New Year’s first Monday assorted links

1. Is education more important for economic growth than we had thought?  Without an educated population, intangible capital could not have anything like its current role.

2. How well did China do this last year?

3. Update to the Splinter and Auten paper on income inequality.  There are other tax papers at that link too.

4. An expanded take on why everything took so long.

5. It’s now five pounds a month to subscribe to the on-line (London) Times.  I believe that price is for outside the UK only.

6. Corporate Social Responsibility can induce the employees of the company to act less morally, as a kind of offset.


It always shocks me how people consistently undervalue human capital. Maybe it is a strong bias from working in tech, but if you get a good idea backed by a good team, there is an ocean of traditional capital to make that work. Networks are always about bottlenecks, and the clear bottleneck in innovation (right now at least) is people, not cash.

What shocks me in tech is how little incentives matter and how much social bonding is the motivating factor to innovation. Most inventors assign away their rights to all their inventions on their first day of work as part of their contract. Nobelist in medicine Kary Mullins made $10k out of PCR DNA replication, which is a multi-billion dollar industry (he says he made more money as an expert witness in patent litigation). Once an executive complained to me about the difficulty in finding programming talent in Silicon Valley. When I asked why they don't simply offer more money to attract more talent, the executive said that's not how the industry works, and they were right.

Education is like invention, a social construct, and something else Econ 101 textbooks don't explain.

"Once an executive complained to me about the difficulty in finding programming talent in Silicon Valley. When I asked why they don’t simply offer more money to attract more talent, the executive said that’s not how the industry works, and they were right."

From my experience it is exactly how the industry works. Tier 1 companies (Facebook, Google) pay exceptionally well and have no problems finding talent, at all levels.

Yep, a lot of other companies are afraid (probably correctly) that they'll have to raise wages across the board, if they start paying more to bring in more talent. So, they'll deal with insufficient staffing and the issues that arise, instead of dealing with tighter margins from higher labor costs.

How much does a Tier 1 company pay for software programmers vs a Tier 2 company? I don't know since payroll data is confidential and I've only seen one or two such sheets in my M&A work. I would imagine that the difference is not that great, probably 140k USD/ yr at Google vs 120k/yr at a Tier 2 place. Legal secretaries at Tier 1 companies make about that much BTW, once again underscoring there's no money in science but that's another topic.

...very difficult to undervalue, overvalue, or understand such a vague pretentious term as "human capital"

The general term "education" ls also too vague to be of value, as it is used here

According to Shakespeare, invention is akin to imagination and innovation is akin to change, alteration. To imagine something is of course not greater than to change something, though if the thing imagined such as an electric car is more important than the thing changed such as the price of the car, than what's greater is only a parallel construction.

4. I always look at it in the opposite way: How did anything ever get invented?

#4 was a great blog post. I appreciated that Katja not only hit all of the top level reasons that people noted, but dug into each one.

Well done.

Well done but note CNTRL + F + "patent" yields no hits. So typical of these kind of posts, the elephant in the room is never mentioned. If he wanted to, the Pharaoh could have offered a patent to his minions to invent, and they would have. I personally think the apocryphal story of the Chinese prisoner who invented a heavier than air flying machine, perhaps a glider, which amused the Chinese emperor, but alarmed him, and the prisoner was then put to death, may have a basis in fact. Who knows where we'd be now if we had a patent system that rewarded real innovation (not design innovations, though they have their place, but curiously the fashion industry rarely uses them, pace Nike; not trolls)?

Ray, I'm with you that patents were required for the modern world to be created. The raw number of inventions that are required for the modern world is staggering and without proper incentives it wouldn't have happened.

However, I think that Katja was talking more about pre-modern times.

@Al - thanks, I'm with you. Pre-modern times is defined as typically before writing, so maybe so, but some of the comments dealt with modern times, hence my comment.

The most important patent for cell phone service was granted to Hedy Lamarr (and composer George Antheil) circa 1940 and kept secret by the war department as a munitions, but even two decades after it had expired, there was no innovation based on spread spectrum frequency hoping. Only the military could afford the cost of hardware for the earliest implementations in the 60s.

By the 70s the ideas was known, but too costly for a single company to "innovate" and computer, chip, network companies worked on standards under IEEE 802.11 to create the early WiFi innovation.

All the ideas existed in 1940, but not the VLSI chip. Thus no innovation.

Likewise, Tesla invented everything needed for Tesla Ludicrous Mode, but without igbt semiconductors he could never come close to building a vehicle like a Tesla that ran on rails with high voltage fed by a third rail. Diesel electric locomotives only got to that kind of innovation in the 90s when GE "innovated" the igbt at 200 amps.

Elon Musk considers inventions as worthless for innovation, and often hindrances.

@Mulp - I saw a declassified patent wrapper on spread-spectrum. The inventor who perfected SS in modern times (1960s), an Italian surnamed person with Bell labs, had his invention confiscated and classified on military grounds (his widow sued, it was in the file wrapper), and the inventor got shafted. You're right in a way: since NONE of these inventors got compensated for their groundbreaking work via patents, as it was just part of their routine job to invent, you could argue that NO patents are needed (since the inventors did not care about patents, though arguably their employers did), and the inventions would have spread faster without patents and without military interference (via classification or funding). But you cannot argue that society is better off without patents (and the inventors employers might agree) since that's not been tried. Neither tried in the way I imagine (with Ray's Improved Patent System- TM pending) nor tried in the way you imagine (no patents) unless you include the 'trade secret' heavy middle ages--and you see what that got us, not that far.

Bonus trivia: Elon Musk is a salesman, not a tech guy. No surprise he's anti-patent. And his company does not really do anything on the cutting edge, IMO. Dell computers was similar, as was Google until they got religion and bought Motorola's patent portfolio (paying a premium) and then started doing real tech like autonomous cars (which IMO they are doing for publicity, not profits, but that's an aside).

#5 It is probably still more than Bob Cratchit earns in a fortnight. How much is it in tuppences?

4. I was one of those who thought "Having concepts in general is a big deal."

I think "the entire mental landscapes of early people was very different" is probably also underrated. People close to nature tend to have a very tight cyclical view of time (with the season) and would not have thought of "progress" until it was rapid enough to be noticed.

Part of that tight cyclical view had to do with resources; if you are on the edge of survival, experimentation means someone dies. That being said I think people were innovating within their possibilities, but their ideas died with them.

Right. Rope might have been invented and died a lot of time before it went into the archaeological record. Whereas today cold fusion only has to be invented once (for real).

IIRC, someone else mentioned that agriculture was invented many times but didn't catch on until the climate stabilized enough to be able to plant the same crop reliably every year. It could be that lots of inventions were constantly being invented by didn't really catch on until all the right prerequisites were met to make them really useful to large numbers of people.

then explain why fat bikes or roller bags too so long to be "invented"/commercialized, despite billions of folk with relevant interests, decades to work on the problem, significant commercial incentives to solve it, etc. underinvention obviously is still a problem.

I answered the ones about roller bags in the comments on the original post - the ADA. Before airports had ramps everywhere to get around, you would have to lug luggage up stairs. So people would check their bags. So if you just check you bags at the check-in, who needs wheels? It was the installation of ramps everywhere so you could make it all the way to the gate entirely on wheels that made the now-ubiquitous wheeled carry-on with the pull out handle convenient.

That may be part of it, but I think it was low ticket prices that made it practical to take lots of short business trips. When you have a meeting as soon as you land, or first thing the next morning, checking your suit in a bag that may or may not appear on the baggage carousel is a risky strategy. You just carry it on. Heavy carry-ons that need to be ported a long distance tend to sprout wheels.

Fat bikes aren't an invention, they are a fashion.

6. Are not these emanations an after the fact PR exercise? A company has methods and practices that annoy either their clientele or investors, so they put lipstick on the pig. Uriah Heep comes to mind.

1. Will an industry (in this case education) overestimate the importance of said industry? Feel free to replace education with banking, government, medicine, technology, etc.

#2 not really sure from the article what is Bruno Maçães core complaint. Is he simply complaining that China, which is slowly becoming dominant on the world stage, used a little of that muscle to move forward a dispute that has not progressed in over 20 years? Really?

China is quite wealthy and powerful. They have the largest economy in the world by PPP and they will likely have the largest nominal GDP in less than a decade. Did Bruno really think that China wouldn’t use that wealth/power to gain some small advantages?

So there is nothing left but surrender?

You can try to agitate for war if you wish.

China has a large, smart, population. Once they threw off the yoke of a terrible ideology (created in the west) it became almost a mathematical certainty that they would be the leader of the world for most of the 21st century.

So the West invented Mao's communes? Who would have imagined? The things one learns these days.
"You can try to agitate for war if you wish."
Appeasement has such a wonderful track record, right?

The ignorance these day. The Yale Group plucked Mao from nowhere to be the editor of the Yale Journal in China, leased three rooms in their premise for Mao to establish a book shop and a forum for meetings. The profit from the bookshop funded Mao's undertaking. """Without Yale's support Mao Tse Tung may never risen from obscurity to command China."""

Directly from the Yale library,

But Yale did not invent his ideology. And he was probably a better bookstore owner than dictator, which proves Yale has more sense than the Chinese.

"You can try to agitate for war if you wish."

That seems to be a false dichotomy. There are options short of war for preventing the Chinese from Imperialisticly seizing territory (South China Sea, disputed border regions, etc) .

" Once they threw off the yoke of a terrible ideology (created in the west) i"

This is a ridiculous statement. First, it doesn't matter who created the idea, it matters who foolishly adopted it. Secondly, China hasn't thrown off Communism as much as it has morphed it into an authoritarian, one party, nationalistic police state. A one party police state might be preferable to a dictatorship, but it's a far cry from a politically pluralistic Republic.

" it became almost a mathematical certainty that they would be the leader of the world for most of the 21st century."

China might well become the country with the highest GDP in the world, but that's not synomous with being the leader of the world.

3. They point out that tax changes in 1980 and especially 1986 not only exaggerated the calculated growth of income inequality but also removed incentives for businesses to retain and invest earning. This overwhelmed the incentives provided by the tax cut to increased personal saving so net effect was to increase consumption from 60 to 68 percent of GDP and reduce investment share. It looks like the new tax law not only did not fix the problem but made it worse with the special tax limit for pass through income.

It feels like we lost lots of muscular social tissue to the fight against late 1970s inflation. It seems like económic thought is cool for thinking about production and trade, but may not be the proper basis for it. Big industrial firms seem to b the best schools and labs and philosopher's stones for workers and consumers, so the chop shop deaglommeration and disinvestment of the last few decades feel like lousy mistakes

it'd, scare you, if you knew my name
mood alterating drugs, for the particular moment,
~amongst very nicely shaped, happy, gals

Any theory about innovation must explain why some inventions spread far and wide in prehistoric times, such as the Clovis point. The materials are simple, but the fabrication technique requires considerable skill. So how did it suddenly spread across North America? Were there schools teaching Clovis point-making? Travelling teachers?

How sudden was it?

I was under the impression that the clovis point basically spread with the clovis people - basically the last wave of human migration from Asia. They basically wiped out the smaller populations of humans that had come over earlier - possibly because of their superior spears.

Yes, I should use the word basically less often. (Any other complaints?)

music, not, maybe

i play a song once in awhile. everybody else can go f u

#5: I've been taught a way around it but I'm not at liberty to describe it. But apart from the wine writer on Saturdays there's little in it worth reading.

Corporate “social responsibility“ that is anything other than demonstrable profit maximization needs to be outlawed. Indeed, current fiduciary duty laws probably make it illegal already

It is executives using their shareholders’ money in order to enhance their own prestige and further their non business preferences. It is very little different than theft.

As opposed to paying themselves huge ammounts of money and getting rewards for failure.

You clearly don't understand what CEOs are paid for or how.

Shareholders pay CEOs for the added value they bring which is enormous. CEOs lead during both good times and bad, and their JOB is to cut employment and expenses during lean times. That's not "failure."

CEO pay is often mostly stock options, so they suffer with the ill fortunes of the company. And if there is a bad employment contract with a CEO, that is the shareholder's concern, not yours.

Your fixation with CEO pay is just part of the politics of redistribution, envy, and hate.

Like the contraception mandate?
I mean, if your going to outlaw corporations having values, let's make it non-denominational.

Note: I'm against the mandate, I'm arguing that private entities should be free to do what they wish, if the shareholders disagree, they are free to vote differently.

"Corporate “social responsibility“ that is anything other than demonstrable profit maximization needs to be outlawed. "

It may be a waste of money, but trying to outlaw it is a just a further waste of time and money. Personally, I try to invest in companies that have high returns. The market will correct for any company that spends money too frivolously.

5. "We may screen your name and address against credit reference and fraud prevention databases when we decide whether or not to accept your application for subscription. By providing us with your details, you confirm that we may carry out these checks. If we do not accept your application for subscription, we will terminate your subscription."

How does this help ? Wouldn't it be simpler to charge first month in advance, and future months in arrears , rather than expending time , effort and money with these checks ?

#4. The idea that people in the past just weren't that intelligent and we had a sudden jump in intelligence 5K years ago strikes me as a terrible failure of the imagination. We have the advantage of living in a society where we are physically surrounded from birth with the technological artifacts of thousands of years of gradual development. You have to conceptualize what it would be like to live in a society with none of that, not even agriculture. Things that seem obvious today just aren't that obvious without thousands of other technologies preceding them.

You make a plausible point. We stand on the shoulders of giants, and technological advancement increased at an increasing rate for the past few thousand years. Whether growth in technology will remain in an exponential climb remains to be seen.

I'm worried that technology has advanced beyond the ability of most people to comprehend. We have become users instead of makers. This is ridiculed in Idiocracy but it's more and more true as time progresses. Are we doomed to become slaves to the 1% of technology producers?

"Are we doomed to become slaves to the 1% of technology producers?"

Since when have the technology producers ever been in charge. They are too busy producing to spend the time on politics.

"2. How well did China do this last year?"

That's a good question, and its answer depends largely on which facts you choose to cherry pick. Most good journalists simply ignore the inconvenient facts that don't fit their preconceived notions - and include only the ones that do. The author of the above article however, is only half good. He did ignore the inconvenient facts, but forgot the second part: including facts that actually fit his narrative.

The analysis is of such a low quality that I'm surprised Tyler linked to it (perhaps because it fits his preconceived notion as well?).

For example, this entire diatribe is purple prose:

"By the end of the year, China had also managed to alienate the strong support it has traditionally benefited from within the American foreign policy establishment. In this case, it all came down to badly rehearsed tactics. When Trump entered the White House, he was the most hawkish American president on China since Nixon, but he was also a universally reviled figure among the establishment.
Again, China could have played a long game. Instead, it preferred to enjoy some early media victories, creating an environment where everyone is calling for a response from Trump. We should see it soon in the form of new trade restrictions on Chinese exports."

What China actually did (or didn't do) is never mentioned. In this case however, the evidence is exactly the opposite of what the author portrays. e.g. it granted 3 of Ivanka Trump's patents after sitting on them for years (on the same day as Xi's Florida visit, it hosted him in the Forbidden City in Beijing, something which China has done to no other leader), and so on. "Badly rehearsed" indeed.

Such cases often remind me of Hitchen's razor: What can be asserted without evidence can be dismissed without evidence.Of course, there is one area where Hitchen's razor does not apply: China. Any claim may be made in the western mainstream about China, and it will be readily believed as long as China is being portrayed negatively.

Apparently, "the world reconciled in horror" when it saw Chinese diplomacy. Here is a glimpse of some other facts about Chinese foreign policy and diplomacy in 2017:

1. In May 2017, it hosted the Belt and Road Forum which hosted 29 heads of state/government, with 130 countries and 29 international organizations participating. India trumpeted its baa lambs' self-esteem and did not participate because one project runs through a Pakistan-controlled region that India claims as its own (to which China replied it does not object to India's trade and investment in Taiwan, which promptly shut India up).

"China could have played its Indian card much better. But now it may be too late: Delhi has decided that the Belt and Road — Xi’s pet geopolitical project — should be actively opposed, and Indian concerns helped push the United States into an equally confrontational approach. The two countries are now actively coordinating on tactics and strategy to block Chinese moves across the whole Eurasian chessboard."

It is amusing that the author thinks that India somehow influenced American foreign policy. Apparently, all those 130 participating countries are damn fools to join OBOR. That America also sent its delegation to attend the Belt and Road Forum is not worth mentioning, since it contradicts the author's narrative and is an exception to Hitchen's razor.

2. China secured a 99-year lease of a major Australian port. All the recent hype of China "influencing" Australia's politicians, China-Australia relations are on a sound footing. The media hype will go away, but the port will remain Chinese for 99 years.

3. The famous speech by Xi Jinping at the World Economic Forum, in favor of openness and globalization. And before you say that China is being hypocritical, it might be worth your while to note that according to the WTO, US is more protectionist than China. Of course, that the US also did much of the same things when it was a manufacturing powerhouse is ignored, since this fact ignores the standard journalists' narrative.

4. US withdrawal from the TPP, which is a victory China achieved without really doing anything.

5. Same goes for the US withdrawal from the Paris Climate Change accord.

6. While the western journalists report with glee about China's lack of success stories in exporting high-speed railway technology, this is mostly uncharted territory. No nation has been really successful (except, ironically, while selling to China) in exporting high speed railway, the biggest failure being the earliest entrant in the race: The Japanese Shinkansen (which never receives such negative press when it encounters delays abroad (e.g. Thailand)). Shinkansen was first sold to Taiwan, where it failed, and now to India, where it is going to.

And remember, Japan has been doing this for over 40 years! But when China, with a mere decade of experience achieves such success ( Turkey), it still becomes the subject of ridicule.

7. If Hungary, Greece and other European nations are defending China, surely it is a victory for Chinese diplomacy? Due to Chinese diplomatic efforts and helpful investments, Greece successfully blocked the EU's efforts to release hypocritical statements condemning China's human rights records and activities South China sea.

8. China signed an FDA with Maldives. Right under India's nose. Maldives also leased a port to China and awarded many infrastructure projects to Chinese companies. China already has an FTA with Pakistan.

9. A China-friendly government (formed by a coalition of two left parties) came into power in Nepal.

10. Sri Lanka leased the Hambantota port to China for 99 years.

11. China and Russia recently upgraded their relationship to a “special relationship” and Russian officials called the friendly relations “unprecedented”.

Recoiling in horror indeed.

"6. Corporate Social Responsibility can induce the employees of the company to act less morally, as a kind of offset."

About 5 years ago, I was working for a larger customer. After a project was over, they removed the gravel & trailers from the construction area an replanted it with turf and trees. I asked someone why they were doing this, since the same area had been used repeatedly for various projects every couple of years going back a decade. My assumption was that the construction area was being moved to the other side of the plant.

Instead, the response was that the corporation had an 'environmental' commitment to return a certain amount of land each year to a 'natural' state. I then asked about the next time we needed space. The person involved said, well then it will be re-graveled for that project. And then afterward would be re-turfed. So, that the same plot of ground could again be returned to a 'natural' state. I suspect that it will never be reported that it's the same acreage being restored repeatedly.

The site I currently travel to is ripping up half their parking to add to an already decent amount of landscaped property. To offset the parking loss they are building a big parking garage, whose carbon footprint will dwarf any advantage the reclaimed land will provide. They do this for a LEED tax credit. I can't image how much money they will spend to make the site environmentally worse.

"Why everything took so long" ?

Might be because it's always been far easier to get rich and famous by copying or otherwise exploiting someone else's invention than by being the inventor?

Yes, there are counter-examples: Bell's telephone, Morse's telegraph, for example. But overall inventors seldom profit much from their inventions, even when these inventions prove to be very useful indeed.

Throughout most history, there has been no legal protection for inventions. Thus if you were a Roman citizen in the time of the Caesars and you invented a better wheel bearing or animal harness, many might copy your invention but it's unlikely it would do much for you.

And that remained true even after the industrial revolution. A few (e.g., James Watt) did well from inventing, but mostly those who profited from inventions were those who successfully exploited one or more inventions made by others. Or who simply copied (and perhaps improved, or at least promoted) what someone else had invented. Or who (like King Gillette) came up with a clever idea and then paid others to figure out how to implement it.

As for today, for every Larry Page or Sergey Brin there are countless innovators who brought the internet into being, and who derived neither riches nor fame from doing so. Rewards mostly went not to those who made the foundational inventions but to those who figured out how to exploit these.

And so it goes: if copying or exploiting the inventions of others has always been a better personal strategy than inventing, why should anyone be surprised that "everything took so long"?

Inventing can help your tribe survive in a hard climate and/or win over other tribes. Not dying is maybe even a stronger incentive than fame and fortune.

Education is more important but that shouldn't be confused with schooling.

#4. Let’s give our hunter gatherers forebears some credit. They invented language and trade , probably the two most significant inventions of humanity.

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