Saturday, November 29, 2014

Top 3%

Hi! Happy Saturday!

Today's blog is about economics and the top 3%.

We hear a lot of talk today about the top 1%. So what's up with the top 3%?

I am the top 3%. Not financially. Financially my net worth is like debt++.

No, I am the top 3% academically. In any school I attended from K-12, community college and finally culminating to a Masters in Computer Science at U.C. Berkeley, I am in the top 3% with a top labor profession of software programmer. My future is secure independent of the amount of money I have in the bank on any given day. Risk for me is not the same as risk for people of less ability. I will always bounce back, no harm no foul.

My labor worth goes up every day because the bar of intelligent ability for getting a job is rising. The higher the brain-power bar for job requirements of education and capacity then the more assured is my position. The intellectual requirements for labor are increasing every day as automation rolls out. My intellectual education and capability will remain well above the minimum required for labor in my lifetime. Will yours? Imagine you are the opposite. Imagine you test in the bottom 3% as you go through K-12. Your labor worth goes down every day. What opportunities do you have? A person at the bottom 3% of educational testing is guaranteed a minimum wage job indefinitely. No amount of hard work will ever change that. Skilled labor is a waning enterprise. Think of skilled labor as the music industry does. Someone like a skilled glass blower may invent an awesome technique...only to have computers replicate that intellectual property for next to nothing. The glass blower, like today's musician, is then left with meager pennies on a sale; except, perhaps the same way musicians have live performance, having some glass blower novelty market.

We talk about class warfare between the top 1% of the wealthy but the real class warfare going on is brain power for jobs. People who happen to be born average and below average brain power are being left out. If you lack brain capacity at birth, education during childhood, then your future prospects are grim in the employment market. Oh you may have other exceptional talents like a voice or a sports skill, but these skills must be exceptional and unreplicable by computers.

Blue collar, low brain power jobs are being reduced in quantity daily even as the world population increases. What happens to the blue collar workers with no blue collar jobs now?

Hold that thought and let us move to economics for a second.

Nick Hanauaer has an engaging talk about economics, the fallacy of trickle down economics. I can sum up Nick's talk in one sentence: don't kill the goose that lays the golden eggs. We learn this simple parable as kids.
A cottager and his wife had a Hen that laid a golden egg every day. They supposed that the Hen must contain a great lump of gold in its inside, and in order to get the gold they killed [her]. Having done so, they found to their surprise that the Hen differed in no respect from their other hens. The foolish pair, thus hoping to become rich all at once, deprived themselves of the gain of which they were assured day by day.
Killing the middle class is a foolish move by the 1% and the redistribution of wealth in this country shows just how foolish the rich are today relative to most other times in America's history. What happened? Answer: a trillion dollars.

So what changed? There are many counter argument's to Nick's talk, which is the point. Here is one quoting economist Mark Skousen , entitled "The Myth of Consumer Spending":
Granted, personal consumption expenditures represent 70 percent of gross domestic product, but journalists should know from Econ 101 that GDP only measures the value of final output. It deliberately leaves out a big chunk of the economy — intermediate production or goods-in-process at the commodity, manufacturing, and wholesale stages — to avoid double counting. I calculated total spending (sales or receipts) in the economy at all stages to be more than double GDP (using gross business receipts compiled annually by the IRS). By this measure — which I have dubbed gross domestic expenditures, or GDE — consumption represents only about 30 percent of the economy, while business investment (including intermediate output) represents over 50 percent.
Thus the truth is just the opposite: Consumer spending is the effect, not the cause, of a productive healthy economy.
Insight into understanding today's economic scale is perhaps best illustrated by an atheist world view. As an atheist there is a world view we hold dear that can be applied here: a world view of "I don't know". The answer to who created the Universe and economics are the same, too big to scale. Both universe creation and economics today are concepts that are too big for us to currently model. However, as humans we don't want to hear "I don't know". Humans in general find the unknown emotionally disturbing. That's why atheists are a minority and the institutions of religion and economics have both proven we the people will accept any answer over admitting we don't know. Humans are insecure. :-)

From "I don't know" as a world view then the obvious becomes clear: no one understands the feedback loop of $1 trillion dollars. No one. So what should we do? So now what?

I posit that the rich haven't necessarily gotten so greedy they've lost sight of the golden egg; it is just that no one understands the golden egg. Therefore anyone can find some economic preacher man that one wants so as to advocate one's favorite personal position and then get to claim that position is helpful to the middle class. If one is rich then investment is king of GDE. If one is poor then the consumer is king of GDP.  Both are right, both are wrong. No one understands a $1 trillion dollar feedback loop.

This blog is about scale and answering these kinds of questions.

How do we do it in computer science? How do we manage trillions? There are many ways to manage scale but I will talk about one the very first ones we learn in computer science: divide and conquer (quick sort).

I've already mentioned clusters in a previous blog post. A quick recap is we re-establish a representation cap of ten-thousand voters per representative and establish a total legislative branch size of 30,000 representatives. The trillion dollar budget is then divided up between clusters of 500 representatives spending only their 500/30,000, or approximately $20 billion dollars. Yeah, $1 trillion dollars is that large.

Another possible approach would be to spread the budget out amongst the various States.

There are many possible ways to divide and conquer. Which one to choose? This is where "we don't know" comes in. When you don't know, you innovate. That means 1.) simulation, 2.) small groups, 3.) years of time. We literally generate a market place of ideas. This is required because life is a feedback loop. The only way to validate the feedback loop is experience, innovation.

When we don't know we innovate. We do it with clinical trials and drugs. We do it with computers. It is time we innovate with politics.

We put the topic of the top 3% on hold, previously.  Let's put both concepts discussed here together. How does economic divide and conquer play into top 3% job brain power? The answer is we need to adjust our expectation of jobs at the same time we adjust economics. In other words we do not have the luxury of holding jobs as a constant as we learn to manage large economies. We can no longer hold to a simple, single model of a job economic engine. We need to innovate in tandem many new ideas and parallel track innovations to keep up with the changes happening every day. These innovations are going to take place over many years and we need to adjust the feedback loop in real-time by running many other experiments in parallel. Wow. That's complicated. But that's what is needed.

And to make things even more complicated we need to adjust the flip side of a jobs economy engine as well, spending. Spending and consumerism are not sustainable just as jobs are not scalable.  We need to adjust all these things together. And climate change too! Together, you and I.
Keep reading this blog to better understand how to run massively parallel innovations.

Well come! and Well met! 

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