On DOGE and government efficiency: bad software, bad regulations, underfunded commitments and more

I spent six years as a mid-level (regional) federal bureaucrat in VHA. I'm also a tech and economics geek with 20 years experience at a very large publicly traded corporation and through our children I have extensive experience as a consumer of federal government services. Lastly I don't have to worry about offending employers or colleagues.

All of which is to say that if you want to think about President Musk's government efficiency push these thoughts may be helpful.

1. The Federal government hires a lot of people to work around both software limitations and a rats nest of Congressional mandates and regulations that may have been well intended but are now obsolete and harmful. The mandates and regulations are only added, never removed.
2. Much of the federal government is outsourced to huge consulting firms that benefit from both less awful internal software and freedom from many federal mandates and regulations (famously including many laws constraining law enforcement). They take a large cut for themselves so their net efficiency effect might be positive or negative. If government became more efficient then much of that outsourcing should be reversed -- but that would drastically reduce campaign donations and post-political employment for public servants.
3. Government software quality was pretty good in the 80s and into the 90s. I've seen some good work in past few years, often by a very quiet semi-volunteer SV cohort that was brought in by Obama, survived Trump I, and continued through Biden.
4. The Federal government lives by unfunded mandates and underfunded commitments. Inefficiency in many forms is a major way to reduce spending on those commitments. A more efficient government would employ far fewer people but would spend more money. The net effect might be negative.
5. If software quality were improved, even without removing dysfunctional internal mandates and regulations, large numbers of working class American would lose what are often low paying but secure high benefit jobs. Even as the overall economy has far less to offer the non-academic class than it did even 20 years ago. Inefficient government employment is a model for what we will need to do for most Americans as our AIs develop.
6. The main reason federal software quality is poor is because federal software procurement follows rules set up in the 1980s to reform defense department purchasing and because of mandates designed to support military veterans and historically disadvantaged populations. These rules are incompatible with creating and maintaining complex software.
7. If government switched to modern software platforms there would be a huge expenditure to upgrade IT infrastructure.

That's about all I have. I know there are others who can offer far more detail, but they will usually be unable to speak freely. If you are a journalist I suggest hunting down other retired mid-level federal bureaucrats.

Warfare goes to the elite

Once upon a time tens of thousands of New Yorkers moved paper from one file cabinet to another. Once upon a time there were jobs for strong bodies. Once upon a time you could be blue collar and middle class.

Once upon a time anyone could be a warrior …

Special Operations Troops Top Casualty List as U.S. Relies More on Elite Forces

… “We’ve moved out of the major combat operations business,” said Linda Robinson, a counterterrorism expert at the RAND Corporation. In recent years, she said, the military has effectively outsourced rank-and-file infantry duties to local forces in places like Afghanistan, Iraq and Syria, leaving only a cadre of highly skilled Americans to train troops and take out high-value targets…

Now the physical and cognitive elite dominate warfare. Automation and globalization — in this case drones and outsourcing to local infantry.

Trump didn’t come from nowhere.

Making of the modern pop song - fusion of the corporate and the anonymous individual

Bruce Springsteen and the E Street Band was the apex of my popular music connection. In a weird adventure of late childhood I attended Winterland's (San Francisco) last-but-one performance — featuring Springsteen.

These days my kids control the radio. So I hear a lot of country-pop and pop-pop. I assumed that music was made more or less the same way that Bruce did his work 30 years ago.

I couldn’t be more wrong. This month’s Atlantic Magazine included a short article that was the most surprising thing I’ve read in years [emphases mine]. It’s a review of John Seabrook’s book ‘The Song Machine’...

Karl Martin Sandberg, Mikkel Eriksen, Tor Hermansen and Other Songwriters Behind the Hits of Katy Perry and Taylor Swift - Nathaniel Rich, The Atlantic

The biggest pop star in America today is a man named Karl Martin Sandberg. The lead singer of an obscure ’80s glam-metal band, Sandberg grew up in a remote suburb of Stockholm and is now 44. Sandberg is the George Lucas, the LeBron James, the Serena Williams of American pop. He is responsible for more hits than Phil Spector, Michael Jackson, or the Beatles.

After Sandberg come the bald Norwegians, Mikkel Eriksen and Tor Hermansen, 43 and 44; Lukasz Gottwald, 42, a Sandberg protégé and collaborator who spent a decade languishing in Saturday Night Live’s house band; and another Sandberg collaborator named Esther Dean, 33, a former nurse’s aide from Oklahoma who was discovered in the audience of a Gap Band concert, singing along to “Oops Upside Your Head.” They use pseudonyms professionally, but most Americans wouldn’t recognize those, either: Max Martin, Stargate, Dr. Luke, and Ester Dean.

Most Americans will recognize their songs, however. As I write this, at the height of summer, the No. 1 position on the Billboard pop chart is occupied by a Max Martin creation, “Bad Blood” (performed by Taylor Swift featuring Kendrick Lamar). No. 3, “Hey Mama” (David Guetta featuring Nicki Minaj), is an Ester Dean production; No. 5, “Worth It” (Fifth Harmony featuring Kid Ink), was written by Stargate; No. 7, “Can’t Feel My Face” (The Weeknd), is Martin again; No. 16, “The Night Is Still Young” (Minaj), is Dr. Luke and Ester Dean….

… The illusion of creative control is maintained by the fig leaf of a songwriting credit. The performer’s name will often appear in the list of songwriters, even if his or her contribution is negligible. (There’s a saying for this in the music industry: “Change a word, get a third.”) But almost no pop celebrities write their own hits. Too much is on the line for that, and being a global celebrity is a full-time job. It would be like Will Smith writing the next Independence Day.

… We have come to expect this type of consolidation from our banking, oil-and-gas, and health-care industries. But the same practices they rely on—ruthless digitization, outsourcing, focus-group brand testing, brute-force marketing—have been applied with tremendous success in pop, creating such profitable multinationals as Rihanna, Katy Perry, and Taylor Swift...

.... “It’s not enough to have one hook anymore,” Jay Brown, a co-founder of Jay Z’s Roc Nation label, tells Seabrook. “You’ve got to have a hook in the intro, a hook in the pre, a hook in the chorus, and a hook in the bridge, too.”

Sonically, the template has remained remarkably consistent since the Backstreet Boys, whose sound was created by Max Martin and his mentor, Denniz PoP, at PoP’s Cheiron Studios, in Stockholm. It was at Cheiron in the late ’90s that they developed the modern hit formula, … Seabrook describes the pop sound this way: “ABBA’s pop chords and textures, Denniz PoP’s song structure and dynamics, ’80s arena rock’s big choruses, and early ’90s American R&B grooves.” ... music is manufactured to fill not headphones and home stereo systems but malls and football stadiums. … Session musicians have gone extinct, and studio mixing boards remain only as retro, semi-ironic furniture.

The songs are written industrially as well, often by committee and in bulk. Anything short of a likely hit is discarded. The constant iteration of tracks, all produced by the same formula, can result in accidental imitation—or, depending on the jury, purposeful replication….

… Hits are shopped like scripts in Hollywood, first to the A-list, then to the B-list, then to the aspirants. “. The most-successful songwriters, like Max Martin and Dr. Luke, occasionally employ a potentially more lucrative tactic: They prospect for unknowns whom they can turn into stars. This allows them to exert greater control over the recording of the songs and to take a bigger cut of royalties by securing production rights that a more established performer would not sign away...

… K-pop, a phenomenon that gives new meaning to the term song machine. Lee codified Pearlman’s tactics in a step-by-step manual that guides the creation of Asian pop groups, dictating “when to import foreign composers, producers, and choreographers; what chord progressions to use in particular countries; the precise color of eye shadow a performer should wear in different Asian regions, as well as the hand gestures he or she should make.”

In K-pop there is no pretension to creative independence. Performers unabashedly embrace the corporate strategy that stars in the United States are at great pains to disguise. Recruits are trained in label-run pop academies for as long as seven years before debuting in a new girl or boy group—though only one in 10 trainees makes it that far...

Of course it’s hardly surprising that pop songs have evolved to match the most common interests of the biggest audience. What fascinates here is the fusion of the modern corporate model with the peculiar talents of three Scandinavians and one American, and the purity of “star power” required of the modern pop performer.

I wonder when the nsAIs (non-sentient AIs) will displace those Scandinavians. Apple is famously vertical and AI-pop is the obvious next step after K-pop.

I’d love to read a Madonna essay on the topic, she seems now a bridge between the old world of Springsteen and the new world of Katy Perry. 

Salmon, Picketty, Corporate Persons, Eco-Econ, and why we shouldn't worry

I haven’t read Picketty’s Capital in the Twenty-First Century. I’ll skim it in the library some day, but I’m fine outsourcing that work to DeLong, Krugman and Noah.

I do have opinions of course! I’m good at having opinions.

I believe Picketty is fundamentally correct, and it’s good to see our focus shifting from income inequality to wealth inequality. I think there are many malign social and economic consequences of wealth accumulation, but the greatest threat is likely the damage to democracy. Alas, wealth concentration and corruption of government are self-reinforcing trends. It is wise to give the rich extra votes, lest they overthrow democracy entirely, but fatal to give them all the votes.

What I haven’t seen in the discussions so far is the understanding that the modern oligarch is not necessarily human. Corporations are persons too, and even the Kock Brothers are not quite as wealthy as APPL. Corporations and similar self-sustaining entities have an emergent will of their own; Voters, Corporations and Plutocrats contend for control of avowed democracies [1]. The Rise of the Machine is a pithy phrase for our RCIIT disrupted AI age, but the Corporate entity is a form of emergent machine too.

So when we think of wealth and income inequality, and the driving force of emergent process, we need to remember that while Russia’s oligarchs are (mostly vile) humans, ours are more mixed. That’s not necessarily a bad thing - GOOGL is a better master than David Koch. Consider, for example, the silencing of Felix Salmon:

Today is Felix's last day at Reuters. Here's the link to his mega-million word blog archive (start from the beginning, in March 2009, if you like). Because we're source-agnostic, you can also find some of his best stuff from the Reuters era at Wired, Slate, the Atlantic, News Genius, CJR, the NYT, and NY Mag. There's also Felix TV, his personal site, his Tumblr, his Medium archive, and, of course, the Twitter feed we all aspire to.

Once upon a time, a feudal Baron or Russian oligarch would have violently silenced an annoying critic like Salmon (example: Piketty - no exit). Today’s system simply found him a safe and silent home. I approve of this inhuman efficiency.

So what comes next? Salmon is right that our system of Human Plutocrats and emergent Corporate entities is more or less stable (think - stability of ancient Egypt). I think Krugman is wrong that establishment economics fully describes what’s happening [2]; we still need to develop eco-econ — which is not “ecological economics”. Eco-econ is the study of how economic systems recapitulate biological systems; and how economic parasites evolve and thrive [3]. Eco-econ will give us some ideas on how our current system may evolve.

In any event, I’m not entirely pessimistic. Complex adaptive systems have confounded my past predictions. Greece and the EU should have collapsed, but the center held [4]. In any case, there are bigger disruptions coming [5]. We won’t have to worry about Human plutocrats for very long….

See also

• Princeton Study: U.S. No Longer An Actual Democracy
• Justice Stevens Suggests Solution for ‘Giant Step in the Wrong Direction’
• Economist Receives Rock Star Treatment
• Transcending Complacency on Superintelligent Machines. Hawking, Russell, Tegmark and Wilczek
• The Piketty pessimist | Felix Salmon
• Frustrations of the Heterodox - Krugman

and from my stuff

• Ants, corporations and the great stagnation 12/2011
• Speculation: The corporate ecosystem and American stasis 11/2010
• Corporate growth and the unexpected triumph of central planning 11/2012
• The debt ceiling: Can Goldman Sachs win if the US defaults? 4/2011. 
• Mass disability goes mainstream: disequilibria and RCIIT 11/2011
• The limits of disaster predictions: complex adaptive systems 2/2007
• Fermi Paradox: The solution set is stable 3/2013
• Apologetics: God and the Fermi Paradox 11/2010 (Sort of related :-)
• Sympathy for Economists 8/2013
• The new history is deep history 4/2010. Democracy is but the blink of an eye.

- fn -

[1] I like that 2011 post and the graphic I did then. I’d put “plutocrats” in the upper right these days. The debt ceiling fight of 2011, showed that Corporations and Plutocrats could be smarter than Voters, and the rise of the Tea Party shows that Corporations can be smarter than Voters and Plutocrats. Corporations, and most Plutocrats, are more progressive on sexual orientation and tribal origin than Voters. Corporations have neither gender nor pigment, and they are all tribes of one.

I could write a separate post about why I can’t simply edit the above graphic, but even I find that tech failure too depressing to contemplate.

[2] I don’t think Krugman believes this himself - but he doesn’t yet know how to model his psychohistory framework. He’s still working on the robotics angle.

[3] I just made this up today, but I dimly recall reading that the basic premises of eco-econ have turned up in the literature many times since Darwin described natural selection in biological systems. These days, of course, we apply natural selection to the evolution of the multiverse. Applications to economics are relatively modest.

[4] Perhaps because Corporations and Plutocrats outweighed Voters again — probably better or for worse.

[5] Short version — we are now confident that life-compatible exoplanets are dirt common, so the combination of the Drake Equation (no, it’s not stupid) and the Fermi Paradox means that wandering/curious/communicative civilizations are short-lived. That implies we are short-lived, because we’re like that. The most likely thing to finish us off are our technological heirs.

Will we get a $5000 custom app development business?

There are a lot of apps I want that that I can't find, apps like a personal-corporate search tool, or a corrosion-resistant wiki, or adding a graph navigation (link) layer to a plain text repository.

I know enough about building software that I can, fairly quickly, make up an initial set of requirements that I'm reasonably sure are a good match to readily available toolkits and technologies. I can quickly revise them to match timelines and resources. It's a bit of an odd knack but it's one I have.

There are architects I know who can, in an hour, lay out how to build to those requirements -- including specifying platform options and toolkit alternatives.

The first step is free for me. For $1K-$2K for 1-2 hours work I can find good people to do the second step.

Things get tricky when we try to turn this into code. Anyone who has done outsourcing knows that there's a gap between the theory of Ugandan MOOC grads wanting to work for $20/hour and the reality of high school quality coders who work for a year before moving into management. Not to mention little details like testing.

Open source only works if the app is something the developers themselves want to use ... and that's a special case.

So for $2K I can only get to the pre-coding step given today's methods for organizing paid work ...

Complexity and air fare pricing: Houston, we have a problem.

Early in my life air travel was almost as expensive as today. At that time, however, we had travel agents and competitive service. It was hassle free.

Later air travel was inexpensive and hassle free. The world felt smaller.

Then it became complicated -- but travel software made up for lost travel agents. We were ahead of the airlines.

Now, it's not so good. It's not just the security hassles. It's not just that the cost of a Minneapolis to Montreal trip has gone up 20% a year for the past four years (now doubled, Hawaii and Europe are cheaper).

It's also that planning a plane trip has become absurdly complex. Complex like choosing a cell phone plan, getting a "free" preventive care exam, managing a flex spending account, getting a mortgage, choosing health insurance, reading mobile bills, fighting payment denials, or making safe product choices. Complex like the complexity collapse that took down the western world.

I blame it all on cheap computing. Cheap computing made complexity attacks affordable and ubiquitous. [1]

In my most recent experience with information asymmetry I found tickets on US Airways for $490 (1 stop) on both Bing and Kayak. When I added a 2nd traveler, however, the price of both tickets increased by $100. (This was harder to spot on the US Airways site as they list deceptive prices, hiding all the "additional fees" airlines carved out to disguise price increases.)

A bit of research (time is how we pay our complexity tax) revealed this happens when the 1st ticket allegedly uses the last "cheap" seat on a flight. The next ticket costs more, and because airlines are loathe to confess this they increase the price of both. That may be so, but it means there's a great incentive to have a few cheap seats that will attract hits from travel sites, but that will turn into high price tickets for the 2nd passenger. This doesn't even have to be planned, natural selection means this kind of emergent "happy accident" of complexity, once discovered, will be leveraged.

This has costs. Maybe high costs. We pay them either by cash lost to legal frauds, or we pay them in time. I think they have more do with the lesser depression than most admit.

It would probably be cheaper for me to just pay my fraud tax to the airlines, but of course I'm not going quietly. I'm studying the (now obsolete) tricks of the trade [2]

• Shop Tuesday at 3pm ET
• Start shopping 3.5 months before departure, buy prior to 14 days
• Tues, Wed and Sat are cheapest days to fly

[1] In the words of James Galbraith (emphases mine): "... The financial world, as it exists, has nothing to do with the commodity world of real exchange economics with its delicate balance of interacting forces. It is the world of technology at play in the form of quasi mass produced legal instruments of uncontrolled complexity. It is the world of, in other words, of evolutionary specialization in the never ending dance of predator and prey...
[2] Seems like there's opportunity for outsourcing complexity management to a new age travel agent and their equivalent for managing the complex scams of everyday life. I fear, however, that only a few of us realize we need help.

Update: Twelve hours after posting I was able to buy both tickets for a total of $200 less than the Saturday price. Same times and planes. I learned ...

• Email alerts are worthless. I think they're just a way to harvest email for spam (we live on Planet Chum). Instead I took advantage of a Kayak feature -- they save the last search in a short list on main screen. I refreshed this twice daily. Between Saturday night and Sunday night I was able to get both prices at the listed price.
• I had to keep referencing the search results Kayak provided. The US Airways site kept substituting the flight I didn't want as the "preferred option". I took me 4 runs to get it right. It's hard to explain what they were doing but to succeed I had to carefully track all the flight numbers.
• Kayak passed my reservation to US Airways as 2 adults. The flight was 1 adult and 1 child. I suspected I needed the Kayak reference to get the price I wanted. Kayak passes its request through URL parameters (only sort of works) so I edited the URL parameter to 1 adult and 1 child.
• US Airways makes pointless use of Flash to animate simple result display. This is revealing.

See also:

• Arms race in the market: Dynamic vs. predictive pricing 7/2006
• The best time to buy a plane ticket 7/2007 - Wed

Bright side: Apple's computer for the rest of us

It's not the best of times. Long Depression 2.0 grinds on. China is increasingly unsettled -- and it's sitting on one of history's great bubbles. American corporations may have decided the American middle class is finished, done in by globalization and IT enabled automation and outsourcing. Spear phishing (Chinese?) caught white house "aides" (Obama?). Core security systems have been compromised. Peak Oil. Pakistan, North Korea, Yemen. The ChromeBook costs 200% too much. Weather badness and rising CO2.

Worst of all, I can't buy a quality dehumidifier at any price.

It's a bit much, even for me. I've got to find some happier things to say -- even if I've got to dig deep.

Today's happy thought - in Fall 2011 Apple will be make my Jan 2010 prediction true ...

Gordon's Notes: Computing for the rest of us: The iPad and the ChromeBook (Jan 2010)

.. The iPad's a pretty thing, but the combination of iVOIP and the return of the Mac Plus and the keyboard and $10 iWorks apps and the $15/month no-contract 250MB limited data plan might shorten Jobs time in Limbo.

... the 2010 [3G] iPad is more than $500 - but by 2011 the device will sell for under $500 with 3G-equivalent capabilities. An additional $15 a month will provide basic VOIP phone services (uses very little bandwidth) and access to email and Facebook Lite -- even before the advertising subsidies kick in. Of course free Wifi access, such as in libraries, McDonald's, schools and so on will provide access to full internet services....

... Think about your family. If it's big enough, your extended family will have at least one person who's, you know, poor. They may have cognitive or psychiatric disabilities. Or you may have a family member who, like most of American, can't keep a modern OS running without an on call geek. These people are cut off. They can barely afford a mobile phone, and they won't have both a mobile phone and a landline. They will have little or no net access. They may have an MP3 player, but it's dang hard to use one without a computer.

By 2011 the combination of a $400 iPad (and iTouch for less) and $15/month VOIP access will start to replace a number of devices that are costly to own and acquire, while providing basic net services at a rate that other family members can subsidize. Not to mention something pretty, which, speaking as someone who grew up poor, ain't a bad thing...

Apple's iCloud [3] and iOS combination mean most families won't need an energy sucking, loud, unstable, unsupportable, malware infested winbox. They will buy a signed-code curated app library iPad with integrated backup and offline media libraries [1]. They will also, unwittingly, accept FairPlay DRM -- which is the best balanced DRM system I've lived with [2].

This will make the world a better place.

Of course there's a silky black lining to the silver cloud, but let's not go there just yet ...

See also:

• The $80 ultra-portable - in unexpected form 9/2010
• Cricket’s $149 Android and the future $4000 Dell desktop 10/2010 - Post-PC predictions
• Buying my Chrome OS (XP) Netbook 7/2009 (Except I didn't. Now I'm buying a MacBook Air.)
• Why you will live in an iOS world 12/2010 - Signed code, curated software
• Computing for the rest of us: The iPad and the ChromeBook 1/2010
• I, Cringely - iCloud’s real purpose: kill Windows

[1] If money is tight however, and a user foregoes home internet service for the $15/month iPad data plan, they really don't want to be streaming their media library. They'll want to do their iPad backup at a local cafe or library.
[2] It's so good it's silently accepted. It's freakin' brilliant and Apple gets no credit. Of course they don't want credit -- because they don't want anyone to notice it. 
[3] In all the iCloud discussions so far there's mention of Apple's prior efforts at iTools, .Mac, and MobileMe. Few remember the 1980s AppleLink (later the basis of AOL when it was interesting) and the 1990s eWorld. Sixth time lucky?

Google Chromebook - disappointing, but a glimmer of hope

Google's long, long delayed "Chromebook" is out.

... Google Launches Chromebooks with Samsung and Acer: Tech News and Analysis

Acer’s Chromebook will start at $349, and Samsung’s model will be priced $429 for its WiFi model and $499 for a model with 3G connectivity...

A price of $150 would be interesting. $100 without batteries would be exciting. $350 and up is just sad. My prognostication rep just took a big hit.

This is more interesting ...

Google Chrome Blog: A new kind of computer: Chromebook

... we’re also announcing Chromebooks for Business and Education. This service from Google includes Chromebooks and a cloud management console to remotely administer and manage users, devices, applications and policies. Also included is enterprise-level support, device warranties and replacements as well as regular hardware refreshes. Monthly subscriptions will start at $28/user for businesses and $20/user for schools.

Completely outsourcing all IT services, including hardware support, isn't pathetic -- especially for public schools. So there's a glimmer of hope for the ChromeOS, but I bet the Parental Controls will be a disaster.

See also:

• The $80 ultra-portable - in unexpected form (9/10)
• Computing for the rest of us: The iPad and the ChromeBook (1/10)
• The $125 Barbie B-Smart Netbook of 2011 (1/09)
• Squeezed 2009: Netbooks, Android and Microsoft

Rework reviewed

I wanted to like Rework by Fried and Hannson, but I feel like I overpaid.

To say it's a short book is an understatement. This is pretty much it:

• Simplicity is the only winning formula.
• Don't hire until quality falls.
• A successful private company can get by with very few employees by outsourcing utility functions (details on this may be in their other book)
• Meetings are bad, but distributed teams need to get together every three months or so. Evidently whatever those teams do together is not "meeting". Whatever "meeting" is.
• True productivity works with a balanced 45-50 hour week -- but when you're doing a startup you should sacrifice sleep and keep your day job.
• You can make money by reselling the detritus of corporate activity, like this book.
• Cash flow is king, be positive early.
• Build enough to sell, then build what you need to keep selling.
• Customers can't tell you what they need.
• Don't fear customers graduating from your services (but I wager they don't make it easy for customers to migrate their data).
• Don't surrender ownership early -- wait until you're a proven company.
• Only hire talented writers - regardless of the position

The book isn't worthless. About two thirds of it feels right, which is better than the average business book. On the other hand, I don't buy average business books.

I'd recommend a pass on this one. Do pick it up at the library or a used book store. $8 would be a fair price.

The Great Waste: Cyclical, Structural, or Both?

Structural unemployment occurs when the skills and culture of the workforce are a bad match for the demands of the market. For Marketarians there can only be two kinds of unemployment - structural and voluntary [1]. This follows because the Market is all wise, and the Market saith "Thou Shalt not Waste Inputs".

Since we obviously have substantial involuntary unemployment and underemployment, a Marketarian must believe this Great Waste is structural. If it is structural, there is nothing to do [2].

Despite some childhood flirtations I an not a Marketarian. Still, I'm sympathetic to the notion of structural unemployment. I've been expecting it for over 10 years. Between globalization, the rise of the machine and the whitewater world I find it easy to imagine that we are facing a structural employment problem. Krugman seemed to agree 3 years ago. Robert Reich is a structuralist today.

Unsurprisingly, The Economist, the modern bible of Marketarians [3], thinks US unemployment is structural too. They point to IT changes...

... In the 1970s and 1980s employment in quintessentially middle-skilled, middle-income occupations—salespeople, bank clerks, secretaries, machine operators and factory supervisors—grew faster than that in lower-skilled jobs. But around the early 1990s, something changed. Labour markets across the rich countries shifted from a world where people’s job and wage prospects were directly related to their skill levels. Instead, with only a few exceptions, employment in middle-class jobs began to decline as a share of the total while the share of both low- and high-skilled jobs rose (see chart)...

The development of information technology (IT) is the leading candidate. Computers do not directly compete with the abstract, analytical tasks that many high-skilled workers do, but aid their productivity by speeding up the more routine bits of their jobs. But they do directly affect the need for people like assembly-line workers or those doing certain clerical tasks..

... the economists find that industries that adopted IT at faster rates (as measured by their IT spending, as well as their spending on research and development) also saw the fastest growth in demand for the most educated workers, and the sharpest declines in demand for people with intermediate levels of education...

In recent writings, however, DeLong and Krugman tell us today's unemployment is not primarily structural (see also). The patterns of widespread unemployment (no labor mismatch) and concomitant deflation don't fit the structural story.

I am largely persuaded by their arguments, but I wonder if we might have both. Perhaps  demand driven unemployment might mask a structural problem?

That occurred to me yesterday. Fortunately Krugman monitors my thoughts so he's already responded ...

... Is it possible that there has been some rise in structural unemployment that’s swamped by a much larger rise in cyclical unemployment? Yes, conceivably...

Aha! Trust me on this -- I run Krugman in an internal simulation. I know what he's thinking. Krugman secretly believes that we do have a serious structural unemployment problem, but atop that we also have a cyclical unemployment problem. (FWIW, My DeLong simulation holds the same secret suspicion.)

Rationally, we should tackle both the cyclical and structural causes of the Great Waste.

Alas, we're not so good at rational these days.

[1] They would further claim that significant structural unemployment is primarily a result of government distorting the (perfect) market.
[2] I can imagine quite a few ways to approach structural unemployment, but that's a cardinal sin for a Marketarian -- akin to planning the overthrow of heaven.
[3] It wasn't always so bad. In the late 80s to early 90s The Economist was a great newspaper.

See also (mostly mine):

• Mass disability and Great Depression 2.0 - 3/2008
• Employment in the Great Stagnation - 8/2010
• Post-industrial employment: adjusting to a new world - 5/2010
• Economics focus: Automatic reaction | The Economist (9/10 - IT spending has hollowed out labor markets)
• Causes of the Great Recession: China, GPSII and RCIIIT. Now for Act III 4/2010
• Neo-Feudalism: Return of the Trades - 2/2004
• Jared Bernstein & Brad DeLong on "Outsourcing": a dialog with interesting discussions 3/2004
• Krugman on globalization: how to manage the losers 12/2007
• Robert Reich's Reason : A Terse Review 5/2004
• Andy Grove on the Need for US Job Creation and Industrial Policy « naked capitalism 7/2010
• The Speculist: What if the Jobs Are Never Coming Back? 4/2010
• Robotic Nation, by Marshall Brain 7/2003

Update 9/29/10: My Krugman simulation is robust. Just as I suspected.

The Corporation - what next?

In my seventh year within the fascinating, feudal, emergent machinery of a classic publicly traded corporation I volunteered to write a white paper about supporting internal collaboration for shared services. I wrote a post in 2008 asking about examples of systems to enable such collaboration.

I can't share the final paper here, but the conclusions were unsurprising. I think they are true of any corporation of significant size.

In the absence of internal markets, contracts, and currencies, true corporate collaboration requires either accounting system reorganization, or serious executive pressure, or some sort of baby-sitting coop style internal currency. All of these things are very hard to do; ironically collaboration outside the corporation is easier (see also - outsourcing) [3]. For example, executive power, like Presidential power, is a limited currency that must be used sparingly. [1]

I felt when I wrote the paper that I was walking old ground, but my real expertise is in health care and more esoteric domains. I didn't know how to follow this trail.

Later I learned I was intersecting the path of Ronald Cause and his 1937 paper The Nature of the Firm [3]. Alan Murray describes the paper in a recent WSJ article on the future of the corporation ...

The End of Management - Alan Murray - WSJ.com

... British economist Ronald Coase laid out the basic logic of the managed corporation in his 1937 work, "The Nature of the Firm." He argued corporations were necessary because of what he called "transaction costs." It was simply too complicated and too costly to search for and find the right worker at the right moment for any given task, or to search for supplies, or to renegotiate prices, police performance and protect trade secrets in an open marketplace. The corporation might not be as good at allocating labor and capital as the marketplace; it made up for those weaknesses by reducing transaction costs.

Mr. Coase received his Nobel Prize in 1991—the very dawn of the Internet age. Since then, the ability of human beings on different continents and with vastly different skills and interests to work together and coordinate complex tasks has taken quantum leaps. Complicated enterprises, like maintaining Wikipedia or building a Linux operating system, now can be accomplished with little or no corporate management structure at all...

I wasn't quite following Ronald Coase however; I was intersecting him. Seventy years after his paper was published, I came from a world where intra-corporate transaction costs were higher than extra-corporate costs. By 2007 collaboration within a typical large corporation had become more difficult than similar collaboration with an external agent.

Why did this happen? That's a rather interesting question. I expect there are publications on it, but they'd be hard for me to find. I wouldn't be be surprised if the costs of intra-corporate transactions are higher in 2007 than in 1937, and that the costs of extra-corporate transactions are substantially lower. The balance has shifted.

So why does the Corporation persist?

Well, for one thing, entrenched institutions are like cities of the northeast or trees tangled in the tropical canopy. They don't collapse overnight just because their sustaining systems are gone. The publicly traded corporation is deeply embedded in American law (including taxation law), accounting standards, international treaty, and politics (senatorial ownership). It's going to be around for decades to come.

Beyond mere inertia, however, Corporations are awfully good at economic warfare; a mode of operation more in the province of Macchiavelli's The Prince than standard economics texts [4]. Microsoft was once the master of this economic warfare, Intel still is. This mode of operation actually destroys customer value, but it's not going away.

Even though the 20th century Corporation will persist, but better and for worse, it's clear we're in one of those times of cranky dissatisfaction where the ancient Monster of the Market is looking vulnerable. We can at least hope there will alternatives.

Murray's sources don't know what those alternatives will be, and they seem reluctant to speculate. His prescriptions are a rehash of the usual management book pap - "agile, flexible, ruthless, cut their losses, lots of bets, Google [5], inspire, entrepreneurs, push decision-making down, wisdom of crowds, feedback, change, innovation, adaptability" , blah-blah-blah.

For my part I've been looking for good speculation since 2006, and I haven't come across much. I wrote up some of my thoughts last June, and some speculations by Iain Banks yesterday. I'm behind on reading Clay Shirky's 2008 book, I suspect I'll have some follow-up posts when I do that.

I'm guessing that we'll somer interesting variations emerge over the next decade. Some of them will resemble Apple (Singaporean model of the brilliant tyrant in what's effectively a public-private corporation), some Google (natural selection - creates sharks and tapeworms), and some may come from China (what is Foxconn [6]?).

I'm hopeful that within a decade I'll be able to invest in privately held companies where the owners have major organ systems in the game. I wouldn't mind working for or owning a part of one of those companies.

Interesting times.

See also

Gordon's Notes

• How big should financial firms be?
• Wanted: examples of publicly traded companies with accounting solutions that support internal collaborative projects
• Beyond the first cause: Deepwater Horizon and the publicly traded company
• Troubled capitalism: The corporate entity
• The corporation as psychopath (2004 - The Economist, lost to a paywall now)
• Canopy Economics (2004)
• Why do corporations exist - theory of the firm (Oct 2010)

Others

• Big and Small - The Baseline Scenario
• Schneier on Security: Here Comes Everybody - Review
• Coding Horror: Revisiting The Facts and Fallacies of Software Engineering
• A Freakonomics Contest: The Coase Theorem Online
• Baby-sitting the economy - Paul Krugman - Slate Magazine (2008)

Footnotes

[1] I concluded that any collaboration must be informal. This can work because are many employees will, for a minuscule amount of recognition and commendation, happily share their work. (Unless their private knowledge becomes job security - which is a bit of a big caveat.)

So the question becomes how best to enable informal networks of internal collaboration at a time when personal connections within corporations have greatly weakened.

If I were (heaven forfend) running a publicly traded company I would require my IT department to choose a network sharing environment that supported search and discovery, and I'd train people to use it. I think you could actually do this on a large scale using an improved version of Microsoft SharePoint wiki (the rest of SP is an unredeemable disaster) and its companion search and discovery services.

This is hard stuff to do in hard times of course, and in easy times it does not seem necessary.

[3] Yes, all these Wikipedia links do have special meaning in this context.

[4] Christiansen's original Innovators Dilemma is one of the very few business books worth reading; his follow-up books are not nearly as good. Machiavelli's The Prince is still the champion though.

[5] An unfortunate example considering the tragic mess they've made of so many of their projects. Apple is conspicuously absent from the list of examples. As always, omissions are interesting.

[6] And why is its english Wikipedia entry so very brief?

Update 8/22/10: I rewrote my original post after I'd thought about it for a while.

Employment in the Great Stagnation

Lester Thurow wrote "The Zero Sum Society" in 1980…

Written during a period of acute economic stagnation in 1980, The Zero-Sum Society discusses the human implications of economic problem solving. Interpreting macroeconomics as a zero-sum game, Thurow proposes that the American economy will not solve its most trenchant problems-inflation, slow economic growth, the environment-until the political economy can support, in theory and in practice, the idea that certain members of society will have to bear the brunt of taxation and other government-sponsored economic actions.

Thurow is 72 now, and out of the public sphere. History was not kind to many of Thurow's speculations, but if I still had my copy I'm sure it would be interesting reading today.

We don't remember the 80s now. Those were the days when Japan was going to take over the world, when a block in Tokyo was worth more than Manhattan. My 1987 Panasonic 8086 was better in every way than any other comparable PC. It was obvious that the entire PC industry would move to Japan, so panicky tariff threats forced Japanese companies to give up the desktop market (they went into laptops instead). Congressmen smashed a Toshiba radio with sledgehammers. In 1989 Sony's Akio Morita co-authored "The Japan That Can Say No" (Do follow that wikipedia link. Morita's criticisms of the 1980s US are particularly interesting.)

Then it all changed. The 90s were good for America, but not for Japan. Concerns about structural unemployment, and about American losing manufacturing, were forgotten until the Great Recession, when it all came back again. I wonder, in retrospect, if the structural unemployment of the 1980s will be seen as the beginning of a trend that resumed with the tech crash of 2000. The picture now is even grimmer than it was in the 80s ...

How Bad Is It? | Talking Points Memo

Last month I showed you what kind of private sector job growth was needed to get us back to pre-Great Recession employment levels. For example, at 200,000 new net private sector jobs per month, it takes 12 years to close the jobs gap, according to Laura Tyson.

The numbers out this morning put July private sector job growth at 71,000. As you can see from this chart, 71,000 jobs per month is literally off the chart on the low end. The Brookings researchers figured it wasn't worth charting anything less than 150,000 net jobs per month because the time horizon for that sort of 'recovery' is too distant to even contemplate....

Or perhaps, even as the gloom deepens, the wheel will turn again. Even though I am a student of Krugman and DeLong, I do wonder how well our economics can model this whitewater world. I honestly don't know what will happen next. I really shouldn't try to make a prediction.

But I will, because, hell, this is the blog where I predicted $5/gallon gas by 2011 -- just before the world economy went off a cliff.

My prediction is that we are seeing a continuation of a secular trend that started in the 70s with the rise of Japan, was transiently interrupted in the 1990s, and resumed about 10 years ago.

This is a trend driven by technology (cheap computing primarily) and by the extremely rapid industrialization of most of the world. These developments are creating prosperity around the world, but they're also producing turbulence and dislocation. When changes are too fast, our economy blows up. Then we put it back together again (sooner with Obama, later with the GOP) until it blows up again.

This turbulence isn't going away. Even as China runs short of labor, India has a vast supply. IT innovation isn't slowing down, and the robots are coming (from Japan, interestingly. The Sun shall rise again.) Heck, Skynet is probably coming too, not to mention our transiently deferred Peak Oil (I'm holding to my sunk costs!).

In America this turbulence favors those with substantial resources, with the capacity to adapt, and with the talents to compete. It is hard, however, on non-wealthy Americans with less than 70th percentile cognitive and social skills. It is exceedingly hard on the bottom 20th percentile. They are the mass disabled.

It's easy to think of solutions to America's problems (see also - 2007, 2004). Health Care Reform was the first troubled step towards separating benefits from jobs. Even without encouragement the market will find new ways to absorb low skilled labor. We can even figure out ways to emulate the Japan of 1990, when the staff/customer ration seemed to be about 1 to 1.

It's easy to think of solutions, but hard to make them work when people like Glenn Beck are cultural heroes.

This is going to be tough.

Public references

Robert Reich (The Great Decoupling of Corporate Profits from Jobs)

Krugman - it's not 1982, it's 2001 on steroids

FiveThirtyEight: Politics Done Right: Labor Force Realignment and Jobless Recoveries

FT.com / Ed Luce - The crisis of middle-class America

… The slow economic strangulation of the Freemans and millions of other middle-class Americans started long before the Great Recession, which merely exacerbated the “personal recession” that ordinary Americans had been suffering for years. Dubbed “median wage stagnation” by economists, the annual incomes of the bottom 90 per cent of US families have been essentially flat since 1973 – having risen by only 10 per cent in real terms over the past 37 years. That means most Americans have been treading water for more than a generation. Over the same period the incomes of the top 1 per cent have tripled. In 1973, chief executives were on average paid 26 times the median income. Now the ­multiple is above 300.

The trend has only been getting stronger. Most economists see the Great Stagnation as a structural problem – meaning it is immune to the business cycle. In the last expansion, which started in January 2002 and ended in December 2007, the median US household income dropped by $2,000 – the first ever instance where most Americans were worse off at the end of a cycle than at the start. Worse is that the long era of stagnating incomes has been accompanied by something profoundly un-American: declining income mobility.

Andy Grove on the Need for US Job Creation and Industrial Policy « naked capitalism - the return of tariffs, and the editorials of the 1980s

Bob Herbert - A Sin and a Shame - NYTimes.com

Comparing This Recession to Previous Ones: Job Changes - Catherine Rampell - NYTimes.com

David Leonhardt on the Ratf*^#: Understanding the U.S. Reponse to the Great Panic - Grasping Reality with Both Hands

How to Make an American Job Before It's Too Late: Andy Grove – Bloomberg

The Ant Tribe - Schott's Vocab Blog - NYTimes.com

The Speculist: What if the Jobs Are Never Coming Back?

Robert Reich (The Future of American Jobs)

China’s Industrial Heart Facing Acute Shortage of Factory Workers - NYTimes.com

The New Poor - The Economy Shifts, Leaving Some Behind - NYTimes.com

Plan B - Skip College - NYTimes.com

Robert Reich - Are Today’s ‘Entrepreneurs’ Actually the Unemployed? - NYTimes.com

Shaken and Stirred - The Atlantic 2005 - predicting upheavals

Robert Reich: Obama, China, and Wishful Thinking About American Jobs

Philip Greenspun - unemployed = 21st century draft horse.

Gordon's Notes related

Apple's battery charger, occult inflation, and the future of American industry

How could Krugman be wrong?

I, Robot. The alternative to Foxconn.

Post-industrial employment: adjusting to a new world (lots of interesting links)

Causes of the Great Recession: China, GPSII and RCIIIT. Now for Act III.

American crisis – imagining a way out

The paradox of 21st century prosperity

Why the US can't separate benefits from employment

Mass disability and Great Depression 2.0

Where has the money gone? To the very American oligarchy.

The day of the American engineer has passed

Neo-Feudalism: Return of the Trades (2004)

On redistribution

Jared Bernstein & Brad DeLong on "Outsourcing": a dialog with interesting discussions

Signs of the end times? Or just new times ... (2005 - conspicuous consumption before the crash)

Krugman on globalization: how to manage the losers (2007)

Post-industrial employment: adjusting to a new world

Six years ago I wrote a review of Robert Reich's book Reason. Reason was a reaction to the GOP's loony rule, but Reich was also very concerned about the fate of the middle class. He was worried that only knowledge workers were going to have work. His answer was better education.

I disagreed. I thought knowledge workers were very much at risk in a "winner take all" world, and I was skeptical that education was really a universal solution (emphases added now)...

... Reich is persisting in the 19th century belief that humans are fundamentally malleable -- at least when young.

Most of the research of the past 10-20 years points to a more complex picture...

... the evidence is strong that humans are not endlessly malleable. This is an increasing problem, because 21st century America rewards a fairly narrow range of workers. In the new-world, many of the old-middle class may not have a happy home -- no matter how hard they retrain. In a fundamental way, many Americans may be "disabled" for the modern workplace.

Reich should not be so quick to write-off redistributive solutions. We will need some creative thinking to produce a healthy American when the true "disability" rate starts to top 30%.

I think the world is coming around to my perspective. For example (undated articles are recent):

• The New Poor - In Job Market Shift, Some Workers are Left Behind - Catherine Rampell
• Plan B - Skip College - Jacques Steinberg - NYT
• The Way We Live Now - Students of the Great Recession - David Leonhardt - NYT
• Your Money - Another Debt Crisis Is Brewing, This One in Student Loans - Ron Lieber - NYT
• College Education, Good Jobs: Why Degrees Are Overrated - TIME (Feb 2010)
• The paradox of 21st century prosperity (Reich, 2009)
• Gordon's Notes: Why your daughters should be roofers -- not architects (3/23/2004)
• In the Basement of the Ivory Tower - The Atlantic (2008) - college as a waste of time for some
• Krugman on globalization: how to manage the losers - Krugman -NYT (2007)
• Where has the money gone? To the very American oligarchy - Krugman - NYT (2006)
• The day of the American engineer has passed (2005)
• Shaken and Stirred - DeLong and Cohen - The Atlantic (2005)
• The New Feudalism: Return of the Trades (2004)
• On redistribution (2004 - Baumol's Disease)
• Jared Bernstein & Brad DeLong on "Outsourcing": a dialog with interesting discussions (2004)

I hope you've taken the time to scan at least a few of the above (esp. Rampell, Steinberg and the discussion of Baumol's Disease). Taken together they reflect a consensus that's emerged over the past six years. I'd summarize it this way:

1. College has become insanely expensive. (The College Industry will be the next bubble to burst.)
2. There's a growing disconnect between the costs of college and the value delivered.
3. Many students would be better served by skills ("vocational") training rather than traditional scholarship.
4. Technology and globalization have eliminated large numbers of office jobs and made some old skills obsolete. Many of the middle-aged middle-class people who lost their jobs in the Great Recession won't work again.
5. In an age of outsourcing, knowledge work may be no more secure than factory work.

Ok, so the last isn't part of the consensus ... yet. It's still mostly a suspicion of mine.

So if we really are entering a world where many formerly middle-class adults won't be able to find stable employment, simply because they lack the skills for the jobs that do exist, what should we do?

College is probably not the answer. In 2007 and 2004 I suggested:

• universal health care (astoundingly, this might happen!)
• separate benefits from employment
• intelligent retraining programs - based on individual skills assessments and locally available employment
• As part of social security reform, eliminate the idea of age-specific retirement. Income has mandatory contributions to tax-deferred funds and non-work (study, vacation, job seeking, whatever) draws from those funds*.
• rethink the meaning of disability in a post-industrial society

The last will be the hardest, but I think we'll get to all of these in time. Civilization is stronger than we think. One way or another, we'll figure this one out - including finding a future for those who don't seem to have a place in the modern economy.

* I first proposed something like this in a 1977 Women's Studies course essay. I just remembered that ...

Update 6/2/10: Robert Reich on "Entrepreneur or Employed". Excellent summary. The modern 50+ knowledge worker is not "unemployed" s/he is "self-employed". S/he is a masterless, "Ronin" contract worker. Reich's recommendations are very close to what I wrote above. There's one in particular I like: "... Since they can no longer depend on tax-free corporate matches to their 401(k)’s or I.R.A.’s, they should be entitled to tax credits that match them". This is one measure Obama might be able to squeak by the GOP loons in Congress.

The paradox of 21st century prosperity

I've had a post brewing for weeks that I'm still playing with. It's not quite right, and may never be, but this Reich comment is pertinent ...

Robert Reich's Blog: Obama, China, and Wishful Thinking About American Jobs

... The dirty little secret on both sides of the Pacific is that both America and China are capable of producing far more than their own consumers are capable of buying. In the U.S., the root of the problem is a growing share of total income going to the richest Americans, leaving the middle class with relatively less purchasing power unless they go deep into debt. Inequality is also widening in China, but the problem there is a declining share of the fruits of economic growth going to average Chinese and an increasing share going to capital investment...

I'd love to see either DeLong or Krugman dig into this claim.

See also

• Gordon's Notes 2008 (another Reich article): Tipping points and GD 2.0: speculations and lessons
• Gordon's Notes 2005: David Brin on hierarchical societies
• Gordon's Notes 2005: Neo-feudalism
• Gordon's Notes 2004: Jared Bernstein & Brad DeLong on "Outsourcing": a dialog with interesting commentary
• NY Times 2009: Rich turn to concierge services to find value (and avoid fraud)

The African mobile phone revolution continues

A few millennia ago I read quite a bit about "appropriate technology" applications for what was then known as "the third world" or "less developed nations".

In those days the idea was to find or invent product designs that returned value, but that weren't dependent on a lot of supporting infrastructure. Sometimes this might be a type of plow, or a type of solar oven. In the past decade or so there was a wind-up radio, More recently, there was the well intended originally MIT based OLPC laptop project

I think some of these ideas worked out, but others, like the OLPC, have been at best indirectly influential. Today's world is, despite our recent economic maelstrom, far more prosperous than the world of my childhood. These days "appropriate technology" may emerge to meet the needs of rural China or from African manufacturing, but it can also emerge in somewhat surprising ways (emphases mine) ...

Africa calling: mobile phone usage sees record rise after huge investment The Guardian

Africans are buying mobile phones at a world record rate, with take-up soaring by 550% in five years, research shows.

"The mobile phone revolution continues," says a UN report charting the phenomenon that has transformed commerce, healthcare and social lives across the planet. Mobile subscriptions in Africa rose from 54m to almost 350m between 2003 and 2008, the quickest growth in the world. The global total reached 4bn at the end of last year and, although growth was down on the previous year, it remained close to 20%.

On average there are now 60 mobile subscriptions for every 100 people in the world. In developing countries, the figure stands at 48 – more than eight times the level of penetration in 2000.

In Africa, average penetration stands at more than a third of the population, and in north Africa it is almost two-thirds. Gabon, the Seychelles and South Africa now boast almost 100% penetration...

Uganda, the first African country to have more mobiles than fixed telephones, is cited as an example of cultural and economic transformation. Penetration has risen from 0.2% in 1995 to 23% in 2008, with operators making huge investments in infrastructure, particularly in rural areas. Given their low incomes, only about a quarter of Ugandans have a mobile subscription, but street vendors offer mobile access on a per-call basis. They also invite those without access to electricity to charge their phones using car batteries.

Popular mobile services include money transfers, allowing people without bank accounts to send money by text message. Many farmers use mobiles to trade and check market prices.

... The share of the population covered by a mobile signal stood at 76% in developing countries in 2006, including 61% in rural areas. In sub-Saharan Africa, closer to half the population was covered, including 42% in rural areas...

This isn't new, the Economist and others have been covering mobile phone use in Africa for since the 1990s. It's a noteworthy and encouraging sign. It's "appropriate technology" that emerged somewhat unexpectedly, but has since received extensive support from governments and aid agencies, including Kenya's investment in new fiber optic connections.

Today these are fairly minimal phones, but Google has done some pretty ingenious things to provide voice and texting interfaces to Google services. In 3-4 years, today's simple phone users may have Android phones comparable to the iPhone of 2008.

We're gradually moving towards the Teledesic/One Laptop per Child vision, but along a less expected path.

Great news for humanity.

See also:

• A good thing happens: fiber optic connections to the Horn of Africa
• Reducing Poverty (old web page, mine)
• Google Brings Texting Services to Africa | Sustainability | Fast Company
• Official Google Africa Blog
• Google SMS push services in Africa: the sale of goods through SMS
• Dan's Data: Laptops for all, and for all a laptop (OLPC and more)
• Laptops become a commodity (2004, not such good prognosticating!)
• Sachs Reith 2007 - Lecture Four - Social engineering
• Reducing poverty by leveraging globalization: SciAm
• Africa: Outsourcing 2008?
• One Laptop per Child - Wikipedia
• Teledesic - Wikipedia (1994 project that promised to deliver computing servies to Africa)

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How to deliver services badly

I think I've come up with a recipe that will guarantee bad services within an enterprise.

They key is to remove executives from direct use of a service or from direct contact with users. This is typically done by the use of admins (who are direct users for executives) and by an insulating layer of management.

This is hard to do when services are managed locally. In this case the service will report into someone who cannot easily attain isolation.

So, in practice, the delivery of a really bad services requires centralizing or outsourcing service delivery. This makes the essential executive isolation much easier to achieve.

NYT tracks the Netbook revolution

The NYT has done a great job of tracking the collapse of the personal computer industries business model, a topic I most recently discusses this morning.

Today Stone and Vance are drilling down on the impact of the $200 price point. It's not the best article in the recent series since they mix the true disruption ($100 netbooks) with various business-oriented cloud outsourcing measures. They also fail to mention Chrome, a rather big omission.

Still, worth a scan to see where the memes are going ...

$200 Laptops Break a Business Model - Stone and Vance- NYTimes.com

... Microsoft’s valuable Windows franchise appears vulnerable after two decades of dominance. Revenue for the company’s Windows operating system fell for the first time in history in the last quarter of 2008. The popularity of Linux, a free operating system installed on many netbooks instead of Windows, forced Microsoft to lower the prices on its operating system to compete...

... Many consumers appear ready to abandon the costly desktop computer altogether. Analysts expect PC sales to fall in 2009 for just the second time in the last two decades, with desktops falling even faster than they did in 2007 or 2008.

The only bright spot in the PC industry is netbooks. Analysts at the Gartner research company said shipments rose to 4.4 million devices in the third quarter of 2008, from 500,000 units in the first quarter of last year. Analysts say sales could double this year despite a deep worldwide recession.

Two lumbering giants, Hewlett-Packard and Dell, missed the first wave of these tiny, stripped-down machines, allowing Acer of Taiwan to grab market share. Acer pushed Apple out of the No. 3 spot behind H.P. and Dell as sales soared 55 percent. Dell and H.P. are making the devices now...

... “Companies like Intel, Qualcomm and Texas Instruments that make chips for these devices are hiring Linux talent as quick as they can,” said Jim Zemlin, executive director of the nonprofit Linux Foundation. “They know the future is netbooks and mobile Internet devices...

Outsourcing AppStore review fraud - a 21st century crime

This is so 21st century.

Positive reviews in the iPhone App Store are worth a lot of money to developers.

So they've found various ways to cheat.

The most recent strategy is to use Amazon's Amazing Turk service to globally outsource app review.

Since only people who purchase applications can review them, the author offers to pay for more than the cost of the application.

The catch is the reviewers have to buy the app first, then leave the review with a tell-tale five period marker, then trust the application auther to pay them for the fraudulent review and cover their upfront costs.

It's a measure of the power of Amazing Turk that it found people who were not only themselves crooked, but they would also trust a fellow crook to pay them for their crooked work.

Honor among thieves, apparently.

It's hard to believe this will scale, so I suspect Apple's current comment strategy will work. Even so, it's a classic 21st century crime!

Salvaging world’s food and medication supply chains and resurrecting the FDA - thank you team Obama

Yesterday was an end to the 14 monster years, the 8 years of dread, the years of environmental decimation, to Rumsfeld and torture and Cheney and …

Damn, it’s a long list.

Good thing Obama has a huge amount of talent to call on ... Gore. Biden. Kerry. Buffet. The Clinton. Obama doesn't come alone, he comes with a superb team and a deep bench.

Somewhere on their to do list is the integrity of the world’s medication and food chain. Fake Heparin, poisonous infant food, poisonous animal feed, counterfeit surgical supplies, toxic toys, -- we've seen 'em all.

Meanwhile the GOP Bush cronies continued to destroy the FDA, the agency that was supposed to protect us from all this.

Fraud in the food and med supply chain has been only one of a non-stop list of disasters falling on pithed America. Ninety percent of Americans still have no idea what's going on; this was one of the many issues that didn't merit campaign attention.

That's over now. No, it's not that Americans have fully woken up. It's that we've dumped the incompetents, and we've engaged the O team.

This TIME story is a reminder of why we need the O team, and why the GOP needs to reform itself. Emphases mine ...

China's Melamine Woes Likely to Get orse – TIME

By Austin Ramzy / Beijing Tuesday, Nov. 04, 2008

First, a tainted product emerges, killing some and sickening many more. Its origin is traced to China, where a combination of greed and negligence allow the danger to slip into the food chain...

...As early as January, infants in China raised on Sanlu brand baby formula began developing kidney problems, and parents raised complaints that were ignored by company and local government officials. When the news finally broke in September, tests found four infants had died and more than 60,000 were sickened from formula tainted with melamine.. Expanded inspections found traces of melamine in milk powder from 22 of the country's 109 producers. The substance also showed up in whole milk and dairy products ranging from White Rabbit candies to chocolate used in sex toys in the U.K.

In late October, the scope of the scandal broadened when Hong Kong authorities announced that eggs imported from the mainland also contained melamine, the result of tainted feed given to chickens. Beijing ordered widespread testing of animal feed, and discovered 3,600 tons of contaminated product. The country's agriculture minister, Sun Zhengcai, called the tainted eggs an isolated problem. And the state press trumpeted news that sauces tainted with toxic chemicals were imported from three Japanese factories.

Change some of the details above and you could have the Chinese Product Safety Scandal of 2007. That round was touched off when the death of more than 100 Panamanians was traced back to cough medicine tainted with dietheylene glycol from China. Then hundreds of pets in North America were killed by eating food made from Chinese raw ingredients, also tainted with melamine. As last year's scandal spread, problems were found with Chinese-produced toys, tires, seafood and toothpaste... ...The Chinese embassy in Washington declared that it was "unacceptable for some to launch groundless smear attacks on China" over food and drug safety problems...

There's even more frightening details in a recent NYT Magazine expose on drug manufacturing in China....

The Safety Gap - Can the F.D.A. Ever Hope to Police Chinese Meds? - NYTimes.com
By GARDINER HARRIS

... China now produces about two-thirds of all aspirin and is poised to become the world’s sole global supplier in the not-too-distant future. But are the Chinese factories safe? Who knows? The U.S. Food and Drug Administration, the European Medicines Agency and other competent government regulators rarely, if ever, inspect them...

In China, where thousands of drug manufacturers sell products in the local markets, profit margins are razor thin, and counterfeiting and contamination are common. In 2002, the Pharmaceutical Association, a Chinese trade group, estimated that as much as 8 percent of over-the-counter drugs sold in China are counterfeit.

... China has in recent years exported poisonous toothpaste, deadly dog food, toys made with lead paint and tainted fish. In one infamous example this spring, Chinese manufacturers substituted a cheap fake for the dried pig intestines used to make the drug heparin, which is given to dialysis and surgery patients to prevent blood clotting. As deaths among those taking the drug mounted, the F.D.A. discovered the taint and banned the contaminated drug. In the end, 81 people may have died from allergic reactions, and tens of thousands around the world were exposed to danger. F.D.A. officials admitted that the agency should never have approved the Chinese-made heparin for sale in the United States; the agency, it turned out, had never inspected the Chinese plant making it.

Concerns about Chinese drugs have become so intense that just three weeks ago, the Health and Human Services secretary, Michael O. Leavitt, announced that the F.D.A. would open an office in Beijing by the end of the year and offices in Shanghai and Guangzhou next year. The agency still plans to send inspectors to China from the U.S., but the offices will provide “an infrastructure that will make those people more effective,” Leavitt said at the time of the announcement.

China’s leap to one of the biggest suppliers of pharmaceutical ingredients in the world happened over the last decade, as the Chinese government subsidized the construction of manufacturing plants that have undercut prices everywhere. Generic drug makers in the United States, where price competition is fierce, were the first to seek cheaper drug ingredients in China. Last year, generic drug applications to the F.D.A. listed 1,154 plants providing active pharmaceutical ingredients: 43 percent of them were in China, and another 39 percent were in India. Only 13 percent were in the United States. Branded drug makers, with their fatter profit margins, resisted buying ingredients from China for years, but with their businesses now suffering, even major pharmaceutical companies like AstraZeneca, Bayer, Baxter and Pfizer have announced deals to outsource manufacturing to China.

I have been writing about the drug industry for more than a decade, but I have rarely written about a subject that both branded and generic drug makers wanted to discuss less...

The F.D.A. regulates more than $1 trillion worth of consumer goods, which amounts to about 25 cents of every consumer dollar spent in this country. This includes $466 billion in food sales, $275 billion in drugs, $60 billion in cosmetics and $18 billion in vitamin supplements. The agency is responsible for monitoring a third of all imported goods, from eggplant to eyeliner, microwave ovens to monoclonal antibodies, slaughterhouses to cellphones. But with fewer than 500 import inspectors and computer systems so old that repairmen must be called out of retirement to fix them, the agency is increasingly beset by a sense of futility.

Even the F.D.A.’s staunchest defenders now acknowledge that something is terribly wrong. Among them is Peter Barton Hutt, who served as the agency’s general counsel during the Nixon administration and is widely considered the dean of the F.D.A. bar in Washington. I’ve interviewed Hutt dozens of times over the years, and he has always defended the F.D.A. No more. “This is a fundamentally broken agency,” Hutt told me earlier this year, “and it needs to be repaired.”...

... To ensure the safety of imported drugs, the F.D.A. relies almost entirely on its own inspections of foreign plants. This was not much of a problem 30 years ago, when most medical products consumed in the United States were made here and F.D.A. inspectors could drive around to plants in their district. Most of those plants have since moved abroad, and now decades can pass between inspections. Testifying before Congress in April, Dr. Janet Woodcock, director of the F.D.A.’s drug center, spoke with rare frankness about the ability of the agency to do its job abroad. “The F.D.A. of the last century is not configured to regulate this century’s globalized pharmaceutical industry,” she testified.

Other current and former F.D.A. officials I talked to echoed Woodcock’s warning. Tim Wells, who was a field investigator and then a compliance officer for 24 years at the F.D.A., now does private audits of drug plants and sees the holes in the agency’s safety net. “A company I recently visited abroad hasn’t been inspected for 10 years,” he told me.

Besides being more frequent, domestic inspections are unannounced and more intense. And when inspectors find dangerous conditions at domestic plants, they generally return promptly to ensure that those conditions get fixed. Not so in foreign plants. In a report released Oct. 22, government auditors reported that between 2002 and 2007, F.D.A. inspectors found dangerous conditions in 15 foreign plants. Only one of those plants was reinspected within two years, the auditors found. In every other case, the agency took foreign managers at their word that promised changes were made.

The record is particularly bad in China. Over the past six years, the F.D.A. has managed to inspect annually an average of just 15 of the 714 Chinese drug plants that export to the United States. At its present pace, the F.D.A. would need more than 50 years to visit all of these Chinese plants. By contrast, the F.D.A. inspects domestic drug plants every 2.7 years...

... When inspectors do go to China, their reports sometimes read like a bureaucratic rendering of Mark Twain’s “Innocents Abroad.” During a 2001 trip, for example, two F.D.A. inspectors visited a plant that was exporting acetaminophen to the United States. The plant had never been inspected. “The F.D.A. inspection team was met at the hotel in Wenzhou by representatives from Wenzhou No. 3 Pharmaceutical Factory and . . . transported by public ferry and then company vehicle to the manufacturing facility on Dong Tou Island off the coast of Wenzhou,” their report states. “There is no street address or plot number, and the address of the facility is given only by the county and province.”

Once the team arrived in what seemed like the middle of nowhere, the inspectors learned the drug was being manufactured at another plant — one that once had a similar name but had recently changed it. “In fact,” the report continues, “inspection found that there were initially three separate and independent firms operating under the names Wenzhou No. 1 Pharmaceutical Factory, Wenzhou No. 2 Pharmaceutical Factory and Wenzhou No. 3 Pharmaceutical Factory. The location of Wenzhou No. 1 Pharmaceutical Factory was also determined by the F.D.A. inspection team during the visit to Wenzhou, and it was learned that the firm is operating under a new Chinese name; however, the English translation of that name was not available.” So the two inspectors flew back to the United States — at taxpayers’ expense — never having inspected a thing.

The F.D.A.’s apparent inability to keep names straight is no trivial matter. One reason the agency failed to inspect the Changzhou plant that produced deadly heparin, for instance, was that someone mixed up the facility’s name and concluded that the plant had already been inspected. Chinese plant names, a vestige of its once strictly controlled economy, are often very similar, and translations can vary. For instance, there are 57 separate drug master files — the basic F.D.A. record of a plant’s name, location and approved product — with “Shanghai” in the name. Some are obvious repeats, like the ones for “Shanghai No. 6 Pharmaceutical Factory” and “Shanghai Number 6 Pharmaceutical Factory.” But others could be separate plants. Or maybe not. It’s just too hard to tell.

Compounding the problem is the F.D.A.’s antiquated technology. Its computer systems are so awful that officials have no way of knowing which names, or which plants, are real. To determine which factories need to be inspected, agency investigators must consult two incompatible databases, one of which lists 3,000 foreign drug plants exporting to the United States and the other 6,800. Which number is right? Nobody really knows. Officials have told House investigators that their best guess for the number of foreign drug plants exporting to the United States is 2,967, while the Government Accountability Office recently guessed 3,249. Neither can the agency tell in many cases when the plants were last inspected (or, more important, which have never been inspected), where they are located or what products they make.

The combined ports of Los Angeles and Long Beach receive about 45 percent of all ship-borne trade that comes to the United States, or some 5.2 million containers a year. When I visited one day in May, giant cranes were unloading and loading more than 30 ships, each bearing about 2,500 containers. Some 40 to 50 of those containers — a tiny fraction of the total — were trucked to a gigantic warehouse about a half-mile from the ports. There the F.D.A. and Customs and Border Protection cracked open shipping containers that they considered suspicious and then emptied the containers into a large examination area in front of the bays, arranging the boxes and crates as if they were pathologists lining up organs from an autopsy.

Just about every crate I saw contained some kind of food product. One crate came from Indonesia, and its manifest said it contained products with chicken inside. Indonesia plus chicken suggests avian flu to F.D.A. officials. So they decided to take a look. The crate turned out to contain chicken seasoning, but no actual chicken. Still, the cans were sent off for testing. Deeper into the guts of the container were glass jars of sambal terasi, a hot sauce. They would probably be sent back because the F.D.A. requires makers of low-acid foods in jars or cans to register with the agency.

The labels on high-end olives from Italy were lacking the required nutritional information, so back to Italy they went. Jars of jam made of figs and tangerines indicated they were produced close to Ukraine, so an F.D.A. inspector said that he wanted to sample the product for radioactive fallout from the 1986 Chernobyl disaster...

... This year, 18.2 million shipments of food, devices, cosmetics and drugs are expected to enter more than 300 U.S. ports; the F.D.A. had 454 investigators in 2007 — one and a half per port — to scrutinize them. ...

... the U.S. Justice Department announced that it had opened a criminal investigation of Ranbaxy, the largest Indian drug maker, with $390 million in annual sales in the United States. In a motion filed in federal court in Maryland, the Justice Department accused Ranbaxy of “a pattern of systemic fraudulent conduct,” including filing fabricated drug data to the F.D.A. and using drug ingredients from unapproved and uninspected plants. AIDS drugs purchased by the President’s Emergency Plan for AIDS Relief were among the medicines implicated, the Justice Department charged. ..

... Officer James Ng of Customs and Border Protection started the tour by putting a package from China through an X-ray machine. The pictures showed row upon row of vials. “When it looks like this, it’s usually anabolic steroids inside,” Ng said. He opened the box, put on a pair of half-glasses and took out one of the vials, which was filled with a white crystalline powder. “It says it’s testosterone,” Ng said and then handed the vial to von Eschenbach.

“It’s an incredible example,” von Eschenbach said, his eyes bright. “It’s a steroid from China, but the label is written in Spanish.”

Customs seizes any steroids and narcotics they find, but they give other drugs to F.D.A. inspectors, who laboriously fill out handwritten forms and send letters to intended recipients. If the recipient swears that the drugs are for his or her own personal use, the F.D.A. often releases the detained package. It takes an hour or two to process each package, “an obstacle that makes their job functionally impossible,” according to a 2003 Congressional investigation. Thousands of packages can pile up waiting for F.D.A. review, and the agency often releases packages without any investigation for lack of staff.

Even when there are inspectors on the job, they cannot be sure every ingredient in a medicine is safe. The F.D.A. confines nearly all of its regulations and much of its inspection oversight to the active part of most pills, which generally constitutes between 1 percent and 10 percent of a pill’s volume. Much of a pill is fillers, binders, coatings, colorants and lubricants that are almost entirely unregulated.

The syrup in which cough and fever medicines are delivered has figured in at least eight mass poisonings around the world in the past two decades, with three of the four most recent cases originating in China. Hundreds died in Panama in 2006, at least 88 children in Haiti died in 1995 and 1996 and some 30 infants died in India in 1998 — all from toxic syrup. In 1937, 107 people in the United States died because of similar toxic syrup. In fact, it was this incident that led to the creation of the modern F.D.A. But plants making fillers and other nondrug ingredients of pills and syrups are rarely, if ever, inspected by the F.D.A. or any other regulatory agency...

... Unlike reforming Social Security or health insurance generally, fixing the F.D.A. won’t mean allocating enormous sums or necessitate reconceiving the system. It just requires some money and will. There are already legislative changes in the works. Bills now circulating on Capitol Hill would require food, medical- device and drug makers to pay annual registration fees to the F.D.A. Those fees would be used to allow as many inspections of foreign firms as domestic ones.

There also seems to be agreement that our regulatory agencies can’t rely on China to police its own factories.

More inspectors will certainly help, but even regular inspections of Chinese plants cannot ensure safety. Inspectors can be hoodwinked; tests can be fooled. “No matter how many F.D.A. inspections they do,” says Senator Sherrod Brown, Democrat of Ohio, “our safety is still at risk if the pressure continues to cut costs.” Brown has introduced a bill to require labels disclosing the source country of key drug ingredients. Some lawmakers have gone as far as to suggest a ban on all drugs made with Chinese ingredients, but China has become such a crucial supplier that a ban would lead to the collapse of the U.S. health care system. And our dependence is only growing: when PricewaterhouseCoopers cited the best place for pharmaceutical outsourcing in the world in an October report to drug companies, its pick was China...

If you're not scared, you're not paying attention.

Bush and the GOP descendants of the Gingrich invasion destroyed the FDA.

Destroyed it, because, of course, the libertarian market deity is supposed to solve these problems.

It's been a damned long 14 years.

Now we have Team O. Their mission is to ...

1. Find someone with deep pockets and resources along the supply chain who can be assigned legal responsibility. Let them be reimbursed appropriately.
2. We need a to be able to enter the NDC code for any drug in an FDA web site and get a full report on where the ingredients come from. Few consumers will ever do this, but the lawyers will love it and it will introduce supply chain transparency.
3. We need China to be strong, happy, and prosperous. We also need safe medications. If that means our inspectors live in Chinese plants (and get rich for their hardships), then we put tariffs on the production of those plants to pay for the inspectors.

There are good people at the FDA. A sane leader will find much support.