Recession Statistics: August 2011

Using the St Louis FED Data we present with some commentary the Recession Stats as we have for the past three years.

First the GDP. It is lagging behind almost all other Recessions as we have seen. This will clearly be a serious problem for the current administration.

Now for its components:

Personal Consumption had been growing but as a driver of GDP it has dropped the last period.

Private Investment also dropped. This is a very bad sign going forward.

Government Consumption has also lagged as we have seen pressure on the over expansion and total ineffectiveness of the Stimulus. There clearly is no credibility in the collection of economists who has said one thing and another happens.

Exports have increased relatively showing the potential weakness of the dollar.

Imports are on norm.

Incomes are below the minimum. That is a major concern. Both as a source of tax revenue and in terms of the pressure downward. Perhaps the only good news is the low pressure on any inflationary trend.

Industrial production is slowly increasing but with low incomes there is little hope of that continuing.

Finally Retail Sales seems to be on par.

Net, this Recession is far from over and signs of a second dip are evident.

This Really Sounds Like Throwing Grandma Over The Cliff

The report from the Hill states:

Failure of Congress to pass the future deficit-reduction package would automatically trigger cuts to defense spending and Medicare. An aide familiar with the deal said the Medicare cut would not affect beneficiaries. Instead, healthcare providers and insurance companies would see lower payments. 

Now one must remember that you must take Medicare at 65, or forfeit it forever, and if perchance you do then your providers must accept what they get paid. Now if Congress slashes payments you lose your providers because you are not allowed by law to pay them any more than what Medicare states.

Now if they reduced the payments but allowed you to make up the difference that is one thing. But these characters have let loose the hounds of hell! Everyone over 65, almost everyone, is caught in this debacle.

Just pay what you will but make it legal for us to make up the difference!

Interest Rates Would Increase: The Other Side

The more I hear that people will have to pay higher interest rates, greater than 3% or so, the more I am amazed. You see there are two sides to this issue. For every dollar loaned there is someone getting interest because they are loaning the dollar. Thus if I have all cash and you still want to borrow money, because you cannot get your business to generate cash, then I would be more than willing to loan it at much higher rates.

You see there are two sides to this argument. One is easily solved, stop borrowing! Yes, you really don't need those new whatever. That of course means lower GDP but how much lower will it get. But if you want it then it will cost more, and in fact it will cost what it should without the FED artificially lowering the interest rates. Perhaps this action will result in an economic balance. Interesting thought!

The Nonsense in Universal Service

There is an article in The Hill regarding the "reform" of Universal Service. Fourteen year ago I wrote a piece on Universal Service. Simply Universal Service is an $8-10 Billion give away by the FCC to rural telcos. It makes small operators quite rich in the process. It allows them to provide local telephone services at rates almost equal to the local CATV provider but in turn it makes them confiscatory profit.

Change the system? One would think so. Get rid of it! Yet the Hill states:

The plan comes one day after a bipartisan group of lawmakers called for reforming the $8 billion fund, which subsidizes phone service for low-income and rural residents. The FCC proposed reforming the $4.5 billion high-cost portion to focus on broadband deployment in the National Broadband Plan.

 Namely they want to move it from the left pocket to the right and may very well increase the costs to the telco users in urban areas. It continues:

The plan unveiled a day later by the telecom firms, including AT&T, Verizon and CenturyLink, attempts to achieve those ends by re-directing the high-cost USF funds to deploy broadband access where there is currently no business case for carriers to provide service. 

 If there is no business case then why do it! This is another "tax" we could cut and we should cut now. Also it would eliminate almost half the FCC as well. That of course is another issue. The FCC was set up originally to do two things: (regulate spectrum, and (ii) manage the monopoly. Well the monopoly is gone and they have turned spectrum management into a fund raising mechanism. But if we managed and taxed spectrum on a real time basis then this would be no problem. I suggested how to do that a few years ago as well. That would totally eliminate the need for the FCC, from a pragmatic sense as well. It would eliminate a lot of plum jobs however and that is something Washington cannot do.

In a sense the USF is the Deficit/Debt crisis in miniature. Namely we could save money and make things more efficient except for the politicians.

The GDP and the Economy

The GDP has a very sluggish growth despite the words from our wonderful macroeconomists who predicted a turn about with the Stimulus. I always come back to Romer's report on January 11, 2009 on how things would turn out. Not a recommendation for the new Delphi oracle to say the least. The above shows the change in GDP since early 2008.

The above shows the components.

A look above at Government expenditures shows that State and Local are slowly building after a drop from their explosive growth but that the Defense spending is still moving forward at an unlimited rate. It is clear that we need to cease that and in fact re-trench substantially. A Defense cut of $50B pa is not unrealistic now. In fact a cut of $60B is achievable by returning forces and acting with a pure Special Forces mindset.

Also the non Defense spending has risen almost $100B and this too can be cut back.

These do NOT include Medicare and SSI. Needless to say we can do a great deal there. Thus it is possible to achieve a $500B cut from the Federal budge and then add easily a 10%-15% reduction on entitlements and we are on a good standing.

The above depicts the change by Quarter. Note the drop in the early part of the Recession but the growth has continued.

Finally we re-emphasize the Govt changes. Defense still remains an issue. This is especially disconcerting since we are allegedly winding down. There is also the issue as to where such expenditures as Homeland Security and CIA/NSA/NRO etc are hidden.

Another View of Interest Rates

There is a fear of increasing interest rates. We all know that the FED has pressured them down by its printing of money. Let us first look at M2 and the Monetary Base.

Clearly we have a growing M2 and an exploding Monetary Base. Trillions are pressed into the banks and the MB now is approaching $3 Trillion.

Now consider a simple retiree. Say they had $1 million in the bank and wanted to live off the interest. Independent of any real inflation, they would have to inflate their earnings at a rate which we will show so as to keep the same annualized payout. Thus if they had $1 million and the annual rate was 5% they got $50,000 pa. But if they want $50,000 pa and the interest is 3%, they must have well over $1.5 million. The rate at which the base must increase is an imputed inflation. We show this below assuming a 10 year Treasury.

 The above shows the 10 year rate as well as the calculated inflation due to the decreasing rate. This imputed inflation is in addition to the actual cost inflation. Thus we see  that for someone on a fixed payout from a seemingly risk free investment they will see an added inflation rate of from 5-10% pa due to the FEDs manipulation of the MB.

Now if the Treasury defaults, and if the money was in cash, then they can buy in at a higher rate and reduce the FEDs inflation. Thus it is to the advantage of those with cash assets to see a default!

Physics is not Economics

In an interview in the Washington Post the former head of Harvard came across as I gather he has always done, well, he just seems to know more than any of us humans.One should be reminded that on January 11, 2009 the incoming "team" of which he was a dominant player issued a proclamation on what the Stimulus would do. NOT!

Now in physics when you say x will happen and it never does, in fact NOT x happens, one must go back and review the theory. Apparently this does not apply to macro types, especially ones with rather large egos. I have seen lots of types like this but they are also right when they predict some outcome. When whatever you predict never comes about one would think some humble pie is in order. Does not seem to be the case here.

As the wizard of Cambridge says:

There are multiple aspects of  this question.  First, the administration proposed considerably more than Congress was willing to enact. Taking account of the addition of the AMT, the Administration’s Recovery Act proposals were cut back by about 20% in the process of passing Congress by very narrow margins.

Second, the President’s economic team advised that there was essentially no danger of excessive fiscal stimulus in 2009.  I joked at the time that worrying about overdoing fiscal policy was like my losing too much weight and becoming anorexic — a conceivable possibility, but very far from the dominant risk.  The President’s political advisers — rightly in my view — constrained the initial stimulus proposals to avoid sticker shock and rejection or great delay on Congress’s part.  

Third, politics aside there were difficulties in moving spending rapidly in 2009.  So-called shovel-ready projects often were not in fact ready to go. Almost everyone close to the process feels that (the VP) and his team did a very good job of moving the stimulus money through the system and, as a consequence, money moved more or less on the schedule we projected in 2009.  They would be the first to say that it would not have been possible to move vastly more money into quick trigger infrastructure projects. Of course it would have been possible to increase the tax cuts or assistance to state and local governments, but there were severe political limits in both those areas.

Fourth, we believed in the winter of 2009 that if, as seemed likely, more stimulus would ultimately be required, it could be passed through the Congress using the unemployment insurance extension for 2010 as a vehicle.  This view proved incorrect. The administration proposed and the House passed in the fall of 2009 a substantial further program with respect to unemployment insurance, job incentives and infrastructure.  Unfortunately it did not pass the Senate and the focus has shifted very much towards deficit reduction rather than job creation.  It is fortunate that the President was able last fall to lead an effort to pair extended tax cuts with payroll tax reductions — without that stimulus we might be looking at a double dip today. 

 Fortunately we did not go over the cliff. Anyone who has worked in capital intensive industries knows the lead time. If you have never done a real days work then you would have no clue. So, shovel ready, great phrase, totally empty.

Imagine more stimulus. There is some crazy assumption that by the Government putting money in the hands of those ill equipped will somehow generate business is insane. Just look at the broadband program. One suspects that most of that money will be totally wasted. I suspect so.

And yes, perhaps there are some people who should worry about weight loss!

Where Are the Jobs?

Now here is an interesting quote from The Hill:

Rep. Joe Crowley (D-N.Y.) was even more direct.

"Mr. Speaker, where is the jobs bill?" Crowley asked. "Your caucus ran on creating jobs and yet [there's] not [been] one single bill in 200 days of Congress to create a single job."

Perhaps the good Congressman does not understand, the Government does not create jobs, unless of course you mean Government employees, but those are not real jobs, they are after all Government employees. 

Business creates jobs, entrepreneurs create jobs, and the problem is that they, and that includes me, have been sitting by wondering if it is worth the risk. This is as bad as the 1972-1980 period. We all sat around wondering then. Now, perhaps because of age, it really seems worse.

Jobs are created by risk takers who see an opportunity and then add their intellectual capital and take the risk to start, and then they rely upon the financial backers, those rich folks, to provide added investment. Now make the environment so uncertain that you drive away the risk takers and tax the rich so there is no investment capital and what does one get, you are experiencing it.

And what can Washington do? Not what it has done of late. So the very idea that Washington can create any real value producing job is insane. The more stuff Washington creates the more that is taken from the economy. Just look at that great idea of a Stimulus! Perhaps the Republicans are right, no jobs bill is the jobs bill!

My Local Used Book Store

I have a small used book store in town. It has been there for decades. It survived the Borders, it survived Amazon, it survived Kindle. Why? It is cheap, it is some what friendly, it has interesting stuff, and it is a walk away.

Borders tried to be too much to too many. I do not think I bought anything from them in a decade. Not that I did not look.

There is a piece in the Boston Globe which I believe totally misses the point. It bemoans the loss of Borders. It states:

Speculations abound concerning the deeper effects of screen technologies on a thoughtful inner life, and it is too soon to mourn the death of reading altogether. People love their e-books. The disappearance of the public book shelf, though, is not unrelated to the blatant new illiteracy that shows itself, at one end, in the shrinking number of published book reviews, and, at the other, in today’s shallow political discourse. Junk opinion replaces the astute analysis that only careful and well-edited authorship provides. ...The business of Borders might be replaced online, but the web that matters most is intangibly of the spirit, and Borders was one of its master weavers. This is the death to mourn - and take warning from.

 Spirit of Borders, I think not. I have placed drafts of my books on line. The get down loaded by the dozens every day, all over the world. Once in a while I get comments. Rarely dd that happen with my Wiley books. I can write things that have a 1-2 year life, such as on health care, and then there are others with a longer life. Is it worth the trouble of getting something published or just getting the ideas out there. Since I no longer worry about tenure, or getting the PR, I can do this. My younger colleagues cannot. But perhaps soon they will.

So is Borders a loss, not at all. What spirit are we talking about! Stuff is out there, and Amazon is making a fortune selling it, and there are tons available on line free.

The issue is what is the purpose of publishing. Making money for the publisher. Sometimes for the author. If that is what you want then stay put folks. If however you are a Thomas Paine and you want to get your ideas out, this is the time to live in. Paine paid to have Common Sense printed and distributed and he took the profits and gave them to Washington. Unlike the classic Harvard Prof in Newton or Lexington, who forces students to but a $200 book, an on line thinker just wants some one to read and perhaps understand his ideas. That is where we are today, that is the new spirit.

Means Testing: Medicare and Krugman

For once I agree with Krugman. Means Testing for Medicare is a mess and not that productive. He concludes:

So what’s the difference between means-testing and just collecting a bit more taxes? The answer is, class warfare — not between the rich and poor, but between the filthy rich and the merely affluent. For a tax rise would get a significant amount of revenue from the very, very rich (because they have so much money), while means-testing would end up imposing the same burden on $400,000 a year working Wall Street stiffs that it imposes on billion-a-year hedge fund managers... What we need is actual control of health costs. Means-testing of Medicare is just a badly designed, unfair form of taxation.

Of course part of the issue is what do we mean by means? Is it income or total wealth. If I have been frugal all my life and have a bit stashed away for my old age yet do not make a massive amount in what is called income, namely I get interest and dividends, then what am I taxed upon? The Baby Boomer who blew everything and has a sky high mortgage and a trophy spouse gets the benefit of my frugality?

That is another way to look at Krugman's stand. Namely not just what you are earning but what you have created. If you have just destroyed whatever wealth you have, albeit your choice, then I have no duty to bail you out.

Obesity: Pigouvian vs Coasean Solutions

As I have been writing for the past few years, obesity leads to Type 2 Diabetes, leads to all sorts of expensive stuff. Today the NY Times has a quite lengthy article reinforcing the fact and suggesting taxing calories. They state:

Rather than subsidizing the production of unhealthful foods, we should turn the tables and tax things like soda, French fries, doughnuts and hyperprocessed snacks. The resulting income should be earmarked for a program that encourages a sound diet for Americans by making healthy food more affordable and widely available.... A study by Y. Claire Wang, an assistant professor at Columbia’s Mailman School of Public Health, predicted that a penny tax per ounce on sugar-sweetened beverages in New York State would save $3 billion in health care costs over the course of a decade, prevent something like 37,000 cases of diabetes and bring in $1 billion annually. Another study shows that a two-cent tax per ounce in Illinois would reduce obesity in youth by 18 percent, save nearly $350 million and bring in over $800 million taxes annually. 

Well we demonstrated a bit more but it is Columbia after all.  At least this time they seem to be going in the right direction. But folks, it is the carbs not the fat. Carbs seem to be the main driver as we discussed. But put that aside.

We can approach this in two ways:

Pigouvian: Tax the thing. This is the Times' author's suggestion. Last year I had a bit of a flap with a Harvard Professor who opposed that, you see, this will work. You get to attack the source. You say:

Calories lead to obesity, obesity leads to Type 2 Diabetes, and Type 2 Diabetes leads to all sorts of costly things, so we the Government want to stop that behavior from the start and to do so we will tax it. Could also work with drugs logically but that is another story. But let us assume that the Pigou approach works. It is an ex ante approach and its intent is to inhibit bad behavior. Another view is its tax is to pay for abusing the calorie limits. But it puts the burden on the abuser. The only question is who gets to keep the money for what? My suggestion is the money goes into a non Government pool to pay for Type 2 Diabetes sequellae. If it runs out then the sick must ante up themselves. They must know that from the start and be reminded constantly.

The Coasean approach is as follows:

Health care costs are shared. If you decide to overindulge and get obese, then you add substantial costs to the system which I must share in. You have thus taken my property, my money via higher costs, and thus I have a right to sue you. The Government has an obligation to facilitate that at no cost and ensure payment. This is an ex post facto approach. It would apply only to added health care costs incurred by life style diseases. Yes that include obesity related diseases, alcohol, sexually transmitted diseases, smoking and the like. Get sick by choice and I get to sue you!

Now the tax approach works because we have used that again and again. It also is better in being ex ante. But it denies freedom of choice for those Libertarians. The Coasean approach is great for Libertarians for two reasons. It allows choice and it punishes publicly the offenders!

 It is interesting to wonder why the Times looked solely at the Pigouvian world.

How Not to Do a Deal

Now over the years I have done a few deals, hundreds. Not the greatest number, but enough to understand what works and what does not. Now I have done these in over twenty countries. I even did a $100 million closing which ran from Athens to Palo Alto, ten hours, seven languages, and it all had to close simultaneously.

Now I have learned what works and what does not.

1. Written term sheets. Yes you put down what you agree to and what you don't in writing. You see words count. They really do.

2. Compromise. Understand what is un-doable and then compromise on the rest. I have even flipped a coin on items which were doable but in contention.

3. Make clear who is negotiating. The person negotiating must have the power to make certain decisions and it must be clear what he must bring back to the boss.

4. Never have the final decision maker in the room during negotiations. You always want time to review.

5. Never, never, allow multiple teams to negotiate. That is a sure way to go unstable.

6. Have your own team together. Keep them focused.

7. Be honest. Loss of trust in negotiations is deadly and a deal killer. Say what you mean and mean what you say.

8. Understand the culture of the other party. Where does he come from, what are his goals. There may be no chance of meeting them. If so walk away.

9. A deal is not a deal until the money is in the bank, for a week! Promises are not deals. The become the basis for law suits. Clarity is only obtained by actions not words. Words is what law suits are about.

10. Focus, focus, focus. Understand what you want, communicate it unambiguously, and act honestly.

Now look at the current budget process. It will fail. Then what. Experience is essential, egos must be set aside, and some form of pragmatism must apply. Look at the Palestinian issue, there is a clear solution, namely do something, and then get more, but you may not be able to get everything up front. Same for the budget and deficit and debt limit.

Hennessey has been doing a great analysis of the politics of this issue. Those interested in the details should read his write up. What comes to the fore are two things; an committed idealist with no real life experience will have a tough time, and if they are also possessing of a great ego, it may never work.

The Law: Is a Degree Necessary?

The NY Times has a collections of comments on the need for Law School. Now Law is not like Medicine, you have to know a real body of knowledge there. In the case of Law, you can read it and you can apprentice it.

Take a contract for example, studying contract law is interesting but it rarely helps write a contract. The only real help to writing a contract is to write a contract, hundreds and perhaps thousands. And watching what goes wrong, reading other contracts, and the like. It is truly the business of an apprentice. Academic lawyers rarely know contracts, the theory at best, yes, but the practice, rarely.

Now take Torts, or the game of getting even. Form frequently is as important as facts. Learn from other torts filings and learn how to frame your argument in tort format, but the key is the trial, convincing a jury. That is the development of a style that is rarely if ever attained at law school. The ability to get the best from your witnesses and the disclosure of the worst from theirs.

Now take Administrative Law, the dominant body of law we deal with today. It is almost all process, and how to work the system. I have seen this before the FCC and a plethora of Governmental bodies, State and Federal, it is pure process.

Finally Criminal Law, and here experience and style count for everything. One need look no farther than some of the cases of late. Style, the ability to manipulate a jury is as important as the number of cases under one's belt.

All of this can be accomplished by "reading" the law, by that I mean real law, and by apprenticing, namely doing real law.

Thus why have Law School at all, just to make money? It is not like Engineering or Medicine, where labs and real stuff is required. In the law you get a desk and some one talking. It is a real farce to charge almost a quarter million dollars for three years, and then to award an ersatz doctorate!


One of the authors in the piece above states:

That education also deals with the relationship between law and society as well as the manner in which law is both used and transformed in action. Whether the questions involve constitutional protection for undocumented children or cloning or climate measures or the parameters of humanitarian intervention or the ownership of the resources beyond our gravitational field, the best in legal education prepares its graduates to participate in the discourse and arrangements necessary to such complex concerns. It is true that the cost of this quality education, all in, may exceed $200,000. The value of a new generation of law graduates prepared to take on these challenges: Priceless. 

The important question may not be cost but, rather, access. What will we do to insure that talented people from all groups in our society, especially those historically excluded, have access to this course of study about the arrangements of power? And how do we insure that all groups in society, including our public and governmental institutions, enjoy the services of our brightest and best prepared? 

 If the author of this piece sees law school as correcting societal issue or in educating more humanitarian lawyers, then so much the better, but why force all to go through the process. The issue should be passing a Bar Exam, and a Law Degree does not guarantee that. In fact experience is a better marker here.

Finally why should a Law Degree cost so much, it has no infrastructure costs, except the professors. So my thought is just let anyone sit for the Bar, and that solves everything.

The Debt: Remeber it is an ARM

The National Debt is not just debt, it is an ARM, an adjustable rate mortgage. Prof Shiller, and I assume one who should know better since he looks at real estate a bit, states in Project Syndicate that:

The fundamental problem that much of the world faces today is that investors are overreacting to debt-to-GDP ratios, fearful of some magic threshold, and demanding fiscal-austerity programs too soon. They are asking governments to cut expenditure while their economies are still vulnerable. Households are running scared, so they cut expenditures as well, and businesses are being dissuaded from borrowing to finance capital expenditures. The lesson is simple: We should worry less about debt ratios and thresholds, and more about our inability to see these indicators for the artificial – and often irrelevant – constructs that they are.

The reality is that as we start to see inflation hit we will see interest rise greatly. Most of the Treasury lending is short term and it will adjust rapidly. That will drive up interest payments.

Now look at the total debt by interest rate in Bills, Bonds and Notes. First Bills:

 Now for Notes:

We have a great deal at the low end but there is still a substantial tail. Now if inflation occurs we will see that explode. We have about $1 trillion in this long term and about $6 + trillion in short term. That really is the problem.

The Bonds then are:

Note here that we have the clumping at the low end but it does go well above 4 and above 5%! That would mean a 10X increase in interest. Shiller seems to ignore that fact. The RM effect can and will cause havoc on the economy unless we halt deficit and reduce the debt!

Of course the left wing economists who pushed this scheme that got us where we are think in line with Shiller. As they state:

High unemployment also lowers long-run economic growth, but we aren't we putting nearly as much effort into that problem as we are into austerity. Where are the White House meetings with key Republican leaders over what to do about the unemployment problem? True, Republicans might not show up show up for such a meeting, but so what? Pictures of empty chairs at a meeting focused on helping the unemployed would send a strong message about what really counts for the GOP. Unfortunatley, Democrats seem to have forgotten about the unemployed as well -- right now all the chairs are empty -- and that sends a strong message as well.

But as one who has created jobs a few times in my lifetime I can assure the academics who have never bet the ranch on a business that (1) Washington never created a real job, just look at NASA and the Space Shuttle, lots of money to launch science projects, (2) real jobs are created by risk takers who see a reward, and with the current Administration they want to tax both income and wealth. Why do anything until the dust settles.

Happy Birthday Mendel

Mendel did peas I do Hemerocallis. In honor of the good monk Mendel I have done a few extra today and depending on what comes out we can name one for him.

Brno in the Czech Republic is a small town, to the East of Prague and home of Mendel. It is worth a trip if one ever gets there, fine place.

The Navy: Where Is It Going

It is interesting to read Admiral King's Report from 1945 to the President regarding what the Navy did during the war. The above is a summary of ships of the line manufactured during WW II. These were all built then, not before or after. 349 Destroyers, 203 submarines, and almost 500 DEs!

Now let us look at the present:

This is it folks. 61 Destroyers. There is at best one third at sea at any time. It depends on whether there is enough fuel available. And who has the credit card to buy it, really! I wonder what the Chinese know, they just got the Canadian oil sands.

There are ten carriers, with at most 4 at sea at a time. A few frigates and 14 ballistic missile subs. When one looks at this and remembers the losses to ships in battle, it really does not take much to cause some harm.

Chilling thoughts. Where is Admiral King when we really need him?

Disease, Definition and Destiny

Lyme disease is one of those ailments which has in many ways become a cult. Difficult to diagnose at time, and also difficult to treat, it is often a clinical diagnosis. Having been one who encountered the problem and its sequella, namely Bell's Palsy, I can on the one hand appreciate the issue but also as one who has seen the near cult like groups spending what appears to be billions on treatments with less than any clinical basis, I am wondering what is up.

People often like to know that they have a disease, it helps define them, they get to wear a ribbon, a wrist band, get to go to support groups, but often it is not the disease but other psychological factors driving the sense of having a disease.

Now autism also falls in this area. Dr Frances in Project Syndicate has an interesting and telling piece. He states:

Not long ago, autism was among the rarest of disorders, afflicting only one child in every 2,000-5,000. This changed dramatically with the publication in 1994 of DSM IV (the manual of psychiatric diagnosis widely used around the world). Soon, rates exploded to about 1 per 100. And a large study in South Korea recently reported a further jump to 1 in 38 – an astounding 3% of the general population was labeled autistic. What is causing this epidemic and where are we headed?

 As he continues all of this growth is due to a change in definition. The DSM IV and soon the DSM 5 allows diagnosticians the broadest latitude to diagnosis these psychological disorders. Unlike say a melanoma, which at times may have some difficulty, there are no well defined boundaries in autism. Parents often like to have a diagnosis for a poorly behaved child, for it surely is not their fault that the little brat just will not conform to society. So out comes autism.

Imagine that 1 in 38 children have the disease, then if so we will have an explosion of exorbitant special education classes and the like. Perhaps the parent just has not done their job, for the left the child in the care of some third party, they continually hand the child off but at the same time tell the child that they are "special" and soon the little one really blieves and acts out the tale they are told.

With DSM 5 it is likely that we will get back to the massive amount of psychological disorders we once saw in the 1950s. Won't that drive up health care costs.

China, Oil, Canada

China has purchased a Canadian oil sand producer according to the BBC. Did not see this one in the NY Times.

The BBC states:

The deal - which must be approved by regulators - is the latest move by state-run Chinese firms to buy stakes in North American oil producers. Canada's Alberta province is believed to have the third-largest reserves of oil in the world. However it is far more expensive to extract oil from Canada's oil sands than from conventional fields. CNOOC says it will pay OPTI shareholders $34m, but will also take on the firm's $2bn worth of debt. The firm's main asset is a 35% stake in the Long Lake oil sands project in Alberta. The International Energy Agency (IEA) predicts that in the next five years almost half of global oil demand growth will come from China. Rising demand for oil and significant cash reserves have led Chinese energy firms to buy into foreign oil reserves.

As the US struggles with its own confused energy policies one continue to see the well managed Chinese economy move steadily forward. In the case of the current Administration the US would ban any such production. Strange folks!

Office Space

I read an article in the NY Times and its commentary regarding office space. It made me think back.

First, in the early 1960s I had my first real job at NY Telephone, suit, even hats. The office was a thousand square foot space with grey desks side by side and telephones from the 1920s hanging from the side of the desk. No air-conditioning and they all went out for martinis at lunch. I even think smoking was allowed and of course no women. It was a monastery scribes' room with suits rather than robes. Coffee breaks were duly observed and everything was in paper.

Then when at NYNEX, soon to be Verizon, I had a room the size of a modest NYC apartment, a conference room, a bath, a secretary room, and even dishes. I was not all the way on top but it was clearly a select group of Bishops and Cardinals, sans color.

When we started my company I had everyone go out to Staples, buy their own desk, transport it back to the cheap office space and assemble it themselves, me included. I still use that $175 desk, it has many fond memories.

In Prague we had a redone apartment, I and my Czech staff shared a set of connected desks, no phones, just mobile, and I overlooked the oldest Synagogue in Europe, and the Golem store. My local COO, yes he worked for me, was a Canadian ex-pat who insisted on his own suite, expensive furniture, secretary etc. He lasted about four months. Then back to the team crammed in on one another.

So what does the office culture of a company reflect? Good questions. Cubicles are dehumanizing, open space is equalizing, and there are times one needs the privacy of a conference room. Yet it all depends on what you do for a living I surmise.

Interesting article but I feel it really missed the point, in fact all the points. Form follows function, I have heard that, architects spout if frequently, but one of my best offices was in the wooden shacks left over from WW II at MIT which housed the Radiation Lab. Mice, drafts, and all!

Google, McLuhan, Academics and Reality

There is a recent article in Science by some researchers who comment on the loss of :knowledge" in a world where there is an intellectual crutch like Google.

When I was young my grandmother made me complete a 1,000 piece puzzle every Saturday before I could have my small handful of M&Ms or Kraft caramels. Puzzles are a reasonable metaphor for the Internet and Google. We assemble new knowledge by getting the pieces that Google presents and from that we can assemble a new picture. At least that is the way it works for creative people. It add substantial value to the human race. I can go out and reassemble pathways for cancer generation, look at the genes, look at the SNPs that may cause problems, look at microRNAs and the like and then share my thoughts with other. It is a new medium and the knowledge that it creates is a new form of knowledge.

But some people believe that Google has a negative side. It makes them rely upon the computer for the storage on knowledge. I suspect the same concern was there when alphabets were developed and we relied less upon oral memorization, and then books, and on and on. Clearly people worried that we would forget arithmetic when we used a calculator.

Avogadro’s Number, Planck’s Constant, Boltzmann’s Number, length of a single carbon to carbon bond in Angstroms, and the list goes on. What is important to remember. Well 2.54 centimeters to the inch is good and 5,280 feet to a mile. That helps. Anyone who has taken Organic Chemistry knows that the reactions are memorized and soon forgotten for the most part. Yet I recall most of the Krebs’s cycle, why? Now for a physician, human anatomy is remembered enough to pass the Board exam, then most likely 90% forgotten until clinical practice gets one to think that this nerve passes through this boned, which is impacting on this, …, well you get the idea.

As I wrote a few decades ago, before Google, but in clear anticipation of it:

To fully understand multimedia it is necessary to explore the work of two sets of major thinkers. The first is Marshall McLuhan and the second is Winograd and Flores. McLuhan, in Understanding Media, and Winograd and Flores in Understanding Computers and Cognition have complemented each other in a way in which their convergence of ideas lays the ground work for "Understanding Multimedia Communications". We shall be relying on these two sets of authors for a guide through the development of the meaning of multimedia. McLuhan has been discredited of late because of his simplistic views. We shall argue and shall attempt to show, that this may be a direct result of the critics, frequently the Pop Press, not understanding how perceptive McLuhan was in his more academic treatises. McLuhan will be the definer the "bright line" that results when a paradigm shift occurs in a new medium.

Winograd and Flores are the other set of lights that the author shall rely heavily upon. Unlike the Pop writers of the above definitions, Winograd and Flores have developed one of the most seminal works in the areas of computers and computation  that have ever been done. These authors have used access to the most recent philosophical understandings of knowledge and knowledge processing from a philosophical perspective to develop a philosophy for computing, especially software development. We shall, in this paper, develop and extend these concepts for the multimedia area.

To quote Drucker, who paraphrased McLuhan;

"Did I hear you right," asked one of the professors in the audience, "that you think that priting influenced the courses that the university taught and the role of university all together." "No sir," said McLuhan, "it did not influence; printing determined both, indeed printing determined what henceforth was going to be considered knowledge."

As Sparrow et al state:

The advent of the Internet, with sophisticated algorithmic search engines, has made accessing information as easy as lifting a finger. No longer do we have to make costly efforts to find the things we want. We can “Google” the old classmate, find articles online, or look up the actor who was on the tip of our tongue. The results of four studies suggest that when faced with difficult questions, people are primed to think about computers and that when people expect to have future access to information, they have lower rates of recall of the information itself and enhanced recall instead for where to access it. The Internet has become a primary form of external or transactive memory, where information is stored collectively outside ourselves.

The authors conclude with:

These results suggest that processes of human memory are adapting to the advent of new computing and communication technology. Just as we learn through transactive memory who knows what in our families and offices, we are learning what the computer “knows” and when we should attend to where we have stored information in our computer-based memories. We are becoming symbiotic with our computer tools (8), growing into interconnected systems that remember less by knowing information than by knowing where the information can be found. This gives us the advantage of access to a vast range of information—although the disadvantages of being constantly “wired” are still being debated (9). It may be no more that nostalgia at this point, however, to wish we were less dependent on our gadgets. We have become dependent on them to the same degree we are dependent on all the knowledge we gain from our friends and coworkers—and lose if they are out of touch. The experience of losing our Internet connection becomes more and more like losing a friend. We must remain plugged in to know what Google knows.

But I had also written:

The important observation that McLuhan makes is not often understood. He really means that the medium defines what is knowledge. A new medium, as a general construct, will define a new knowledge base. We all too often define knowledge so obtained with truth. In fact, truth is that relative reality that we find comfortable to our understanding, and all too often ascribe an absolute character to it. The essence of this paper will deal with these two issues; knowledge as defined in the McLuhanesque sense, and truth as a phenomenological expression of that knowledge. Multimedia communications will alter those definitions and will dramatically change the way we see, think, and ultimately act. We argue, for example, as with McLuhan, that television violence, for example, changes what is knowledge, the acceptance of moral norms, and this change in moral knowledge is reflected in the truths of everyday existence. The expansion of multimedia communications will take this minor concern many levels higher. Thus multimedia communications is a technological issue, a philosophical consideration, and ultimately a moral imperative.

So is Google good or bad, or is the McLuhan construct the key. Namely the new medium defines the new knowledge. We rarely memorize Homer, yet it was created to be memorized and recited. We see knowledge moving from oral, to written to being in a nether world of digital domains.

The point to make is simple, Google is progress, a massive amount of progress. It expands the human's ability to access and correlate data, information, and to create new linkages. For anyone who started as I did in a paper library, it was the slowest process ever. On line searching was cumbersome, costly, and less than productive. You paid a fortune for the article. But Google sets a new threshold, I can find what I need as I am creating. It changes the way I think, the way I write, the way things get done.

What the authors seem to be speaking of is the useless socializing on the Internet, the telling of others just what they had for lunch etc. I had a Facebook account driven by my MIT students but after a while saw it as not only a wast of time but as a mechanism which built a persona of me based on the persona of my Facebook friends, and I often did not agree with or even like what was being developed. Google allows me to work as I need to. It will change the way we think, and yea as McLuhan said, it will change what we perceive of as knowledge.