I spent a good deal of my career in large corporation land. I saw very little investment in productivity. I saw much investment in mergers and acquisitions, defense of IP, reduction of tax liability, and creation of "moats" to defend markets. Much "productivity investment" was defined as shifting production to cheaper countries which had even less capital assets per unit. Investment in research and development atrophied. Productivity investments were "too slow" to matter. "Too slow" because they would not increase executive compensation quickly enough. Perhaps this is part of the problem.
2) Management's tenure is closely tied to stock performance.
3) Management's compensation is closely tied to stock performance.
4) Cost reductions immediately generate cash that can be used to buyback shares (mgmt compensation metrics often do not adjust for share buybacks).
5) Investments in productivity use cash. Cash is needed for research and engineering and serious time to find real improvements. Technology investment is also risky. Tying cash up in investments also reduces ROA and ROE until productivity benefits are realized.
6) Technology may be the best investment in the long run but in the long run mgmt gets fired or retires.
My impression from sitting on internal investment committees is that mgmt prefers fast cash generation to productivity investment (technology).
l think most big firms are run by managers who came up through MBA or Sales or Marketing or Legal. I think fewer through the engineering or science verticals. But maybe firms run be engineers show more (relative) investment in productivity. Would be interesting to find out.
" is written in Nouriel's “Dr. Doom” persona—that does sell, and sell very well:"
OH NOES! We're all going to die! Basically Nouriel is the guy who has predicted 11 of the last zero world-ending apocalypses, is he not?
"Debt spirals and crises,"
People! If all else fails, you can monetise the debt! Rich people hate it, but if the choice is between starving people and a radical change in the designated arbitrary unit of pricing, who cares? (Rich people care, that's who cares.) South America never dials in their inflation, but they do know how to monetise the debt, which is why Argentina hasn't grown like we would want, but they are also not Zimbabwe - or the Congo.
"... the ten-dollar hamburger - we may be headed for the 100-dollar hamburger, but that's merely a nuisance as long as there is plenty of hamburger to go around." (<--- I haven't got the quote exactly correct.)
a) "their amplification by our very limited societal private-sector and public-sector ability to deal smoothly with large-scale bankruptcy situations," b) "our continued failure to design a stable international financial system," c) "threatening stagflation,"
a) We have a very limited ability to deal smoothly with large-scale bankruptcy situations because the people who own the large institutions have lots of money and work hard to make sure their particular national government cannot deal with the situation if their institution goes bankrupt so that their national government will be leery of controlling/regulating the large institution and will also move heaven and earth to pay off the large institution's bad debts when it all goes wrong, preferably with a small profit for the people who control the wrecked institution. There's a simple solution for this though: telling the large institution to go fuck themselves and regulating them anyway, or liquidate ownership thoroughly when the giant institution goes toes up. The Obama administration, following in the footsteps of the Bush administration achieved a total face plant & complete clusterfuck on this score.
b) The historical record says there's never been a 'stable international financial system', merely more stable situations when the world is in a growth spurt. The 1880-1890's did not involve stable financial situations - neither did the 1920's. The closest you get is the 1950's and 1960's when taxes on rich people were very high and banking was stiffly regulated. I do not think Nouriel means super-strict regulation of banking, I think he means 'Argentina, Weimar, Zimbabwe....GOLLLLLL - {cough} CRRRRYYYYYPPPPPPTTTTOOOO'. Which doesn't accomplish anything in terms of financial stability but does drives sales to people who mine things, like gold and bitcoin.
c) I've been listening to Boomers BS'ing about the Boogieman of stagflation for ... it seems like my entire life. I have to say: a couple of rotten quarters in 1975 is not and should not be the basis of an entire economic policy. If the economy is contraction, but the previous quarters wages are still rising and/or the central bank slams on the brakes (to create the contraction to force a demand collapse to 'match supply' so economists don't have to pay an extra quarter or two for a pack of bubblegum) then that's a stagflation condition. If you remember the last quarter of 2008 and the first quarter of 2009 the economy was in severe contraction (economic contraction) and businesses started sacking people as fast as they could (rising unemployment) and they started repackaging all their products to sell a given shrunken unit (SKU #) for the same price (rising inflation, or in this case shrinkflation), which is stagflation. No one mentions that particular episode of stagflation, because they are not making serious statements when they drag the stagflation boogieman out of the closet for economic Halloween. If they making serious statements, they'd just come out and say that stagflation is an inherent transitory phenomena (DUH) of harsh contractions that are caused by negative supply shocks or negative monetary shocks.
Nouriel is just spewing the usual apocalyptic crap here.
"the increased costs of caring for an aging population,"
How much of an increased cost? 2% of GDP? I have to say it's very weird that on the right you have these old guys going on about how terrible that people (like these old guys) are aging (improved medical technology leading to longer lives is going to result in more old people - that is what you're trying to do) and how terrible it is that there are all these old people hanging around (like these old guys who are complaining). The solution always seems to be that we should inflict harsh financial pain on older people (the ones over there, not the ones complaining) rather than raise taxes on *gasp* the older dudes complaining about too many old people. After enough of this, I have begun to suspect this is an indirect way to go all Jordan Peterson and whine that there aren't enough young hot chicks around to mack on. It's either that or a way to complain that the heavy urbanisation forced by the economic policies the old guys push for have result in drastic population declines in rural areas that they old dudes do not, in fact, live in. At any rate, I don't see any particular reason to think an aging population is going to result in massive disaster, absent a Children of Men scenario ('magic').
"out-of-control AI hacking our brains to our detriment,"
Feel free to advocate for privacy regulation, anytime here would be good.
"the threatened loss of many of the benefits of the division of labour via a retreat from globalisation,"
Given that the previous complaints that there were not enough employed people (or actually employed men), a re-division of labour from slightly reduced globalisation is perhaps a minor positive, at least in rich countries, or in poor countries that were not previously benefiting from globalisation. On the other hand, if one were to be merely complaining about a reduction in benefits (profit margins) from less Chinese money... too bad. For you.
"the New Cold War between China and the U.S.A."
How is this any different from the New Cold War between the US and the RF, which I hear is a thing right now? If I look up Nouriel's twitter is it going to turn that he's very concerned about Putin's prospects and he can't believe a comedian who wore a dress in a skit on a comedy show is kicking Putin's ass and that such an event heralds the fall of civilisation? (It does not herald the fall of civilisation, anymore than a woman in pants and a suit jacket heralded the fall of civilisation in the period 1890-1960.
"and global warming."
He finally found a serious problem to be concerned about! Yay! I know, maybe we could tax rich people to help fund solutions and then the problem would be reduced and then we could go back to worrying about how unstable the international financial system is.
"overreliance on an easy-money cure for “secular stagnation”"
'Secular stagnation is terrible, and we must keep it in place using any means to hand, so that Howard Schultze isn't upset that his coffee shop chain doesn't suffer the terror of unionisation. Or the terror of video games.'
"and there were no civilization-shaking, urgent problems like global warming far closer than horizon, we could be satisfied with 2%/year global-frontier technology growth. But now we do not even have that—my forecast is 1% per year. We have global warming that we have not dealt with and need to."
Generally - we can spend lots of money on government R&D and we can engage in passing some legislation and re-allocating our money toward better designed education system to educate people (as Catherine Rampbell says, correctly) to work on the R&D (read: reduce the money wasted paying ridiculous salaries to people who work in the exciting field of collegiate administration and loan servicing) and we can do it anytime we feel like it. We did it in 1916-1917 (and actually, we also did it starting in 1862), and also 1939 and 1959. No reason we can't start tomorrow.
Unfortunately, we spend all our time catering to the cranky complaints of old dudes who say that there are too many old people (and the chicks, they are apparently not hot enough), too many people playing video games and also we're not supplicating the Chinese Communist party enough.
elm
nouriel can reduce the 'excessive' population of old people by exactly one any time he feels that he might be a burden on society
Ok, here's a rough list of the "megathreats" I'd mention:
1. Climate change, meaning only the direct effect of rising temperatures on humans
2. The impact of climate change on agriculture and animal husbandry; that is, will we be able to feed ourselves
3. Rising sea levels which will ruin large areas of coastal occupation
4. The refugee crisis as people flee climate disruptions
5. Disruption of currently stable political arrangements both internally and internationally, in particular a likely move towards authoritarian regimes to seal borders with military force and to seize economic assets
6. Unequal distribution of wealth now, with consequent lessened ability to organize the economy to fight climate change and its consequences
7. The incipient authoritarian challenge today which, if successful, will both reduce the ability to find solutions to the climate problems and will be self-reinforcing as those problems worsen
8. The oppressive consequences of authoritarian governments for women and minorities
In short I view his first 8 "threats" as fairly trivial or short term, the last two as underdeveloped by failing to explore the feedbacks from both dangers that will worsen them both.
Your additions (or corrections) are exactly right but I think all three need to be detailed and expanded
Nouriel’s is a book for people who fly on airplanes, often in business class. So it is **mostly** aimed at megathreats to their portfolios, rather than to the wellbeing of the human race...
I spent a good deal of my career in large corporation land. I saw very little investment in productivity. I saw much investment in mergers and acquisitions, defense of IP, reduction of tax liability, and creation of "moats" to defend markets. Much "productivity investment" was defined as shifting production to cheaper countries which had even less capital assets per unit. Investment in research and development atrophied. Productivity investments were "too slow" to matter. "Too slow" because they would not increase executive compensation quickly enough. Perhaps this is part of the problem.
Interesting…. But why not invest in higher productivity?
1) Management runs companies not shareholders.
2) Management's tenure is closely tied to stock performance.
3) Management's compensation is closely tied to stock performance.
4) Cost reductions immediately generate cash that can be used to buyback shares (mgmt compensation metrics often do not adjust for share buybacks).
5) Investments in productivity use cash. Cash is needed for research and engineering and serious time to find real improvements. Technology investment is also risky. Tying cash up in investments also reduces ROA and ROE until productivity benefits are realized.
6) Technology may be the best investment in the long run but in the long run mgmt gets fired or retires.
My impression from sitting on internal investment committees is that mgmt prefers fast cash generation to productivity investment (technology).
l think most big firms are run by managers who came up through MBA or Sales or Marketing or Legal. I think fewer through the engineering or science verticals. But maybe firms run be engineers show more (relative) investment in productivity. Would be interesting to find out.
Thanks
" is written in Nouriel's “Dr. Doom” persona—that does sell, and sell very well:"
OH NOES! We're all going to die! Basically Nouriel is the guy who has predicted 11 of the last zero world-ending apocalypses, is he not?
"Debt spirals and crises,"
People! If all else fails, you can monetise the debt! Rich people hate it, but if the choice is between starving people and a radical change in the designated arbitrary unit of pricing, who cares? (Rich people care, that's who cares.) South America never dials in their inflation, but they do know how to monetise the debt, which is why Argentina hasn't grown like we would want, but they are also not Zimbabwe - or the Congo.
"... the ten-dollar hamburger - we may be headed for the 100-dollar hamburger, but that's merely a nuisance as long as there is plenty of hamburger to go around." (<--- I haven't got the quote exactly correct.)
a) "their amplification by our very limited societal private-sector and public-sector ability to deal smoothly with large-scale bankruptcy situations," b) "our continued failure to design a stable international financial system," c) "threatening stagflation,"
a) We have a very limited ability to deal smoothly with large-scale bankruptcy situations because the people who own the large institutions have lots of money and work hard to make sure their particular national government cannot deal with the situation if their institution goes bankrupt so that their national government will be leery of controlling/regulating the large institution and will also move heaven and earth to pay off the large institution's bad debts when it all goes wrong, preferably with a small profit for the people who control the wrecked institution. There's a simple solution for this though: telling the large institution to go fuck themselves and regulating them anyway, or liquidate ownership thoroughly when the giant institution goes toes up. The Obama administration, following in the footsteps of the Bush administration achieved a total face plant & complete clusterfuck on this score.
b) The historical record says there's never been a 'stable international financial system', merely more stable situations when the world is in a growth spurt. The 1880-1890's did not involve stable financial situations - neither did the 1920's. The closest you get is the 1950's and 1960's when taxes on rich people were very high and banking was stiffly regulated. I do not think Nouriel means super-strict regulation of banking, I think he means 'Argentina, Weimar, Zimbabwe....GOLLLLLL - {cough} CRRRRYYYYYPPPPPPTTTTOOOO'. Which doesn't accomplish anything in terms of financial stability but does drives sales to people who mine things, like gold and bitcoin.
c) I've been listening to Boomers BS'ing about the Boogieman of stagflation for ... it seems like my entire life. I have to say: a couple of rotten quarters in 1975 is not and should not be the basis of an entire economic policy. If the economy is contraction, but the previous quarters wages are still rising and/or the central bank slams on the brakes (to create the contraction to force a demand collapse to 'match supply' so economists don't have to pay an extra quarter or two for a pack of bubblegum) then that's a stagflation condition. If you remember the last quarter of 2008 and the first quarter of 2009 the economy was in severe contraction (economic contraction) and businesses started sacking people as fast as they could (rising unemployment) and they started repackaging all their products to sell a given shrunken unit (SKU #) for the same price (rising inflation, or in this case shrinkflation), which is stagflation. No one mentions that particular episode of stagflation, because they are not making serious statements when they drag the stagflation boogieman out of the closet for economic Halloween. If they making serious statements, they'd just come out and say that stagflation is an inherent transitory phenomena (DUH) of harsh contractions that are caused by negative supply shocks or negative monetary shocks.
Nouriel is just spewing the usual apocalyptic crap here.
"the increased costs of caring for an aging population,"
How much of an increased cost? 2% of GDP? I have to say it's very weird that on the right you have these old guys going on about how terrible that people (like these old guys) are aging (improved medical technology leading to longer lives is going to result in more old people - that is what you're trying to do) and how terrible it is that there are all these old people hanging around (like these old guys who are complaining). The solution always seems to be that we should inflict harsh financial pain on older people (the ones over there, not the ones complaining) rather than raise taxes on *gasp* the older dudes complaining about too many old people. After enough of this, I have begun to suspect this is an indirect way to go all Jordan Peterson and whine that there aren't enough young hot chicks around to mack on. It's either that or a way to complain that the heavy urbanisation forced by the economic policies the old guys push for have result in drastic population declines in rural areas that they old dudes do not, in fact, live in. At any rate, I don't see any particular reason to think an aging population is going to result in massive disaster, absent a Children of Men scenario ('magic').
"out-of-control AI hacking our brains to our detriment,"
Feel free to advocate for privacy regulation, anytime here would be good.
"the threatened loss of many of the benefits of the division of labour via a retreat from globalisation,"
Given that the previous complaints that there were not enough employed people (or actually employed men), a re-division of labour from slightly reduced globalisation is perhaps a minor positive, at least in rich countries, or in poor countries that were not previously benefiting from globalisation. On the other hand, if one were to be merely complaining about a reduction in benefits (profit margins) from less Chinese money... too bad. For you.
"the New Cold War between China and the U.S.A."
How is this any different from the New Cold War between the US and the RF, which I hear is a thing right now? If I look up Nouriel's twitter is it going to turn that he's very concerned about Putin's prospects and he can't believe a comedian who wore a dress in a skit on a comedy show is kicking Putin's ass and that such an event heralds the fall of civilisation? (It does not herald the fall of civilisation, anymore than a woman in pants and a suit jacket heralded the fall of civilisation in the period 1890-1960.
"and global warming."
He finally found a serious problem to be concerned about! Yay! I know, maybe we could tax rich people to help fund solutions and then the problem would be reduced and then we could go back to worrying about how unstable the international financial system is.
"overreliance on an easy-money cure for “secular stagnation”"
'Secular stagnation is terrible, and we must keep it in place using any means to hand, so that Howard Schultze isn't upset that his coffee shop chain doesn't suffer the terror of unionisation. Or the terror of video games.'
"and there were no civilization-shaking, urgent problems like global warming far closer than horizon, we could be satisfied with 2%/year global-frontier technology growth. But now we do not even have that—my forecast is 1% per year. We have global warming that we have not dealt with and need to."
Generally - we can spend lots of money on government R&D and we can engage in passing some legislation and re-allocating our money toward better designed education system to educate people (as Catherine Rampbell says, correctly) to work on the R&D (read: reduce the money wasted paying ridiculous salaries to people who work in the exciting field of collegiate administration and loan servicing) and we can do it anytime we feel like it. We did it in 1916-1917 (and actually, we also did it starting in 1862), and also 1939 and 1959. No reason we can't start tomorrow.
Unfortunately, we spend all our time catering to the cranky complaints of old dudes who say that there are too many old people (and the chicks, they are apparently not hot enough), too many people playing video games and also we're not supplicating the Chinese Communist party enough.
elm
nouriel can reduce the 'excessive' population of old people by exactly one any time he feels that he might be a burden on society
Ok, here's a rough list of the "megathreats" I'd mention:
1. Climate change, meaning only the direct effect of rising temperatures on humans
2. The impact of climate change on agriculture and animal husbandry; that is, will we be able to feed ourselves
3. Rising sea levels which will ruin large areas of coastal occupation
4. The refugee crisis as people flee climate disruptions
5. Disruption of currently stable political arrangements both internally and internationally, in particular a likely move towards authoritarian regimes to seal borders with military force and to seize economic assets
6. Unequal distribution of wealth now, with consequent lessened ability to organize the economy to fight climate change and its consequences
7. The incipient authoritarian challenge today which, if successful, will both reduce the ability to find solutions to the climate problems and will be self-reinforcing as those problems worsen
8. The oppressive consequences of authoritarian governments for women and minorities
In short I view his first 8 "threats" as fairly trivial or short term, the last two as underdeveloped by failing to explore the feedbacks from both dangers that will worsen them both.
Your additions (or corrections) are exactly right but I think all three need to be detailed and expanded
Nouriel’s is a book for people who fly on airplanes, often in business class. So it is **mostly** aimed at megathreats to their portfolios, rather than to the wellbeing of the human race...
Probably good marketing on his part.
Yes. Very good marketing!
Roubini's list is .... not the one I'd make. Feel free to be harder on it.