Education and Wisdom

[kmguru]

Talking to friends about America's Industrial Policy, it came to our attention that we do not have any. Why?

Just because one is formally educated in a great institution, does not mean you are Wise. Case in point:

On Larry Summers - the chief economic adviser to Obama ----

Under no circumstances, he emphasized, should America have an industrial policy.

http://www.ourfuture.org/blog-entry/...issance-policy

About Larry Summers

http://en.wikipedia.org/wiki/Larry_Summers

At age 16, he entered the Massachusetts Institute of Technology (MIT), where he originally intended to study physics but soon switched to economics (S.B., 1975). He was also an active member of the MIT debating team. He attended Harvard University as a graduate student (Ph.D., 1982), where he studied under economist Martin Feldstein. In 1983, at age 28, Summers became one of the youngest tenured professors in Harvard's history.

What is wrong with our child prodigies, they start out great and somewhere along the lines lose massive amount of brain cells!

[Billy T]

IMHO, part of the reason why he US has no coordinated “industrial policy” is that Government planning has a bad image in the US. As your link points out the lack of government influence and control has the government currently running, or at least owning, some of the most important US industries (finance and autos).

While few American want Ayn Rand’s extreme freedom from government controls and regulations, especially after GWB weaken them with the Madoff’s Ponzi etc. and the current crisis as the result, many Americans have a strong bias against the government displacing or favoring certain industries. The current struggle to get the US health care system to be more like other developed nations is a good example. Many Americans seem to want to have the higher cost (profits for the doctors, insurance companies, drug stores, clinical labs, etc.) and the 3 to 4 year less life expectance than Europeans enjoy.

I like to point out that via the IRS tax code the US has a very centrally planned economy that most American do not realize. I.e. almost every major economic decision (rent or buy, sell stocks with loss to offset gains, put braces on your kid in January and get other deferrable medical services in that same tax year, not when they were first needed, etc.) is strongly guided by the tax laws. More on this at:
http://www.sciforums.com/showpost.ph...6&postcount=33
and the link there to the OP of old thread with more discussion of a less distorting and simple Tax Plan.

[nirakar]

About Larry Summers

http://en.wikipedia.org/wiki/Larry_Summers


What is wrong with our child prodigies, they start out great and somewhere along the lines lose massive amount of brain cells!

The wikipedia article is interesting. Summers is not of the same quality as his uncle Paul Samuelson.

The ability to see the truth and the ability to say whatever will advance your career are two separate talents. To excel at either talent you must be able to in some way learn, remember and create order out of the information that is presented to you but the type of order that you create will be different because the goals are not the same.

The ability to see the truth is what scientists, and analysts need. The ability to say whatever will advance your career is what lawyers, politicians, corporate or non-profit NGO, or government bureaucracy ladder climbers and media pundits need. For this second type they only need to understand the truth to the degree that they need to in order to not fall into intellectual traps while the subtly and convincingly tell the people who matter whatever they want to believe. To be convincing it is better if you have the ability to believe whatever comes out of your own mouth and never realize that you are just telling people what they want to hear. This self-deceptive quality in no way diminishes the intellectual greatness of the mastery in the art of persuasive yet subtle sucking up. This art probably requires a greater intelligence than the art of seeing the objective truth.

Either talent would help a child excel at school but an instinctive but subtle suck up who is a great learner will do a little better at school than a truth recognizer who is a great learner will do because the truth recognizer may say things that his teacher disagrees with while part of the intelligent suck up's intelligence is an instinctive understanding of when to conform to the flaws in the teacher's understanding and when to reveal the teacher's flaws to the teacher in order to impress the teacher.

Summers whole career looks more like somebody trying to rise in status than like somebody trying to understand and share the truth.

I have exaggerated the distinction between the two types of intelligence but there is some truth two what I am saying. I don't think Summers was a genius child who lost his intelligence. Summers is also not a genius at sucking up because if he was a genius in that area who would not have disparaged women in a way that would hurt his career.

Summers idiotic Reaganomics/Friedman ideology seems to to predate Reagan's presidency. While holding this ideology is unsophisticated in terms of truth, it does help you construct a semi-coherent consistent narrative to use as a base from which to weave interconnected stories that all tell the powerful that "when they do whatever they want to do and people get hurt they are being good because in the bigger picture having the powerful do whatever they want to do and temporarily hurting the weak will end up helping both the weak and the powerful".

The fact that Clinton and Obama value Summers just goes to show that Clinton and Obama have stronger instincts for conforming with the cliches that please the powerful than they have to understand reality. Summers talent is making those cliches sound like truth and thereby giving comfort to the people who must conform to those cliches if they want to please the people that they instinctively want to please.

We all live in a soup of competing groups of cliches.

[kmguru]

The 17th Politburo of the Communist Party of China have all engineers as members except one. There is an article that talks about

China vs. U.S.: Economic Power vs. Military Might; Which Will Prevail?

Our people does not seem to get it that Healthcare should be run by doctors, industry should be run by engineers. Yet we have a tendency to let companies like GM run by glorified secretaries and Cyber command run by lawyers.

[Doreen]

Our people does not seem to get it that Healthcare should be run by doctors, industry should be run by engineers.

Do doctors want to be administrators, chief financial officers, etc.? Do engineers?

[kmguru]

Do doctors want to be administrators, chief financial officers, etc.? Do engineers?

I can only speak for myself. When the CFO took over the corner office, that company died - because the CFO did not have the concept of what the company IP is and what it can do. He only focused on the short term profits. He sold his mother for that. That became the American culture.

A 110 year engineering company died because a janitor rose to be the President.

If that is the logic, then we deserve what is happening to us and the Asians are winning. And that is why American Cars do not last like Toyotas. High quality Cameras are made in Japan because that administrator does not know how to build one. I worked with Kodak and Polaroid - same story all over.

Do soldiers want to be Generals?

[glaucon]

He only focused on the short term profits. He sold his mother for that. That became the American culture.
...

If that is the logic, then we deserve what is happening to us and the Asians are winning. And that is why American Cars do not last like Toyotas. High quality Cameras are made in Japan because that administrator does not know how to build one. I worked with Kodak and Polaroid - same story all over.

An astute observation.
It's been my experience [..working for a multinational US based company...] that the American corporate business model is ultimately driven by the bean-counters, and that providing a market with a quality product is at best, a secondary concern. Anyone with even the simplest of economic education can tell you that this kind of 'strategy' is doomed to fail.

[Doreen]

I can only speak for myself. When the CFO took over the corner office, that company died - because the CFO did not have the concept of what the company IP is and what it can do. He only focused on the short term profits. He sold his mother for that. That became the American culture.

A 110 year engineering company died because a janitor rose to be the President.

If that is the logic, then we deserve what is happening to us and the Asians are winning. And that is why American Cars do not last like Toyotas. High quality Cameras are made in Japan because that administrator does not know how to build one. I worked with Kodak and Polaroid - same story all over.

Do soldiers want to be Generals?

I am not saying you are wrong. I just don't know if engineers and doctors, in general, want to run large organizations. I would guess very few soldiers really do want to be generals. But very few is enough. But it isn't a good analogy, since doctors are not like privates - except when they are privates. You can still perform your doctorly duties up to retirement, but a General, generally, is not so useful in the trenches.

[Pandaemoni]

I think it is a bit simplistic to say "engineers should run industry" (or doctors "healthcare" by which I assume we mean the healthcare industry and the related healthcare insurance industry).

Industry is not just about making products. It is about that, but it is also about marketing and financing those activities. Indeed, it's been shown on many occasions that sometimes people don't want a "better" product if a "cheaper" product is available. Just look at the backlash against Walmart and the hordes of people who shop there. The truth is, Walmart does not destroy mom and pop stores, Walmart's customers do, but taking their business away from mom and pop to give it to Walmart.

It is obviously correct to say that management should have a long run view and know about the compa nies products, but it is just as correct to say that engineers managing companies should know the difference between debt and equity financing and which is better for the shareholder whose investment makes the business possible. (And let's say debt is better, do you simply borrow money or engage in a accounts receivable financing, like a borrowing base loan or a securitization?) The engineers should also be aware of possible marketing leads with new retailers, focus group results in which non-engineer customers explain what they want to see in the product, and the ins and outs of the regulatory framework in which the company operates.

Running a large business, like anything terrifically complex, is a group exercise. Turning every corporation into a technocracy would be counter-productive in many cases. I don't kno0e that we need government industrial planners to fix that, especially since those planners would likely as not be economists and lawyers, not engineers--and they'd all perforce be bureaucrats.

[kmguru]

An astute observation.
It's been my experience [..working for a multinational US based company...] that the American corporate business model is ultimately driven by the bean-counters, and that providing a market with a quality product is at best, a secondary concern. Anyone with even the simplest of economic education can tell you that this kind of 'strategy' is doomed to fail.

Finally someone agreed with me due to their experience. I have been posting this theme for 10 years in various forums and no one responds or understands. No wonder we are in this trouble.

[kmguru]

I am not saying you are wrong. I just don't know if engineers and doctors, in general, want to run large organizations. I would guess very few soldiers really do want to be generals. But very few is enough. But it isn't a good analogy, since doctors are not like privates - except when they are privates. You can still perform your doctorly duties up to retirement, but a General, generally, is not so useful in the trenches.

As I said, that type of flawed logic is pervasive in this country and look where it got us vs. look at Asian countries and even Germany and some scandinavian countries....

[kmguru]

I think it is a bit simplistic to say "engineers should run industry" (or doctors "healthcare" by which I assume we mean the healthcare industry and the related healthcare insurance industry).

This is not a theoretical debate. When Lawyers do liver transplant, the patient will die. Is that simple enough? When actual decisions are made by idiots then the whole country suffers. Is that simple enough. Even the Republicans are saying no one should be between you and your doctor.

The reality in Asia, Germany and those solid growth industrial economies have the right people on the job to make the decisions. A CFO job is to be a CFO and not CEO or COO. I did not say, an engineer should be a CFO.

Obama appointed a guy to be the decision maker of the Cyber Technologies that does not know the technology. He appointed a commerce secretary to understand the intricacies of production and import/export, but when he sits down to discuss these matters with his engineer counter parts in China, he will have no idea what they are talking about. It is like discussing Liver transplant procedure between a Lawyer and a Doctor.

The reason we are in this mess is that critical decisions on your health care is no longer between you and your doctors but with people who know nothing about health care.

[Pandaemoni]

This is not a theoretical debate. When Lawyers do liver transplant, the patient will die. Is that simple enough? When actual decisions are made by idiots then the whole country suffers. Is that simple enough. Even the Republicans are saying no one should be between you and your doctor.

Yes, and when your doctor gives you advice on the number and power of microprocessors that can be exported without violating the ITAR regulations, you should expect to go to jail, as he almost certainly has no idea what he is talking about.

Which is more likely to be important to business? Import/export regulations, or a liver transplant?

So "simple" is exactly the right word, and by your logic, all businesses should be run by lawyers, as all businesses are regulated by laws. But wait! All businesses use technology, so I guess they should be run by technologists. Oh wait! All businesses require labor, so I guess we need the common "working man" to be in charge.

In the health care field, the problem is that "healthcare" is only part of the issue, and that is the part doctors are good at. The other parts are "cost" and "administration" and at those parts of the business, doctors suck. If you want and can afford the most expensive heathcare, great, then all you need is a doctor. If you want affordable health insurance, though, then a doctor is not going to give you that, and doesn't have the skills to work that out.

Let's imagine that you want affordable health insurance and, hypothetically, you find an insurance company with a "don't be evil" mindset.

Suddenly, you need an actuary and you need someone making sure that your doctor is not an idiot or ill informed (which many are). That is not because the insurer wants you to die, or even because they are money-grubbing scumbags, but because what they provide is not heathcare, but "affordable health insurance." If you want "unlimited healthcare" that's fine, but be prepared to pay for it. If you want affordable health insurance, though, then you need that extra layer.

It's a slogan, and nothing more, to say that healthcare should be between you and your doctor. You ALWAYS have the right to whatever healthcare your doctors prescribes...the QUESTION is who PAYS for it, not what care is available to you. Your insurer will never tell you that you "can't" have that seventh MRI, all they will say is that your policy with them won't pay for it. You are always free to get it, you are just not freee to force them to pay for it. That sounds pretty fair. As soon as you you demand someone else pay for it, then healthcare is no longer between just you and your doctor, but you, your doctor, and the payor.

You may not like that, but, again, that is because you are ignoring the fact that cutting the payor out of the decision eliminates the ability of the payor to offer affordable health insurance. What you really want is unfettered discretion in treatment, no matter what the cost of it *and* for your health insurance to be affordable too. That's the way a child thinks. It's no different than thinking you wabt to eat dessert for every mean and yet have perfect health and never have yur teeth rot. The two desires are not mutually exclusive in every case, but they are highly negatively correlated.

In the long run over hundreds of millions of people, the only way to have unfettered doctor discretion is for people to have no insurance or expensive insurance. That makes perfect sense, because when someone else is footing the bill, people have a tendency to order the more expensive stuff off he menu.

It's like having an open bar. Sometimes someone will throw a party with an open bar, and the partygoers will have the option of ordering the top shelf liquor from it. Sometimes the party organizer will limit the open bar to only the cheaper liquor. Your solution? "What I drink should be between me and my bartender, and the man paying for the damned open bar should shut up and suck my cock!"

If you are the only one ordering the expensive drinks...then it is likely not an issuer. The extra cost for you will average out. If everyone orders the expensive drinks, because bartenders recommend the better booze (because it is in fact "better" and his area of expertise is in providing you a good drinking experience, not in cost containment), then the party organizer is stuck with the huge tab.

Further, you are writing on an online forum about putting engineers in change of all industry, thus THIS IS ENTIRELY A THEORETICAL DEBATE! How could you possibly think otherwise?

I do think healthcare insurance reform is needed, but the solution isn't to require insurers to do what doctors tell them to do. The fix is much more complicated and involves things like tax policy, another area where getting advice from your doctor will get you no good results.

[kmguru]

Further, you are writing on an online forum about putting engineers in change of all industry, thus THIS IS ENTIRELY A THEORETICAL DEBATE! How could you possibly think otherwise?

OK then. You have the freedom to play in your sandbox, but do not come crying when the sand gets in to your eyes.

[Pandaemoni]

OK then. You have the freedom to play in your sandbox, but do not come crying when the sand gets in to your eyes.

I've been living in the system for a while now, and have my complaints about it, but I think the crying is coming from your side of the debate. People are happy to pay as little as they can for health insurance, and complain when the premia increase, but then when the time comes, they want it to cover every procedure and medicine under the Sun including alternative therapies.

When you enter into an insurance contract, you are stuck with its rules and limits. The crying seems to start when people decide that they would rather ditch the rules and limits and have a small premium payment for maximum coverage, and if the insurer speaks of the rules and limits, people tear up and cry WAAAHHHH! to their legislators.

The real problem in my view is a combination of post hoc justifications for why there should be no limits on insurance policies (which, as noted, is just saying that you want a better deal after the fact, and is essentially an unfair and unsophisticated argument) and, more fundamentally, insurers ignore their own rules and adopt a mindset of arguing every case that is not crystal clear under the policy terms. Lots of businesses do that, but most do it in an atmoshere of honest good faith negotiation, whereas your average insurer has *nothing* to negotiate with *you*. You are not its customer and you could not negotiate against it if you wanted to, the customer is your employer. Worse, your employer doesn't care about every hassle and denial of coverage the way that you do--at least not nearly so much as it cares about cost. When it next decides which plans to offer to its employees it won't haggle over better coverage or streamlined payment processes, it will haggle over price to the exclusion of most other things.

So the insurers was to pay as little as possible, because that increases their bottom line, employers want premia and fees low (as do we all, but employers are, as noted, likely to overemphasize that)...and there is fundamentally not a significant conflict there. In fact, aggressive denials of coverage reduce insurer costs to the point that they can lower premia.

It's a system that has hugely inefficient agency issues built into its core. The fix there is simple, stop allowing employer provided healthcare, but right now that is tax subsidized, and few people are smart enough to realize that giving up the subsidy would be good for them in the long run. In the meantime, the private, non-employer healthcare market (which I use) is pretty inexpensive, and the service provided is, not perfect, but pretty good. The system would be even better if every insurer were operating in that market, and not just a few of them.

There are other problems too not as easily remedied. For example, it makes very good sense for insurers to charge the elderly and those with pre-existing conditions more for coverage, because they cost more and are far more likely to be "free riders" leeching away the money of the healthy (which makes the healthy not want to participate). How you fix that without leaving people in trouble uninsured is a tough call, though I am not sure that just "putting doctors in charge" would do much. In that case, there are just tradeoffs rather than good choices--the young and the healthy will get screwed for a while, and pay far more than they should on an actuarial basis...so your either force them to have coverage, you watch as they rationally opt out of coverage (creating problems for that that do get ill) or you let a number of chronically ill people down. Even that would not be so bad, but for the looming health crises of the baby boomers, that will require massive support (on top of social security) to meet their needs.

[kmguru]

I've been living in the system for a while now, and have my complaints about it,

I am talking primarily about Industrial development of this country and not Health Care. For Health Care there are tons of threads that you can have your debate. Health Care is an expense. Industry is an income for people and country. Once industries go away, it would not matter how the health care is done - it will set us back 100 years.

I used Health Care as an analogy in the sense that never let a Lawyer do your Liver Transplant. I guess I was not very successful in that analogy. My bad.

[Pandaemoni]

I am talking primarily about Industrial development of this country and not Health Care. For Health Care there are tons of threads that you can have your debate. Health Care is an expense. Industry is an income for people and country. Once industries go away, it would not matter how the health care is done - it will set us back 100 years.

I used Health Care as an analogy in the sense that never let a Lawyer do your Liver Transplant. I guess I was not very successful in that analogy. My bad.

Well, my initial response to you was almost entirely about industry (and only had references to healthcare).

On industry, I think my point still stands, putting engineers in charge of "industry" generically is likely putting professional athletes in charge of professioral sports. They play and know their respective games, but they have no especial expertise at the other parts of that business. The marketing, stadium upkeep, souvenier and food services, merchandising, contract negotiation with employees, suppliers and media outlets and preparing those contracts; financing the costs of losing seasons, what to do with the profits from profitable seasons; maintaining adequest general liability insurance, etc. etc., are all well outside their field of expertise.

It takes a variety of skills to run an industry, of which the engineering is only one.

[kmguru]

On industry, I think my point still stands, putting engineers in charge of "industry" generically is likely putting professional athletes in charge of professioral sports.

Yes, it is your thinking that is muddy. The real world example is China, Japan, Germany, Korea, Taiwan and so on. It should be time to change your thinking based on the real world example, not theoretical book knowledge.

Besides, my friend taught the Chinese about the art of Industrial development and the result shows today. After countless arguments that knowledge stands.

See the growth path in a graph: (one is engineering driven, and the other is Lawyers/Fluff driven - can you tell which one is which?)

[glaucon]

On industry, I think my point still stands, putting engineers in charge of "industry" generically is likely putting professional athletes in charge of professioral sports.

And that would be a bad idea??

They play and know their respective games, but they have no especial expertise at the other parts of that business.

Ah. Good point.
Still, you have to admit that these 'administrative' members, to do their job, must acquire some knowledge of the sport [in this case..]. Given that then, would it be so difficult to simply rearrange the positions? Put the athletes 'in charge', while selecting some of them to be taught some of these administrative skills??

I'm not saying it should be done like this, or that it would be better if it were done like this, but simply that it could be done like this. Just because we have an existing model, doesn't mean that it has to be done in that manner...

[iceaura]

Industry is not just about making products. It is about that, but it is also about marketing and financing those activities. Indeed, it's been shown on many occasions that sometimes people don't want a "better" product if a "cheaper" product is available. Just look at the backlash against Walmart and the hordes of people who shop there. The truth is, Walmart does not destroy mom and pop stores, Walmart's customers do, but taking their business away from mom and pop to give it to Walmart.

Ignoring Wal Mart's true role is misleading - the former customers of the mom&pops were not presented with the actual costs of their purchases at Wal Mart.

Wal Mart managed to arrange the export of the costs formerly borne by the mom&pops and reflected in their prices, to others. They also managed to divert the flow of benefits formerly pooled in the community to distant places - thereby drawing down on accumulated community wealth as well as siphoning circulating monies. Wal Mart essentially mines the community's wealth and productivity, analogous to an absentee landlord over-cropping rented land.

Had the WM customers been presented with the pro-rated bills for the local school programs and road maintenance, health care and unemployment effects, housing and other amenity support, wage increases and work arrangements, formerly included in the prices at the mom&pops, the deals would have been considerably less attractive.

And in the real life estimation of these costs, the setting of the actual prices at Wal Mart, wisdom might be as important as education.

When you enter into an insurance contract, you are stuck with its rules and limits. The crying seems to start when people decide that they would rather ditch the rules and limits and have a small premium payment for maximum coverage, and if the insurer speaks of the rules and limits, people tear up and cry WAAAHHHH! to their legislators.

The crying starts when people live in misery and die sooner because of the fine print in an insurance contract they had been paying thousands of dollars a year for, had no choice about, and did not understand.

Every bum sleeping under a park bench in Paris has better medical care available to him than most of the insured people have bought for themselves in the US, and the average Frenchman paying for that - not the bum, the guy footing the bill for himself and the bum - is paying less than half what the average bill-footer pays in the US.

And the people justifying that ridiculous state of affairs seem to be very well educated, for the most part, with lots of complicated appeals to economic theory backed by disparagement of the bums involved.

So more wisdom would seem to be the prescription, rather than more education.