Author Archives: rdmyers75@hotmail.com

Bill Gross on the new normal

In this 2009 essay, after an incomprehensible and irrelevant introduction involving golf, Bill Gross from PIMCO gives us his reasons why we may be in a “new normal” of lower economic growth:

  1. American-style capitalism and the making of paper instead of things. Inherent in the “great moderation” of the past 25 years was the acceptance of a sort of reverse mercantilism. America would consume, then print paper assets and debt in order to pay for it. Developing (and many developed) countries would make things, and accept America’s securities in return. This game is over, and unless developing countries (China, Brazil) step up and generate a consumer ethic of their own, the world will grow at a slower pace.
  2. Private vs. public-driven growth. The invisible hand of free enterprise is being replaced by the visible fist of government, a temporarily necessary, but (if permanent) damnable condition itself in terms of future growth and profits. The once successful “shadow banking system” is being regulated and delevered. Perhaps a fabled “110-pound weakling” may be an exaggeration of where our financial system is headed, but rest assured it will not be looking like Charles Atlas anytime soon. Prepare to have sand kicked in your face, if you believe you are a “child of the bull market!”
  3. Global economic leadership. It’s premature to award the 21st century to the Chinese as opposed to the United States, but if the last six months have been any example, China is sort of lookin’ like Muhammad Ali standing over Sonny Liston in 1964 yelling, “Get up, you big ugly bear!” Not only has China spent three times the amount of money (relative to GDP) to revive its economy, but it has managed to grow at a “near normal” 8% pace vs. our “big R” recessionary numbers. Its equity market, while volatile and lightly regulated, has almost doubled in twelve months, making ours look like that ugly bear instead of a raging bull.
  4. United States housing and employment. Old normal housing models in the U.S. encouraged home ownership, eventually peaking at 69% of households as shown in Chart 1. Subsidized and tax-deductible mortgage interest rates as well as a “see no evil – speak no evil” regulatory response to government Agencies FNMA and FHLMC promoted a long-term housing boom and now a significant housing bust. Housing cannot lead us out of this big R recession no matter what the recent Case-Shiller home price numbers may suggest. The model has been broken if only because homeownership is declining, not rising, sinking to perhaps a New Normal level of 65% as opposed to 69% of American households.

As usual, no acknowledgment that ecological limits could play a role. If they are playing a role, my thought is that the boom times leading up to 2007 could easily have masked a weaker, but more permanent, signal being sent to us by our planet. Then following the bust, that signal could make a recovery harder than it should have been if we were simply reverting to a long-term mean. So during each boom, we forget about the underlying signal, then after each bust it gets harder and harder to recover to the previous trend, and we scratch our heads as to why. If my hypothesis is correct, eventually there will come a bust that we don’t recover from. Maybe this is even it – there is essentially no growth in Europe or Japan, and we are celebrating a very low growth rate in the U.S. It will be difficult to discern the long-term signal from the noise in real time. In hindsight, it may be obvious.

Robert Shiller on the new normal

Here’s Robert Shiller in Project Syndicate talking about the “new normal” of slow economic growth:

There is a name for the despair that has been driving discontent – and not only in Russia and Ukraine – since the financial crisis. That name is the “new normal,” referring to long-term diminished prospects for economic growth, a term popularized by Bill Gross, a founder of bond giant PIMCO.

The despair felt after 1937 led to the emergence of similar new terms then, too. “Secular stagnation,” referring to long-term economic malaise, is one example. The word secular comes from the Latin saeculum, meaning a generation or a century. The word stagnation suggests a swamp, implying a breeding ground for virulent dangers. In the late 1930s, people were also worrying about discontent in Europe, which had already powered the rise of Adolph Hitler and Benito Mussolini.

The other term that suddenly became prominent around 1937 was “underconsumptionism” – the theory that fearful people may want to save too much for difficult times ahead. Moreover, the amount of saving that people desire exceeds the available investment opportunities. As a result, the desire to save will not add to aggregate saving to start new businesses, construct and sell new buildings, and so forth. Though investors may bid up prices of existing capital assets, their attempts to save only slow down the economy.

“Secular stagnation” and “underconsumptionism” are terms that betray an underlying pessimism, which, by discouraging spending, not only reinforces a weak economy, but also generates anger, intolerance, and a potential for violence.

So this is the old “animal spirits” argument. There is almost never commentary from economists or financiers about the possibility of ecological limits having something to do with this. There are two ways ecological limits could manifest themselves. One is by making us gradually poorer through high prices of food, energy, and various raw materials. That could happen slowly and gradually, be obscured by the ups and downs of business/credit cycles and geopolitics, and not be obvious until it is too late. We could theoretically innovate our way out of the problem, but there might be a downward spiral where as we get poorer and poorer, we devote less effort to innovation and more to making ends meet. The second way ecological limits could manifest themselves would be through a sudden, catastrophic tipping point or climate shift. This would be a point where supplies of food, energy, water, and critical raw materials get so tight they cause a catastrophic breakdown of the systems of civilization, rather than just high prices. Of course, if you are poor enough, high prices and system breakdown have roughly the same consequences for you and your family. If you are rich enough, you can withstand the former just fine, but not the latter.

free parking and why good people are misled by the forces of darkness

Here’s a nice quote from a blog called Saporta Report:

Parking causes sprawl. The vast amounts of parking required at locations push businesses and other uses further and further apart. Free parking encourages us to drive to the grocery store, and we insist on having ample amounts of parking.

As the amount and size of our parking lots decreases, our businesses can move closer together. A business that couldn’t previously open in a neighborhood as a corner grocery because of required parking minimums could now open to serve walk-up customers.

This is exactly right. Free parking is an enormous hidden subsidy to unsustainable land use practices and unhealthy lifestyles. It does all of us far more harm than good. If we eliminated these subsidies and let our cherished “free market” set a fair price on parking, the equation would be fundamentally changed.  The problem is that a majority of people still don’t see this. They perceive (correctly in many cases) that the way their community is designed, they would be unable to get around quickly or safely without a car, and they can’t envision their community changing its design, or living in another community with a different design. Even in places where walking and cycling are relatively safe and fast, like in or near Center City Philadelphia (see this Washington Post* article), and many people understand that 100%, the voices of the car culture are still louder and more politically influential at the moment. Here in Philadelphia, I see that being characterized in the media sometimes as an old vs. young, rich vs. poor, black vs. white struggle, which is very unfortunate because that is not what it is about at all. It is about health, safety, sustainability, community, competitiveness, innovation, and joy.

* Note that the Washington Post article above is unfortunately titled “Why cars remain so appealing even in cities with decent public transit”. It goes on to conclude that it can take a long time to get around by public transit, if you live far from your job. Then it concludes that walking and cycling are better than both driving and public transit, if you live near your job. But busy people who only have time to read headlines are likely to miss that point entirely, aren’t they?

how to write a letter to an elected official

I’m a little disenchanted with TED Talks these days, because I think most of them could be reduced to a sentence, if not a phrase, that I could understand in 10 seconds rather than wasting 15 minutes of my life waiting for some Tediot to get to the point. But here is an interesting one about how to write a letter to an elected official. First, it says to use an actual pen. Second, it says that politicians are not rational, moral creatures, and you have to understand their interests and then cater to them. It recommends these steps:

  1. Show appreciation for the politician, if not the person then at least the complexity and difficulty of their job.
  2. Don’t pull punches in stating your position, but avoid personal attacks.
  3. Explain that other people are giving them bad information about the issue. Then give them the good information you think they need.
  4. Offer to provide them with lots of additional good information in the future.
  5. Sign with lots of titles and credentials.
  6. Send the original to the district office and cc the main office (something about the main office might ask the district office for the original and it might get more attention, don’t know if I buy this).

green infrastructure reminder

The American Society of Landscape Architects reminds us that green infrastructure is more than what we used to call stormwater management practices. It’s a network of designed and natural ecosystems linked together to perform critical functions cheaper and better than purely manmade systems could:

Green infrastructure includes park systems, urban forests, wildlife habitat and corridors, and green roofs and green walls. These infrastructure systems protect communities against flooding or excessive heat, or help to improve air and water quality, which underpin human and environmental health…

Here are just some of the many benefits that these systems provide all at once: green infrastructure absorbs and sequesters atmospheric carbon dioxide (C02); filters air and water pollutants; stabilizes soil to prevent or reduce erosion; provides wildlife habitat; decreases solar heat gain; lowers the public cost of stormwater management infrastructure and provides flood control; and reduces energy usage through passive heating and cooling. In contrast, grey infrastructure usually provides just a single benefit.

“All at once” and “single benefit” are key phrases. You have entities like wastewater authorities, transportation authorities, parks and wildlife agencies that are each trying to maximize the single benefit they have been tasked within the limited budget each has given. Each is trying to be efficient, but together they are inefficient, redundant, and even working at cross purposes. There is nothing responsible or ethical about sitting inside your bubble making “cost-effective” decisions that ignore everything happening outside your bubble.

This article drills down to a fantastic wealth of references that we should all take a year off and read.

(By the way, this article also contains some questionable numbers about at least one program I happen to be familiar with. But never mind, the concepts are right even if the numbers are questionable.)

National Geographic “Greendex”

National Geographic has developed an index that tracks the green-ness of consumer behavior worldwide.

“Greendex 2012: Consumer Choice and the Environment—A Worldwide Tracking Survey” measures consumer behavior in areas relating to housing, transportation, food, and consumer goods. Greendex 2012 ranks average consumers in 17 countries according to the environmental impact of their consumption patterns and is the only survey of its kind.

The top-scoring consumers of 2012 are in the developing economies of India, China, and Brazil, in descending order. Those in emerging economies continue to round out the top tier of the Greendex ranking, while the lowest scores are all earned by consumers in industrialized countries. American consumers’ behavior still ranks as the least sustainable of all countries surveyed since the inception of the study, followed by Canadian, Japanese, and French consumers.

Meanwhile, consumers in developing countries with the highest Greendex scores are the most likely to agree that they “feel guilty about the impact [they] have on the environment,” despite having the lightest footprint as individuals. The research finds a positive relationship between the extent to which people feel guilty about their impact and the Greendex scores of average consumers in the same countries. Consumers with low Greendex scores, i.e., those demonstrating the least sustainable behavior as consumers, are least likely to feel guilty about the implications of their choices for the environment.

I don’t doubt the validity of their conclusion that the average person in China, India, and Brazil has a much lower environmental impact than the average person in Canada, Japan, France, and the United States. I am surprised though by their finding that people in developing countries express more guilt about their own personal ecological footprints. That is not my impression based on some time living and working in Asia. The small, unscientific sample of people I have interacted with are definitely concerned about air and water pollution, for health and safety reasons, and if they belong to a generation that still remembers the land they tend to feel some sadness about urbanization. But concern about health and safety is not the same thing as guilt. People are demanding cleaner air, water, and food for themselves and their families, but that doesn’t mean they are thinking much about their impact on the environment for the environment’s sake. It’s a great story to tell that as these billions of people catch up in wealth and spending to their more industrialized, urbanized neighbors, they will do so without adopting those neighbors much larger ecological footprint. I want to believe it, but I don’t believe that is the path we are on.

 

telepathy

According to the BBC, telepathy is here, sort of. Human brain waves can be read by machines, then transmitted by machines to other human brains, which can perceive them. At the moment, they are perceived only as light, not the original thoughts that they were. Before we get too excited, the researchers say they think the technology will eventually allow perception of the original thoughts, but not in our current lifetime. I can see another implication though – if brain patterns are already being read into computers, we will eventually figure out how to have computers interpret them. Assuming progress in computing power continues to be exponential or super-exponential, I wouldn’t be so sure that we won’t see this relatively soon. Lots of exciting, and scary, implications, of course.

walking and creativity

This article in the New Yorker talks about how walking stimulates thinking and creativity.

Because we don’t have to devote much conscious effort to the act of walking, our attention is free to wander—to overlay the world before us with a parade of images from the mind’s theatre. This is precisely the kind of mental state that studies have linked to innovative ideas and strokes of insight. Earlier this year, Marily Oppezzo and Daniel Schwartz of Stanford published what is likely the first set of studies that directly measure the way walking changes creativity in the moment. They got the idea for the studies while on a walk.

It goes on to talk about differences between walking in natural and park-like settings vs. city streets. But is it too much to ask for safe, park-like city streets where people can stroll and think and interact? Does this sound crazy? No, it just means picking some streets and getting all or most car traffic off them, which can be done if people live near where they work and shop. Then you drastically slow down the remaining motorized traffic, if any, plant lots of trees and provide occasional places to sit. Make those public investments, and complementary private investments will pop up. Even from a cynical economic perspective, the cost-benefit is there, I sincerely believe. And the more subtle effects that cost-benefit analysis will miss – a more creative, innovative, less-stressed society – will follow, I sincerely believe. These are really the fundamentals, I am pretty sure. Maybe we can unleash a new wave of creative problem solving. Let’s stop thinking cynically about how we can make cities a little less bad, and start thinking about how we can unleash their potential.

innovation units within big companies

According to the BBC, some big companies are forming small internal units to act more like startups:

Kassir Hussain, director of connected homes at British Gas, says Hive was founded on the “lean start-up principles” espoused by Eric Ries in his book The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses.

In practice, this means developing a product or service step by step, constantly consulting with customers so that money isn’t wasted on features they will not want. Each stage of development is tested – so-called “validated learning” – so that future success is almost built in to the process. Normal management structures don’t apply.

“We believe that job titles can actually prevent co-operation and teamwork,” says Mr Hussain. “It’s about encouraging an entrepreneurial mentality throughout the business. Hive’s product development is in days and weeks, not months and years.”

Hive’s Active Heating system, which lets you remotely control your home heating via smartphone, now has about 80,000 customers. But the service could not have come about from within British Gas’s complex corporate structure, Mr Hussain believes.

“Nearly three-quarters of Hive’s business is staffed by people with digital backgrounds from outside the group,” he says.

I see a few lessons here. First, the group has outsiders. Second, it is protected from the internal bureaucracy. Third, it has permission to take risks, which implies permission to fail. But it tries to limit the size of failures by staying in constant touch with customers. Not mentioned here is the idea that it has adequate resources, but that must be the case.

The other important question is how you would take this concept that seems to work well with consumer products and apply it to other sectors like, say, services or government.