Month: May 2009

Rewards of an Alternate Route

by Lane Wallace

In an earlier post on how to cope with uncertain times and changes, I noted that sometimes, alternate routes or destinations can turn out to be way better than the original goal or place you expected or set out to reach.

Case in point: this piece by Micah Toub in the Globe and Mail about attempting to navigate Los Angeles by bicycle, instead of by car. Following the advice of urban bicycling experts who've learned how to navigate safely around LA's legendary car traffic–and traffic jams—he ends up exploring back roads he normally wouldn't travel … and finding treasures and colors in the city he never noticed before. Even if it takes him a little bit longer to get from point "A" to point "B." Worth a look. 

Geography of Personality

by Richard Florida

MapScoll links to a series of "new and improved" maps of Big Five personality types from the expanded (Canadian) edition of my book Who's Your City?. Based on data collected by Cambridge University psychologist Jason Rentfrow and his collaborators, these new maps ignore state and national boundaries and include the U.S. and Canada.

The first maps agreeable types.

The second charts conscientious personalities.

The third is for extroverts who are more likely to move according to Rentfrow and company's research.

The fourth maps open-to-experience personality types, also more likely to move.

The fifth is for neurotics.

A Failure of Capitalism (IX): More on Inflation

by Richard A. Posner

My last entry described a simple pattern in which the expansion of the money supply by the Federal Reserve and borrowing by the Treasury Department to finance soaring government debt–measures resulting from the depression–create a risk of inflation, which impels corrective action that can trigger a recession that would thus be an aftershock of the current depression. I need to be more precise about inflation, and in particular to avoid an implication that zero inflation is the summum bonum that the government should be striving to achieve.

In fact we may need inflation as one of the weapons to fight the depression, and this for two reasons. The first is to prevent deflation. Deflation, the opposite of inflation, refers to the situation in which the purchasing power of money increases because the ratio of money in circulation to the quantity of goods and services being sold decreases. Between 1930 and 1933, the dollar deflated at a rate of about 10 percent a year. This meant that on average if a product cost $1 in 1929, it would cost only 90 cents in 1930.

Deflation decreases economic activity by rewarding hoarding; in a deflation, money you put under your mattress will be worth more in a year just as if it were earning interest, but it will not contribute to consumption or investment because it is not being spent. To attract buyers in a deflation, sellers must reduce prices (otherwise the real as distinct from nominal price of their goods will rise), which increases deflation by reducing the ratio of money in circulation to goods. And deflation increases indebtedness in real terms, because people who contracted debts before the deflation began or was anticipated pay interest, and repay the principal of their debts, in dollars that are worth more.

We are in a deflation, though so far a mild one.

The Consumer Price Index is .7 percent below what it was a year ago. The signs are in the incredible discounts that sellers are offering for many consumer products, such as automobiles, airline tickets, and luxury goods. And it is important to note that one can be in a deflation, in real as distinct from nominal terms, even when the CPI is in positive territory. For in May of last year the inflation rate (based on the CPI) was 4 percent; so if today it were 1 percent (positive but lower than last year), someone who a year ago had borrowed money for a year at 8 percent, expecting that half the interest he would be paying would merely be offsetting expected inflation–that the real rate of interest was only 4 percent–would be repaying the loan with dollars worth 3 percent more than the dollars he borrowed, because inflation had turned out to be only 1 percent. He thus would be in for a rude awakening when it came time to repay. To prevent burdening debtors in this way, we want the rate of inflation to be well above zero.

Second, as Casey Mulligan (an economist at the University of Chicago) has pointed out, a positive inflation rate will not only prevent deflation, but by lightening the debt load will increase the real income, and hence spending, of persons with debt. Specifically, as he points out, inflation will increase the price of houses but not the size of mortgages, so it will reduce the number of abandonments and foreclosures. The point is not limited to mortgage debt. A feeling of overindebtedness due to a decline in the market value of one's savings increases the propensity to save rather than to spend, and inflation reduces the amount of debt in real terms. When Roosevelt took the United States off the gold standard, shortly after his inauguration, deflation gave way to inflation (the gold standard ties a nation's money supply to the amount of its gold reserves, and though U.S. gold reserves had been growing, the Federal Reserve had "sterilized" gold imports–that is, had refused to allow them to increase the money supply). That inflation is believed to have contributed to the rapid economic recovery that began then.

But it may not be easy to create just the right amount of inflation and at the right time. For remember that the ratio of money to goods depends on the amount of money in circulation, and if people are afraid to spend, just pumping money into the economy may merely increase the amount of money that is hoarded. And the more that is hoarded–that piles up waiting to be spent–the greater the risk of serious inflation when confidence returns and the hoarded cash begins to be spent. This danger makes inflation a very tricky, though conceivably an indispensable, weapon of public policy in a depression.

Predicting a Revolutionary Future

Future2

by Lane Wallace

Time magazine's cover story this week is a predictive look at how "the way Americans work" is going to change over the next 10 years. "Throw away the briefcase: you're not going to the office," it proclaims. "There's no longer a ladder, and you may never get to retire, but there's a world of opportunity if you figure out a new path." One essay within the piece even uses the virtual world online game "World of Warcraft" as a model for how intensely competitive company work teams will operate, 10 years from now. 

First. Any time I read or hear anybody saying "this is how future events are going to play out," I instinctively backpeddle. Remember the new economy that wasn't ever going to end? Or the new world order of peace that was in ascendance … right up until September 11, 2001, when suddenly it wasn't, anymore? Budget surpluses? Housing as a great and booming investment? 

A few weeks ago, I found an old, hardcover book in an antique store in Foster, Rhode Island. It's a science book called Astronomy, published as part of the "Whitman World Library" in 1963, and I intend to keep it on my shelf as an entertaining, cautionary tale for anyone who's tempted to be too absolute about how the future will unfold. In a quick flip-read of the book, I found such predictive gems as: "the first man-made objects to explore the Moon will undoubtedly be automated tanks, radio-controlled from Earth or from an intermediate space station," and "rocket experts believe that [space] stations will orbit Earth in great numbers in a few years." The illustrations are a hoot. 

By 1963, mind you, NASA had been in business for 5 years, and the Agency's Mercury/Geminii/Apollo program had been underway for at least two. We would actually land a man on the Moon a mere 6 years later. So these predictions weren't made years ahead of the fact, or in an informational vacuum.  

And, to be fair, the astronomy book didn't get everything wrong. Eventually, we did send little robot "tanks" to explore another planetary body. It just wasn't the moon, and it wasn't until 1996. But "postal rockets" to provide communication between multiple space stations and Earth?" Yikes.

The point is, enthusiastic futurists and technology evangelists have been predicting revolutionary changes in our lives for the better part of the past century. And without question, our lives have changed. But rarely as quickly, or completely, or exactly in the ways, the predictions envisioned.  

At this year's TED (Technology, Entertainment, Design) conference, Tim Berners-Lee, who's credited with inventing the World Wide Web, recounted that, when he first sent his boss a memo on his idea (which his boss had reluctantly agreed to let him pursue in his spare time), his boss's comment, in the margin, was a casual, "vague but exciting." And even Berners-Lee admitted, "The things that happened with the web were much more than we originally imagined." 

Which is to say, even technology wizards don't always foresee which innovations are going to be the truly disruptive or transformational ones … or how that technology will actually play out in life and the world. 

Predictions are always interesting to read. And useful, in terms of considering general trends or movements that are influencing, or at least pushing against, life as we know it. But reading them, I'm always reminded of a game I used to play as a kid, when I'd try to predict which way a trickle of water from the hose was going to go through the garden dirt. One way or another, the water headed downhill. There's no stopping change or progress. But even when I tried to influence the outcome, by nudging dirt one way or another, or got excitedly sure about which way the stream was going to go … it often surprised me, by finding some unexpected weak spot in the dirt and jumping sideways along a new course. 

Will more people work in independent jobs and from home, over the next 10 years? Quite possibly. Will company benefit structures change? Probably… but also, probably, in some companies more than others. Will health care coverage and insurance systems change? Almost assuredly, now. But will the changes in how we live and work be as sweeping as revolutionary as the Time article predicts? I'm skeptical. There are other forces, and truths, that work against revolutionary and sweeping change in the world. Just ask anyone who's ever tried to change it. And that's true for the business world, as well (more on this later). But in any event … the future of how we work will almost assuredly evolve in defiance of any firm prediction. And in ways, and in reaction to events, that we don't, or can't, foresee. 

Personally, I'm okay with that. 

(Image by Flickr user veloopity. More vintage images of the future here.)

It Pays To Be Short

by Patrick Appel

Jonah Lehrer, among the best science bloggers out there, points to this piece by NPR:

…for the taller person it takes a tenth of a second longer for the toe-touch to travel up the foot, the ankle, the calf, the thigh, the backbone to the brain, the brain waits that extra beat to announce a "NOW!" That tall person will live his sensory life on a teeny delay (at least as regards toe-touching). This, of course, could apply to all kinds of lower-extremity experiences — cold or heat against the skin, tickles, rubs, hitting a soccer ball — the list goes on and on.

Vaughan has more.

Before You Even Think About It

by Richard Florida

Google has developed a nifty new algorithm to identify employees who are most likely to leave the company. Discoblog explains:

Performance reviews, pay raises, promotion histories, and other data on its 20,000 employees were crunched into yet another mathematical formula, which reportedly spat out the names of who was most likely to quit.

No surprise, Google insiders are keeping quiet about the details of the algorithm, though they will say that it has already "identified employees who felt underused," a key precursor to telling your boss to shove it. Meanwhile Laszlo Bock, the company's head of HR, told the Wall Street Journal that the algorithm helps the company "get inside people's heads even before they know they might leave."

Perhaps it's fashionable to bash uber-successful companies. I visited Google twice for book talks  – once at their Silicon Valley headquarters, and also at their NYC office. I've been to a lot of high-tech companies, leading-edge manufacturing plants, and the trendiest of creative enclaves, but Google still blew me away. The digs were great, and employees (at least the ones I met) appeared smart, challenged by their work, and genuinely engaged in what they were doing. Not to mention, the algorithm seems pretty useful and reasonable to me.

Class and the Happiness of Nations

by Richard Florida

Over the past week, I've discussed the role of class in economic performance, innovation, and entrepreneurship. But what about happiness?

There is considerable debate over the happiness of nations. The Easterlin paradox suggests that there is little or no relationship between a country's economic development and its level of happiness in comparison to others. An influential paper by economists Justin Wolfers and Betsey Stevenson contradicts the Easterlin paradox, finding a clear relationship between economic development (measured as GDP per capita) and happiness. In other words, countries that increase their wealth become happier, and countries that increase their wealth more than other nations become happier than others.

But what about the effects of class on happiness? Are societies in which a greater share of workers are members of the creative class on balance happier than those with large working class populations?

To get at this, Charlotta Mellander used data on happiness – measured as overall life satisfaction – from the Gallup Organization's World Poll.

The results could not be more striking. Happy nations appear to be creative class nations.

Nations with a large concentration of the working class are far less happy. In fact they appear downright unhappy. Perhaps Marx was right after all about the alienation that comes from industrial work – or, in this case, the unhappiness found in working class locations.

Source of all graphics: Martin Prosperity Institute

We'll be doing more on the connection between class structure and the happiness of nations in the future, so stay tuned.