Saturday, August 25, 2012

The Robots are Coming!

One of the reasons the Federal Reserve bank is cutting the interest rate to near zero is a desire to encourage businesses to borrow money to start new enterprises and create new jobs. In fact businesses are mostly using this opportunity to restructure their debt at lower levels. However, there is one area where companies are making new investments, robotics and automation. American companies are doing everything they possibly can to eliminate as many employees as possible.

It is part of a trend that dates back at least 200 years to the dawn of the industrial age. (Wikipedia) “The Luddites were a social movement of 19th-century English textile artisans who protested—often by destroying mechanized looms—against the changes produced by the Industrial Revolution, that replaced them with less-skilled, low-wage labour, leaving them without work and changing their way of life. Eric Hobsbawm called machine wrecking: "collective bargaining by riot".”

In the 19th century as many as 95 out of 100 Americans were involved in agriculture. Now less than 5% of our work force produces more food than their great grandparents could possibly imagine. Mechanization, superior seed, custom blended fertilizers, and economy of scale have completely revolutionized food production. The same forces have been at work in industry for several generations. Today, flexible programmable robots and machine tools have replaced the majority of American factory jobs left in our country. They work long hours without rest, never complain, ask for a raise, or require health insurance. They make U.S. manufacturing more competitive with cheap foreign labor. This trend is returning more profits and some production to our country, but not the secure high quality industrial jobs of the past.

In a recent article, Mark Cuban, the eccentric owner of the Dallas Mavericks observed, “What has happened is that the brick and mortar world has had every bit of intelligence that can be sucked out of it completely removed. Any information that can be created, identified or recognized is being captured in as automated a process as possible and delivered to “big data” or even small data databases in the cloud. What used to require some intelligence at the brick and mortar work place has been seeded and ceded into the cloud.” The middle class job is getting squeezed out of existence by technology that replaces middling intelligence with a machine. This is not just the traditional union assembly line job in an automobile factory. It doesn’t take a genius to prepare that production report you create every week. Accounting software in the cloud can prepare an infinite number of customized reports in the blink of an eye. All it needs is a low level data entry clerk to feed it the numbers.

I can’t find the quote, but once a noted futurist was asked to predict the first applications for truly advanced robotics. He didn’t hesitate replying, "super soldiers and sexual surrogates." I would add menial labor. The military robots are already here. We call them smart bombs, cruise missiles and unmanned vehicles. It is curious that the first complete replacement of humans with computers in a military application was cruise missiles. College educated bomber pilots with diplomas and thousands of hours of specialized training were easy to replace. It turns out replacing an infantryman with a machine is a task well beyond the current state of the art in Artificial Intelligence. The 18 year old high school dropout with a cheap assault rifle and a trenching tool has been optimized by millions of years of evolution to run around the woods while attempting to kill his brother. And Oh Yes! I have recently read the Japanese are attempting to develop a robot to replace women (really!).

Stepford Wives here we come?

Even though I am familiar with the economic concept of creative destruction, I am very uneasy about artificial intelligence invading my world. Factory workers displaced by automation are not finding new jobs of equivalent quality. In the office, artificial intelligence is impoverishing many clerical jobs, turning positions that required some knowledge and skill into piecework for data entry clerks.

I know that in 20 years there will be new jobs that can’t even be imagined today. Even in today’s dismal employment situation, Mark Cuban observes, “And those cloud based service companies are hiring, hiring, hiring. You would be hard pressed to find a single example of one of these companies that is not looking to hire more smart people. Experience not required.”

He adds, “That giant sucking sound you hear is the sound of intelligence being sucked from the brick and mortar locations into smart applications in the cloud licensed or owned by the companies that own the brick and mortar locations.”

I am no Luddite but I hope that the pace of real innovation is controllably slow.

Most people are just average. Where are the new roles for these individuals? For a society to prosper rewards better be coupled to desirable behavior. "How then is wealth to be divided now that robots create the robots, that create the computers, that manipulate the knowledge that defines power in this brave new world. People are, for better or worse, what they do (that is the sum total of their various roles in society). I believe these roles do not limit us but protect us from our own mediocrity (A warehouse man in a factory can earn enough to support a family. This along with other roles such as husband, father, church deacon, union-rep etc. lead to self esteem). If an individual perceives his role in society as being a burden to his betters, should we be surprised that he becomes a member of a street gang in one of our inner cities or commits suicide in an environment like an Indian reservation or drinks himself to death in a slum in Northern Ireland?"

Freedom from work and responsibility is no answer. If too much leisure time is made available for self discovery by new applications for artificial intelligence the results for the average person may not be at all desirable. After making lumpy pots in a ceramics class and attending too many meditation seminars, we may just discover that there is nothing to discover. Will we then retreat into drugs or alcohol or perhaps, virtual reality?

Sunday, August 19, 2012


Recently, I have considered the consequences of life decisions. They are decisions we all make; who to marry, where to attend school, what career path to follow. Often these decisions are neither; good or evil, wise or unwise. They are just decisions made by imperfect beings with incomplete information that can have terrible or wonderful consequences.

I have tried to understand what consequences are so valued by individuals that the unintended second order effects are unimportant. I believe one is mastery. As I look at the lives of people my age, 60 something, some of the individuals most at peace are those who have achieved mastery.

I have a friend who dropped out of college because he discovered that he would rather work with wood than pursue a white collar career. He never earned a lot of money, but he has always been able to provide for his family. More than that, he became a recognized expert in his field. Builders specified him by name to install expensive doors on custom made mansions. His current employer has structured his job in a way that it is a testament to my friend’s knowledge and depth of experience. The imaginative designs and quality construction of his kitchens are famous in his little corner of the world. My friend is at peace with himself and the world. A long, long time ago, he made a decision to differentiate himself from the rest of his world. He followed his own path and achieved mastery.

His decision was not without unintended second order effects. Years of manual labor has taken a toll on his body. My friend and his insurance company have contributed far too much to the 401k accounts of various orthopedic surgeons.

I believe acknowledging our decisions, as our decisions, is one of the first steps towards wisdom. The second step is accepting the consequences of these decisions, good and evil, as the fruit of our labors. Then and perhaps only then, when we are willing to acknowledge and accept what actually exists; we will be able to address the problems and shortcomings in our lives.

May God have mercy on my soul.

Friday, August 17, 2012

As If Parents Don't Have Enough Worries

The other day with a mixture of pride and concern a young father was telling his friends his three year old had learned how to buy games on mom’s iPad. Evidently, mom does not lock her credit card number with a password.

Then this morning I read an article by Quentin Fottrell entitled Things Apple Won’t Tell You.

Recently an eight year old from Rockville, MD ran up a $1,400 bill on mom’s iPad playing Smurf’s Village, an app touted by Apple as a “freeemium.” The game is free up to a certain point then Beeline, the company that makes the game, charges for the Smurfberries necessary unlock imprisoned Smurfs or to build your own Smurf Village.

The online description of this game does mention the possibility of charges, but evidently 8 year old children and very few of their parents ever bother reading the fine print. Guess we know why these games are given away for free. This story did have a happy ending. Mom was given a one time reimbursement. Beeline notes iPad users can adjust their settings to block in-app purchases and request a refund if they buy an app by accident. However, when a customer enters the Apple App Store they are warned all sales are final. If you buy a bad app the chances of getting your money back are pretty small.

Saturday, August 11, 2012

Risk Reward

This is a risk and reward curve courtesy of E.J. Smith and Young Research and Publishing. What this means is that a portfolio of 100% stocks will lose about 20% of its value once every 20 years or so. That would have been more like 40% in 2008. Remember, if you lose 40% one year it will take a 66.67% increase to get even. That would be a little less than 5 consecutive years of 12% return. I remember once we had two 20 year storms in a single year.

Something to think about.

Saturday, August 4, 2012

The Briefcase Technique

This is a bad time to be unemployed. Stable, wealth producing jobs are disappearing from our country at a frightening rate. Since it has been 27 years since I last did the job search thing, I feel quite inadequate to address the dilemmas faced by today’s job seekers. From time to time I have found suggestions that seem to have merit that I could pass along to readers of this blog. The following method taught by Ramit Sethi of the “I Will Teach You to be Rich” blog seems to be most appropriate for freelancers, but the presenter also has collected data showing it works when looking for a job or getting a raise.

The foundation of this technique, indeed the foundation of all such efforts in today’s economic climate must be what the author terms, “amazing preparation.” Before approaching a potential client or employer, understand their business, their problems and challenges. Networking, research on the web, or preliminary informal conversations with low level employees who are tasked with keeping people like you away from the decision makers are all ways of collecting valuable intelligence data.

When you have finally earned an interview with a responsible manager with real decision making power bring your briefcase along with you into the room. At some appropriate point, perhaps when the subject of price or salary comes up, or when potential client or employer asks the question, “What’s in it for me?” Pull a one to five page proposal out of your briefcase and hand it to the interviewer.

Announce you have prepared this paper to detail the things you can do for the company. It should be a menu, allowing the reader the potential of selecting one from column A and two from column B.

Sethi contends the technique works because it takes the focus off you and your needs and squarely addresses the customer and their needs. He contends that one of the main reasons people are not employed is the very real fear that a new hire will require a lot of the manager’s time to train or coach them into a productive employee. Sethi also notes that managers don’t want to create anything like a five page proposal but they love to tweak and edit such proposals. In my experience this is absolutely true. Providing a manager with something they love to do anyway, seems pretty smart to me.

When applying this technique to more responsibility and a concurrent raise, at the end of the proposal include comparable salary data from a third party website or some similarly authoritative source.

Ramit Sethi The Briefcase Technique Video

Friday, August 3, 2012

Shaken, not Stirred

The other day as I was watching Quantum of Solace, I once again realized I have never had a martini, shaken or stirred made with vodka or gin. For the record, Wikipedia informs me the James Bond ordered 19 vodka martinis and 16 gin martinis throughout Fleming's novels and short stories. Several times I have though about ordering a martini; I just never got around to actually drinking one.

A few months back, I first became acquainted with the idea of a bucket list, a list of 1,000 things you want to do before you die. As I am headed toward retirement, I found the idea quite appealing. I am not exactly sure what goes into a bucket list and what would qualify as a goal (I don’t think of personal goals as the sort of thing one would find in a bucket list). Drinking a high quality classic gin martini is now on my bucket list.

Like almost everyone my age, I have regrets. One of them is never learning to ride a motorcycle. My parents had a pathological fear of motorcycles, so I put off the bike until after I graduated from college. Then I wanted to get married and life happened. I always needed money for something besides a motorcycle. The other day I drove past a Harley Dealer offering motorcycle lessons. I mentioned this idea to my wife as a possible for my bucket list. She was less than encouraging, but didn’t come down too hard on my dreams. Hmm… We shall see.

My wife has an idea for my bucket list. She would like us to learn to speak Italian. Middle school, high school and college all taught me I don’t have much talent in foreign languages but I have always thought it would be very cool to master a second language. I already know how to shout and wave my arms when I am upset. Maybe Italian would be a good choice.

I did something from my miniscule but growing bucket list, trap shooting. One of the leaders of our church decided taking the men out trap shooting would be a good thing. I enjoyed myself and actually managed to hit something. I think I would like to do that again, maybe this time with a little more instruction. I inherited my father in law’s beautiful old shotgun. What better way to put it to use?

I like the idea of a bucket list. It is good to dream dreams, even if they will not be fulfilled for many years. Of course, some items, like my martini, can be experienced whenever we actually get around to it. Financial management is hard work. There should be a time for rewards. I hope you don’t wait until retirement to begin thinking about your bucket list.