Retraining Myth Revisited

I wrote a blog about a year ago showing that most retraining is a myth.  Here, I am going to revisit the subject with a few new points.

In that prior blog I used the example of an assembly line worker in a washing machine factory who is 40 years old and his company is closing down.  Social workers proposed retraining as a solution to the person's situation.  I pointed out that at age 40 the payback period for the retraining is half of that for a 20 year old and thus a bad investment.  Here is my new point.

The fact that this person took a job as an assembly line worker is an indicator of the intellectual ability of the person.  We know that there is a major economic trend toward more intellect required for jobs of the future.  People who now have those more intellectually demanding jobs started out having a higher IQ in the first place.  Like wise, those who were assembly line workers had lower IQ's on average.  To expect that at age 40 and person starting with a lower IQ can be "retrained" to compete with a person with a higher IQ trained at age 20 can compete is ridiculous.

It would be wonderful if retraining could compensate for IQ, but we have to be realistic.  We have another trend and that is that it costs much more to teach a low IQ person compared to a high IQ person.  In a typical college lecture, the low IQ students are lucky to retain 50% of the lecture content while the higher IQ person can retain 90% or more.  As students, we all have experience with kids in school who were "good at" math or science and others who had difficulty.  Those are the facts.  This is why retraining costs much more while the pay back period is shorter.  If it cost twice as much to retrain a person and they have half the time to pay back the cost, it means that the retrained person will cost "four times" that of the higher IQ younger person.  Now, what do you think of the value of "retraining"?

I have not proposed the solution, only defined the problem.  What do you think is the solution for the 40 year old assembly line worker who is out of a job?  The assembly line worker should have seen his problem coming and he should have tried to prepare himself.  Why don't assembly line workers recognize their problem?  I know that many feel their union will "save" them, but we all know that there is no way that any union can save them.  Remember the people on Easter Island who built giant statues as a means to save them from starvation due to over population?  How is what the 40 year old assembly line worker did any different?

PS---The most economical alternative is for the low skilled 40 year old assembly line worker to take any job that they are qualified for and accept lower pay and a lower quality of life.  We have to put our money on the winners and minimize the cost of losers.  Automation has always worked it way up from the bottom, not from the top down.  Recognize the facts of life.

PS--In the past, we have been sloppy about advanced technical education.  We let kids who were not interested in technology opt out of these classes when they had the IQ's to do well. Many kids made this decision at a very young age when they had no understanding of how they were going to make a living in the future.  Our teachers and parents are going to have to start acting like adults and requiring young people to study the STEMS in school so they are prepared for "their" future.

Tesla's Electric Car Violates The Laws Of Physics

Have you heard the latest claims from Tesla about how fast they can recharge their batteries?  They claim that it only takes "one minute" to recharge.  If that were true, it would be great.  They claim that it can drive 500 miles.  This blog is about the truth and rules of physics.

Here are the starting points.  It takes at least 50 hp for the typical car while it drives at 50 mph.  That means we need 50 hp for 10 hours.  We know that a hp is equal to about 750 watts.  That means we need a total of 375,000 watts-hours.  That would be the same as 375 kilo-watt-hours.  If we pay $0.20 per KWH, it will cost us $75 for power given we have 100% efficiency.  This is only the first part.

Next, we need to consider how we will get $75 worth of electricity into our battery in just "one" minute.   Just what is a "watt"?  It is one volt times one amp.  Simple! The highest voltage we can expect to have is 220 volts.  Next, we need to convert the 375,000 watt-hours to watt-minutes.  That works out to 22,500,000 watt-minutes.  The final step is to convert the watts to amps and that works out to 102,272 amps.  Most new homes have electrical systems rated at 200 amp at 220 volts.  That means we would need to tie together 511 homes to get the amps we need.  Those are the facts.

Even if Tesla charged up a big capacitor bank over a period of time and then discharged that accumulated power into their battery in only "one" minute, it would be like setting off a bomb.  Bombs don't have all that much power.  It is the fact that that power can be released in less than a second that accounts for the blast.  It would be the same with a "one" minute battery charge.

The bottom line is that Tesla can't violate the laws of physics.

PS--In a prior blog, I pointed out that if you want less pollution from cars, then you need to figure out how to make them "cost" less.  The bottom line with everything that humans make or use is that "cost" is 100% correlated with pollution.  The more people we have who spend morenmoney for living the highest quality of life, the more pollution we will have!  Fewer people or a lower quality of life.  There is no free lunch here!

PS--The only logical way to supply the energy needed to drive 500 miles in just one minute would be to have the energy stored in a big capacitor bank.  At Jennings Radio Corporation in San Jose, Ca, we had a capacitor bank that filled a whole building in 1960.  It would take something like this to hold the amount of energy needed.  It took several hours to charge the capacitor bank.  If this is the kind of thing that Tesla is using and it was in your garage, it could only be used about one per 24 hour period.  At Jennings, to discharge the big capacitor bank we had to use "buss bars" rather than wires.  It would require copper bars 1/2" thick by 3" wide to carry that much energy in just one minute.  If something went wrong, the whole thing could explode like a bomb.
  

The Economic River

I have been trying to understand economics and have been frustrated by all the supposed experts and talking heads on TV and in our universities.  Back in graduate school, I ran head on into Ted Krepps who was a famous economists.  We locked horns and to this day, I feel that he was dead wrong with his ideas.  This blog is about how I look at economics.

I have blogged in the past about "one movers".  Those are the people who can only see things "one step" at a time.  They have no mental ability to consider the interaction of independent variables or variables that have a degree of inter correlation.  In economics, there are few variables that are 100% independent of one another.  Here goes my position.

First, look at our economic systems as a "river" with boats on the river being paddles by people.  There are a lot of variables that need to be taken into account if we are to understand what is going on out on the river. How about the speed of the river and the fact that it might change over time.  How about the boats on the river and the fact that they are paddled at different speeds and that speed can change over time.  Consider that there are new boat added to the fleet over time and some sink or are taken off the river as time goes by.  This is getting complex isn't it?  I did not tell you that economics was simple did I?  If a person can not keep the situation that I have described above straight, how can we have much trust in them as economists and their ability to predict the future?  Even if they understood the economic situation on the "river" do you think that they could explain what is happening to the average person?  I don't think so.  That is the reason that we get the mish mash that we do from economists.  Now, back to the "river".

Most of us look at economics like we were standing on the river bank at a fixed spot.  We see the boats moving on the water, some going forward and some going backwards.  Let me use and example.  We have two boats on the river, one is being paddles at 3 mph and the other at 5 mph.  The river is flowing at 2 mph.  Now, what does this picture look like?  We have one boat that is going up stream at just 1 mph and the other at three time that speed at 3 mph.  Now, lets ask if that is fair to have one boat earning 3 times as much as the other boat?

What if the speed of the river increased to 4 mph?  This could represent an economic recession.  Now, we have one boat that is actually going backwards at 1 mph while we have the other boat still going 1 mph forward.  Is this starting to look familiar?  What we have is an economic situation where the economic river is flowing faster and faster while we have people who have more intellect who are figuring out how to paddle faster.  Here is what you now see on the river.

The flow is still at the 4 mph, and the person in the first boat is only able to paddle at 2 mph rather than their original 3 mph.  Now they are going backwards at 2 mph rather than the 1 mph described above.  Now, the other boat with the smarter paddler is able to paddle at 6 mph and even if the river is flowing at 4 mph, they are still gaining 2 mph.

Next, lets take an other look at the boats from our chair on the river bank.  If the slow boat was being paddled at the original 3 mph and the river was flowing at the original 2 mph, the boat would be making "progress" up river.  Look at this like growth in the economy.

What we do not notice from our chair on the river bank is that the paddlers are getting older as they paddle up the river.  Further, that boat out in front of you on the river is "not" the same boat.  It is a different boat paddled by a different person who is at the "same" age as the person who was at that same point last year.  Paddling up the river is a little like climbing the economic ladder.  As you sit in your chair on the side of the river, you do not notice that the people in the boats are earning more money each year as they climb the economic ladder.  It is like the person who works at McDonald's who does not get a raise in pay while the person who worked at McDonald's last year is now the manager and paid much more.

Are you starting to see how economics is more complex than economists tell us.  The human mind can handle pictures and graphical things that are very complex and that is one of the reasons that I use the "river" model.  Think how your mind can keep complex things on the river straight.  The "river" has changed from what it was before 1950 and most economists who learned from books written in the 1930's ans 1940's are just out of touch.  Remember the "river" and how it changes as well as the boats and the boaters.  Think about Amazon and how they changed "river"?

Advice On Tax Plan

I have never seen so many incompetent people in government until they exposed themselves by discussing their new tax plan.  First, they need a clear objective and they don't have that. Second, they need to explain how their plan meets the objective and they are not doing that either.

You only have to look back at the Obama administration and the problems that he created to see what needs to be done now.  Obama doubled the nation debit and only grew the economy at about 1%.  This caused a significant reduction in the median family income and put more people on food stamps. What he did was to allow government to spend much more money than they collected in taxes.  During the Obama term, we should have collected much more in tax than we did.  You have to ask, "How is that any different from lowering taxes now?"   It is not!

Here is the problem.  We need to encourage companies to make things that they can sell and then hire more workers.  We have a big market here in the USA, but the products here cost more than those imported.  One way to change that is to take some of the burden off companies and put them onto imported products.  If we don't want to put a penalty on imported products, then all we can do is to, at least, take cost off companies.  That is where the 20% top tax on companies comes in.  Next, we need to assume that companies will sell more and thus pay a lower tax on "more" sales.  If sales grow enough, it is possible that some companies could actually pay more tax, Why are we not counting that?

The other thing is that under Obama we have more people on welfare who could work.  This is a big one.  Not only do people on welfare not pay tax, they consume the taxes paid by people who do work. If you can get them off welfare and into a job, they have a double impact.  That is what the lower tax on companies is supposed to do.  Who is talking about that?  No one!

Now for those who now have jobs and pay all the taxes.  With more jobs, many of these will get promoted and thus earn more even if the tax rates stay the same.  If they own stock, they will cash in as companies are taxed less.  We need to be counting that.  The other thing is that if companies expand, the people they hire will pay tax with the idea that it will offset the lower tax paid by companies.  Not hearing about that either!

As far as selling the new tax plan, politicians need to start telling the middle class that they are "not" directly the main beneficiaries of a tax cut.  What they will get are higher paying jobs as companies expand.  Since most of the middle class does not pay any tax, the best way to help them is with higher paying jobs, not lower taxes!  Explain to the middle class that lowering the tax on companies will lower the amount of imports and get people who do not have jobs off welfare and back to paying taxes.

PS--The other thing is that they have to stop discussing "how many angels can dance on the head of a pin"?  They have to stop using the words "all" or similar words.  There is no plan that will promise 100% of any group of people will pay more or less tax in the future.  Rather than trying to answer the stupid question, "Will everyone get a tax reduction?", they need to attack the stupidity of the question.  They need to focus on words like "most" rather than "all". If voters can't handle this, they don't deserve help!

Data Normalization

I know that 99% of you have no idea what "normalization" means.  My introduction to the concept came in advanced math.  It is a simple concept that we all need to understand and that is the idea behind this blog.

Notice that I used the word "data".  The analysis of "data" is where I have used this concept the most.  One area where "normalization" is critical is in economics and decision theory.  Here is a simple example.  If you gave your friend $100 and he promised to pay you back the same $100 in a year, is this "equal"?  Is the $100 your friend paid you back one year later "equal" to that $100 you loaned him a year before?  With that same $100, a year ago, you could have purchased 50 loaves of bread.  Now, with that same $100 paid back to you a year later, you could only purchase 44 loaves of bread.  Now, that is not equal is it?  Adding interest to the original $100 is one way to "normalize" the $100 you expect to be paid back a year later.

Where "normalization" comes in is that you have to "normalize" that $100 paid back a year later in some way so that it can be compared on the day that the transaction was made.  It is like adding apples and oranges.  If the money is not "normalized" to its value on the same dates, it can not be added or subtracted.  This is the same with almost all data that we used to make judgements and decisions.

Look at something like personal income.  Let's say that in 2000 the median family income was $50,000 and in 2010 it was up to $55,000.  Is this good?  Is this progress?  Politicians will claim that they have helped the median family.  Is that true?  It might be or might not.  To compare the two numbers, you first need to "normalize" the data.  For this example, I will use the loaves bread method.  Back in 2000 the median family could purchase 25,000 loaves of bread, but in 2010 with $55,000 the median family could only purchase 24, 444 loaves of bread.  Once the median family income is "normalized" in terms of loaves of bread, it is clear that the median family is "not" better off.

Another common error is just looking at the growth in the GNP.  If during the same period above, the GNP grew by 10%, it looks good.  Obama or some other politician would take credit for helping the median family, but is this accurate.  During this same period, the population of the USA has grow by 12.5%.  That means the share of the GNP for the median family has actually gone "down".  If we divided the GNP by the size of the population and compared those numbers, this is called "normalization" so that the two numbers are comparable.

The numbers would look something like this.  (GNP/100)= .01GNP compared to (GNPx110/1.125= .00982.  It is clear that the median family is worse off even with the growth in the economy.  This is one reason that we all need to think about "normalizing" data before we jump to a decision or conclusion.