Of Clouds, PCs, and zEC12s

Earlier this week I read about the, like, serious arrival of The Cloud in computing—meaning that someone maintains computers and memories that we just access from afar—yesterday came news of IBM’s unveiling of a new mainframe computer, zEnterprice EC 12 (zEC12). One of its uses, of course, is to host lots of lots of clouds. With that we have once more closed a circle—because what goes around, comes around. Almost as if to put a seal on that, HP stock was turning squeeshy because, in crude summary, the PC is dead.

To be sure, the PC market is still vast, but the sex-appeal is gone. PCs have turned into commodities. But we still need them to talk to The Cloud. It’s sort of analogous to saying that when we pray we pray to God, not to the prayer rug—and the PC has turned into a mere rug.

Meanwhile I had begun to fear for the future of the Smartphone. Now that these little smaller-than-your big ham palm devices have more power than my HP Pavilion 6647c PC, smartphones have nowhere to go. Here comes zEC12 to give them a new challenge. “Miniaturize me!” says the zEC12 proudly—“do that and you’ll be a real telephone.”

The name of my computer, by the way, does sound rather grand: HP Pavilion on and on and on PC. Reminds me of aristocracies that have come down in stature—some Russian Princess living in penury in Paris handing out towels at up-scale public toilets. I am sad for you, dear Pavilion; but the lineage of nobility is still visible on your careworn features—while in the small, sturdy, abstract black cabinet of the zEC12 I detect its lineage too—the great monsters that used to take up most of a floor in office buildings.

Yes. What goes around. One of these days even the humble abacus will be back in place of honor, but that might take a little longer.

Contorted Commerce

My entrance into the world now generally called “technology” began with an Apple IIe. I was a rank beginner, and it took me some time to discover that Apple’s general strategy was to obsolete its products on what seemed to be a schedule. This irritated me enough to abandon Apple for IBM; I never bought another Apple product since. The other day our cell phone finally failed. I thought it might be fixable, so naively I took it to a shop. They looked at it and laughed. I ended up with a Samsung product. Satisfying, that. Apple at least temporarily prevailed over Samsung yesterday—and it pleased me that I was helping Apple’s opponent.

I belong to what might be a silent majority—people who treat tools as tools. Especially in the “technology” category—until it too gets absorbed into ordinary reality—the corporate impulse is to exploit the customer by obsolescing product at regular intervals. Microsoft is working on yet another bloody version of Windows. Facebook is terror-ridden because it can’t as yet put ads on smartphones. I’m in the majority that only needs a stupidphone—and I get those free with a wireless telephone contract. Never bought a car except to get some transportation. My ego is big enough without a $50,000 emblem that spends virtually all of its time waiting to be used.

But what about progress? Well, where are you progressing to? The funeral home is a pretty good guess. Back before “technology” appeared, I’m thinking of the Egyptians, the big egos in that day had themselves embalmed. Call it the terminal technology. I’m waiting for the Market to launch LaZer-Cremation as the Baby Boom finally reaches its collective apotheosis. After that we might actually return to normalcy again. It’s coming. It’s coming.

Dust Bowl Remembered

Click to enlarge; Esc returns to post.

We are experiencing a significant drought this year. It prompted me to look back to the Dust Bowl days, 1934 and 1936. The maps above show the conditions that prevailed in July of 1934 and July of 2012. It tells me that conditions in 1934 were a whole lot worse. Agricultural practices put in place after the Dust Bowl days, to prevent future recurrence, were still in the future. The over-farmed regions turned into dust. We were also in the midst of the Great Depression.

The 2012 map, above, is instructive. I learned today that in the nineteenth century people called the region now known as the Great Plains (a map of that is shown as well) “the Great American Desert.” The land in those regions was considered very poor. But it was developed for agriculture nonetheless. On the 2012 map that is the region exhibiting the worst drought. The patterns between the two periods are very similar. The inset image is from Wikipedia’s article on The Great Plains.

No. This is not an attempt to question Global Warming. What the maps reveal is the fundamental geological characteristic of the North American continent. With masses of oil available, much water can be pumped—and poor soil can be made to yield crops by artificial fertilization. Changes in climate, whether temporary or permanent, can test marginal regions to the limit. This is happening now—but that test in 2012 is relatively mild. It was a whole lot worse in 1934.

Signs of Unraveling

This morning a story in the New York Times informs me that services exist that sell the eager buyer Twitter followers, Facebook likes, and YouTube views. The story (“Buying Their Way To Twitter Fame”) suggests that we can prove this to ourselves by doing a Google search on the phrase “buy Twitter followers.” Celebrity for Sale.

It seems to me that the rapid spread of social media—with just about every corporation with some meaningful footprint on the web attempting to create its own—arose from a false premise—namely that the Internet had revealed a hidden human proclivity for forming networks. But there was nothing hidden about it. We’re social animals. The convulsive attempts I’d noted, two or three years ago already, reminded me of the years leading up to the dot.com bust when people talked about a new paradigms in business (“profits do not matter”) and with hyped excitement that “the new price is Free.” We used to collect such statements at our own enterprise in anticipation of what would come later. And it’s not over yet. In today’s issue of the Wall Street Journal comes a story titled “When Freemium Falls Short.” It points to cases where the strategy of building a business by giving the product away is the straight road to bankruptcy.

Such careless thought on the positive side had its parallel in the massive growth of spamming on the negative side of the Internet’s development. Free and easy access, praised to the skies, has its heavy downside. The numbers can’t be trusted. It used to interest me to know how many people read my blogs—until I discovered that the numbers are diluted by masses of people hoping to garner visits by causing bots to click on my site. Visitors are recorded by Google. At first I was amazed by having ninety visits, say, from some to me obscure url—and would follow it home. Only to discover that it was really spam—wanting me to do just that—so that its site would gain “hits.” This is yet another version of a little known method of faking followers, interest, and lifting numbers entirely illegitimately. Knowing that my numbers are “cooked,” I no longer have an interest. But some people publicize these numbers for self-glorification or use them to attract advertisers.

A third aspect of the Internet mirage is the belief that the number of eager advertisers out there is infinite. With “freemium” still the accepted model for new enterprises (at least for now), the only hope of getting revenue is by advertising. But some advertisers are now beginning to realize that they may be looking at a bridge to their customers built mostly of vapor.

This subject has its parallel in another institution of much greater age—but going in the same direction. That institution is Democracy. In that case the mirage arises from thinking that the ignorant and careless deserve the same power as the responsible and thoughtful. Over time the coherence of the commonwealth is lost as Truth becomes what the majority favors. Or the majority, in effect, disappears in deadlock.

The Abstract Rises, the Physical Sinks

Another way to put this is to ask: Where Have Jobs Grown? They have grown in those sectors farthest removed from the production of physical goods and energy. The best explanation of that is that energy slaves and their machines are getting ever better at satisfying our physical needs. Therefore, to employ the population, we have to do something else.

I illustrate this with a chart, using data from the Bureau of Labor Statistics’ Current Employment Statistics program (link), showing job growth from 1972 to 2011, a forty-year period:

In this arrangement, the curves show cumulative percentage growth in jobs created from a 1972 base. The listing of sectors on the right is in order of growth rank. Manufacturing is at the bottom. Utilities also had negative growth, thus employing fewer people than the sectors did in 1972. Construction began to tank even before the housing bubble burst in 2008.

When the economy no longer needs people to mine minerals or to harvest wood, to transform raw materials into products, to supply fuels or to build things, what remains is services of all kinds.

Under Services here I combined Professional and Business Services, Health and Private Education Services, Information, and Leisure and Hospitality. Government education (state universities and local schools) I show separately. The Trade and Transportation category is made up of Wholesale, Retail, and Transportation and Warehousing. Of these, Retail had more growth than Wholesale, and Wholesale grew at a higher rate than Transportation and Warehousing. Data on farm employment are not collected by the Bureau of Labor Statistics—but that category has been shrinking, not growing.

A closer look at Services is provided by the next graphic. It shows that the biggest growth has been achieved by Health and Education Services (which is mostly health services). Thanks for aging, Baby Boom. Leisure and Hospitality includes entertainment. Information includes television and radio along with other communications media.

The menu for detaching from the physical dimension? Discover fossil fuels, get some leisure. Cultivate ingenuity and create machines to use the fossil fuels. While the oil lasts we can keep ourselves entertained without worrying too much about rain, sun, drought, floods, and so on. Afterwards these charts will be redrawn again.

Reading Tea Leaves

Some notes here on the last release of employment numbers. First, my habit is to contrast employment gains (2010-current) with employment losses (2009-2008). Doing so we have recovered 45.3 percent of jobs lost. But, as I pointed out a short while ago (link), we should also count growth in the labor force—in addition.  I showed there than we need to generate 87,300 jobs every month just to account for the increasing labor force. In the 2010-current period, that totals to 2.7 million jobs (31 months’ worth). These have to be added to the 8.7 million jobs lost in the Great Recession. This means that we have to produce 11.4 million jobs—and we have actually recovered 4.7 million. Therefore our recovery, thus far is at 41.2 percent, not 45.3.

As the period of the “recovery” extends—it is more than 2.5 years old—and no even perceptible upward thrust is present in the numbers, this phenomenon appears to signal something new. Our habit is to view recessions are recurring cycles of brief decline followed by resumption of growth. That isn’t happening this time.

Reading tea leaves is difficult. Suppose we see recessions as occasional hangovers from too much boozing. If that’s the case, the last recession was certainly a hum-dinger. Are we to see this sluggish response of the economy as something more than just getting back to normal? As, perhaps, a kind of wide-spread reform? It would be ironic indeed if the public has decided to come to its senses and stay off the bottle, this time. It would be interesting to look at “recovery” not as the resumption of our spendthrift ways but as a genuine recovery from them. In that case, and in due time, other changes will necessarily evolve. Among them? Well, we do have to employ the population. Will we, of necessity, accept lower compensation in the future? And will “insourcing” replace outsourcing as a new trend—in due time echoed by legislation and incentives to make it happen faster? The longer this lasts the more I will wonder.

Employment Update: July 2012

At present the Employment Situation numbers releases by the Bureau of Labor Statistics (link) are the occasion of dueling announcements by the two candidates for the presidency. Hence the numbers are widely known early on the first Friday of every month. My role has devolved to being a record keeper. Mitt Romney saw the July numbers as yet more proof that President Obama has failed; President Obama welcomed added jobs but deplored that they were not greater in number. The stock markets evidently saw the numbers as good news and stocks rose in response.

So what were the numbers? The economy gained 163,000 jobs in July. If we add the effect of net changes made to numbers for May and June by BLS updates, another 4,000 were added to total jobs gained in the year. Every private sector gained jobs except Mining and Logging (a loss of 1,000). Government lost 9,000. As it delights me to point out every month, that’s the sector where the politicians are themselves responsible. They talk the talk but do not walk the walk.

Herewith a graphical presentation:

In the 2008 and 2009 period we lost 8.7 million jobs. In the 2010-2012 period to date, we have recovered 4.7 million jobs—thus a 45.3 percent recovery in 31 months. Assuming that this rate continues into the future, we shall need three years and 2 months more to arrive at the point in employment we had reached in December 2007.

I’ll comment on this further in the next post.

Straws in the Wind

The two massive power-outages in northern India, last Monday and Tuesday, initially affecting 300, then 600, and yesterday 680 million people for a day, ought to be seen as straws in the wind; and in this day and age, repeating that in other words, thus saying that these are “signs of things to come,” seems appropriate.

People like me are labeled Chicken Little, the chick famed for crying that the sky is falling. But the point is not so much to engage in doom and gloom but, rather, to suggest how the global and local environments are shaping. Aesop has a fable that applies with equal force. It is about the Grasshopper and the Ant. Now I looked high and low in folk tale archives, and I cannot there discover any allegory about the King Who Was Too Fat to Die—nor one about a deeply caring Mother Nature who sheltered darling little Capitalism under her shielding wing.

India is the second-largest nation in the world—and only partially developed. When things fail there, vast masses are involved. When Chicken Little grows up, it worries about physical maintenance, alternative forms of energy, and ways of husbanding what fuel resources remain. An example of that is to replace, to the extent possible, private with public transportation. Which reminds me to look up some data about railroads.

Okay. So people sat about in trains with gloomy faces. Okay. Some barbers cut hair by candle light. These two events lasted about, say, 30 hours in the aggregate. From the peaks of the United States of Grasshopper, the Indians are far away and tiny. Useful outsourcing targets, they, especially those in the big cities. Don’t worry your little feathery head, Chicken Little. Mighty Technology will come to rescue us—and them. When, finally, they get with the program and cut those evil taxes.

Off the Reservation

So who at GM was responsible for pulling the company’s advertising money away from Facebook? The Wall Street Journal told me so today. The man was Joel Ewanick, then the company’s global marketing executive. The Journal’s story tells us that Ewanick was fired—evidently for “failing to properly vet the financial details of a European soccer-sponsorship deal.” Did his actions regarding Facebook play a role. Oh, no! Oh, no! Not the least of it. But Ewanick’s talking to the WSJ about that action, before the Facebook IPO was launched “didn’t go over well among the executives in GM’s top ranks,” the Journal tells us. A European soccer-sponsorship deal? Really? Or was the board just digging for something—anything—to rid itself of a man who was “polarizing,” a “glass breaker,” and a “firebrand”?

Nothing wrong with pulling money from an advertiser—but making GM look like a maverick, making it seem disrespectful of the gods of Social-Media, why that will start somebody digging into European soccer sponsorships.

Reminds me of another polarizing firebrand at GM, Ross Perot. He joined the board in 1984 when GM bought Electronic Data Systems and Perot became GM’s largest stockholder. From his board position, Perot had a look-see. Soon he was in the public media criticizing GM’s ways. Board members don’t do that, Ross. Phrases like “nuke the GM system” and “teaching an elephant to tapdance” reverberated in the media—until, in 2007, the board decided to repurchase all of Perot’s stock for $700 million and to send him back into the wilderness where firebrands belong. I got these facts from an old Time Magazine story (here).

Will we learn, in days to come, that GM has once more discovered that a presence on Facebook “has been shown to be helpful to reach a vital audience”? Wouldn’t be surprised. As for Ewanick, I don’t think he will just disappear.

Expanding Canvas, Shrinking Paint

The WSJ yesterday carried a story titled “Social-Media Stock Frenzy Fizzles.” Whatever the content here, I admire that headline. Catchy. Now all this, I think, began when General Motors called its advertising money back from Facebook—in advance, one speculates, of pouring out vast masses of it on NBC’s coverage of the Olympics. Tell you the truth, I’m falling in love with Chevrolet all over again. The Olympic spirit? Oh, it’s Okay. The Chevrolet spirit? Now that’s the shining red pickup I want to drive to heaven.

I got to thinking yesterday, what with that frenzy fizzling. The abstract thought was: If supply expands fueled by frenzy—but demand shrinks because the customer isn’t shopping anyway, no matter what you say, no matter how low interest rates are, no matter how radiant that Shining City in the Cyber Sky, why then there is a mismatch. And even those people dancing the St. Vitus dance will eventually notice. The visual image that came unbidden into my mind is the situation of a painter who discovers that his canvas is expanding as he tries to cover its surface, and the faster he paints, the more his paint-supply diminishes.

We’ve all noticed it, of course. With-it broadcasters have developed a new sign-off line. “See us online anytime. And follow us on Facebook and on Twitter.” Why is that list so short? Wikipedia shows a list of 198 social-media (link)—from “43 Things” to “Zoopa”—and it doesn’t even include Zynga, a “major player” in services and games.

Painting the sky Chevrolet red? GM has no problem doing that—on NBC. Watching sports big time every four years? Yes. Discovering what itsibitsiThunder has to say on Twitter today? That isn’t quite so big a magnet.

Quantitative Easing

What isn’t easy is to remember what the Federal Reserve’s latest monetary whip, to energize a sluggish economy, means. Here I teach myself again.

Put in the simplest words, quantitative easing is another way of saying “printing more money.” And the name applied here is “quantitative” because the Fed determines in advance what quantity of money it will print. The “easing” part is trickier.

The Fed buys, from the banks, long term financial instruments that they are holding. An example is mortgage-backed securities. The Fed pays for this with money it creates out of thin air. The consequences? The banks have more cash. When instruments are purchased, their value goes up. When dividend-yielding financial instruments are purchased, their value goes up too—but their dividend yields go down. QE therefore reduces “yields” as well. Another name for yield is interest rate.

Now the “easing” part is tricky because what the Fed wants the banks to do is to lend the extra money to businesses and industry. Business and industry spend the money on structures and capital goods. This causes demand to increase. Demand in turn causes companies to produce. And in order to produce, they hire people. Simple, but very indirect.

The current situation is that banks don’t want to lend to people who need money; they want to lend to the wealthy only—who don’t need money. Banks behave like this because the risks of lending into a sluggish economy are high. But the banks love quantitative easing because they don’t mind selling long-term financial securities. It increases their flexibility without imposing a cost or forcing them  to do anything.

The very fact that the Fed must print money to begin this attempt to stimulate the economy, very indirectly, increases the money supply at a time when there is already too much money in circulation. This means that quantitative easing is inflationary. Inflation hurts people who save and those on fixed incomes; it helps people who borrow; they pay back loans with money that is worth less than the money they borrowed.

Now the straightforward way to stimulate the economy is denied to the Fed—but at least theoretically available to the Executive branch. That way is to launch programs to hire people directly—as Federal employees. If the programs are well designed, thus if the people hired actually believe that the job will still be around in a couple of years, they will start consuming. That causes demand to increase—and the “easing” then follows.

I feel for the Fed. It wants to do what the Executive branch might wish to do but hell will freeze over before the Legislative branch will let it do it.

The V-Words

One of the best-kept secrets in such times is that virtue is efficient. The prevailing view, instead, is that virtue is weak, the mark of the timid; it’s easily shouldered aside by the aggressively competing. The Lords of the Universe didn’t earn their red suspenders by their virtue; they earned them by taking huge risks, cutting corners, and trampling the weak on their way to the top.

Now, of course, people admire success but want their children to be virtuous. The popular media, in response, have produced a kind neo-archetype of the hero. He keeps returning in endless variations. He is a cop so deeply committed to justice that he takes the law into his own hands. That commitment is supposed to stand for virtue; that breaking of rules is supposed to be the much admired aggression. He tramples all over the “bureaucratic” rules, hunts and destroys the criminals, and, with the deus ex-machina of the film-maker, manages to escape the consequences of his transgressions against the public order. Somehow the film neglects to tell us who pays for the dozens of cars and scores of storefronts and bridges destroyed in the big chase. Another version is the “virtuous thief.” He is a fantastically clever jewel thief or bank robber—but his crimes are packaged as punishment for the wicked Big Powers of Money. In the midst of some heist he turns into a supercop and thus, balancing his small crime by solving some Big Crime, emerges washed clean and pure with a halo and the love of the incompetent but luscious female detective whom he helps—and who therefore gets all the credit.

Now back in the real world, vice is destructive  and virtue is efficient, and one does not smoothly morph into the other. The real world, however, operates on another time scale than the movies. Processes are slow. Decades pass as virtue is watered down by complex processes of compromise and what is known as a vicious cycle develops. Its earmarks are weakening of regulations and slackening enforcement, spending what has not been earned, thus mining the future, compressing time, thus working for the near- at the cost of the long term, manipulating perception rather than seeking the truth, and hyping vice under the guise of freedom and self-expression.

The virtuous cycle is equally slow in its development. It depends on patience, savings, self-restraint. Precisely because such behavior is difficult, it values education and training; both are productive of a realistic view of life; you don’t get something for nothing; pay me now or pay me later; results equal effort; do unto others; etc. In the virtuous cycle gains are small—but they cumulate through savings; they are invested carefully, hence they have small rather than “insanely great” returns. The long-term view, therefore is natural. The virtuous cycle, like the vicious, has a tendency of growing exponentially. In due time it produces great wealth. And there we find its Achilles heel. Wealth becomes habitual. The virtues begin eroding. And the first cracks appear. Bits of stone start trickle out; water seeps in. A vicious cycle is born.

Alas. One always seems to beget the other. My hope is that a virtuous cycle is now beginning—and may explain why nothing exciting is happening out there. It takes a lot of time for the buried ants to emerge from the rubble of the collapsed structure and then, in the open again, to start rebuilding a virtuous hill.

11th Commandment

Anxiety and anticipated Schadenfreude†are beginning to erupt. This coming Thursday Facebook will publish its first earnings results since going public. Does Facebook have the moxie to attract the advertising revenues that may in future rival Google’s? Those who hunger and thirst for an uninterrupted population growth in the Olympus of the Cyber Cosmos—especially as Yahoo seems to be ailing—are anxious. Those who delighted in Facebook’s rocky IPO are sharpening their pencils; whatever the results next Thursday, they will find them wanting.

Now, don’t you know it, advertising must be personalized. The ads appearing when You land on Facebook must mean You, You, You. And Facebook, presumably, has all the stuff it needs to personalize the ads. After all, its members reveal such tightly-held secrets as their gender, age, and where they went to school. And then there are those many words they write there that can be individually mined and polished into pointers straight at ads. Am I a little doubtful? Yes. Suppose I shared with Facebook that I spend a minimum three hours a day in giving myself elaborate pedicures. Just suppose that. Now if I really did that, I would have quite an arsenal of nailclippers, creams, and even nail polishes already—not to say tiny little cotton pads to place between my toes to keep them sweating as I labor on their edges or polish, prime, and paint their sufaces. Foot odor would be a no-no, several brands of foot deodorants would stand there waiting to yield creams and sprays. Therefore, arriving at Facebook, all those ads trying to sell me Surecut Serrated Toenail Scissors (which I usually call SSTS here at home) or Sally Hansen Clip n’ Catch—or bottles of her Hard As Nails, of which one is still half full—or Pour Homme Ultra Slim Clipper in Black Leather Pouch (which I bought and only use for clipping the small toe nail on my left foot), why all those ads would mean nothing at all to me. They would be same-old, same-old. Yes, I have my doubts.

But what can a poor industry, entirely dependent on advertising revenue, do? What except to innovate? Yes, to innovate. Thus Facebook has a program of tracking people’s off-Facebook travels on the Internet and examine, using little bots (they work for mere pennies per nanosecond), the key words found on those sites so that, when people return to Facebook again, new ads, based on this on-the-hoof research can be presented to the owner. I went to check out how the Roman poet Virgil’s name is spelled. In the future, once that innovation is in place, I’ll see on Facebook is an ad offering me Virgil’s Aeneid. But I already own three different editions.

So what else can the poor industry do? They can drive me, lash me, seduce me, prod me to do even more self-entertainment. Only when I do that can they present me with their ads and if the minor gods of statistics so will it, I will actually click through. It should be a commandment, the 11th Commandment. Thou Shalt Engage in Entertainment. Failing which, the Cyber Heaven will cloud over and the radiance of the gods up there will dim.

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†The German word means joy over others’ misfortunes, literally “damage-joy.”