Koch-up and Conspiracy

If there was ever a test of the thesis that businessmen are better at sorting things out than politicians the repeal of Obamacare is it, and so far businessmen are not looking good. From over here it seems bizarre that a President who controls both houses of Congress cannot get through one of his key campaign pledges.

The Democrats are standing on the sidelines of this debate and whilst I guess there are many who feel real concern at the proposal to take healthcare away from millions and increase its costs to millions of others. Mixed in with the elation of victory there must be some feeling of schadenfreude.

President Trump tried to pull together a coalition of right wing Republicans with very, very right wing Republicans. Despite being one of the most conservative Congresses in living memory, there is a core of libertarian speaking Congressmen who are almost off the spectrum, the Freedom Caucus. They don’t want Obamacare “fixing” they want it repealing.

The Koch brothers, David and Charles, have publicly promised millions of dollars to congressmen, who vote against the current proposals, to help them get re-elected. Why this is not simply illegal is beyond understanding. That is unless you read @JaneMayerNyer  book “Dark Money”… This charts how the once reclusive heirs to the Koch empire used their considerable fortune to support a range of not for profit organisations promoting a range of extreme libertarian views and, in passing, their own business interests.

Ms Mayer’s book reviews almost 50 years of giving by the Koch family whose fortune is based largely on extractive industries and which over the years has had a number of significant brushes with the Environmental Protection Agency (EPA).  Oddly enough they think climate change is a conspiracy by those wanting to expand the role of government and have funded much work to attempt to undermine the science of global warming and are keen to limit or even abolish the EPA.

The groups they support always have names like Americans for Jobs Security and Centre to Protect Patient Right . The only thing the name tells you is that they almost certainly aim to do the reverse of what the words mean.

Money speaks in America and loudly, however currently 54% of the population are in favour of Obamacare. What is more, a lot of them are low income republicans. Some elected officials seem to have find that attack adds don’t cut it if they are held responsible for taking away health care for a large swath of their supporters.

The failure to repeal Obamacare is a fantastic result for ordinary Americans, many of whom will have voted for President Trump. However, progressives need to wake up. This was not a triumph of the opposition it was a Koch-up of the extreme right. They will regroup and return and they have hundreds of millions of dollars to throw at getting it right. The Democrats deserve a day of celebration but no more.

President as C E Ohhh!

Many of those that elected President Trump voted for him because he was a business man. They thought if he could run a successful business empire, 4 bankruptcies notwithstanding, he should have transferable skills to run the country efficiently. The case is often made that people successful in business will almost certainly be better at running government than career politicians and it is clear President Trump believes this also.

Whilst there may be superficial similarities and some overlapping skill sets, such as managing people and negotiating there are profound differences which in truth mean the two jobs are not just quantitively different they are qualitatively different as well.

Firstly, there is a level of accountability in government that is far in excess of that of both public and private companies. It is one thing to give a motivational speech at the staff conference to a group of people who’s careers depend in large part on your view of them. It is a wholly different issue to have your every utterance picked over by your peers who have a career interest in demonstrating that what you are doing is wrong.

The relative power and ability to challenge of, on the one hand, staff, customers and shareholders and on the other Congress, pressure groups and the media is immense. In the former case the executive has an information resource which translates into a real power advantage. In the latter it may often be the case that citizens, think tanks and pressure groups are much more informed about an issue than the President. Worse they can demonstrate in public his ignorance.

There is also an important difference in the relationship between means and ends. In most businesses there is a fairly well defined objective in terms of growth and profit. There may be debates about how this is achieved but those debates are largely within a relative well defined area. In politics the ends are often in question and the means so diverse and contested as to reignite challenge as to the nature of the ends.

Another huge difference lies in relation to the transparency of the processes of government and business. Even where there is not out and out secrecy there is much within business which remains behind the corporate veil. Intellectual property law, commercially sensitive data, compromise agreements for staff leaving organisations all provide more (or less) legitimate protections of corporate information. In liberal democratic governments the presumption is of the peoples’ right to know and only in clearly specified areas, such as national security, is there an ability for the state to limit transparency. Even then there is often oversight by independent individuals to ensure policies are not being breached.

Leading a country is about persuasion, consensus building and the ability to compromise. Running a private business you are the principal owner of is unlikely to be a good learning environment for those skills. Indeed it is very unlikely that direct challenge of any kind is going to flourish. From his behaviour in the course of the campaign and his month in office no one is going to describe President Trump’s management style as collegiate.

He clearly cannot tolerate anyone questioning his view of the world. His behaviour in the recent press conference confirmed this. He is hectoring and plain rude when he deals with people who do not simply say “Yes, Mr President”. His style betrays a lack of real confidence. He seems to need approbation and confirmation of his brilliance.

His continued attacks on Hilary Clinton are instructive, they are those of someone who, despite having won the election, is not convinced he has beaten her. At one point in the press conference he felt compelled to state. “I won the election.” Who was he trying to convince? Himself?

It looks very unlikely that President Trump will learn from his mistakes. Difficult when you do not think you have made any. He will plough on as he has started. As time goes by more and more people will say no to Mr Trump, eventually even those within his “team” will start to abandon him. He will become ever more beleaguered. The outcome is unlikely to be good. There is a chance he may resign in a fit of pique and speak to “his people” about how he has been undermined by the Washington establishment.

Alternatively he may start to manufacture reasons for dismantling the bulwarks of liberal democracy. He has already started undermining the legitimacy of the courts, the press and the opposition in Congress. With a divided America the opportunity for authoritarian action should not be underestimated. The idea that “it can’t happen here” was challenged by Sinclair Lewis in the 1930’s when populist right wing parties were growing across Europe. His warning has a new currency which should not be ignored.

Many see President Trump as an outrageous clown, a gift to the satire industry, a reason to open Twitter to see what latest irrational rant he has supplied for our entertainment. This is a mistake. President Trump is a dangerous liability.

He has identified a genuine and difficult problem. The existing political elite of Republicans and Democrats have failed to protect the interests of many millions of ordinary Americans. That issue will remain after President Trump has gone. Once he has gone if the narrative of “elite conspiracy” gets hold there are a lot of very angry and very well armed Americans who’s remaining faith in democratic change might be destroyed. If he does not go he may well become a genuine threat to American democracy.

 

 

 

Worse than Fatal Distraction

The risk map of the world is looking pretty sick at the moment. There are a number of risks which have enormous potential for dislocation and harm and the likelihood of their crystallising is increasing remorselessly. The following are just two very different issues each of which is capable of having a massive impact on the lives of everyone on the planet.

By far the most important and increasingly urgent issue is climate change. The evidence for the reality of its connection to man’s use of fossil fuel is so well established I take it as a given. The deniers no longer deserve the compliment of treating them as susceptible to rational argument. The problem is we are nowhere near to taking the scale of actions needed to keep the temperature increase below 2 degrees celsius. Much good work has been done and alternative energy is making real progress but the pace of change has to accelerate significantly if we are to achieve the targets agreed by 190+ countries  at the Conference of the Parties in Paris in 2015.

If we are to achieve the reduction in fossil fuel required it means well in excess of 50% of the proven reserves currently on energy providers balance sheets will  be stranded in the ground. Clearly, this will have a major economic impact. The more delay in addressing the issue means the greater the threat from runaway climate change, or the greater the dislocation to the economy when action is taken, or both. As risks go, making planet Earth uninhabitable is about as bad as an impact can get.

The second major area of risk is the continued financialisation of the global economy. The issues which preceded the 2007/08 credit crunch and subsequent Great Recession are still with us and indeed growing again. Trade imbalances, growth of debt – public and private, lax regulation of the financial sector and threats of even that being weakened.

It is not just millenarian communists who think the financial system is inherently unstable. Hyman Mynsky, an economist widely seen as having identified the mechanisms leading to the credit crunch identified a cycle of investment behaviour which inherently lead to crises over time. Initially cautious investment strategies become less and less so as a benign environment lulls people into a false sense of security. Following this of course there is, what has come to be known as the Minsky moment where creditors look down and find, like Wile E Coyote (Road Runner), they have run off the edge of debt mountain and there is nothing holding them up but their hubris.

The financial sector now completely dominates the real economy and economic decisions are overwhelmingly determined by financial considerations. We have, what has been called “quarterly capitalism” where long term growth and productivity are sacrificed to short term dividend payments.

This financialisation of the economy has driven a massive increase in debt. In 1950 the average level of private-sector debt across advanced economies was 50% of national income. By 2006 it was 170%. Adair Turner, Chairman of Financial Service Authority in 2008, charts the growth of debt and argues it is now a major source of instability in the economy and needs to be much more effectively regulated.

The credit crunch and subsequent Great Recession confirmed the scale of the impact of financial crashes. They are notoriously difficult to predict but perhaps more worryingly with the continued growth of the financial sector and the contraction of the state it could well be that, next time, some institutions are too big to save.

There are of course a host of other major sources of instability and risk. The growth of public debt, automation of jobs and growing intra-state inequality.  Political instability in the Middle East, the Ukraine, the South China Seas, North Korea generate the potential for international conflicts and the risk of nuclear exchanges. They also sustain the environment, albeit with great help from the developed world, for international terrorism. A terrorism which generates enormous amounts of fear in the Christian West and enormous numbers of dead people in the Muslim Middle East.

Whilst the risks are all very distinct with different drivers and consequences they do have one thing in common. They are global risks. They can only be properly addressed by concerted, international, government action. And what are we in the process of doing? Separating, building walls, exiting international agreements, imposing religiously discriminatory travel restrictions, constraining international trade, generally pulling up the drawbridge.

Since the outcome of the US election commentators and politicians from all sides in the States and abroad have attempted to put a positive spin on the matter. From a mixture of wishful thinking, and patriotic desire to rally around the head of state a number of reassuring stories have been woven. Some argued the campaign rhetoric would prove to be just that and evaporate once the keys to the Oval office had been secured. Others claimed Mr Trump was really a smart guy who would recognise his need to surround himself with advisors that knew what they were doing. Yet others suggested that within the Whitehouse machine there are people and mechanisms to prevent a rogue president from doing something completely stupid. There were even those who thought that the shock of victory would somehow jolt Trump into being a rational human being when he faced the awesome responsibility of office.

As time has passed and he has pull together his team and started signing executive orders the truth has forced itself into the light, when something looks like a duck, walks like a duck, is called Donald and quacks you have got to give up believing its going to be a swan.

Neglect of the challenges facing the world is not President Trump’s style, he seems absolutely determined to make them worse. His climate change denying beliefs mean he has put someone in charge of the Environmental Protection Agency who feels the link between climate change and human activity remains to be proven.

His campaign pledges about dealing with Wall Street are to be taken forward by ex Goldman Sachs trader Stephen Mnuchin as Treasury Secretary and it looks like their first action is going to be to review the Dodd-Frank “Wall Street Reform and Consumer Protection Act”. What betting they are determined to strengthen it to something like the more radical Glass-Steagall Act, repealed by President Clinton, which had the intended consequence of preventing financial crashes!

His approach to international relations seems to be to fight fire with petrol. First he alienates the whole of the Muslim world, if not all the Muslim states, by attempting to impose a religiously discriminatory immigration ban. Beyond that is the threat of a much more aggressive screening programme for immigrants. One can only imagine what that will look like. Ellis Island may yet become the only point of entry. He rapidly moved on to charge his defence staff with providing  options to defeat IS, options which might have been considered “off the table” under the previous administration.

President Trump is not politics as usual. Dealing with him politicians need to recalibrate their basic assumptions about how diplomacy and international relations and international co-operation work. The result of the US election has to be respected and realpolitik means efforts need to be made to establish a working relationship with the “leader of the free world”. But one should sup with this man with a barge pole. It is not just that he is completely incompetent, he cannot be trusted .

In more stable times he would be a fatal distraction from the real job of governments, right now he is even worse than that.

 

 

State Visit and Brexit

You have to have sympathy for Mrs May. She probably has two in-trays, one, and by far the biggest, how to make Brexit work and second, everything else. Given this you might think it is not surprising that she drops the occasional diplomatic clanger.

The decision to extend an invitation for a State visit to President Trump is clearly a mistake. Rattled by the public outcry Downing Street’s initial response seemed to be “it wasn’t us”. There was the “clarification” of the process whereby invitations are proposed alluding to a some arcane Committee which no one had ever heard of as if it had come up with a proposal which Mrs May had just accepted. This was so obviously incredible no one really pushed it. According to all reports, Mrs May’s faults do not include a failure to attend to detail. The idea one of the UK’s most powerful weapons in the arsenal of soft power would be deployed without her specific proposal much less considered approval is laughable.

The question then arises about why do it so early in Trump’s presidency. Yes Mr Trump was elected and yes he is now the leader of the most powerful nation in the world but why offer him the star prize this early in his Presidency. Usually this is something that happens a couple of year in. Mrs May seems to have gone a lot further than most British leaders on the first date. Well beyond holding hands.

It could be that no one in her team appreciated how unacceptably President Trump could behave. This seems unlikely. Whilst his capacity to shock is undiminished his ability to surprise is long past. His demeanour is boorish, his attitude to almost every minority, and some majorities, is appalling and his politics are vile. All of this is clear and has been so for some time.

He is, non the less, the democratically elected leader of the US and it is a key part of the job description of the UK Prime Minister to establish a professional and friendly relationship with the “leader of the free world”.  With everything that was known before the visit however you might have thought the emphasis, at this early stage, would be on establishing a professional relationship. Friendship, might have been seen as a future goal, growing out of cordial in the fullness of time.

The fact Mrs May had forewarning of the ban on immigration makes things even more puzzling. She was not ambushed in the Turkish press conference, she and her advisors had plenty of time to think about this. Something which the majority of our allies responded to in clear and unambiguous terms almost immediately was given a straight bat in Turkey.

Unfortunately, she has now painted herself into a corner where there is no good move. She sticks with the invitation and risks a visit marred by demonstrations or withdraws it and upsets the biggest toddler on the planet who will scream and scream and scream.

But why? How has someone who was selected precisely because she was seen as a safe pair of hands arrived at this pass? I started this piece speculating about Mrs May having two in-trays. Of course that is not true. There is only one and it is Brexit. Her place in history will be defined by Britain’s withdrawal from the EU. To make this a success is probably Mission Impossible but to prevent it being an unmitigated disaster hard Brexit requires alternative trading agreement being put in place and in record time.

Could it be that the need to make early progress on a trade deal with the United States blinded Mrs May to all the risks in developing a close relationship with President Trump? Perhaps. It is impossible to know from outside. What is clear is that it has not been Mrs May’s best moment so far and it has created an issue which has a long way to run. More significantly it betrays a failure to appreciate quite what a challenge President Trump represents. With him politics has shifted gear and the existing political elites are struggling to come to terms with this. They need to and fast.

Politics and Ethics

Politics and ethics make uncomfortable bedfellows. Some think they have nothing to do with one another and that it is only a naive liberal who could think they have any connection with each other in the “real world”. Robin Cook, when he became Foreign Secretary in 1997, was ridiculed by some and patronised by others when he set out his Mission statement and talked about an ethical Foreign Policy. Over his period in that office this was often used as a stick to beat him with when some trade deal was done on weapons or some visit from the head of an unsavoury ally occurred.

Politics, it is argued, is about the art of the possible and should not be constrained by ethical considerations which get in the way of a “good deal”, more often than not a good trade deal, and quite often a good arms trade deal. There is rarely a shortage of highly respected politicians and business leaders willing to point out that in the real world we have to be pragmatic and often sup with the devil. That realists have to put aside their moral scruples on particular issues for a greater good.

That politics is a messy business is unarguable. Yalta was not a meeting of those with a common ethical view of the world looking forward to the defeat of fascism. Politics is always about compromise and deal making. In democracies compromise is at the heart of the process. Those that lose elections compromise their views to allow the winners to implement theirs for a period of time.

That politics requires a pragmatic approach to issues does not mean, however, that it is, or should be, an ethics free zone. There are times when the ethically right thing to do is also the politically correct thing to do.  Usually the ethically right thing to do is more difficult and the benefits less tangible but that does not always, of itself, change its political correctness.

Mrs May had a a difficult hand to play in her visit to the United States. President Trump is the democratically elected leader of the most powerful country in the world and maintaining a sensible relationship with him is in the interests of the UK. Given President Trumps behaviour to date, during the election, as President elect, and latterly as President, many would find it difficult to shake hands with the man, nay be in the same room as him.

Politicians earn their pay when they subordinate their feelings to the needs of their country and do things which may be personally distasteful to them. However, suppressing all ethical judgement is a mistake. When approaching the meeting with President Trump geo-political security, trade, the implications of Brexit were all matters where the UK has a vital interest in US attitudes and one cannot make progress by standing apart from someone in such a key position of power.

To be fair, Mrs May also addressed some of difficult areas of concern such as President Trumps views about NATO. However, her desire to secure a favourable response from President Trump was palpable and it was clear from her speech in Philadelphia she wanted to maintain the “special relationship” with the US. This relationship, first enunciated by Churchill in 1946, has always been one of a junior and senior partner and in the realpolitik of diplomacy has been of material benefit to the States occasionally (when they need support in the UN for a foreign adventure) and helped UK morale in its transition from “top Nation” to somewhere much further down the pecking order.

Going into this meeting Mrs May knew what President Trump is like. What you see is what you get and what you see is awful. She might have thought that some distance from this man might be sensible. Polite and respectful of someone who has been elected to such an important office, business like in areas of common concern but above all reserved.  The image of his holding her hand may well haunt her for years to come, however, what she could have done to prevent that is uncertain. Comments about the “stunning election victory” were a gratuitous hostage to fortune. His stunning victory is that of the “noisy minority”.

If the president represents the American people we do not want a “special relationship” with them. The reality is he does not. He does not represent the half of the electorate that voted against him, and it is my strong belief that in due course those that voted for him will come to the view that he does not represent them either.

There have been few reasons for optimism as the new year began. Two impressed me, both out of the United States. First Michelle Obama’s last speech which was a model of optimism and dignity, second the women marchers following the inauguration. Maintaining a special relationship with this face of America has to be the right thing to do. But to paraphrase, right now America is the worst of places and the best of places.

Ethically President Trump is repugnant. Despite the circumlocutions of some, the alternative facts of others and the wishful thinking of many he is also politically repugnant. I suspect Mrs May is going to regret bitterly the invitation to meet our head of state.You have to work with lots of people but you need to chose your friends carefully. You are often judged by their actions.

What looked like a competent managing of a difficult challenge on Friday has started to unravel as President Trump issued an odious and in truth incompetent Presidential edict on immigration. Mrs Mays’ initial response at the press conference in Turkey was 100% political and ethics free.  Basically, US immigration policy is the responsibility of the US.

Maintaining a pure ethical stance amongst the crooked timber of mankind is probably impossible. However, a good politician never loses site of what is right and wrong and makes difficult judgements about when a line is crossed. Often those judgments carry a political or a personal cost, or both. When they are not made however they can have awful long term consequences.

Robin Cook was presented as naive when he talked about an ethical Foreign Policy. No doubt there were some who thought his ethical stance, resigning from his position of Leader of the House of Commons in 2003 following the invasion of Iraq, was naive also. Had there only been more such naive politicians with robust moral compasses’ at the time the world might have been a much better place.

 

 

Will robots “Exterminate!” jobs?

In December 2016 Mark Carney gave the Roscoe Lecture in Liverpool and spoke about the challenge of automation. He made the point that, “…every technological revolution mercilessly destroys jobs and livelihoods – and therefore identities – well before the new ones emerge.” His talk reflects growing concern around the world about the impact of robotics, machine learning and artificial intelligence. Some take an optimistic position arguing we can and should race “with” rather than “against” the robots, others are more concerned about the social and economic consequences. The following books reach differing conclusions,  but pretty much all agree on the accelerating pace of change and the ubiquitous impact they are set to have on the labour market.

In 2014, Erik Brynjolfsson and Andrew McAfee published “The Second Machine Age” It followed an earlier and much shorter work entitled “Race Against the Machines”. I start with this, much quoted, work as it provides a good overview of the brynspeed and scale of change. They start out with an interesting analogy to illustrate the accelerating pace of change in information technology based on the operation of Moore’s Law. That “law” was first enunciated by Gordon Moore in 1965. Over the years the shorthand version has become that roughly every two years the complexity of integrated circuits double and their cost halve. The critical consequence of this is the power and costs of computing double and halve respectively also.

This law has proven reasonably accurate over the past 50 years which means of course the power of computers has doubled 25 times since it was first described. Brynjolfsson and McAffee then use an analogy to give some indication of what may happen in the future if the law continues. They use the, possibly apocryphal, story of the reward provided to the man who invented chess. When asked by the emperor what he wanted he said he would like rice, and the amount of rice to be the exponential sum of rice if you started with one grain on the first square of a chessboard and then two grains on the next square and then doubled again on each remaining square of the chess board.

His request was granted until the amount started to become apparent. After 32 squares it amounted to 4 billion grains of rice which is about one large fields worth. So the first half of the chess board delivered a significant but manageable reward. The problem was when they moved into the second half of the board. Geometric progression really starts to accelerate and by the time you get to the 64th square you are at 18 quintilian grains of rice, more than has ever been grown on the planet. In passing, the emperor had the inventor’s head chopped off. No one likes a smart Alec.

The point that Brynjolfsson and McAfee are making is that computer technology is now approaching the second half of the chessboard and the increases in power which have been impressive to date, will pale into insignificance as we go forward. Computer power will increase at such a rate that it is difficult to predict what the limits of its capacity going forward will be or its consequences.

When you read Brynjolfsson and McAfee you cannot but be infected by their optimism. They are clearly impressed by the speed and depth of challenge technological change is creating. Despite the optimistic tone of their writing they do see the issues which this rapid change generates. In an article for the January 2016 World Economic Forum they recognised that “Globalisation and technological change may increase the wealth and efficiency of nations and the world at large but they will not work to everybody’s advantage…” They go on to make clear “ordinary workers” will bear the “brunt of the changes”.

Further they see the negative outcomes are likely to be increasing inequality of wealth and incomes leading to inequality of opportunity meaning that not all talent will be accessed, undermining the “social contract”which underpins social order. They also state, perhaps prophetically given what happened in the remainder of 2016, “Political power, meanwhile, often follows economic power, in this case undermining democracy.”

They argue, because of all this, there is a need for greater social investment to allow the provision of good quality basic services including education. They also make the case for public sector investment to boost the economy in the short term however they also talk about simultaneously putting in place a fiscal consolidation plan. There is a bit of cake and eat it here.

Coming from a rather different position is Martin Ford whose book “The Rise of the Robots” was the FT’s surprise business book of the year 2015. Ford makes the point that Information Technology is a radical “general purpose technology” by which he means it is similar to fordelectricity or steam. These advances had implications in every area of life. Electricity effected production, transport, communications, culture and opened the way to the creation of completely new industries. IT is a similarly powerful and ubiquitous innovation, what is more the pace of its evolution is accelerating across the second half of the chessboard.

Ford focuses on the economic impact of IT on employment. He describes how the declining costs of technology and the rising costs of labour are undermining the competitive advantage of developing economies workers. Foxconn, for example, who make Apple devices in China announced in 2012 plans to introduce up to a million robots into its factories there.

Another interesting example Ford presents relates to the textile industry. This was decimated in the US in the 1990’s as jobs went to low wage economies like China, India and Mexico. But between 2009 and 2012 US textile exports increased by 37% on the back of automation technology that could now compete with the lowest wage economies on the planet. Of course this does not mean the jobs that were lost have been recovered. It means the jobs were first exported to the developing economies and have now been replaced altogether by technology. Mr Trump might find it more difficult than he thinks when he tries to bring the jobs back home.

Of course many of the jobs that have been lost to technology to date have been precisely the manual jobs which provided reasonably well paid work for the lower skilled working class. With the development of machine learning and artificial intelligence however a wider and wider range of jobs are becoming vulnerable. The success of Deep Blue in beating Garry Kasparov in 1996 was seen as a major milestone in the development of computer capacity.

Whilst this feat was impressive it was largely a result of what might be called brute computation. There are an immense number of potential chess games however they are all derived from a set of basic moves which can be easily programmed. Advantage is obtained by computing the potential future moves given any particular configuration of the pieces. As computers become able to compute ever larger numbers they can see further ahead in the game which gives them the advantage.  In crude terms their sheer number crunching ability eventually gives them an unbeatable advantage. The success at the chess board is in large part a result of quantitative advances in IT.

Some argue we are now moving in to a period where qualitative changes are being made. It may be that the scale of quantitative change leads at some point to a qualitative change but different approaches are being made to the development of algorithms such that machine learning becomes self sustaining. It is the difference between programming a computer with chess moves on the one hand and enabling the computer to learn how to play chess itself. When this is combined with natural language communication some very impressive results ensue.

One of the most impressive of these is mentioned in many of the books. It is Watson, another IBM supercomputer, which managed to beat two champions of the American TV show Jeopardy in 2011. Jeopardy is an altogether different game from chess. It does not have an easily programmed set of rules. It is based on cryptic, natural language questions which may involve humour, slang, high culture, popular culture, deliberate red herrings etc. There is no straightforward set of basic moves you start from or algorithmic rules to move forward with. The Jeopardy victory was great publicity but the remarkable capacity of the machine was not developed to win a TV show.

Immediately after the show Watson was launched as a diagnostic tool in the health industry. By 2013 it was helping diagnose health issues and design patient treatment plans at major medical facilities in the US. IBM see Watson as having a wide range of applications based on natural language information requests. It is now starting to be used by companies to review business strategies. And for the avoidance of doubt I do not mean making sure their budget numbers add up. I mean taking a view about what products should be launched when, and where R&D expenditure should be made. Of corse Watson is not the only game in town.

Eureka is a programme which was set to work out the mathematical equations which explain the  motion of two pendulums, one dangling from the other. A fiendishly difficult problem, according to those that know about these issues, and incomprehensible to those of us that did woodwork. According to Ford the programme, “…only took a few hours to come up with a number of physical laws describing the movement of the pendulum – including Newton’s Second Law – and it was able to do this without being given any prior information or programming about physics or the laws of motion.”

The implications of this level of machine learning for the professions has been analysed by R Suskind and D Suskind in their rather academic, but non the less interesting book “The Future of the Professions”. In broad terms they see robotics and automation as mainly impacting on manual and administrative jobs. However software is now set to have the same transformative impact on professional jobs.

susskindIn true academic form they begin by carefully defining what a profession is and the model of the relationship between professionals and society. The definition talks about a body of specialist knowledge; admission through the gaining of credentials; a regulatory framework and a set of common values.They then identify the problems that the current model is experiencing. Economic issues of affordability, technological challenge in the manufacture and distribution of knowledge and a growing suspicion that professional knowledge is used to blind people with pseudo-science at the behest of those with economic power etc.

One of the most interesting parts of their work is the review of what is already happening. They systematically review, Health; Education; Law; Journalism; Management Consulting; Tax and Audit; Architecture and …Divinity! What is already happening is shocking but Susskind and Susskind make the same chessboard point. Technological innovation is on an exponential path and it will have the kind of transformative impact on the professions that digitalisation has had on the music industry.

Ford’s work reinforces the same points that automated sports coverage and news articles are starting to appear regularly, if not always identified as such. Precedent searches for law practices, journal reviews for doctors, automated diagnostic programmes are all examples of where technology is starting to make inroads. Whilst currently the focus is mainly on the effective analysis and review of vast quantities of data. It is replacing the need for some of the more routine middle class functions in the legal and health professions. It is a moot point whether a computer will take Silk but each year the possibility of this happening is becoming greater. Even if this never happens, a huge number of middle class jobs are at risk over the coming years, put that together with the more mundane jobs that are going and the economy looks set to need fewer and fewer people.

It is usually at this stage in the reviews of IT and AI progress that people start mentioning Luddites and the need for us to learn from history. The point is made that 300 years ago circa 90% of the population worked in agriculture. Now it is something less than 1% in the UK. As productivity in agriculture increased other opportunities opened up for the workforce that was thus “freed up”. Another, oft quoted, example is the development of the internal combustion engine. When this replaced horses millions of jobs were lost in breading, maintaining, and  cleaning up after them. However, millions of new jobs were created in the production, distribution and maintenance of cars. Given all this we should not worry too much about the IT revolution automating existing jobs, this will “free up’ labour to move into new jobs that will surely emerge.

Ford is not so sure about this, and neither am I. As computing power becomes ever more powerful and also ever cheaper robots will become ever more flexible and may well be able to take on whatever new jobs are created. There is a qualitative difference between previous technological revolutions and the current IT based one. Previous revolutions, brought about by general purpose technologies such as steam, electricity and the internal combustion engine, have been about introducing a source of brute power which humans use to magnify their efforts. Initially IT did something similar magnifying our physical capacity so that, for example, highly automated Amazon warehouses could replace a huge amount of manual labour. However IT also magnifies our intellectual power, indeed in terms of the storage, retrieval and manipulation of data machines have far exceeded man for decades. Whether at some point machines cross the Rubican of consciousness is in some ways irrelevant. There are millions of sedentary jobs which currently middle class workers do which are at risk. The internet of things linked to a machine which has the capacity to have a natural language “conversation”, whether they understand that in some conscious sense or not, means enormous amounts of intellectual work will disappear as far as humans are concerned.

Ford certainly feels we are moving into a new economic paradigm where substantial numbers of people will be redundant in the very strong sense that there labour and intellect is not needed, not just by a company or an industry but by the economy as a whole. This concern is shared by another interesting writer on the subject, Ryan Avent in his book “The Wealth of Humans”.

Avent disagrees with the view that the digital revolution is radically different from what has gone before. He argues the economic process is very much in line with what happened in the industrial revolution. At that time society had to make a trade-off between “…new and improved goods, services and experiences at lower costs in exchange for social and economic disruption.” (my emphasis) Avent looks at the continuities of economic processes between the industrial and the digital revolution. Specifically he looks at the concept of scarcity and how that determines cost. He sees, like Ford and others, that labour is becoming more and more abundant. In this context labour “finds itself settling for a shrinking share of income – and is increasingly irrelevant in the taking of important economic decisions.”

Given that labours bargaining power in the economy is limited and it no longer has the power of trade unions to artificially boost its scarcity to increase its bargaining power, it has to turn to aventpolitics to protect its position. If the existing political elites do not seem to be responding then it is increasingly likely labour will turn to “…radical political movements that offer the possibility of political expression and economic power.”

Avent charts the way the economy has evolved over the past few decades, and how, what he terms, social capital has increased in value. He defines social capital as “contextually dependent know-how, which is valuable when shared by a critical mass of people.” He makes the point that 80% of the value of Standard and Poor’s 500 companies is now “dark matter” or “the culture, incentives and tacit knowledge that makes a modern company tick.” In other words an enormous proportion of value is created socially. At a national level social capital is within institutions like, the rule of law. However, the rule of law isn’t a thing, it is an emergent property arising out of the willingness of a citizenry to accept certain processes that substantiate the rule of law in practice. As Avent sees it, the benefits of the collectively created social capital of the digital economy are going increasingly to the owners of financial capital. Further he thinks that “… this mismatch is a source of significant economic trouble.”

I started this article with an analogy about the geometric progression of computer power. We are now entering the second half of the chessboard and thus the pace of change in relation to AI, machine learning and robotics is likely to be even more spectacular than in the past. There is another issue that is picked up in some of the books above and illustrated by a story, again possibly apocryphal, about a visit by a trade union official to a modern Ford Motor plant. The official is being taken around by Henry Ford Junior. Mr Ford is extolling the virtues of the robots which produce the cars without the need for food breaks, trips to the toilet or holidays, 24/7 and 365 days of the year. The never complain or argue for higher pay. At the end of this paean for the robot the trade union official turned to Mr Ford and asked. “And how many cars do they buy?”.

During the enclosure movement it was said that sheep ate men. Some think now that software is eating men. I hope new jobs do come and they are like the physically and socially sustaining jobs that emerged in the post-war trente glorieuses. Jobs that enabled people to have a reasonable standard of living and a sense of their own worth as part of society. I have my doubts however and think Avent is probably right when he comments on how the the global economy has evolved in recent years  and concludes”…the hardest part in finding utopia is not the figuring out of how to produce more. We’ve managed that. The hard part is the redistribution.”

 

The Second Machine Age, E Brynjolfsson & A McAfee. Norton Press 2014.                                   The Rise of the Robots, M Ford. Oneworld Publications 2015.                                                             The Future of the Professions, R Susskind and D Susskind. Oxford University Press 2015.      The Wealth of Humans, R Avent. Allen Lane 2016

 

 

Brexit means…?

Mrs May’s axiomatic definition reassured many after the referendum. For some it was a clear statement of a withdrawal from Europe and all its works, for some it was a democrat’s recognition of the will of the people, and for some there was room for hope about how terms would be agreed. There were doubtless some who thought Mrs May was bound to say something of the sort in the heat of the result but that perhaps over time cooler heads would prevail and a route to remaining in would be sought.

What was a stroke of genius in the immediate aftermath of the referendum is looking increasingly threadbare. In the intervening period the Tory party has managed to rub along without undue stress. There have been the occasional spats but a statement that can comprehend such a wide range of policy options from hard to soft Brexit does not provide enough of a target for anyone to secure purchase on for an argument.

At the moment the Conservatives are like a pack of hungry wolves looking for a carcass to fight over, growling at each other but unable to give vent to their growing frustration because no body of policy has emerged. No wonder Mrs May does not want to reveal her hand, it would likely be bitten off. It will be a feat of legerdemain worthy of Dynamo if she can carry out the negotiations without having to reveal what the deal is until it is done. Sadly, or perhaps fortunately, no one is that good.

Over the weeks and months to come, as statements crafted by the finest minds in the university of the bleedin’ obvious start to give way to substantive proposals these will be seized upon by hungry wolves on all sides of the debate. Depending on the level of compromise attempted the policy for Brexit will either enthuse some and outrage others or, more likely outrage all.

Worse for Mrs May, as all this is going on, the settled view of the majority of the electorate may start to change. If inflation and wage restraint take hold at the same time next year, those that voted for Brexit may have second thoughts. (Warning – votes for Brexit can go down as well as up). Given this an early election might be a good call, but then, who knows.

Mrs May seems to have a good way with words. Her promise to focus on those just about managing, her firm line on executive pay and footloose executives treating tax as optional were all launched with rhetorical flourish. The difficulty is when these things have to be delivered. Her political skills do not seem to match her verbal ones.

I cannot however feel much sympathy for the leader of a party whose leadership are able to transubstantiate infantile ambition into gravitas and lift party interest and power above the interests of the nation. A leadership which has almost destroyed the Union of the United Kingdom, indeed may still yet, and has put at risk the European project which, for all its faults, represents a way to unite in opposition to global forces which threaten the livelihood, and indeed the lives, of its citizens.

There is some way to go in the process of Brexit and better counsel may yet prevail. With all the challenges that exist in the world at the moment having the whole of the British political elite and public administration focused on taking the UK out of Europe is an error of political leadership of the highest order. Tony Blair’s premiership will rightly be forever blighted by the decision to take us into Iraq, David Cameron’s will surely be the same over taking us out of Europe.

The decision on Iraq casts a long shadow, down to the fate of the people of Aleppo and beyond. Brexit does not mean Brexit, it means a whole lot more. If the vote for Brexit was a protest vote against the incompetence of the political elite it cannot be dismissed as completely irrational.