huntress wrote:

I'm gonna disagree. The math is simple. The hard part is deciding which crystal ball to use for the inputs.
Picking a metric and the five top things that affect that metric and taking action is far superior to arguing about how difficult it is and doing nothing. You can fix an error in your actions. You can't fix inaction.
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You're kidding yourself. Finding the things that "affect" the metric is part of how they build models. It involves a lot of statistical testing and regression analysis.
The relationships have limits and the relationships are usually calculus functions.
From there, the statistics often are complex.

When? When the event occurs? The event is 40 years in the future.

Go ahead and try it. See what you project for China's economy and the US economy 40 years from now. It's simple, right?
BTW, my son is just climbing down a ladder after re-roofing our kitchen extension. Now he has to spend the rest of the day running his latest predictive econometric model on his company's cloud-networked SPSS system. He has a master's degree in math and a degree in economics, and does econometric research and analysis for a top consulting firm. I should let him talk to you, but I ate up his spare time today by getting him to nail a square of shingles so I could repair the furnace, which kept blowing out its pilot light, and then watch TV. <g>
--
Ed Huntress

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On 12/30/2014 11:55 AM, Ed Huntress wrote:

Calculus functions are simple functions. People who know how to solve complex math are easy to find. The hard part is finding people who can decide what math is appropriate and what numbers to plug in... AND HAVE THE LEADERSHIP ABILITY OR CLOUT to take action based on the result.

Sure, they are...but the more inputs you consider, the more likely you'll encounter inaction. Start with the big factors and DO SOMETHING. Refine it as you go.

When the trajectory deviates from where you've decided it should go.
You can't just jump in your sailboat, tie down the tiller and have someone wake you up when you get there. You gotta have your hand on it at least some/most of the time. You gotta watch the weather. You gotta stay out of the way of the big ships. But, you can just get in your boat and start sailing if you've covered the big stuff in your plan. Work the rest out as conditions change. You can't predict everything. But you can sit on the dock fretting over the details and get nowhere.

The purpose of action is to CAUSE a result. China's economy is only a factor in ways that affect my objectives. I seek a high level of satisfaction with the US standard of living now and in the future. Ideally, that can be done in concert with success in China by whatever metric they value. If we can't to that, I'd be willing to sacrifice China. I'm selfish.

I'm not even a little bit interested in hearing why we're in this pickle or why it's a hard problem. It'd be far better to have him talk to someone who can actually make a difference. I'm rather pessimistic. There'll be riots in the streets before I'm seriously affected. I expect to be dead, or living in China, long before that happens. ;-)
But I do enjoy a spirited discussion.
but I ate up his spare

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Where do you get these ideas?

How do you know how to make it go where you want it to go?

I thought you said we could predict where different economies would be 40 years from now. What happened to that idea?

What do you think analysts who work for big consulting firms do? On his last job, his time was billed out at over $125,000/month ($500,000/month for a four-person team). Do you think that nothing is being done with the results?

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On Tue, 30 Dec 2014 14:55:45 -0500, Ed Huntress

</snip>
Old methodology called EvOp [Evolutionary Operations].
http://tinyurl.com/nffwfkz
You do not have to understand the process. Change a variable, for example interest rates, and see what happens. If the output moves in the "right" direction make more of the change. If the output moves in the "wrong" direction reverse the change.
Accurate record keeping is critical.
It is criminal that we allow the "leadership" to sabotage the economy everytime things start to improve for the average citizen. Things are getting better? Time for a war or recession.
--
Unka' George

"Gold is the money of kings,
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On Tue, 30 Dec 2014 15:54:02 -0600, F. George McDuffee

That'sw great! And on whom, or on what economy, do you conduct the experiments? And how do you make everything else stand still, so that you know what you're measuring?
In the kind of predictive modeling we've been talking about, without an extensive program of regression analysis, you can't separate one cause from another.

I doubt if any of them have much to do with it. In an economy like ours, there are too many variables, too few unequivocal cause-and-effect relationships, and too many confounding behaviors of masses of people. Oh, and here are too many ideology-driven theories, most of which assume that humans are uniform, rational robots. But each theory assumes that we robots have different goals and desires.
--
Ed Huntress

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Dang. I wish I were still limber enough to do that safely.

Ask him what relevance, if any, Stuart Kauffman's Origins of Order might have to to his research and analyses. And report back here with his answer.
--
Mike Spencer Nova Scotia, Canada

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On 30 Dec 2014 19:14:05 -0400, Mike Spencer

His reaction: "Stuart who?" <g>
He doesn't know about Kauffman.
--
Ed Huntress

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