Archive for year: 2017

On the second afternoon of the Directed Energy Conference we attended last week in Washington, DC, we kept an eye on an old man wearing a seersucker jacket. The day before he had been dressed equally nattily and somewhat extravagantly. But it wasn’t his sartorial style that caught our attention, it was his nametag informing us and anyone else who looked that he was with the NSA that had us curious. Why was a near-80-year old man working for NSA and why was he publicly acknowledging what was once known as “No Such Agency” it was so secret? We, of course, struck up a conversation with him. It turns out he’s retired but still acts as historian for the agency, chronicling the super secret organization’s activities, technologies and efforts from the 1960s, 70s and 80s, all recorded, we hope, as stylishly as he is dressed. But we are unlikely to ever find out since even information from so long ago is still classified and likely to remain so beyond our lifetimes he informed us. But we keep no secrets about international trade being unfairly maligned, the growing influence of China and whether to choose happiness or success. It’s this week’s International Need to Know, presenting seersucker suits of information in an often button downed world.

Without further ado, here’s what you need to need to know.

Stop Blaming Trade

Ironies are in full bloom in the world today, watering our eyes and causing us to sneeze in amusement. One is that though the political world is perhaps more divided than ever, the two sides are united in blaming international trade for why we have arrived at this point in history. It is the reason Trump was elected we are often told, or why Brexit happened or for any number of other problems plaguing our world–the suffering of the middle class is due to trade between nations, or at least that is the theory.  But much like the love of the recent Star Wars movie or the sudden emergence of rosé as the hip new drink, the masses often make mistakes. We cannot arrest today’s global problems when we are chasing the wrong suspect. Additional evidence that the policy detectives have mis-fingered trade as the culprit arrive in a new report by the Bank of Settlements (although this report is unlikely to settle the argument about trade). The report notes that “in practice, trade and financial openness appear to have made only a fairly small contribution to the increase in income inequality (see the right most graph below). Rather, technology appears to have been the dominant factor: the returns to skilled labour, which uses technology more intensely, have increased substantially.” This makes sense when one steps back and thinks about it clearly without ideology or preconceived notions clouding the mind. Trade adds value, it does not subtract. Give a class of 25 students each a bag of candy  and ask them to trade the candy in their bags. When they are finished, 99 percent will put a value on their new bag of candy higher than the pre-trade bag.* Once we stop blaming trade perhaps we can get on with concentrating on the real challenges that are harming middle classes around the world. 

China’s Increasing Influence

China is increasingly influential in culture, the economy and in many other ways. They are not yet the world’s largest economy and it will likely be a while before they are. They can’t lead on free trade issues as some think since they have one of the world’s most closed economies. But they are big. Darn big. And China increasingly exerts itself around the world in many spheres.  For example, China now has the world’s fastest super computer (and second and third as well). They are making a huge push into esports with their largest ICT company leading the way: “entertainment giant Tencent has accelerated its e-sports expansion with the unveiling of a new five-year plan…The plan is based on Tencent’s expectations that China is set to become the world’s largest e-sports market. Tencent predicted there will be 220 million e-sports players in China and 335 million globally by the end of this year.” Or look at international students where the U.S. has been dominant. China is now home to more students from Africa than is America. China’s ascent was likely to happen anyway due to their sheer size and growing economy but recent American political events have accelerated the trend. We wonder what the world will be like with the Chinese business culture prevailing in the world rather than America’s?   

Happiness or Success?

In an interesting article on which countries spend the most on education, we came across data on whose parents prefer happiness for their children and whose prefer they have a successful career. As you see in the graph below, French parents by far wish for happiness for their kids and are much less concerned over whether they have a successful career. Of course, does a successful career for Amelie mean she makes lots of money or does it mean she derives happiness from her job? If the latter, maybe Amelie can be happy and have a successful career.  Putting semantics aside, Canada, U.K., Australia and U.S. parents all put a much higher premium on happiness over successful careers. For India and Malaysia, happiness and success are a toss up. We hope you will happily peruse the graph below. 

Incentives are a funny thing. They drive so much in our world and yet often have unintended consequences. A few years ago, like many in our socio-economic demographic, we bought a Fitbit to measure our exercise, sleep and other such metrics. We lost it fairly quickly but then our wife gave us another one as a gift. We have not lost that one, which speaks to a certain incentive in itself. But the Fitbit has changed our behavior. Where once we would worry about getting the best–read nearest–parking spot, now we park further away just to get more steps recorded on our Fitbit. That is a good thing. On the other hand, we are often less efficient nowadays. Where once we maximized our trips back and forth from our car to our house, carefully carrying many things at once, now we purposefully make many trips between house and car, again in order to record more steps. We do the same kind of thing on house projects, going back and forth to get different tools. Perhaps this is more physically healthy for us and there may even be a Zen-like aspect to it leading to more mindfulness, but by being less efficient we are surely getting less done in life. It occurs to us that the optimal use of a Fitbit is someone who walks in their sleep. But, we don’t recommend taking that step. We do recommend minding the employment gap, examining the case of the Canadian cow and analyzing the cost of fun. It’s this week’s International Need to Know, throwing no-look passes for data and knocking down three pointers of analysis as we try to be the Golden State Warriors of international information.

Without further ado, here’s what you need to know.

Mind the Gap

Political volatility around the world continues to be high as we saw in the recent UK elections. Some may think voters are making unwise choices but there is a reason for the angst and sturm of the voting class with further evidence coming from an Organization for Economic Cooperation and Development (OECD) study on employment this week. The good news is that in OECD countries the “employed share of the population aged 15 to 74 years rose for the third consecutive year,” finally reaching pre-financial crisis levels. The bad news is that the share of middle-income level jobs has fallen. There are more high income and low income jobs in OECD countries, but the kind of jobs that have been the foundation of liberal democracies are eroding away. This is due mainly to demand for high skill jobs. The OECD reports that “Between 1995 and 2015, the middle-skill share of employment fell by 9.5 percentage points in the OECD area, while the shares of high- and low-skill occupations rose by 7.6 and 1.9 percentage points, respectively.” In the chart below you can see how in every OECD country high skill jobs have increased while middle skill jobs decreased. Low skill jobs increased in all these countries except Hungary and the Czech Republic. We note the UK is home to one of the larger gaps of jobs though not nearly the largest. The world is in the midst of a large economic transition and political volatility is likely to remain high throughout the transition.

Climate Change & the Case of the Canadian Cow

A new book, Drawdown, lists the top ten solutions for addressing global warming. You are likely to be surprised by the list, as we were, or at least by some of them. We were not surprised by number 4, however–eat a plant rich diet. After all, we are aware that cattle flatulence is a major emitter of global warming gases. In fact, the book notes that “if cattle were their own nation (and what a boring nation it would be, animals standing around eating a lot and farting–wait, there are large swathes of America just like that), they would be the world’s third-largest emitter of greenhouse gases.” Alas, we like BBQ too much and relish our Five Guy burgers (though relish is not one of the condiments we use) to become a vegetarian. But then comes news from Canada of an effort to genetically engineer a cow so it does not pass gas. “The Genome Canada project, led by Filippo Miglior at the University of Guelph and Paul Stothard at the University of Alberta, harnesses labs in the US, UK, Denmark, Australia, and Switzerland to help identify cows that produce fewer greenhouse gases, with the ultimate goal of distributing the responsible genes—conveniently transported in the form of bull semen—to areas that don’t have the resources to develop their own greener cows.” Perhaps someday we will be able to enjoy our beef without there being a beef about what it is doing to the environment.

The Price of Fun

Fun, as that great philosopher Ferris Bueller could tell you, is an underutilized commodity, perhaps more so than ever today. Children, who by all rights should be in their prime for having fun, are instead sent on forced marches of activities organized to the last second and given mounds of homework one would expect in a chemistry PhD, but not for a ten-year-old. And, our politics today are certainly not much fun unless you are of the same bent as the Marques de Sade. So perhaps it is high time to examine the price of fun. No not the metaphorical consequences of having fun you killjoy, but the actual cost. For that we turn to the World Economics Cost of Fun Index which as you see in the first chart below has gone up considerably since 2011. The index “is based on average end-user prices for typical recreational activities and items in national currencies indexed to January 2011 = 100.” When looking at individual countries it should be no surprise that the cost of fun has spiked in Russia in recent years  Does Vladimir Putin look fun? I don’t think so.* Fun is still affordable in China though it has gone up by 13% in the last year. In the last 12 months, fun has become cheaper in Japan and in the U.S. as well. So even as you work at your job this week, take care of your chores this weekend and help out your community in whatever way you see fit, take a moment and have a little fun. You never know, it could be more expensive tomorrow. 

As you may have noticed, music is important to us and we make a point of getting to live shows when we can. You may also have picked up that we are big fans of New Orleans. So when the Hot 8 Brass Band out of the Crescent City comes to town, you know we’ll be there. They are the Rolling Stones of brass bands to the Rebirth Brass Band’s Beatles, combining funk, hip-hop, bounce and the call backs of the sanctified church with the long tradition of brass bands. One of our favorite shows we’ve ever been to was a Hot 8 second set in NOLA around 1 am in a venue not much larger than our living room. The slide of the trombone nearly hit us. Tuesday night’s show was fantastic too with the guys jamming in top form. With all that divides our world, music often brings us together–whether here in Seattle, down in New Orleans, over in Manchester, or even in Tehran. On the latter, we came across the video below of two Iranian buskers, a woman bassist and a man playing the guitar, covering Radiohead’s Creep. Check out the short video below and then tap your feet as we examine yet again how different Japan is, delve into whether we should worry about China following Japan’s economic path and then breathe in, but not too deeply, the latest data on air pollution. It’s this week’s International Need to Know busking for knowledge and information on the streets of our hustling, bustling world.

Iranian Buskers play a funky rendition of Rad…
46 likes	6678 views

Without further ado, here’s what you need to know.

Japan is Different Part 6,753.5

We love Japan. It has one of the most unique cultures in the world and we are a sucker for those who march to the beat of their own drum, even when it’s an entire nation. Of course, there are trade-offs in everything in life and Japan’s uniqueness can lead to challenges. For example, in Japan, CEOs are far older on average than in other countries. As you can see in the chart below, the average age of a Japanese CEO is 61 while globally it is 53. Further, only 33% of Japanese CEOs worked in another company at one point in their career while globally the figure is 74%. An article in the Nikkei Asian Review notes that “because many Japanese CEOs build their careers in a fairly culturally homogeneous environment, Japanese companies are at a big disadvantage when it comes to competing globally.” That cultural homogeneity makes our world much more heterogeneous, but like Japan’s lack of immigration and its other insular ways, homogeneity also has challenging effects for the country and economy. 

Will China Become Japan?

No we don’t think China’s CEOs will suddenly become old but people are making comparisons between the two countries’ economies. The Financial Times notes a number of eerie similarities between China’s economy and the pre-bubble, late-1980s Japanese economy, just before Japan’s long economic slog. But, the FT, which we esteem as much as the next person, misses two factors that typically, for the ever complicated China, point in various directions. First, is a demographic comparison. China, like Japan, like most of the world, has an aging population and most important has a shrinking working age population. The chart below by Charles Schwab, shows that under current projections China’s aging demographics are closely mirroring Japan’s. As we’ve noted before, economic growth goes up due to a larger working age population and due to productivity increases.* Unless trends change, China will face a future demographic headwind. However, China does not have the same closed society culture that Japan has so it’s possible it’s working age population could increase due to immigration (like America) or perhaps its birth rate will start going up again. Nonetheless, the graph below is worrisome. The other thing the FT article neglects to mention is that although Japan’s economy has been problematic, if one looks at GDP per capita, Japan does not look so bad. Of course, GDP overall is not growing and we shouldn’t expect it to expand with a shrinking population. But, the economy, when discussed in per capita terms, is not so bad. Whether China follows Japan’s path we do not know, but there are plenty of short-term worrying signs.

*China productivity, like the rest of the world’s, is way down in recent years.

The Air Up Here

Depending on where you live, the air you’re breathing is full of particulates and other pollution. In recent years, Berkeley Earth began a major project to start tracking such pollution. In the map below you’ll see the worst areas in reds and purples (those colors sure seem to get a bad rep in graphics and metaphors while green just keeps skating on by–like much in life, our perceptions of colors are unfair). Berkeley Earth measures PM2.5 — particulate matter measuring 2.5 microns across or smaller–to determine where air pollution is problematical. Large parts of China, of course, look like Jake Lamotta’s face during a Raging Bull boxing match. But they are by no means alone. India is full of purple and red too. You’ll even see some yellow in parts of Europe and the United States. Berkeley Earth has not mapped Africa yet. Berkeley Earth has calculated “daily exposure to PM2.5 in terms of cigarette equivalents. Red is like smoking five cigarettes a day, purple brings you up to 10 and the brownish purple is the equivalent of Humphrey Bogart in a saloon in north Africa–15 or more Pall Malls a day. During a really bad day in Beijing one might as well inhale a pack of 25. But, as Berkeley notes, China is trying to address air pollution–and the incentive is not so much climate change but because of these localized air pollution health issues. There may be a lesson in here for addressing a variety of transnational issues resistant to solutions.

Our favorite current TV show is Better Call Saul, a kind of prequel to Breaking Bad. We in fact prefer it to its antecedent. Its quietness, more sophisticated character study, more complicated moral compass we find far more intriguing. The main character, Saul/Jimmy, is at odds with his brother, Chuck, who spends considerable time trying to harm Saul. Chuck is mentally ill, manifesting itself in an irrational fear of electricity. In the most recent episode, Saul wins a minor victory over his brother which leaves Chuck holed up alone in his house, apparently in the depths of despair. A character sympathetic to Chuck asks Saul to talk to his brother. He refuses–after so many years of turmoil with his brother, he turns his back on him in perhaps his brother’s greatest time of need. The character sympathetic to Chuck says to Saul, “Chuck was right about you all along. He’s mentally ill, what’s your excuse?” She finishes her rejoinder to Saul, who is sipping a celebratory drink, by saying “Enjoy the champagne.” It is a devastating moment. Our sympathies are with Saul but the show reminds us that no battle, especially those involving mental illness, is won without loss. So far, society and science have proven themselves inadequate to the challenge of dealing with mental illness. Mental illness does not discriminate–it afflicts every race, every gender, the poor and rich alike, the downtrodden and even the most powerful. So as we watch rapid fire events in this world, we will remind ourselves of the devastating rejoinder, enjoy the champagne. Our glass is neither half full or half empty but Waterford crystal clear as we examine drones gone wild, the shifting political alliances with China and who votes the most (no not Chicago graveyards). It’s this week’s International Need to Know providing sunshine on happenings around the world even under continuous gray skies (c’mon Seattle, where’s spring?).

Without further ado, here’s what you need to know.

Drones Gone Wild

One of our earliest posts on this platform was about drones and how the U.S. needs to remember that we will not have a monopoly on them forever. We noted that many other countries now have drones. Turns out nowadays criminals do too. So much so that The Telegraph reports “a British prison has become the world’s first to use a new system designed to stop drones flying over perimeter walls to drop contraband into jails.” The prison is creating a drone shield consisting of sensors that can jam drones and prevent them from delivering drugs, weapons, cell phones and other items the jailers don’t want their prisoners to have access to. The name of the system, created by the UK companies, Drone Defence and Eclipse Digital Solutions, is Sky Fence, a science fiction overlord type of name which invokes as much fear in us as the prisoners do in the jailers. We live in interesting times.

Who are you With?

The world is changing in ways that can seem uncomfortable to many. China’s growing importance in the world, coupled with political turmoil in the United States and Europe, is informing how the world interacts with China. We offer two recent examples. First, at the One Belt One Road summit (see our post last week about it), a number of final communiques were released. But EU members did not sign onto a trade statement “because a series of concerns they had raised with the Chinese government were not incorporated into the draft text.” These concerns focused on a lack of environmental protections and an unfair tendering process. The EU has been increasingly concerned about China’s closed markets. In fact, the EU recently imposed anti-dumping duties on steel and other products from China. China and the EU’s relationship will continue to evolve. At the same time, China’s relationship with North Korea also appears to be changing. China apparently prevented North Korea from conducting a nuclear test on April 20th. This is the first time China has exerted such pressure on North Korea. Experts note it is difficult to take action against North Korea because they could easily attack South Korea with nuclear weapons in a matter of moments. Less noted is that China is also vulnerable to such attacks. So their willingness to take action is notable. As China strides larger across the world stage, they will find the same challenges and complications that confronted other world powers throughout history. There is no free or easy ride.

Who Votes?

There have been a number of high stakes elections over the last year, some of them with surprising results. They have been influenced by everything from worries about transformative technology, concerns about immigrants, reactions to income stagnation and even by Russian interference. The political pros will tell you (often for a hefty price) that voter turnout is a big factor in who wins elections. They break down turnout in a myriad of ways, from income and education levels to race and gender. But overall in which countries is there the highest voter turnout? Belgium comes in first according to the Pew Research Center which is ironic given complaints that the European Union (EU) is not a very democratic entity and Brussels is home to the EU.  Belgium is followed by Sweden, South Korea, Denmark and Australia. In this Pew list, Turkey brings up the rear although given recent events in that country those poor voters may not matter at all (and could be viciously attacked in Washington D.C.)

We find ourselves today ruminating about pancakes, Roger Federer and excellence. We were fortunate, thanks to a friend, to attend a charity exhibition match in Seattle last weekend between perhaps the greatest men’s tennis player in history, Roger Federer, and one of the top ranked players in the world, John Isner. Earlier in the evening these two matched up with Bill Gates and Pearl Jam’s Mike McCready in a doubles match. It was a wonderful evening that featured this amazing shot by Federer (fourth video on the page). Federer has lots of talent, of course, but he worked hard mentally and physically to become one of the greats. Before we were married, most Sunday mornings we would make pancakes while listening to Johnny Cash. We still cook pancakes today though not as often as in our weekly bachelor days. And yet, despite our many hours practicing our pancake skills, we cannot claim we are the Roger Federer of pancake makers. We do not know if we have spent Malcolm Gladwell’s 10,000 hours making pancakes but one would think we should be pretty darn good by now. But instead we research pancake schools on the Internet as we serve hot off the griddle more evidence of China trying to fill a vacuum, some worrisome signs about peace in our world and just how global the fall of the middle class is. It’s this week’s International Need to Know, the French Toast of international news, data and information.

Without further ado, here’s what you need to know.

The Great Vacuum War of 2017*

We talked a few weeks ago about the world’s leadership vacuum. China is continuing to try to fill it. For example, last week China demanded that it be the sole source of financing for a major logistics railway in Pakistan, and the Pakistan government agreed to the demand. Originally, both China and the Asian Development Bank (ADB) were to finance the railway. The ADB is a multilateral development bank funded by both Western and Asian countries. The bank is often involved in projects like the Pakistan railway. However, Pakistani newspaper The Dawn (it’s always reddest before the dawn) reports that the Minister for Planning and Development Ahsan Iqbal said in a news conference, “China strongly argued that two-sourced financing would create problems and the project would suffer.” Originally the ADB was going to provide $3.5 billion for the 1,700 kilometer rail line which is “considered the backbone of the country’s logistics, connecting two major ports with the rest of the country for transporting goods and passengers.” Even before political changes in the United States, China was playing a larger role in world events, including in development. In fact, in 2015 it created an Asian Infrastructure Investment Bank (AIIB) to rival the ADB. The AIIB recently received a big endorsement from Bank of Japan Governor Haruhiko Karoda, “Infrastructure needs are huge and it’s simply not possible for the Asian Development Bank and the World Bank to fill the gap completely,” said Kuroda. Space is full of vacuums. China is trying to fill ours.

*A title that only Charlie Mitchell will fully appreciate

All We Are Saying

While listening to the remarkable Louis Armstrong cover of Give Peace a Chance (no, really, check it out—peace has never swung so hard) and reading about political protests by both the left and the right, it occurred to us that what is missing from today’s protestors as opposed to those from years gone by is optimism. There was an optimistic bent to long ago protests fueled perhaps by a belief that their agitation would lead to a better world. Today’s protesters fill the optimism void with anger.*  Perhaps this is because although we live in the most peaceful and prosperous time in human history, there are worrisome signs of regress. The last couple years of trouble are either a hiccup or perhaps this long virtuous cycle of peace and prosperity is turning towards something darker. Take peace, for example–the last few years have seen peace take a beating. Looking at one measure—The Global Peace Index—there are now fewer countries in the “more peaceful” part of the spectrum as you can see in the maps below. Much of this is due to increased terrorism:. According to the Peace Index, “Deaths from terrorism increased by 80 per cent from last year’s report with only 69 countries not recording a terrorist incident.” Internal conflicts leading to more displaced people also led to the peace index achieving its lowest score since 2008. Whether this negative data is a short term blip or we are in for a trend of trouble is, of course, one of the more important questions of our time. 

2016 Peace Index

 

 

2011 Peace Index

*Or maybe it is anger that is causing the regress.

The Poor Middle Class