Reflections on “Sonic Boom” by Greg Easterbrook

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Commentary on Sonic Boom by Gregg Easterbrook

His reasons for believing that an explosion in globalization is coming:

  1. ease of communication
  2. freedom of speech and democracy
  3. markets tend to consumer demand
  4. rising education levels
  5. chip-based electronics
  6. equality of women
  7. reduced military spending and interlinked nations

My concerns after reading his introduction:  will he be addressing these global issues (in retrospect he gets to about half of them on the economic and complexity front, but not on the security and terrorism issues):

  1. tightly coupled economies exaggerate economic turbulence
  2. religious fundamentalism and terrorism
  3. weapons of mass destruction
  4. pandemics
  5. overpopulation and concentration along fault lines
  6. Agro terrorism
  7. economic rationalization: if prices converge at some point it’s no longer economic to ship goods made on one continent to another comment.
  8. Extending trendlines infinitely is a recipe for disaster in forecasting

Chapter 1 notes: Shen Zen

  1. ports as a measure of economic activity
  2. he sees the rise of the global middle class while I see the consolidation of capital into fewer and fewer hands at the top level. It’s clear that rising living standards is a good news story, but this makes the plight of the poor even more troublesome
  3. treats Arab nations as a governmental issue in not a religious or cultural issue
  4. ironically China is moving more towards free markets in the US away from free markets
  5. economic efficiency tromping cultural differences
  6. social progress intolerance increasing
  7. inflation held in check: this is open to some dispute as developed nations continue to print more money to print themselves out of excessive debt
  8. rise of the entrepreneurial class that a reliance on innovation to stay ahead of population dynamics
  9. the rise of urbanization as a way to more efficiently manage populations and distributes the benefits of growth: cities as accelerators of progress
  10. smaller families improve education and freedom; contrast this with the ideas that demographics are destiny that the rise of Third World religious-based populations threatening to overwhelm syrup population growth advanced countries
  11. the effect of network communications on freedom of information: this is a good insight when compared with the effect of samizdat in Eastern Europe in the 50s and 60s. The Hungarian and Czechoslovakian uprisings were crushed because of a lack of the ability to coordinate information among dissidents in real time.
  12. Declining industrial employment is inevitable in his you because of the improvements and efficiencies in robotics and automation
  13. cooperative superpowers: China and the US: this view acknowledges the economic interdependence of two superpowers, something that was not the case between the USSR and the US

Chapter 2 Notes: Waltham

  1. represents new generation of emerging global services businesses that are closely connected to educational centers for R&D
  2. holding a higher place on the growth ladder exposes you to more job insecurity as you are more exposed to the whims of change. Easterbrook calls this “churn”
  3. basic vulnerability of professional and business services: at the mercy of the actual manufacturers who can achieve a point where it’s easier to do that in house then pay for offshore support. Knowledge-based job security is vulnerable to the quality of your educational system and the quality of your network outreach
  4. job insecurity jeopardizes the social contract that once you’re in the middle class you stay there, that you can only go up
  5. job insecurity is combined with the two-way fluidity of socioeconomic class.
  6. Easterbrook finds fault with corporate boards and CEOs, which I agree with and have written about in another post.
  7. The irony is that Easterbrook sees growing inequality inside the American socioeconomic culture driven by the same economic forces that he sees driving people towards convergence globally. Which way is it?
  8. What Easterbrook describes as housing stress I see simply as economic rationalization as the distortions of the bubble years are gradually worked off. I believe he correctly identifies governmental intervention is a problem with Freddie Mac and Fannie Mae. He stopped short of describing the moral hazard of underwriting poor investment banker behavior which does nothing to fix the problems and which will almost guarantee a repeat of bubble mentality in the future.

Chapter 3 notes Yahkutsk

  1. effective climate change on economic growth is highlighted in this chapter
  2. identifies the problem of not in my backyard (NIMBY) behavior by environmentalists who are preventing the deployment of high-tech energy collectors in their backyards
  3. places a lot of faith in conservation which is hard to reconcile with the population explosion that is supported by a raising of quality of life standards
  4. observes that the world can no longer be understood because of the explosion of instant communication, freedom of expression and economic well-being that supports discretionary development
  5. observes that the world is becoming increasingly statistics driven: it must be in order to get your mind around rapid changes in large demographics. The book Supercrunchers is an excellent treatment of this phenomenon.  http://www.amazon.com/Super-Crunchers-Thinking—Numbers-Smart/dp/0553384732/ref=sr_1_1?ie=UTF8&qid=1295286476&sr=8-1
  6. a nice introductory discussion of the difference between data, information, knowledge and wisdom, or what David Chang calls data smog “. My sense is that it takes education to be able to understand the world statistically and to know the limits of the statistical inference. Taleb describes this quite effectively in his discussion of fourth quadrant problems. In my business as a financial advisor I find that an understanding of statistical insights is probably the best predictor of success in the financial markets, more than any other.
  7. The abundance of information sources and different points of view serves to highlight cognitive biases more than ever, particularly the confirmation bias in which it becomes easier to find pseudo-evidence that supports your preconceived notions. The strata polarizing public opinion insulated by half-truths and pseudo-facts.

Chapter 4 notes: Erie

  1. illustrates the downside of resisting the globalization move. An unwillingness to adopt open standards and global methods reduces you more and more to a backwater
  2. Erie shows the unusual blend between traditional perspectives and the constant reinvention of itself by General Electric. A curious combination of constant reinvention and respect for tradition.
  3. In Melton Comstock believed in the need to swing for the fences: it’s a success story because it worked but it’s dangerous to think that that’s the only way it can be done.
  4. This chapter supports a belief in basic R&D, some research out of Australia that I posted last week suggest that is not absolute R&D dollars that yields innovation but the quality of your network connections. This is similar to the idea of connectivism in educational theory.
  5. This chapter gives dangerously close to hero worship in the GE Way limits only one path to potential success. The biggest same problems as Collin’s ” Good to Great”, which is anecdotally attributing success in hindsight to what is now apparently obvious

Chapter 5 notes: Leipzig

  1. detailed discussion of the energy market which is at one in the same time: the largest in the world and yet the least innovative. Probably because of the high capital requirements for developing the capacity and the need to ensure that they are failsafe before rolling them out.
  2. Easterbrook treats the energy market choices almost exclusively on a cost-benefit basis and does not include very much about political realities and the political strength of multinational energy companies to preserve their favorable positions.
  3. An excellent connection between horsepower in miles per gallon and the shortsightedness of consumer demand
  4. good summary of the economics of solar power
  5. good discussion of the lack of economics of corn-based ethanol: the links I posted last week should debunk the whole myth of the wisdom of the political process to find sensible solutions. Politics is completely distorted the economics of ethanol. The case for Brazilian swamp grass as a source of biofuel is underestimated.
  6. Synthetic biology is a lot more promising than capital-intensive nuclear
  7. Easterbrook observes the irony that the probability of success in research and development is inversely proportional to how centralized the public research is. If you want clean energy get the government out of it is his.

Chapter 6 notes: Arlington

  1. shift from giant corporations to nimble quick thinking entrepreneurial startups. This is a good discussion of what it takes to generate new ideas that can be implemented.
  2. The real discussion is whether or not innovation is better supported by an existing infrastructure of a large company that has a built-in network effect in resources that can be applied and proven methodologies of scaling up innovations for global effect quickly as opposed to individual startups that have to make the leap to global development themselves. Think about Cisco, Microsoft, Apple and Intel whose R&D strategy includes buying up small competitors when they had achieved a sufficient level of effectiveness that may be the best hybrid approachable. This keeps governmental policymakers out of the economics decisions that they are unsuited to make as we saw in the previous chapter.
  3. Nice discussion of the effect of tax policy on capital gains as a way of encouraging or squelching entrepreneurial activity.
  4. A good insight that to succeed in the global era you can either be a low-cost producer or have a fundamentally new innovation. America is betting the farm on being an innovator, which means that the quality of the educational system is more important than ever.
  5. Very good summary of the dynamics of venture capitalism
  6. Easterbrook asked why people with money are so prone to make foolish decisions: this is part of the problem of lack of statistical appreciation of the world. People who studied made office results new that something was fishy well before the disaster set in.
  7. Regulatory solutions to entrepreneurial funding are likely to make capital flee elsewhere rather than fixing inherent problems.

chapter 7 notes: Chippewa Falls

  1. this is a discussion of lean globalization, and the flattening of organizations. How do global corporations continue to reinvent themselves at a pace that allows them to maintain their large size. The law of large numbers suggest that this should be very difficult.
  2. Easterbrook makes the argument that the pace of reinvention may be so great as to be unforcastable, and suggest the idea of flexible manufacturing is a way to preserve competitive advantage while retaining the efficiency of large numbers.
  3. Makes a strong case for nanotechnology and nano manufacturing
  4. Easterbrook is implying the drive globally to reduce manufacturing jobs makes me wonder about the wisdom of having fewer and fewer locations for manufacturing and the corresponding political and economic power that would consolidate in fewer and fewer hands.. A really nice discussion of this in a futuristic sense is the book “The Diamond Age” by Neal Stephenson who foresaw this world in 2000: it’s a combination of nanotechnology meets multinational corporation and competing cultures. It’s one of the best five books that I’ve ever read and one that I highly recommend to future thinkers  http://www.amazon.com/Diamond-Age-Illustrated-Primer-Spectra/dp/0553380966/ref=sr_1_1?s=books&ie=UTF8&qid=1295288028&sr=1-1

Chapter 8 notes: Camden

  1. describes the effect of emergent organizational change in the competitive world of consumer appliances. Supports the idea that this cannot be done by planning and forecasting but only through adaptation, testing, cycles of reflection and action. This is action research applied to business dynamics. If this model continues to be successful than the argument is that societies that offer the most freedom and rewards for innovation and flexibility and social organizational have a competitive advantage. Those that are tied to restrictive laws and regulations will suffer because they will be slower to adapt or restricted in their adaptive choices.
  2. Easterbrook is almost becoming an apologist for Marx in this chapter. An interesting comparison between Marxist 10 proposals in the Communist manifesto and global economic developments. Does not follow up with the idea of these modern developments emerging without design even though he is made that point in other chapters.
  3. An excellent point is made that the economy is not something that can be run by a politician or a single corporation or by any method of central planning. I’m uncomfortable with his notion that the increasingly tightly coupled global financial markets will be disaster resistant simply because previous system shocks haven’t brought it crumbling down. Studies of complex adaptive systems examine networks in a number of dimensions to determine how robust they are. Tightly coupled networks for example are more efficient and effective at distributing positive effects than loosely coupled ones; however, they are more vulnerable to system shocks that are disastrous because there is less slack in the system and harmful effects are transmitted more quickly. Over long periods of time there is a good reason to have loosely coupled networks to allow for firewalls to be built at the cost of decreases in efficient propagation of positive signals throughout the network. It may be that the best contribution national governments can contribute to the global network is there very inefficiency and the fact that they are slow to adapt. This may be the source of the kinds of firewalls that are needed to prevent disaster in the future. Not by design, but by the protective qualities of bureaucratic ineptness.

Chapter 9 notes: Los Angeles

  1. this chapter argues for the growth of cultural diverse city, even as previous chapters have argued about the convergence of economic says world becomes increasingly global. The irony is that the convergence of economic realities across nations produces a rising standard of living for all which actually supports increased cultural diversity.
  2. This chapter makes the argument for the core competency of the US being high-quality colleges. He draws the correlation to their commitment to universal public education. A very telling point is made on page 181: in 1940 the average young American was a high school dropout while today the typical young American has at least some college.
  3. Easterbrook points to the clear economic benefit of higher education, and we have seen in other postings by Easterbrook why very good colleges are every bit as a whole as the top tier.
  4. He observes that advancement in the modern officer corps the US Armed Forces is unlikely without a bachelors degree; I would actually extend this to say that a Masters degree is required for advancement to senior ranks. There’s an increasing trend in the search for general officers with terminal degrees especially if taken in nontraditional areas, such as the example of David Petraeus. This is one of the most important discussions we have inside my college as part of broad Army educational responses to it dynamic world.
  5. In my mind it remains to be seen how long the US can afford to have the cost of this high quality college education outstripping the rate of inflation, particularly as college education becomes more mainstream. I I can easily see how teacher salaries are going to be seen as a public entitlement by teachers unions and this serves to inform the debate about educational testing as an evaluation of program effectiveness and why unions are so resistant to that idea.
  6. The global increase in IQ scores and SAT scores is fascinating. The chapter is a pretty good case for the importance and economic value of investing in quality education

Chapter 10 notes: Sao José Dos Campos

  1. this chapter describes the phenomenon of non-US centric growth stories by focusing on resource rich Brazil, which is blessed with abundant natural resources, the military protection of the US in the Western Hemisphere, broad population and geographic diversity, and the lack of the regional security challenges experienced in Asia Africa and Europe. Combine this with the recent news that Venezuela now has oil reserves larger than that of Saudi Arabia and you can easily see how the Western Hemisphere center of power could shift southward.
  2. Over the last 15 years I have noticed with interest how changes in global economic conditions alter the demographics of people who come to my investment seminars: recently South America and Australia have begun to dominate where once it was US and Europe.

Chapter 11 notes: your town

  1. Easterbrook quickly moves on to the many forecasting future changes that serve to put your results more and more on your own shoulders: constant change, a blending of home and work, responsibility for your own changing career three time, increased risk by being left behind, lack of happiness with your improved material conditions and a concern for assured healthcare. This is a description of an atomistic self-reliant society that is very susceptible to the political message of central planners who seek to provide a governmental solution for these kinds of safety nets. You can see that every day in the mantras of the Democratic Party and why they are so attractive. I’m not judging this is a bad thing just recognizing that it’s a human thing.

My conclusions:

  1. excellent insights from a variety of perspectives. Still has more of a US centric cultural approach than some might like, but as long as the US continues to be the leader in innovation and the production of exportable cultural products, I think that focus is warranted.
  2. Several thought expanding discussions, particularly the comparison of Marx with modern developments I found to be refreshing and insightful.
  3. The discussion of education and public policy could have gone more in depth in the US experience. I would’ve liked to have seen a comparison between US universal public education with that of perhaps the caste system of education in India.
  4. Could have gone deeper into the consequences of government directed safety  networks
  5. a very good treatment of the reality of uncertainty and complexity and how it overwhelms centrally planned strategies.
  6. Stop short of arguing for the importance of ensuring that we have an appreciation for the utility and boundaries of statistical reasoning, particularly when dealing with the law of large numbers and reduce time available for decision-making. There are implications for organizational structure and limits on power that are implied in that discussion that he stopped short of describing. Nicholas Taylor’s work is a logical next step for those interested in that idea.
  7. All in all an excellent reading, very well written and highly recommended.
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