2012 August 30 Thursday
Venture Capitalists And Universities Rush To Online Education

The VCs see a huge fat industry ripe for plucking and gutting.

So the VC guys and the start-ups look at K-12 and higher education, which between them cost over $1 trillion per year in America, and much more around the world. They see businesses that are organized around communication between people and the exchange of information, two things that are increasingly happening over the Internet. Right now, nearly all of that communication and exchange happens on physical platforms—schools and colleges—that were built a long time ago. A huge amount of money is tied up in labor and business arrangements that depend on things staying that way. How likely are they to stay that way, in the long term? Sure, there are a ton of regulatory protections and political complications tied up in the fact that most education is funded by the taxpayer. As always, the timing would be difficult, and there is as much risk in being too early as too late.

Still, $1 trillion, just sitting there. And how much does it cost for a firm like Learn Capital to invest in a few people sitting around a table with their MacBook Airs? That’s a cheap lottery ticket with a huge potential jackpot waiting for whomever backs the winning education platform.

The amount of waste and duplication in education is huge. Why should tens of thousands of explain calculus every year? Why not just record the lectures and use all live teaching labor for Q&A sessions?

When universities and colleges start doing massive layoffs think of it as the freeing up of a dwindling supply of high IQ labor.

The big name universities are in a rush to go online. They are starting to feel desperate.

A few months ago, free online courses from prestigious universities were a rarity. Now, they are the cause for announcements every few weeks, as a field suddenly studded with big-name colleges and competing software platforms evolves with astonishing speed.

Massive Open Online Courses (MOOCs) are taking off.

A group of online-learning ventures is collaborating on a new kind of free class to be offered this fall, known as a mechanical MOOC (for “massive open online course”), that will teach a computer-programming language by patching together existing resources from open-learning sites.

After software and cheap high speed connections cause a gutting of teaching staffs in most universities what comes next? Automation of medicine. The total costs of health care in the United States is well over $2 trillion. The potential for savings is therefore even larger. Though health care automation entails tackling a much harder set of problems.

By Randall Parker 2012 August 30 10:34 PM  Education Online
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CIA Agents Shot In Mexico Were Fighting Drug Cartels

The United States is (rightly) treating Mexico as a failed state. Of course, the US government would deny treating Mexico as a failed state. But the US is (correctly) acting as if the Mexican government can't control its own sovereign territory.

MEXICO CITY — The two Americans who were wounded when gunmen fired on an American Embassy vehicle last week were Central Intelligence Agency employees sent as part of a multiagency effort to bolster Mexican efforts to fight drug traffickers, officials said on Tuesday.

The US sends military aid and training to the Mexican government because it has partially lost sovereign control. This loss of control makes Mexico a failed state. That CIA agents could get shot by Mexican federal police makes sense because the loyalties of Mexico's institutions have become corrupted by drug cartels.

We should make it extremely difficult for drugs and people to cross the US-Mexican border. Mexico would be better off if we did.

By Randall Parker 2012 August 30 09:14 PM  Mexico
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2012 August 29 Wednesday
Small Groups Make Large Fortunes

VMWare illustrates how much fortune-building no longer depends on having huge factory workforces. When (if ever) will US immigration policy catch up with this fact? Success is about very high quality, not quantity.

“If you think back to 2002, VMware had a great team of 100 engineers who could really make server virtualization sing,” Maritz told Wired this week, during an interview at the company’s massive VMworld trade show in San Francisco. “Having the services of those 100 engineers turned out to be incredibly valuable. They did something that really transformed the industry and they gave rise to an asset that’s worth plus-or-minus $40 billion.

“The same sort of thing is going to happen in the networking industry.”

The article is about how WMWare just bought a company called Nicara for $1.26 billion and how its engineering staff is similar size to VMWare's staff in 10 years ago. We live in an era when robots are becoming more able to displace human workers in factories and wages are in decline. Why import any workers who aren't capable of helping to create businesses with revolutionary technologies? The economy's need for the poor and ignorant is in relentless decline.

Update: Check out trends in employment in manufacturing. The only educational level experiencing an increase in employment in manufacturing industries: advanced degree holders. Manufacturing needs more brains and less brawn. The same is happening in Silicon Valley where companies with large manufacturing divisions have given way to companies with staffs that are half engineers and few manufacturing workers.

By Randall Parker 2012 August 29 10:43 PM  Economics Labor
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2012 August 25 Saturday
Hypergamy In China Cutting Fertility Of High Ranking Women

In the United States you need to visit a pick-up artist blog (a very highly excellent one at that) in order to read realistic discussions of female hypergamy (basically, where women try to trade up and dump their lower status men). But in China social scientists consider hypergamy a serious problem to discuss.

One hurdle in finding a spouse is China’s long-standing tradition of hypergamy—or women marrying up, in terms of income and status. The older and more accomplished a Chinese woman is, the narrower her potential dating pool, explains professor Li Yinhe, who researches sex and relationships at the Chinese Academy of Social Sciences (CASS). Even with millions more men than women overall in China—due to rampant abortions of female fetuses by couples hoping for a son—the prospects aren’t necessarily easier for women “at the top of the social pyramid.” As Yang says: “A-class women don’t match with B-class men.”

Why this is a problem: women who have the genes that enable them to do well in business and engineering (e.g. genes for higher IQ, conscientiousness, and drive) are least likely to reproduce. This does not bode well for the gene pool of future humans.

Western countries need more a more pragmatic social science elite that will study and discuss humans as they really are. Ideological feminism and ideological diversity worship are not doing us any favors.

By Randall Parker 2012 August 25 11:22 AM  Human Nature Attraction
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2012 August 19 Sunday
Great Recession 5 Years Old And Running

Ambrose Evans-Pritchard looks at the failure of the industrialized countries to recover from the last recession.

The world remains in barely contained slump. Industrial output is still below earlier peaks in Germany (-2), US (-3), Canada (-8) France (-9), Sweden (-10), Britain (-11), Belgium (-12), Japan (-15), Hungary (-15) Italy (-17), Spain (-22), Greece (-27), according to St Louis Fed data. By that gauge this is proving more intractable than the Great Depression.

Evans-Pritchard looks at the huge debt build-up that preceded the recession as a major cause of slow recovery which is unlike recoveries from previous recessions. That debt built up over a period of decades. Check out US household debt as a percentage of GDP over a 50 year period ending in 2010. Corporate, federal, local, and personal debt reached over 3.5 times GDP by the end of 2009.

Find it hard to believe the total public and private debt is some multiple of GDP? Back in December 2009 Federal Reserve chairman Ben Bernanke laid out the basic facts in response to a question from Senator Bunning.

Bernanke: The current ratio of public and private debt to GDP, including not only the debt of the nonfinancial sector but also the debt of the financial sector, is about 350 percent. (Many analysts prefer to focus on the debt of the nonfinancial sectors because, they argue, the debt of the financial sector involves some double-counting--for example, when a finance company funds the loans it provides to nonfinancial companies by issuing bonds. The ratio of total nonfinancial debt to GDP is about 240 percent.)

Since personal bankruptcies have been made more difficult and the financial industry was bailed out by governments a natural liquidation by bankruptcy process has been slowed. So the debt burden has remained high. At the same time, over-promising on entitlements has governments running up more debt and this is made worse because sluggish economic recovery also means slower increases in tax revenues.

What matters about debt: Will profits and tax revenues rise fast enough to service the debt? When huge debts and growing entitlements expenditures exist an absolute decline in economic output is a recipe for disaster. Rising debt requires rising output to service the debt. Otherwise default (whether by official default or inflation) becomes inevitable.

Are the lingering effects of an excessive debt build-up our only problem? I don't think so as I'll explain below. But even if the debt burden is the only root cause of a weak economic recovery the debt burden shows no sign of lightening. Mortgage foreclosures and personal bankruptcies are cutting down consumer debt. But the increase in government debt shows no sign of abating. The US sovereign debt burden is not an isolated problem either.. Japan's 200+% GDP debt burden will cause a financial crisis in about 15 years, possibly sooner if the markets come to understand the approaching crisis. This could cause a US Treasury bond demand crisis. The US already faces a very serious fiscal solvency problem. Outside events (e.g. break up of the Euro zone, a Japanese sovereign debt crisis, much higher oil prices). could cause that developing problem to reach crisis stages much sooner than would otherwise be the case.

Europe might precipitate the next crisis. Europe has very large sovereign debt problems.

Germany can only go so far in bailing out Europe. The cost of recapitalizing European banks (despite overly optimistic stress tests), including those in Germany, is estimated to be €420 billion under an adverse scenario, just for non-performing loans. The cost of marking down — let alone writing off — sovereign debt would be much greater. As of last November, 20 of the largest banks in the European Union carried $4.2 trillion in PIIGS (Portugal, Ireland, Italy, Greece, Spain) sovereign debt, about seven times the amount of their $620 billion in equity.

What enabled debts to get so big? As memories of the Great Depression have faded and financial companies have become more adroit at assessing individual risk the trend has been to grant more consumer credit. Plus, the political class has to keep promising more goodies in each election. So the trend has been so spend more without taxing more. Plus, financial companies have created more complex debt instruments for corporations. The resulting pile of debt becomes a big house of cards.

What made industrialized civilization possible in the first place? Have we gotten so far way from the Malthusian Trap that perhaps we are hurting from loss of the benefits that the Malthusian Trap's selective pressured bestowed on us? Some people look around and see signs that a civilization that has peaked. The Derb and Bruce Charlton see slowing rates of innovation and other signs that our capabilities aren't increasing overall. Sure, we've got fancier smart phones and more powerful computer server farms. But where are the improvements that are as dramatic as electric power or the car or jet airplanes?

Forty-three years! Forty-three years before that, Lindbergh had not yet flown the Atlantic. Forty-three years before that, the only automated forms of transportation were the railroad and the steamship. Bruce Charlton:

That landing of men on the moon and bringing them back alive was the supreme achievement of human capability, the most difficult problem ever solved by humans. 40 years ago we could do it – repeatedly – but since then we have *not* been to the moon, and I suggest the real reason we have not been to the moon since 1972 is that we cannot any longer do it. Humans have lost the capability.

These melancholy thoughts of civilizational decline came to mind again when I heard on a news broadcast that it will take at least a year to bring the Colorado cinema mass murderer to trial. And even when the trial eventually gets underway, says TIME, “the case is shaping up to be a years-long criminal proceeding.”

Is the accumulation of bureaucratic crud and the gumming of government decision-making a major cause of a slowed rate of material progress? Or is the parasitism and imposed inefficiency just more noticeable because we've exhausted our ability to generate growth because the easy ways to cause growth have been basically used up? Tyler Cowen argues in the fast few hundred years we basically harvested the low hanging fruit of natural resources, scientific discoveries with great commercial value, and with mass education to raise skills levels. So progress is now harder to make. I agree with this argument.

I am less optimistic than Tyler about an eventual return of good times. I see three main possible ways that could happen. Maybe artificial intelligence will enable us to resume a sustained period of rising living standards. I'm skeptical on this point because over the last couple of centuries the number of working scientists and engineers has exploded by many orders of magnitude while the rate of discovery of fundamental enabling insights has dropped. This suggests there are fewer things left to discover and that AI won't change this. Name one discovery since 1960 as important as the laser (first proposed by Einstein in 1917 and initial demonstrations in 1947 and for optical pumping in 1952. Similarly, Bardeen, Shockley, and Brattain invented the transistor in 1948. Name an invention after 1960 that is as important.

Perhaps fusion energy will become feasible and also very cheap. With very cheap energy we can concentrate very low concentration elements into high and useful concentrations. Another possibility for enabling a return to a period of lots of low hanging fruit comes from genetic engineering once it becomes much easier to do. But none of these enabling technologies seem like good prospects to reignite growth in the next 10 years.

I see the Peak Oil theorists as addressing a subset of the problems which Tyler addresses (though Tyler doesn't really address how serious a problem we face due to Peak Oil). Writing from a Peak Oil perspective Fabius Maximus thinks our civilization peaked in the 1990s when oil prices fell to $12 per barrel. Since then rising natural resource costs, especially energy costs, have throttled growth. While the 1990s seem like the last good sustained party time that period still seems like a pale shadow to the 25 year period after WWII in terms of yearly sustained changes in quality of life.

UCSD energy economist James Hamilton (who I've linked to a few times above) questions whether we can have economic growth without growth in energy usage. I would extend that question and ask whether we in the industrialized world can have economic growth without growth in our use of assorted minerals such as aluminum, iron, platinum, and other elements.

"The question is, how much can we keep growing without a growing supply of energy?" said James Hamilton, a University of California-San Diego economics professor who has been on the leading edge of research into the impact of high energy costs.

"We've had temporary experiments with (oil supply) disruptions in the Middle East," he said. "We don't really have experience, if worldwide, we produce less oil year after year and have to deal with that on a longer-term basis. Certainly, the transition to dealing with that could be very disruptive."

What's your expectation for the major economies of the world over the next 20 years?

By Randall Parker 2012 August 19 09:52 AM  Economics Limits To Growth
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2012 August 18 Saturday
Stanley Kurtz: Obama Wants To Abolish Suburbs

It used to be that you had to pay for those with zero or negative marginal productivity thru taxes and by being victims of crime. But you could still pursue your own choice of lifestyle. I think this freedom to pursue a safe middle class suburban lifestyle is going to come under increasing pressure in the future. Stanley Kurtz argues in a a new book, Spreading the Wealth: How Obama is Robbing the Suburbs to Pay for the Cities, that Barack Obama wants to wage war against independent suburbs in his second term and he's already pursuing policies to rob suburbanites to support city dwellers.

President Obama is not a fan of America’s suburbs. Indeed, he intends to abolish them. With suburban voters set to be the swing constituency of the 2012 election, the administration’s plans for this segment of the electorate deserve scrutiny. Obama is a longtime supporter of “regionalism,” the idea that the suburbs should be folded into the cities, merging schools, housing, transportation, and above all taxation. To this end, the president has already put programs in place designed to push the country toward a sweeping social transformation in a possible second term. The goal: income equalization via a massive redistribution of suburban tax money to the cities.

Unfortunately, the upper classes are so wealthy and insulated that they do not feel any common bond to the middle class. So the elites aren't going to oppose soaking the middle class for the benefit of lower classes.

One approach is to force suburban residents into densely packed cities by blocking development on the outskirts of metropolitan areas, and by discouraging driving with a blizzard of taxes, fees, and regulations. Step two is to move the poor out of cities by imposing low-income-housing quotas on development in middle-class suburbs. Step three is to export the controversial “regional tax-base sharing” scheme currently in place in the Minneapolis–St. Paul area to the rest of the country. Under this program, a portion of suburban tax money flows into a common regional pot, which is then effectively redistributed to urban, and a few less well-off “inner-ring” suburban, municipalities.

Technological trends are gradually wiping out the utility of having low skilled workers living in the same region as high skilled workers. Not many decades ago factories had engineers, managers, and blue collar workers of various skill levels. People of various gradations of intellectual ability functioned in a mutually beneficial relationship. But today the managers, analysts, marketers, and engineers living in the suburbs do not have economic relationships with poor folks living in decayed cities. Rather, the engineers and managers are tending increasingly automated factories where the number of highly skilled workers hasn't dropped while the number of assembly line workers has plummeted. Other managers and engineers are managing relationships with contract manufacturing plants in Asia. Software engineers are operating portions of factories remotely (I almost became involved with such a team right before the 2008 financial meltdown caused the project to get canceled).

I saw a chart (and I can't remember where) recently of manufacturing employment by skill category. Manufacturing is employing more highly skilled workers and fewer low skilled workers. Anyone know where that chart came from? I'm guessing that manufacturers are employing a lot more machine learning specialists.

There is still some economic demand for less skilled workers in proximity to the more highly skilled. Janitorial work, food services, road repair, gardening, and a number of other service occupations still employ large numbers of workers below 100 IQ. But advances in robotics will cut into the need for humans to do most of that work, leading to a large unemployable lower class. When that happens if the market is left to its own devices we will see the rise of a city and its suburbs which contain very few people below 100 IQ. Whole regions will specialize in highly skilled workers who still have economic value. Other regions will house the unemployable.

By Randall Parker 2012 August 18 09:59 AM  Politics Redistribution
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2012 August 12 Sunday
Gen X Cares Squat About Global Warming

Why don't social scientists poll and compile longer lists of issues that elicit feelings of apathy?

ANN ARBOR, Mich.—As the nation suffers through a summer of record-shattering heat, a University of Michigan report finds that Generation X is lukewarm about climate change—uninformed about the causes and unconcerned about the potential dangers.

I'm going to guess the Gen Xers are more concerned about college debts, low paid jobs (or even lack of a job), or lack of a bed partner. Plus, lots of other distractions compete for their attention such as video games, reality TV shows, Daily Mail articles about celebrity hook-ups, smart phone text messages, uploading ugly pictures of their girlfriends to Facebook, and tweets. We are supposed to be surprised?

"Most Generation Xers are surprisingly disengaged, dismissive or doubtful about whether global climate change is happening and they don't spend much time worrying about it," said Jon D. Miller, author of "The Generation X Report."

What is surprising? Nothing. What's sad? The world is getting ever more overpopulated and its resources more depleted and very few intellectuals find this worthy of note. Their only politically correct environment issue is Global Warming. They've even made that issue harder for the masses to grasp by renaming it to Global Climate Change.

As advances in social media and smart phones continue to make distractions more compelling Gen X pays less attention to global warming.

The new report, the fourth in a continuing series, compares Gen X attitudes about climate change in 2009 and 2011, and describes the levels of concern Gen Xers have about different aspects of climate change, as well as their sources of information on the subject.

"We found a small but statistically significant decline between 2009 and 2011 in the level of attention and concern Generation X adults expressed about climate change," Miller said. "In 2009, about 22 percent said they followed the issue of climate change very or moderately closely. In 2011, only 16 percent said they did so."

The human race is not designed to care about the entire planet. We top out at worrying about threats facing just 100 people and don't scale mentally beyond that level. Unfortunately, the human race is now impacting the entire planet and as intelligent dominant omnivores we faces no predators that can constrain us.

By Randall Parker 2012 August 12 09:15 AM  Civilizations Cognitive Limits
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2012 August 11 Saturday
Romney Won't Go Populist As He Trails Obama

Daniel Larison on why Romney won't call for breaking up big banks or ditching Bush's foreign policy:

He is one of the worst conceivable messengers for a populist message around. If he were to make such a proposal now, it would be dismissed as one more implausible reinvention of himself. It may be that he genuinely believes that deregulation and tax cuts are a cure-all economic agenda, or it may be that he assumes that this is what he thinks he’s supposed to believe. Either way, Romney is no more likely to call for breaking up the banks than he is likely to abandon Bush-era foreign policy. Would he be right to do these things? Yes. Would it prove that Romney is capable of doing something other than campaigning as a cookie-cutter Republican nominee? Of course. Those are the other main reasons it is never going to happen.

It says a lot about how the US electorate has changed that during a period of high unemployment the sitting President stands a decent chance of getting reelected. Historically, bad economies doom the party in power. Yet Obama's supporters consider other factors more important. Why is that? I can think of a couple of things. First, identity politics. The electorate votes more heavily by racial and ethnic identity (or loyalty) as America becomes more balkanized. Second, declining workforce participation across a wide range of demographic groups. The health of the economy doesn't matter much if you've given up working. Supporting Obama becomes even more important if you don't work because you've managed to join the millions who have gotten onto disability benefits since Obama took office.

Suppose Obama gets reelected. That could turn out to be a blessing to the Republican Party if the economy deteriorates over the next 4 years. Best to not be in a position to be blamed for it. The decline in the number of workers per retiree and per other entitlements collectors has put the US on the same path as European nations that are struggling with sovereign debt burdens. The future looks like a vicious cycle:

But as public debt, pensions and healthcare burdens escalate and a shrinking manufacturing base denies opportunities to willing workers, there is much more at stake here than the credit, blame and spin of presidential politics, according to the University of Michigan's Don Grimes.

"We could be facing a much bigger problem," Grimes said, pointing to the experience of Europe, where aging, debt-ridding nations are now struggling for equilibrium. "The experience of Europe is that they essentially sustained a lifestyle with borrowed money," Grimes said, adding that as the population-aged resources "dried up, there was no income flow, no tax revenue. It's a vicious cycle."

By Randall Parker 2012 August 11 06:45 PM  Politics American Presidency
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2012 August 04 Saturday
The OECD Is A Tax Cartel

Think of governments as businesses that do not want competition. Globalization? An effort to reduce competition. See Cartelizing Taxes: Understanding the OECD’s Campaign Against 'Harmful Tax Competition'.

I see more cartels in our future, both in business and government. The biggest reason the Eurocrats have to keep Greece in the EU? Protect the cartel.

By Randall Parker 2012 August 04 09:05 PM  Economics Political
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