Thursday, May 01, 2008

Cognitive Economic Development

Bill Clinton’s Labor Secretary Robert Reich coined the term "symbolic analyst" back in the 90s when he published The Work of Nations. By the term he refers to specialized and highly educated individuals that can process abstract information and solve problems / add value in the world of ideas. In terms of economics and economic development, traditional entities like nations and corporations are fragmenting into smaller economic units whose prosperity depends not on location or nationality but on the ability to provide value in the information age. Think Google. What kind of people does Google hire?

A decade later Thomas Friedman published best seller The World is Flat which presents a bold and confronting view that provoked some controversy, in particular from his lack of sympathy about outsourcing jobs and objections that his view exaggerated the speed of the development. The reader can learn about his "ten flatteners" and the "triple convergence." For our purposes here, I want to underscore his emphasizing, like Reich, the importance of a well educated workforce in creating high paying jobs.

David Brooks has a short New York op ed piece, The Cognitive Age noting that worldwide communication can now send information anywhere in seconds. He claims we have moved beyond the globalization paradigm and have entered a Cognitive Age. High paying jobs and economic development follow cognitive skills. He writes, We’re moving into a more demanding cognitive age. In order to thrive, people are compelled to become better at absorbing, processing and combining information. This is happening in localized and globalized sectors, and it would be happening even if you tore up every free trade deal ever inked.

Brooks is making a an important point. The globalization paradigm emphasizes the fact that information can now travel 15,000 miles in an instant. But the most important part of information’s journey is the last few inches - the space between a person’s eyes or ears and the various regions of the brain. Does the individual have the capacity to understand the information?

What is most sorely needed? Not only education and training, but education and training with updated consideration of the distinctions of psychology, culture, and pedagogy, the processes that produce learning.

Google, Microsoft, Facebook, eHarmony, Amazon, eBay, Cisco, Apple, hires what kind of employee? The jobs chase the skills and the skills chase the jobs. To those inside the box, it looks like the chicken and the egg. What if you develop the workers already working? Improve a local company’s productivity? They run a little smarter, succeed a little better. They need to hire more people. No chicken. No egg. Not a huge scale, just 10,000 or so a year in customized venues using the specific components the tailored training requires for their context, distilled employee development straight into the existing economy.

While it does not happen overnight, communities with the capability of providing cost effective, high end, customized training services for local employers have a distinct advantage over those that do not.


Blogger Policon said...

x4mr- Your post is most troubling in light of your "something else" experience. What would it take to re-establish your company as a private operation? A half million dollars of FF&E and the same amount in working capital? Are the economics such that it can only run with funding from government? Why is that? Are there equivallent companies in metro-Phoenix that operate privately?

Your mention of Robert Reich caused me to finally look over his blog. I found the post below (it's late, but I promise next time I'll try out the link instructions you provided a few weeks back), which ranks as one of the scariest yet. We may be in a deep, deep economic mess that we're all still denying. I had always believed Peter Drucker's contention that compounding productivity gains would allow us to provide all the goods and services society needs with only 50 percent employment by 2020. Seems a little like the fact that the world produces more than adequate amounts of food to feed the whole population, yet 30 percent are starving or underfed. It's that damned distribution problem (think Mexico). If training is the answer, why don't the business opportunities of that result in lots of training startups? Is it because, like you described in s.e., so many of the people who need it most are so immature that they are presently untrainable and unemployable? Maybe that will change rapidly if we fall into a deep recession (still can't bear to say the d word).

Howard Bloom's Lucifer Principle talks about how society's in failing superpowers (think England mid to late 1800's) cast about blaming all their troubles on domestic scapegoats rather than facing the true causes. Life is tough when you're tumbling down the pecking order and make no effort to fix it.

From Robert Reich's Blog
Sunday, April 13, 2008
Obama, Bitterness, Meet the Press, and the Old Politics

I was born in Scranton, Pennsylvania, 61 years ago. My father sold $1.98 cotton blouses to blue-collar women and women whose husbands worked in factories. Years later, I was secretary of labor of the United States, and I tried the best I could – which wasn’t nearly good enough – to help reverse one of the most troublesome trends America has faced: The stagnation of middle-class wages and the expansion of povety. Male hourly wages began to drop in the early 1970s, adjusted for inflation. The average man in his 30s is earning less than his father did thirty years ago. Yet America is far richer. Where did the money go? To the top.

Are Americans who have been left behind frustrated? Of course. And their frustrations, their anger and, yes, sometimes their bitterness, have been used since then -- by demagogues, by nationalists and xenophobes, by radical conservatives, by political nuts and fanatical fruitcakes – to blame immigrants and foreign traders, to blame blacks and the poor, to blame "liberal elites," to blame anyone and anything.

Rather than counter all this, the American media have wallowed in it. Some, like Fox News and talk radio, have given the haters and blamers their very own megaphones. The rest have merely "reported on" it. Instead of focusing on how to get Americans good jobs again; instead of admitting too many of our schools are failing and our kids are falling behind their contemporaries in Europe, Japan, and even China; instead of showing why we need a more progressive tax system to finance better schools and access to health care, and green technologies that might create new manufacturing jobs, our national discussion has been mired in the old politics.

Listen to this morning’s “Meet the Press” if you want an example. Tim Russert, one of the smartest guys on television, interviewed four political consultants – Carville and Matalin, Bob Schrum, and Michael Murphy. Political consultants are paid huge sums to help politicians spin words and avoid real talk. They’re part of the problem. And what do Russert and these four consultants talk about? The potential damage to Barack Obama from saying that lots of people in Pennsylvania are bitter that the economy has left them behind; about HRC’s spin on Obama’s words (he’s an “elitist,” she said); and John McCain’s similarly puerile attack.

Does Russert really believe he’s doing the nation a service for this parade of spin doctors talking about potential spins and the spin-offs from the words Obama used to state what everyone knows is true? Or is Russert merely in the business of selling TV airtime for a network that doesn’t give a hoot about its supposed commitment to the public interest but wants to up its ratings by pandering to the nation’s ongoing desire for gladiator entertainment instead of real talk about real problems.

We’re heading into the worst economic crisis in a half century or more. Many of the Americans who have been getting nowhere for decades are in even deeper trouble. Large numbers of people in Pennsylvania and across the nation are losing their homes and losing their jobs, and the situation is likely to grow worse. Consumers are at the end of their ropes, fuel and food costs are skyrocketing, they can’t go deeper into debt, they can’t pay their bills. They aren’t buying, which means every business from the auto industry to housing to even giant GE is hurting. Which means they’ll begin laying off more people, and as they do, we will experience an even more dangerous downward spiral.

Bitter? You ain’t seen nothing yet. And as much as people like Russert, Carville, Matalin, Schrum, and Murphy want to divert our attention from what’s really happening; as much as HRC and McCain seek to make political hay out of choices of words that can be spun cynically by the mindless spinners of the old politics; as much as demagogues on the right and left continue to try to channel the cumulative frustrations of Americans into a politics of resentment – all these attempts will, I hope, prove futile. Eighty percent of Americans know the nation is on the wrong track. The old politics, and the old media that feeds it, are irrelevant now.

5/02/2008 2:19 AM  
Anonymous Mariana said...

"Eighty percent of Americans know the nation is on the wrong track"...I am very tempted to say 'too bad' but I am not so mean and I do care.
I remember reading "Future Shock" in the early 70's (three times!) It was a shock. Twenty years later I faced reality: the american society is not visionary but REACTIVE. The BandAid land. This is -in my humble opinion- the major problem. We should have known that math teaches critical thinking, problem solving skills, understanding information; we should have known from history that understanding other cultures win or prevent wars; we should have known that cars polute the air webreath (climate change or not) and the list goes on, and on, and on.

5/02/2008 9:01 AM  
Blogger Policon said...

Mariana- You're right. We've fallen into a bad syndrome of weak leadership, polarized politics, and a media hellbent on using negative reporting to push political agendas with misinformation.

The message below from Tom Patterson at the The Goldwater Institute makes the point that education is the root of the problem, not inequitable tax rates. If fifty percent of Americans pay no federal income taxes at all, how injust can the system actually be?

April 29, 2008

'Tax Cuts for the Rich' Dangerous Rhetoric

by Tom Patterson,

The presidential candidates are promising some pretty pricey stuff. But you and I aren't going to have to pay for it. No, the free health care, free college, subsidized mortgages, and other goodies can be paid for by repealing President Bush's "tax cuts for the rich."

But here's the problem. There were no Bush tax cuts for the rich. The rates were cut, but the rich pay more taxes than ever. The top 1 percent of earners now pay 36.9 percent of all income taxes (up from 25.8 percent in 1986), while the bottom 50 percent pay 3.3 percent of the taxes and almost half pay nothing at all.

But it's true the rich are getting richer. The poor have become richer, too, over the past 30 years, but not at the same rate. So there is a growing income gap. Changes in the tax code can't possibly explain the disparity. In fact, changes in taxation have mitigated the growing gap in wealth.

The problem isn't taxes, but education. Some areas have high school dropout rates up to 50 percent. Throw in high numbers of under-educated immigrants, and an income gap is all but assured.

The candidates may think they get a lot of political mileage by bashing Bush and his wealthy friends. But "hope" and "change" based on economic myths and promises that can't be paid for don't cut it. Eventually, reality intrudes.

Tom Patterson is chairman of the Goldwater Institute, a former state legislator and emergency room physician. A longer version of this article originally appeared in the East Valley Tribune.

Learn More

Goldwater Institute: Does Arizona Need More Tax Cuts?

East Valley Tribune: 'Tax cuts for wealthy' screed doesn't hold water

Cato Institute: Hurting the Rich Important to Obama

5/02/2008 9:30 AM  
Blogger x4mr said...

Without getting into a really long post, our thinking is obsolete. Not everyone requires a 4-year degree, but our system marginalizes those without one. We struggle with shortages of an entire class of important workers, technicians, because we don't value or pay them.

Labor market theory suggests compensation rises to rational, competitive rates. That's not what happens. Employers leave positions unfilled rather than pay above a perceived guideline of limited rational basis and molasses response to changing conditions.

Know what an echo-cardiogram technician gets paid? Try to hire one. I know one with four job offers, all within a grand. Not one clinic has the freedom to pull him away with a bid outside the approved scale.

We have dramatic teacher shortages. Can we raise salaries? The market says we would.

I am slightly off topic, which is that new wealth and high wages will increasingly flow to the cognitively productive, a bad sign for the United States which is valuing education less and less.

Reich said that fully 4/5 of the US is falling behind the 1/5, and there is virtually no leadership on the issue.

Finally, I had a SAIAT model that totally worked if provided physical infrastructure, and only for awhile. I was poised to use the $200K we had to invest in an IT infrastructure (SAIAT was right on the backbone) that could have served clients in a way leading to full self-sufficiency.

Joe Snell slashed funding 55%, making the IT investment impossible, and he contracted with board members behind my back. When they tried boot me out and take my place, I knew it was over. He took money from Goodwill, MAC, SAIAT, and perhaps others (Augie ?)

If you actually knew what was destroyed so Snell could tuck money away in TREO's account, your blood would boil.

5/02/2008 11:32 AM  
Blogger Cigar Man said...

My blood did boil, because I saw what x4mr was doing. It is easy to get theoretical about "cognitive skills" and what that means. How do you translate our educational issues to solutions in real classrooms?

X4mr has said that others will have to address K-12. I also deal with training adults.

What x4mr did with SAIAT was a practical street smart way to provide training in "pieces" that could be arranged in a unique way for each employer need. All of the workers, bit by bit, raise their skill levels. That's how it works. When you reach a certain point, the worker pool supports better companies coming in.

If you read "Something Else" you see how he created multiple revenue streams, and he was in a position to purchase equipment on a raised floor (already there) with almost infinite power and internet speed, perfect for a server farm. The optical fiber was right there, hanging from the ceiling! With a little more time, it would have been up and running, raising the skills of the workers in Tucson who have jobs, which is the hardest population to reach.

The community spent millions and millions during the early years under an idiot. X4mr finally got it running in Fall 06, and TREO's Snell said, "If I can't have it, no one can."

PCC always claims that it can do anything, giving Snell the justification to shut SAIAT down. When asked about it, all of "the cloth" just lie.

5/02/2008 2:37 PM  
Anonymous Anonymous said...

believer said: If the benefits to the client companies, the trained employees, and our community are so profound, why can't SAIAT be restarted as a for-profit venture? If the numbers just don't work as a pure for-profit, why can't we at least go round up a grant or soft loan from a local charitable trust like the one left by Tom Brown (Burr Brown)?

How many of us would volunteer to raise resources for this cause?

5/02/2008 3:25 PM  
Blogger x4mr said...

Most appropriate questions. Consider reading Chapter 15 of Something Else.

Trying to stay brief, true "for-profits" only address demand that consolidates into lucrative programs, like UofP offering MBA's or New Horizons offering computer courses.

For almost all education, the following equation holds:

Educational costs = price + subsidy

In K-12 public schools, it is 100% subsidy. In public and private non-profit, it is a blend. Publics use state appropriations for the subsidy. Privates (Harvard) use donations and endowment income.

Even then, vast majority of students require additional federal aid (loans, etc.)

At SAIAT, I created a hybrid model that generated revenue approximately as:

1. Public funds (30%)
2. Testing Revenue (certification services) (10%)
3. Training Center Services (including catering) (35%)
4. Tuition and Fees (25%)

to cover expenses of:

1. Facility
2. Staff
3. Instructors
4. Other instructional costs

Here is the key distinction. As a non-profit, SAIAT used profitable activities (the center, catering..) to subsidize customized training NO ONE ELSE WOULD DO.

Public universities do exactly the same thing on a much larger scale, making money with their business schools, computer science dept. parking fees and cafeterias, etc., to help subsidize psychology, philosophy, the library, etc.. Also, undergraduate (in general) subsidizes graduate education.

From a huge Raytheon project, we built up cash reserves exceeding $200K with the intent to build up the a server farm (on the backbone) which projections showed we could quickly use to generate revenue putting us close to self-sufficiency.

TREO took all of that money by slashing $132.5K from our support, causing immediate $10K/mo. losses blamed on me by two SAIAT board members who had contracted with TREO without SAIAT's knowledge. A month the contract was signed, the two board members tried to have me fired.

Board member RR and I saw that we only needed 1-2 more years, but the 55% slash torpedoed all possibility. The lying sack of shit that he is, Snell wrote county administrator Huckelberry insisting SAIAT approved the funding cut, and even had the gall to say our performance would "improve."

Bleeding to death is improved performance. Think about that.

What did TREO do with the money it withheld? Put it in their bank.

It is all in Something Else chapters 10-14.

5/02/2008 6:00 PM  

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