The Importance of Providing Context for Data

Data in Everyday Life: How Serious is the Student Loan Debt Crisis?

Did you know that 1 in 4 Americans have student loan debt? In the United States, there are more than 44 million people who collectively owe $1.56 trillion in student loans.

I thought 25% seemed too high. Thankfully this post also provides the number, 44 million. The USA population is currently estimated at 330 million. 44 million is closer to 14% than 25%. My guess is that the 25% is of some subset of the USA population (people between certain ages maybe)?

I think a point about the importance of providing the proper context when showing data has also been made in this post. There is certainly a sensible argument for why 25% of certain ages is a more useful figure for understanding how widespread student debt is (rather than saying 14% those in the USA have student debt). But in the case where that decision is made the details should be spelled out.

Related: Operational Definitions and Data Collection - Data Can’t Lie (data can be wrong) - Poorly Stratified Data Leads to Mistakes in Analysis - Understanding Data

14 Plus Potentially 14 More Years for Copyrights Has Become 120 Years

Our Intellectual Property Laws Are Out of Control

Thomas Jefferson opposed all government-granted monopolies, but James Madison argued that while monopolies generally are bad, there is a place for patents and copyrights. In the end, the Patent and Copyright Clause (Article I, Section 8) empowered Congress "[t]o promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries."
The idea was that innovators would be rewarded with a short-term monopoly on their work. Afterward it would enter the public domain, hopefully sparking further creations or discoveries. In the early days the Constitution's "limited times" were quite limited: 14 years for patents; 14 years, plus a potential 14-year renewal term, for copyrights. And patents were strictly scrutinized to ensure that they represented real inventions. (Jefferson himself, when he was secretary of state, served as a patent examiner, so important did he consider this task.)
Nowadays the limited times aren't so limited. Copyright has been extended to the life of the author plus 70 years; corporate works (with no living person as "author") get a 120-year term. Patents are good for just 20 years, but there's far less scrutiny to ensure that they represent something truly new—a lot of "nuisance patents" are filed to provide bargaining chips rather than to protect actual creativity. Also, influential companies often get Congress to extend their own patent rights through special legislation. Does a century-plus exclusive right encourage invention more than a 28-year exclusive right? It's doubtful.

Sadly, we continue to damage society to provide government granted monopolies to large campaign contributors.  And we allow our legal system to be subverted by companies threatening to subject others to abusive litigation.  We should fix the system to work for society instead of against the interest of our society.  It is even worse that the USA continues to pressure foreign government to adopt solutions those paying USA politicians lots of cash want, at the expense of the citizens in those countries.

The copyright and patent systems must serve their public purpose or encouraging innovation and creation. The current system does the opposite. The system is doing great harm to our society (likely more harm than anything other than the broken health care system). We need to fix it. Sadly we keep electing fundamentally corrupted politicians that act mainly to serve those paying them the most and who have shown little interest in what benefits the country.

Related: New Deadly Diseases for Business - Bad Government, Closed Access - links to articles on the deadly disease of our broken patent and copyright system - Intellectual Property Rights and Innovation

Are We A Few Heros or a Society

Drucker Institute tweet: "Does government tax policy “prevent and penalize” entrepreneurship? Weigh in!" On their post: Who Really Built This Blog Post?

President Obama, speaking to an audience last Friday, said the following: “Somebody helped to create this unbelievable American system that we have that allowed you to thrive. Somebody invested in roads and bridges. If you’ve got a business, you didn’t build that.” In response, Romney, highlighting the line “if you’ve got a business, you didn’t build that,” has called Obama’s words “insulting to every entrepreneur, every innovator in America.” To insinuate “that Steve Jobs didn’t build Apple, that Henry Ford didn’t build Ford Motor, that Papa John didn’t build Papa John’s Pizza,” Romney added, is “wrong.” ... What do you think: What’s the best way for the government to foster entrepreneurship?

I think far worse than any of the taxes is the extremely bad job that has been done with the health care system. Deming noted this as one of the 7 deadly diseases over 3 decades ago and it is in much worse shape today. Costing twice as much as other rich countries with no better results is bad. Since the costs are so large they are huge barriers to entrepreneurs.

Even worse for entrepreneurship though is the poorly designed system where 1 employees medical expenses can cause serious damage to small companies. And the poorly designed system that makes it difficult to get coverage for previous conditions - which greatly increase the cost (in risk) of changing jobs, starting your own new business…

The recent reforms did help some, but it is an extremely small step after 3 decades of failures and making things worse. There is so much more that needs to be done. The costs and uncertainty related to health care are likely the most critical problem for entrepreneurs. Another contender is liability costs (yet another one of the decades old deadly diseases). 

The next contender is the broken patent and copyright system (which I think of as one of the new deadly diseases - along with excessive executive pay). I would put all of these far ahead of tax system issues for entrepreneurs. The biggest thing government can do is fix the 3 deadly diseases I mentioned above. People like Jobs (and Wozniak), Henry Ford, Larry Page and Sergey Brin are extremely valuable to a society. They make great contributions. Thinking they are therefore the reason for Apple, Ford and Google's success is ludicrous. They contributed. They contributed a lot. Dump them in Mali when they were born and they would not have created those companies as adults.

Saying that society doesn't play a huge role is false (a failure to understand systems thinking). Saying governments role is the same as societies also shows a poor ability to reason. The good things that Jobs, Gates, Bezos... are related to government in some ways but are much much more related to the entirety of growing a business in the USA. Inside those companies many others helped make the organizations a success.

Certain individuals do have an amazing ability to create successful systems. Again they can't do it themselves. They need other people. Granted a few of these leaders are extremely special. 95% of CEO's are decent at their jobs (or even not that good at their jobs) but replacing them with any of hundreds of other people would make little difference. But those CEO's all think they are more like Steve Jobs - they are not.

Profit = Market Price - Actual Cost or Price = Cost + Desired Profit

Comments on Google Nexus Q – Made in the USA

I agree with

"Deserved Profit = Market Price – Actual Cost"
   not
"Price = Cost + Desired Profit."

But what I see glossed over by many lean folks when they present this is volume and the complexity involved.  The iPhone could sell 10,000 (say, or some number anyway) at $2,000 in addition to an carrier subsidy.  They can sell millions at a much lower price point.  Market price is a movable thing (depending on volume).

Also the 2nd formula is fine for deciding what products to build (theoretically - you have to be guessing at the values).  But it is totally fine to say we need a price of $350 for x product for us to decide to offer it.

The task is then to guess right.  If $350 is not going to work you give up - or more likely go back to the drawing board.  Can we make it better for just a bit more and then sell it for $400?  Can we re-engineer certain things and lower the price to $250 and even if that means we had to get rid of the ability to use wifi will that work in the market?

It definitely can be sensible to say we can't make x for less than $400 - we are not pricing it at $300.  It might mean we can only sell 10,000 instead of 30,000 if we priced it at $300.  But since at $300 we are losing $100 a unit high volume isn't great.

I think "If the market price for a device like this is $100, then you have to engineer the total product cost so it can be profitable at that price." is very well said.  Again volume is still a big issue.

Sometimes there are price cliff points - I can't imagine selling a tablet that isn't hugely better than the iPad on specs for more than the iPad price.  So above that level the volume may be miniscule.  But I think often there are not cliff points.

And the company does get to set the price.  The market then decides to buy or not, and buy in what numbers.  Apple would probably sell very few iPhones for $3,000 more than they cost today.  How many they would sell at $100 more or $100 less may change significantly but they would still be huge sellers at either of those prices.  So that "market sets the price" idea is not 100% accurate (I don't think anyway).  I do think the first formula is a better concept than the 2 formula.  But it is something that is maybe 80% accurate?  And the 2nd isn't totally worthless (it is just that it should be looked at more as a should we offer this product or not decision).

Pricing decisions also have big long term versus short term considerations.  Apple has started pricing many things in a way which makes it really hard for competitors to undercut them.  Apple, almost for sure could charge more for the laptops they sell and the iPad and iPhone.  But if they did they make it easier for a competitor to compete on price.  This pricing decision is an Apple decision not a market decision.  The market weighs in after Apple make the pricing decision.

But the price point for a kinda ok tablet at $199 - maybe will work?  Fire seems to be doing ok, for a pretty small, kinda lame, really cheap tablet.

Apple has done well create products for prices much above what people thought was market price.  It turned out people were willing to pay more for a great product.

You can notice that we are trying to sell this car for $35,000 and we are hardly selling any.  Ok, lets make it $30,000 and see what happens.

When setting what prices you will try to sell for, looking at your costs is a perfectly sensible thing to do.  Once the market tells you that you are off, you need to adapt to the market.  It isn't super easy though.  Often you can think the market failed to appreciate the value we offered because we messed up x feature and with y missing it was an issue and people will buy only black from Apple but they won't accept that from us (or whatever).  What we need to do is fix those mistakes.  The pricing given those mistakes the market sets below what we expected but that isn't really a pricing issue it is really a damaged offering issue.  Eventually mis-understanding pricing may become obvious, but it often isn't.

Anyway, my main point is just that the "market price" isn't some easy thing to know.  It isn't like looking up the freezing point of water.  I do agree with the "formula" I just think the way it is presented is often not as useful as it could be.

Causes of the Health Care Crisis

Root Cause of Health Care Crisis? by Pascal Dennis

Costs are exploding -- and crowding out other critical expenditures like education, R & D and infrastructure. Health care outcomes are disappointing. Miracles occur within the silos, catastrophe across them.

What's the root cause of this sorry state of affairs?

I don't think there is 1 reason why the health care system is so bad in the USA. If I had to pick the most important reason it is the legal infrastructure. The system is designed (with legal constraints) to favor entrenched interests instead of customers and stakeholders.

It is true other rich countries also have massive room for improvement. But the USA stands far below all other rich countries. The costs in the USA are about double the average rich country. And the heath care outcomes are mediocre. And the economic and personal outcomes are extremely bad. Tying health insurance to an employer is an extremely bad idea - that is rare among rich countries (I am not sure if the USA is unique in this bad practice, or not).

I have many posts on the problems on USA health care and how to improve the health care system in the USA.

It is possible to try and find the common reasons for health care failures in the USA and other rich countries but the USA is really in its own class of badness.

Related: Can We Expect the Health Care System in the USA to Become Less Damaging to the Economy? - USA Spends Record $2.5 Trillion, $8,086 per person 17.6% of GDP on Health Care in 2009

Country Boundaries are Becoming Less Important

Knowledge workers are the new capitalists by Peter F. Drucker

knowledge workers are highly mobile within their specialism. They think nothing of moving from one university, one company or one country to another, as long as they stay within the same field of knowledge.
...
Money is as important to knowledge workers as to anybody else, but they do not accept it as the ultimate yardstick, nor do they consider money as a substitute for professional performance and achievement. In sharp contrast to yesterday's workers, to whom a job was first of all a living, most knowledge workers see their job as a life.

I agree with Drucker. Singapore, Shanghi, Rio De Janeiro, Stockholm, Hong Kong, Berlin, Tokyo, Paris... and many more are going to be destinations for those that grow up in the USA. The numbers of people moving out of the USA in the next 30 years for jobs in the top 10% of the income bracke,t will be many multiples of what it was in teh last 30 in my opinion.

The USA has great advantages. China and Inida do too. But so do many other locations. The USA probably has more ability to absorb mistakes and I still feel it is the best situated, but the gap is much much smaller than it was 30 years ago.

Related: USA Losing Brain Drain Benefits - Long Term Economic Growth - Technology Centers of Excellent and Economic Growth - Keeping Out Technology Workers is not a Good Economic Strategy

Lean Thinking for a Scary Economy

The Role of Lean in the "New Normal" World (the broken link was removed)

The "New Normal" often means we are hanging on, and feel our best days are behind us. For the first time in the USA, many feel their children's future will be filled with less opportunity than they experienced.
...
We need to embrace the "New Normal" as a both a challenge and an opportunity. [North Carolina University] IES is working to help organizations move toward making "circumstances" that will generate true job growth in this "Flat World".

The improvement aspects of lean manufacturing are very beneficial. And the quick response to the market (reduce inventories, pull...) are very beneficial. Both help in any economic climate and are useful today.

I actually think some even more beneficial traits exist in lean thinking for the current economic climate. Lean, the way Toyota practices it, is not about optimistic hopes (focusing on great potential gains) but instead on minimizing risk. I can't find it now, but I believe Taiichi Ohno was clear that he was very focused on making Toyota safe for the long term. Not chasing after quarterly or yearly profit targets.

While many focus on Toyota's quick changeover, pull systems..., and rightly so the importance of long term thinking is huge. When you are focused on long term benefits - you don't take huge risks. You don't over leverage your company. Long term thinking along with respect for people means you focus greatly on avoiding a situation where your company into a position where you have to have layoffs. If that means you leave some potential profits on the table in rabid markets - fine.

I own stock in Toyota and am very happy I do.

The economic future is still bright. But it is also more demanding. The huge amounts of relative wealth the USA enjoyed from 1950-2000 is becoming a thing of the past. Riding on the success that came automatically from that wealth will not work. Improvement is needed to succeed.

Related: Bad Management Results in Layoffs - Managing Our Way to Economic Success (1986) - CEOs Want Health-Care Reform

Monopolists Provide Lousy Service

I think there are many companies that obviously do not attempt to provide good customer service: airlines, large banks and Verizon are examples that have huge numbers of customers being treated very poorly. If there are options to choose decent service it doesn't bother me so much (credit unions provide a very good alternative to large banks most often). Thankfully you can often avoid United, American... by choosing Jet Blue or Southwest but obviously that is not always possible. Verizon is even more annoying because they have bought their way into very anti-competitive positions (banks and airlines also obviously have done so alos).

Near monopolies have the freedom to provide lousy service. Companies like Verizon, American, Chase, Wells Fargo... attempt to make their customer hostility sustainable by securing monopolistic positions. It has worked pretty well for them. I think we are much more likely to get customer friendly policies by new companies coming along that don't sell out the oligopolists. Unfortunately the anti competitive behavior these companies favor it just to buy out customer focused alternatives instead of providing service themselves.

Regulators allow such anti-competitive behavior is another thing we could hope to see change. But the chance of proper regulation of anti-competitive behavior is not good. And hoping those companies stop being so customer hostile is not something that will likely work. I don't see good odds that the monopolistic customer hostile companies will change. Those companies that don't have monopolistic positions are not such a big issue because after providing universally bad service they go out of business. It would be nice if our regulators didn't allow the monopolistic behavior but they obviously are going to do their part to allow capitalism to function, bad service and high prices is what we can expect from the monopolistic companies.

Re: How to Design Poor Service – Expect 100% Utilization of People or Resources

Related: Why is Customer Service So Bad? - Verizon Provides Lousy Service = Dog Bites Man - Price Discrimination in the Internet Age

Global Manufacturing Data by Country

Update 2013: see chart of manufacturing output by leading countries from 1999-2011.  The current ranking is China, USA, Japan, Germany.

Topic: Economics, Manufacturing

I am still looking for a good source for manufacturing data by country and year. Today I found some data from the United Nations Statistics Division. The data for the top five manufacturing economies: China, Germany, Japan, United Kingdom and United States. Figures are in current $US billion. The data used is for Mining, Manufacturing and Utilities (because China and Germany do not have manufacturing data separated out).

Country	2001	2002	2003	2004
United States	1,781	1,779	1,876	2,012
Japan	991	929	1017
China	507	551	638	754
Germany	421	449	545	613
United Kingdom	280	283	322	378

For manufacturing output only:

Country	2001	2002	2003	2004
United States	1,460	1,463	1,523	1,623
Japan	866	812	894
United Kingdom	220	223	254	298

This data shows the United States manufacturing economy is continuing to grow and is solidly the largest manufacturing economy: which contradicts what many believe. It is true manufacturing jobs are decreasing in the United States and worldwide - China is losing far more manufacturing jobs than the USA.

I including some information on the manufacturing economy in my post to the Curious Cat Science and Engineering blog: Phony Science Gap? and referenced my previous post here, Manufacturing and the Economy which reminded me that I wanted some updated data.

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