Thursday, January 29, 2015

Review: The Second Machine Age Work Progress And Prosperity In A Time Of Brilliant Technologies

From time to time one reads a book that is important. The Second Machine Age Work Progress And Prosperity In A Time of Brilliant Technologies by Erik Brynjolfsson and Andrew McAfee is important. In the authors’ view, the confluence of falling technology costs, increased computer processing power, cheap sensors and the quality and ubiquity of networks, are ushering in a revolution equally as potent and far-reaching as the Industrial Revolution.
Drawing parallels to the effect on civilization of the Industrial evolution, and how long its subsequent impact has continued, they see brilliant technologies in the early stage of changing about everything. They provide a historical context on the growth in living standards, starting with the domestication of the horse, development of agriculture, which led to cities, afforded great armies and so on.  Things really didn’t advance much from there until the steam engine was perfected, which created factories, mass transit, electrification and essentially modern life.
They support the case that while innovation drives productivity, it takes time for innovation to be adopted, widespread and then subsequent advancements to leverage combinations of innovations.
The authors identify how those new combinations are occurring. The new revolution starts with the difference in digital goods to traditional goods.  Digital goods can be endlessly copied at a cost that is nearly zero. And falling costs combined with improving power is enabling machines to do things now that researchers weren’t projecting to happen until far into the future – e.g.-Watson beating anyone at chess; driverless cars and Siri. 
And like the Industrial Revolution, there will be sharp winners and losers. Just as motorized looms destroyed jobs in textiles; robots, speech-activated call processing, and tax software replace factory and warehouse workers, call center agents and accountants. Digital downloads replace the CD and reduce musicians income. The authors are concerned that the job loss affect may be longer lasting and more far reaching with this revolution than the Industrial. In the Industrial Revolution, farmworkers displaced by tractors, threshers and combines found work in factories. They make an interesting argument that digitalization makes it possible for everyone to have the best. An example they use is that if one bricklayer can lay X bricks per hour, that doesn’t mean that someone won’t hire the second best bricklayer who can only achieve .9X; perhaps at a slightly lower wage. In the world of digital goods, in some fields everyone worldwide has access to the single best, eliminating work for second and third place. Expanding that argument, in many fields one only had access to providers in one’s area-town, city etc., but in the digital realm one has instant global access. While they foresee a variety of new jobs being created, they find it difficult to envision where an equivalent number of jobs will be created.  Indeed, they pin some of the failure of total employment to return to pre-2008 levels on the widespread adoption of technology reducing staffing requirements.
They cover the types of jobs they see at most and least risk in the race against the machine. More importantly they cover skills and education needed to compete in the future. I hesitate to call out any chapter as particularly informative or intellectually challenging; they are all impressive.  The authors conclude with policy recommendations. Part of the discussion made me nervous; I feared they were heading for a policy recommendation of guaranteed income, or extremely high tax rates on the successful. Instead, they rallied to a defense of work and its importance [They provide a good example of two communities, one where employment was high even if wages were low vs. same income levels from welfare-type programs but low employment. The latter area was blighted].
They conclude with a series of policy recommendations and, as they label it, wild idea s. One is a national mutual fund to make sure everyone has, as one of my bosses used to say, a piece of the rock.  Let me provide my twist to their national mutual fund wild idea. The U.S. needs to invest the funds that come into Social Security. Now, before someone’s hair catches on fire, I didn’t say “privatize”.  (I agree in some small way with Presidential candidate Al Gore’s “lock box” hypothesis). Many states have excellently run pension funds for state employees. (Some of those pension funds may be underfunded, but that isn’t the managers’ fault). Leading examples include Calpers in CA, Wisconsin Teachers and Texas Teachers. What I am talking about is funding Social Security, not privatizing it. It will take a very long term view – fifty or more years. If two percent of the incoming funds into Social Security were invested in the first year, and then increased by an additional two percent each subsequent year, in fifty years the trust would be backed by actual assets.
As with any investment program, diversification would be important.  Our funds should go in to timberland, oil and gas, stocks, bonds, apartment houses, raw land, shopping centers and the like. At that point, every American would be a capitalist, and an owner of the capital deployed in these new technologies.
This is an important book, highlighting topics that affect business, government, education, labor, and personal skills development.

Highly recommended.

Monday, January 26, 2015

Four Reasons to Be Optimistic About Medicare

The most recent trustees’ report forecasts that the Medicare trust fund will be exhausted in 2030. While that is a financially frightening prospect, there was good news buried in the report: the previous forecast indicated the funds would be gone in 2026.
I believe there are reasons to be far more optimistic. Here’s why:
1.       There are cheaper medical services on the way. Theranos has a totally new approach to blood analysis as an example. Founded by Elizabeth Holmes, and backed by a who’s who, Theranos has micro labs that can be installed anywhere and only require a few drops of blood. Millions of us troop to a Quest Diagnostics center, or one of its competitors, to have our blood chemistry tested for any of thousands of things like cholesterol levels, hepatitis presence, insulin and blood sugar and so on. Quest, of course, bills the patient, and/or the patient’s insurer, including Medicare. Theranos is an example of a better, cheaper, faster option. While its new process must make it through the FDA approval minefield, I expect it will eventually become a real alternative, certainly before 2030. And, due to FDA leadership, the Obama administration or both, the FDA has actually shown some needed speed and flexibility recently.
2.       There are new ways to clean hospital rooms. There are a number of life-threatening illnesses that, from a practical point of view, can only be caught in a hospital or a nursing home. Nasty strains of pneumonia. The debilitating clostrium difficile. In its April 2013 report, Antibiotic Resistant Threats in the United States, the CDC estimates 23,000 Americans die each year from microbes that are resistant to current treatments. It states “The estimates are based on conservative assumptions and are likely minimum estimates”.  Many, if not most, of these deaths are a result of infections acquired in a hospital. Patients are treated with a series of more and more toxic (and expensive) antibiotics in hopes of curing the infection. Xenex Healthcare now provides robots that disinfect hospital rooms with high-intensity bursts of light. Savings to patients (copays and out-of-pockets), insurers and underwriters including Medicare should run into the billions.
3.       There are new antibiotics on the way. Again, treatment of patients infected with superbugs is expensive. Patients may be in high-cost intensive care units. Better antibiotics can prevent or reduce most of those costs. Most pharmaceutical companies have walked away from antibiotic research. From an investment viewpoint, that decision makes a lot of sense. FDA approval is gigantically expensive. If approved, an antibiotic may only be used for a few doses. And if patients are sickened, have reactions or die as a result of an antibiotic treatment, lawsuits are certain to follow. Therefore pharma has moved research to the treatment of chronic illnesses like diabetes, where they may have a customer for twenty years, thirty or even longer. But there are some firms that are investing in antibiotics. Northeastern University, in conjunction with NovoBiotic, have announced isolating Teixobactin, a soil-dwelling bacteria that doesn’t get along with MRSA (methicillin-resistant Staphylococcus aureus), one of the most evil superbugs. Testing so far indicates that Teixobactin is well-tolerated in mice and kills a variety of bad actors.
4.       Eventually, we hope that auditing will catch up with the bad guys. Years ago, some Medicare official stated that as much as ten percent of Medicare billings are fraudulent. Apparently that was based on pretty flimsy analysis. However, there is at least anecdotal reason to believe it could be more than ten percent – actually a lot more. Some future Congress and Administration will likely chose to apply the same data techniques that Visa, Mastercard and American Express apply to spot fraudulent card activity in seconds. That alone might be enough to add several more years of life to the trust fund.

While I’ve shown four reasons, in reality they boil down to fewer. Science and technology underlie all. That makes me optimistic that people will live longer and healthier, and Medicare won’t run out of money as fast as feared.

Wednesday, January 14, 2015

Review of The Peripheral by William Gibson

If you are a William Gibson fan, you’ll likely be excited to learn that he has returned to his particular flavor of science fiction. He has detoured into more conventional (but no less enjoyable) fiction recently, exploring conflicts among ad agency/security firms, investment denim creators, spying drones controlled by smart phones, etc, but returns to the scifi genre in The Peripheral. For folks who’ve never read his work, his prose is exactly right-not unnecessarily long, not too spare. Just right.
 He is the guru of the near-future; one reads about things in his work that you are certain don’t exist, and then observes them in a few years. This novel however reaches a little farther into time than his previous work. It presumes that multiple presents and futures exist-that is the multiverse or quantum universe hypothesis.
Within that framework, he shows his craftsmanship in creating characters that the reader immediately envisions, easily finds believable and become interested in.
In the book, the U.S. has been economically devastated by an event only hinted at. Our protagonist Flynne is an expert gamer and the sister of a former highly skilled military veteran. (Gibson seems partial to heroines).  At his request, she substitutes for her brother in what she believes to be testing an online shooter game, only to observe a death that she finds uncomfortably realistic. Her observation of the event set the plot in motion, and the book proceeds along two dimensions, one in the not-to-distant future U.S.; the other farther into a future. And the folks in the more distant future have learned how to get messages to the past/other parts of the multiverse. And some of them are out to make sure that no one in their future finds out what Flynne saw.
These messages flow in both directions and enable Flynne and others to experience the alternate universe via realtime communications. Going much further into that will give too much away.
While it is science fiction in its roots, Gibson has always been equal parts scenes, characters, mystery and action, with the future tech and science fiction in supporting roles. The action proceeds quickly in The Peripheral, locking the reader in. We become quickly attached to the no-nonsense, quick-thinking Flynne, her professional warrior brother Burton, and his ex-military buddies. We are suspicious of Inspector Ainsley Lowbeer who is investigating certain event in the future, and curious how she seems to know so much. We are unsure of who are the good guys and bad guys within the large cast of characters in the alternate universe.
Like a few other celebrated authors, Gibson creates words when he feels it necessary (do any reviews fail to mention he invented the term cyberspace?). A few new ones crop up here; we’ll see which join the dictionary.
I’ve stated before that I have one huge problem with Gibson. Apparently I can read his books far faster than he can write them. I did my best to stretch this one out- limiting the number of chapters to burn through at each sitting. Fighting the urge for an all-night reading session. But inevitably I finished and I eagerly await his next.

This is William Gibson at his best: a skillful professional story teller. An intriguing page-turner. Highly recommended not only to Gibson fans like me but to anyone who cares for science fiction.