Amateur economists matter because they see properties of the economy that professional economists cannot see or do not wish to see. Academic economists have a tunnel vision problem, they avoid economic issues where a mathematical model does not fit - and some of the most important properties of the economy do not obey mathematical equations. The economic incentives in an academic economist's career encourage him to focus excessively on models.
What about journalists who write about economics or corporate governance? Journalists have their own groupthink, in terms of what questions are worth asking and what's worth writing about. There are a few excellent contrarians (Gillian Tett and John Kay) who are not afraid to point out when economists (and financial industry experts and corporate executives) are flat out wrong. That said, the mainstream media has substantial biases (everyone does) - so there are vitally important characteristics of the economy they do not wish to ask questions about.
Amateur economists may not get respect or prestige, but their insights can matter. Here are some properties of the economy where an amateur economist can provide better insight than an academic economist:
* Corporate executives make poor decisions to a greater extent than economists realize. The economy is more ossified and sclerotic as a result. Reasons include socio-economic discrimination, tunnel vision, looking only at quarterly financial numbers and not making the effort to examine the operations behind the numbers, not taking a long-term view, and lack of supervision by institutional shareholders.
* Corporate executives have no idea how to manage technology workers. They cannot be technology experts. But they also make no effort to manage the political/economic incentives that drive technology workers' behaviour. (Technology workers don't want worker productivity growth if they feel it threatens their career.)
* Corporate executives' preference is to lock innovators out of the building, because their socio-economic status is usually low. Corporate executives make decisions based upon socio-economic status, not based upon the merit of an idea or product. (In a nutshell, I'm saying that corporate executives are shallow, and for that reason lack the willingness or intellectual flexibility to tackle long-term cost-efficiency problems.)
* Socio-economic discrimination is very prominent in today's economy. Not only does this damage the economy, the effect on individuals can be demeaning, and it discourages innovation. The higher the rate of socio-economic discrimination, the more sclerotic the economy. The result is less innovation, lower economic potential, lower worker productivity, and lower total factor productivity.
* Nobody cares about worker productivity. (Yes, this includes the CFO.) Hence, impediments to worker productivity growth remain in place for decades - or longer.
* Nobody understands worker productivity. Why will worker productivity spurt up, and then stagnate for decades? Academic economists do not have a clue. Mathematical models can't explain that, you have to watch how people behave. But to understand worker productivity, you first must understand that nobody cares about worker productivity. You also have to understand what happens to people who try to solve such problems (bad things happen to them).
* Nobody cares about the long-term (look at what they do, not what they say). The most obvious examples are corporate executives, institutional shareholders, and taxpayers. A less obvious example are those who control financing of research. This is a huge factor in economies becoming stagnant and sclerotic.
* Everyone has a bias, usually specific to their choice of profession. This is because of economic/political incentives within a career path, and also old established habits of the profession. Everybody. Including me, including you. In general, this over the long term makes the economy more sclerotic.
* People will do what they have an economic incentive to do. Without the incentive, they won't do it. I know that sounds over the top, but the range of exceptions is strikingly narrow. Raising a child obviously falls within the range of exceptions, but not much else does. You think charity workers are an exception? Then read Gillian Tett's utterly appalling essay on anti-poaching efforts. A more important example is ...
* Nobody has an economic incentive to solve cost-efficiency problems in medical care and medical research. So nobody tries to do it. This is true even though the high cost of medical care damages a lot of people's lives. [ And this is precisely the sort of economic problem where academic economists are so useless, why drug prices are high is my own expertise ]. Health care executives are NOT trying to solve long-term cost-efficiency problems.
* Pharmaceutical CFOs are incompetent. If institutional shareholders were not wasting time sleeping under the desk and eating doughnuts, the CFOs would have been fired long ago. My previous blog post went into detail on this.
* THE ROLE OF THE MAINSTREAM MEDIA IN THE HIGH COST OF HEALTH-CARE:
The high cost of health care is a big problem, and institutional investors and the mainstream media make the problem worse. Here's why:
Health care executives are not motivated to solve long-term cost-efficiency problems. Hence, the high cost of health care. Obviously, this damages people's lives. You would think that gung-ho journalists would be digging deep for the scoop, going into the details. But for the most part, the mainstream media doesn't really care about the politics and economics inside the health care industry. Both the mainstream media and institutional investors play a very quiet and passive role in this area, this encourages health-care executives to continue to not make an effort.
* Technology workers are Luddites. More about this in a later blog post, but examples include: movie special effects, Javascript coders, and of course, pharmaceutical SAS programmers. Technology workers usually have an economic incentive to stop worker productivity growth.
* The economic interest of a technology worker is often aligned with the economic interest of a software vendor and NOT aligned with the economic interest of the shareholders of the company that actually cut's the technology worker's check. This is a problem across the American economy, but later blog posts will mention pharmaceutical SAS programmers: pharmaceutical SAS programmers have an incentive to protect the SAS programming language AT THE EXPENSE OF pharmaceutical shareholders.
* Technology companies do not want worker productivity growth. The more workers have to master the proprietary platform, the more powerful the software vendor is in negotiations with the customer corporation. (For example, in negotiations between SAS Institute and pharmaceutical executives, SAS representatives have total unquestioned power. The reason for this is that pharmaceutical CFOs have been incompetent in managing long-term cost-efficiency issues.)
* Chief Financial Officers are simply not very good at playing the long game. Perhaps the pharmaceutical industry is an extreme example, but this is a problem across the economy. (As you'll see in later blog posts, I generally assume that, regarding management of long-term cost efficiency problems, it's the CFO whose head should be on the chopping block. In any case, it has to be either the CEO or the CFO. If there are many people to blame, then no one is accountable.) For example, watching pharmaceutical CFOs spar with SAS Institute is like watching a chess grand-master spar with someone who couldn't beat a five-year old in checkers. Yes, pharmaceutical CFOs have been that incompetent on this long-term cost-efficiency issue. I do not exaggerate. My next blog post will explain.
* Short-term cost cutting is very different from solving long-term cost-efficiency problems. They are different problems that require different techniques. For example, layoffs do not usually raise long-term worker productivity. But here's a clue: you have to look at incentives. Do workers have an incentive to solve worker productivity problems? Do workers have an incentive to stop worker productivity growth and lock innovators out of the building? Institutional investors and the media do not make the distinction between short-term cost cutting and long-term cost-efficiencies, and if investors and the media do not make the distinction, do not be surprised if corporate executives also don't care.
* Worker productivity is NOT a measure of how hard-working or lazy a worker is. (It is a contributing factor, but there are other factors.) A surprising number of corporate executives don't get that. Measuring time at the water cooler is not a measure of worker productivity.
* Wall Street often does not care if corporations waste a lot of money. Investors do not take the long view, so it's okay to waste a lot of money as long as the company is raking in the cash on the revenue side. It's a bad idea for an institutional shareholder that claims to take the long view to do this, because the longer you wait, the worse it gets.
* Institutional shareholders do a lot of damage to the economy by what they don't do. They are very lazy thinkers, and they are not independent thinkers. Group-think is a big factor: one shareholder will not examine an issue because other shareholders are not. They make the economy much much more sclerotic. And considering the number of employees working at pension funds and the like, that is a huge amount of wasted brainpower. By far, institutional shareholders are the weakest link in the economy.
* The COMPETE/COOPERATE problem : when you have a compete/cooperate problem, you have an issue that can create a mal-functioning economy. You have a group of entities (institutions or individuals) that often need to compete against each other, but in some situations they need to cooperate in order to solve long-term problems. The most important example is institutional shareholders.
* The university sector matters as much as the corporate sector. Aside from actual scientific limits, the economic/political incentives in research careers can cause serious long-term economic problems, and delay innovation for centuries. Scientists often have a deep hostility to new ideas and contrarian researchers.
* I call this problem the "TWO OUTFIELDER PROBLEM": problems that fall at the fuzzy boundary between the public sector and the private sector can remain unsolved for decades. Like in baseball, a pop ball goes straight up the middle, you see the ball on the ground and two outfielders pointing the finger of blame at each other. A lot of applied computer science problems are like that.
* "THE OPAQUE/TRANSPARENT PROBLEM": If you are a small vested interest, and you want to protect your economic status, then secrecy is great. If you are in charge of an operation or department that outsiders struggle to understand, then you have that secrecy, and secrecy is power. Many vested interests scattered throughout the health-care industry use secrecy to stop cost-efficiency problems from being solved. And corporate executives also use opaqueness to justify their salaries, but a lot of people who play this game are upper-middle-class workers.
* Regulations have many reasons for existing. Some are there for good reasons, others are there to protect vested interests, or by accident. But if you are a full-time employee looking after your own career, never criticize a regulation. Talk as if all regulations are good and not to be questioned. A later post will cover this.
* Thomas Malthus was right. Now maybe some brilliant researcher will make some great discovery at the intersection of psychology and quantum mechanics ( you cannot collapse the Schrodinger wave without a life form, something that physicists really really don't want to talk about ), and economic potential will surge. But the implications may also not be good economic news, and in any case, physicists will do everything in their power to make sure that contrarian researchers are denied financing. At the moment, it does look like Thomas Malthus was right, and academic economists are not comfortable recognizing that reality. North America will do OK for this century, but expect per-capita GDP in western Europe to stagnate and then begin to decline sometime this century. And the next century? Buy a gun and lock the door.
* "Crack-The-Whip" worker productivity growth and structural worker productivity growth are not the same. I suspect most of the worker productivity growth over the past several years is ctw-worker productivity growth ("ctw" stands for "crack-the-whip"). This involves, for example, dismissing lazy workers, a necessary task. It can also involve making hard-working workers work harder (via fear, for example). It's a result of the shift in the balance of power between capital and labour. But this is a cyclical effect, it's not where rising living standards come from in the long run. Rising living standards come from long-term structural worker productivity growth. This is from careful implementation of technology, or changes in business processes. In my experience (certainly in the pharmaceutical industry), corporate executives deserve no credit at all for structural worker productivity growth. They have great respect for people with high social status and the right political connections, and no respect at all for people of a lower economic class who solve structural worker productivity problems. Executives deserve no credit for structural worker productivity growth because they are shallow and lack imagination.
* There are large parts of the American economy where the "FREE-MARKET CAPITALISM MODEL" is not at all accurate. A later post will elaborate, but examples include: the pharmaceutical industry, the entire health-care industry, the market for corporate executives' salaries, government(of course), university research, sports, education. The higher the rate of socio-economic discrimination, the more likely that the free-market model does not explain that part of the economy. To make the problem worse, some people treat the free-market model as a theory as explaining how the economy works, but others treat the free-market model as an ideology.
* My last bullet-point is both tongue-in-cheek and dead serious. You can gain deep insights into economics by insulting everybody. Of course, taking the most cynical view of human nature will not give a 100% accurate understanding of the economy. But it comes surprisingly close, certainly more accurate than all the mathematical toys that academic economists play with. To be a good economist, don't go out of your way to insult people, but don't be afraid to insult people. Again, Tett's article on anti-poaching is a useful example showing how ugly human nature can be (we're talking about charity workers here!). In order to deal effectively with the high cost of healthcare, you have to reveal truths that people in the healthcare industry do not want under the sunlight. Someone who tackles the root causes of the high cost of healthcare will have few friends and many enemies.
OK, that's a pretty big list of insights on how the economy REALLY works. But each bullet-point above shows a dimension of the economy where an insightful amateur economist can provide valuable insights that an academic economist cannot or will not provide.
Sunday, September 29, 2013
Sunday, September 15, 2013
Fire Derica Rice
Derica Rice, the Chief Financial Officer of Eli Lilly should be fired. He's doing a lousy job and he is certainly not worth anywhere near what he is paid. The reason why he keeps his job is because institutional shareholders don't do their homework. I worked at Eli Lilly in 2007-2008. Eli Lilly has a deeply entrenched cultural problem: a lack of political will for solving long-term cost-efficiency problems. Eli Lilly has a lot of structural cost-efficiency problems and worker productivity problems that have remained unsolved for decades. These problems, since they are cultural, cut across all operations and departments (my particular expertise is computer programming services, where pharmaceutical shareholders consistently get ripped off). Derica Rice has done almost nothing to deal with these long-term cost-efficiency problems. He is not competent, he is not really trying, he should be fired.
The pharmaceutical industry has a deep cultural problem: a total lack of political will to solve long-term cost-efficiency problems and worker productivity problems. To understand this cultural problem, consider this example: the worker productivity problem for providing diverse and complex statistical tables to statisticians and medical researchers. (The SAS programming language has serious worker productivity problems for several areas, including tables.) Each statistical table request typically requires over 400 lines of code (hours of work), but an outsider with common sense would see that most requests should not require more than 20 lines of code (20 minutes of work). This is a waste of pharmaceutical shareholder's money. This problem has been around since the 1980s, maybe earlier. This is a problem that could have and should have been solved by 1995. Why wasn't it? Because IT'S NOT A COMPUTER SCIENCE PROBLEM - IT IS A CULTURAL PROBLEM. First, pharmaceutical SAS programmers have an economic incentive to NOT solve worker productivity problems. Second, the pharmaceutical industry is deeply hostile to innovators and to new ideas in general. Both pharmaceutical SAS programmers and pharmaceutical CFOs prefer to keep innovators locked out of the building, but for different reasons. Pharmaceutical SAS programmers (especially senior SAS managers at CROs) want to protect their economic status by stopping worker productivity growth. Pharmaceutical CFOs have a different reason.
CFOs only want solutions and innovations that come from people like them, other members of the corporate elite. [ This is called SOCIOECONOMIC-DISCRIMINATION, and I'll write in other economic posts how it damages the American economy.] In general, corporate executives have deep contempt for the poor and middle class, a problem that is becoming worse as the American economy becomes more ossified. In this context, it means they find it hard to believe that worthy solutions come from an innovator who is not like them. So when corporate executives receive letters from innovators from a much lower economic class, they instinctively toss such letters in the trash.
In a nutshell:
Pharmaceutical SAS programmers are protecting their own economic interests.
Pharmaceutical Chief Financial Officers are shallow people.
So that is why this worker productivity problem remained unsolved for decades - because it's not actually a computer science problem, it's a cultural problem. [And as I'll argue in later posts, it's a cultural problem not only across the pharmaceutical industry, but in the broader healthcare industry - and this damages a lot of people's lives.]
What happens when an innovator announces a solution? You still have the same cultural problem. Pharmaceutical SAS programmers (and especially CROs) will do everything in their power to keep the innovator locked out of the building. And pharmaceutical executives continue to toss letters from the poor and middle class in the trash.
I sent Rice, and the CFOs of Biogen and Pfizer, at least two letters each explaining the situation. I called Rice twice, but of course the receptionist's job is to protect the corporate executives from the scumbags of the lower economic classes. [Disclosure: I have not worked at Pfizer or Biogen, but this is a problem in the entire drug industry.] I sent letters to other pharmaceutical executives as well, all letters have been ignored.
Obviously, with the announcement of this breakthrough, pharmaceutical SAS programmers were not happy about it ( using SAS, each table typically needs over 400 lines of code (hours of work), using the new syntax the same table can be done in under 20 lines of code (perhaps 20 minutes of work)). So for obvious reasons, pharmaceutical SAS programmers do not want me allowed in the building. (And oh, the pharmaceutical industry continues to pour millions of dollars into one SAS macro library after another, even though CFOs should have known by 1995 that macro libraries do not solve the productivity problem. It was worth trying 25 years ago, but today selling a macro library is like selling a bridge from Brooklyn. CFOs put money into technology projects based upon political reasons, not merit.)
To understand the mistakes that Rice and other pharmaceutical CFOs are making, institutional shareholders and economics columnists in the media need to understand the difference between short-term cost cutting techniques and solving long-term cost-efficiency problems. They are different methods for solving different problems. So long as institutional shareholders and the mainstream media continue to ignore the difference between short-term cost cutting and long-term cost-efficiencies, the cost-efficiency problems in the healthcare industry shall never be solved, because health-care executives are not motivated to solve them.
Short-term cost cutting is easy for the CFO to do. It does not require examination or restructuring of the underlying operations. Typically, it's a layoff announcement. It can also involve shuffling work back and forth between in-house and CROs, or other ways of shuffling costs around. The problem for long-term shareholders (and customers who pay high drug prices) is : short-term cost cutting methods do not raise long-term worker productivity (I'll explain why in a later post). Solving long-term cost-efficiency problems is much harder work, it requires deeper examination of the operations. It is work that pharmaceutical CFOs do not wish to do. When you solve long-term cost-efficiency problems, the benefits for long-term shareholders and/or people buying medicine can be dramatic. But the pharmaceutical industry does not solve long-term cost-efficiency problems, and has not been for decades.
Derica Rice made about five million dollars last year. Other pharmaceutical CFOs made similar multi-million dollar salaries in one year. They do short-term cost cutting, which provides little benefit to long-term shareholders and customers. They do not solve long-term cost-efficiency problems. They also don't talk to most innovators (because most corporate executives are stuck up). Do these people deserve an annual salary of say, $500,000 per year (about a tenth of what many of them make)? They most certainly do not. They should be fired.
The pharmaceutical industry has a deep cultural problem: a total lack of political will to solve long-term cost-efficiency problems and worker productivity problems. To understand this cultural problem, consider this example: the worker productivity problem for providing diverse and complex statistical tables to statisticians and medical researchers. (The SAS programming language has serious worker productivity problems for several areas, including tables.) Each statistical table request typically requires over 400 lines of code (hours of work), but an outsider with common sense would see that most requests should not require more than 20 lines of code (20 minutes of work). This is a waste of pharmaceutical shareholder's money. This problem has been around since the 1980s, maybe earlier. This is a problem that could have and should have been solved by 1995. Why wasn't it? Because IT'S NOT A COMPUTER SCIENCE PROBLEM - IT IS A CULTURAL PROBLEM. First, pharmaceutical SAS programmers have an economic incentive to NOT solve worker productivity problems. Second, the pharmaceutical industry is deeply hostile to innovators and to new ideas in general. Both pharmaceutical SAS programmers and pharmaceutical CFOs prefer to keep innovators locked out of the building, but for different reasons. Pharmaceutical SAS programmers (especially senior SAS managers at CROs) want to protect their economic status by stopping worker productivity growth. Pharmaceutical CFOs have a different reason.
CFOs only want solutions and innovations that come from people like them, other members of the corporate elite. [ This is called SOCIOECONOMIC-DISCRIMINATION, and I'll write in other economic posts how it damages the American economy.] In general, corporate executives have deep contempt for the poor and middle class, a problem that is becoming worse as the American economy becomes more ossified. In this context, it means they find it hard to believe that worthy solutions come from an innovator who is not like them. So when corporate executives receive letters from innovators from a much lower economic class, they instinctively toss such letters in the trash.
In a nutshell:
Pharmaceutical SAS programmers are protecting their own economic interests.
Pharmaceutical Chief Financial Officers are shallow people.
So that is why this worker productivity problem remained unsolved for decades - because it's not actually a computer science problem, it's a cultural problem. [And as I'll argue in later posts, it's a cultural problem not only across the pharmaceutical industry, but in the broader healthcare industry - and this damages a lot of people's lives.]
What happens when an innovator announces a solution? You still have the same cultural problem. Pharmaceutical SAS programmers (and especially CROs) will do everything in their power to keep the innovator locked out of the building. And pharmaceutical executives continue to toss letters from the poor and middle class in the trash.
I sent Rice, and the CFOs of Biogen and Pfizer, at least two letters each explaining the situation. I called Rice twice, but of course the receptionist's job is to protect the corporate executives from the scumbags of the lower economic classes. [Disclosure: I have not worked at Pfizer or Biogen, but this is a problem in the entire drug industry.] I sent letters to other pharmaceutical executives as well, all letters have been ignored.
Obviously, with the announcement of this breakthrough, pharmaceutical SAS programmers were not happy about it ( using SAS, each table typically needs over 400 lines of code (hours of work), using the new syntax the same table can be done in under 20 lines of code (perhaps 20 minutes of work)). So for obvious reasons, pharmaceutical SAS programmers do not want me allowed in the building. (And oh, the pharmaceutical industry continues to pour millions of dollars into one SAS macro library after another, even though CFOs should have known by 1995 that macro libraries do not solve the productivity problem. It was worth trying 25 years ago, but today selling a macro library is like selling a bridge from Brooklyn. CFOs put money into technology projects based upon political reasons, not merit.)
To understand the mistakes that Rice and other pharmaceutical CFOs are making, institutional shareholders and economics columnists in the media need to understand the difference between short-term cost cutting techniques and solving long-term cost-efficiency problems. They are different methods for solving different problems. So long as institutional shareholders and the mainstream media continue to ignore the difference between short-term cost cutting and long-term cost-efficiencies, the cost-efficiency problems in the healthcare industry shall never be solved, because health-care executives are not motivated to solve them.
Short-term cost cutting is easy for the CFO to do. It does not require examination or restructuring of the underlying operations. Typically, it's a layoff announcement. It can also involve shuffling work back and forth between in-house and CROs, or other ways of shuffling costs around. The problem for long-term shareholders (and customers who pay high drug prices) is : short-term cost cutting methods do not raise long-term worker productivity (I'll explain why in a later post). Solving long-term cost-efficiency problems is much harder work, it requires deeper examination of the operations. It is work that pharmaceutical CFOs do not wish to do. When you solve long-term cost-efficiency problems, the benefits for long-term shareholders and/or people buying medicine can be dramatic. But the pharmaceutical industry does not solve long-term cost-efficiency problems, and has not been for decades.
Derica Rice made about five million dollars last year. Other pharmaceutical CFOs made similar multi-million dollar salaries in one year. They do short-term cost cutting, which provides little benefit to long-term shareholders and customers. They do not solve long-term cost-efficiency problems. They also don't talk to most innovators (because most corporate executives are stuck up). Do these people deserve an annual salary of say, $500,000 per year (about a tenth of what many of them make)? They most certainly do not. They should be fired.
Friday, September 13, 2013
My Bias
I'm about to write a series of economics articles on this site, and one of the most important economic guidelines is:
Everybody has an economic(and political) bias (often specific to one's career choice).
In terms of economic incentives, nobody is objective , even if some of us strive to be objective.
So a fair question is: what is your economic bias?
Fair enough, although if you are reading this blog, you already know. But I'll be explicit:
I have the economic bias of an "Angry Innovator".
For decades pharmaceutical shareholders have been consistently ripped off because of the severe worker productivity problems in statistical programming services, problems that could have and should have been solved in the 1990s. I have a solution that brings the cost of statistical table production down by more than 80%. So I'm an innovator.
But I failed to understand just how deeply dysfunctional the politics and economics in the pharmaceutical industry is. It turns out that nobody in the pharmaceutical industry cares about solving worker productivity problems. SAS programmers are not at all happy about this breakthrough (they are protecting their own economic interests). Pharmaceutical CFOs don't answer my letters because they are stuck-up people who think communicating with innovators from the poor or middle class is beneath them.
So I'm angry. So now you know what my economic bias is.
But I have learned some things here, something that theoretical economists and newspaper economics columnists even today do not understand. People will often behave in a superficial or shallow manner (especially corporate executives) and that fact distorts and reshapes the economy in ways that economists don't even try to understand. The health-care industry is particularly bad, and health-care executives simply do not wish to solve long-term cost-efficiency problems and long-term worker productivity problems. And that is a big problem.
Everybody has an economic(and political) bias (often specific to one's career choice).
In terms of economic incentives, nobody is objective , even if some of us strive to be objective.
So a fair question is: what is your economic bias?
Fair enough, although if you are reading this blog, you already know. But I'll be explicit:
I have the economic bias of an "Angry Innovator".
For decades pharmaceutical shareholders have been consistently ripped off because of the severe worker productivity problems in statistical programming services, problems that could have and should have been solved in the 1990s. I have a solution that brings the cost of statistical table production down by more than 80%. So I'm an innovator.
But I failed to understand just how deeply dysfunctional the politics and economics in the pharmaceutical industry is. It turns out that nobody in the pharmaceutical industry cares about solving worker productivity problems. SAS programmers are not at all happy about this breakthrough (they are protecting their own economic interests). Pharmaceutical CFOs don't answer my letters because they are stuck-up people who think communicating with innovators from the poor or middle class is beneath them.
So I'm angry. So now you know what my economic bias is.
But I have learned some things here, something that theoretical economists and newspaper economics columnists even today do not understand. People will often behave in a superficial or shallow manner (especially corporate executives) and that fact distorts and reshapes the economy in ways that economists don't even try to understand. The health-care industry is particularly bad, and health-care executives simply do not wish to solve long-term cost-efficiency problems and long-term worker productivity problems. And that is a big problem.
Sunday, September 8, 2013
Technology Workers are Luddites
I'm going to be putting a number of economics essays on this blog in the coming weeks, because my experience in the American economy has given me unusual insights into the ways in which the American economy is ossified, sclerotic, and gummed up. These attributes of the economy cannot be explained by the mathematical models that academic economists depend upon. And these aspects of the economy are something that I understand much better than corporate executives and newspaper economics commentators. The health-care industry is particularly problematic, and does not get nearly enough attention from the mainstream media. My hope is to change that, because the high cost of healthcare damages a lot of people's lives.
One of the economic guidelines I've discovered over the years is:
TECHNOLOGY WORKERS ARE LUDDITES.
Insulting? Sure. But it is, sad to say, oh so true. Of course, how true it is depends on the context, and depends on when certain economic incentives apply. But it is indeed often the case that technology workers simply do not care about worker productivity, and it is often the case that the economic incentives that drive technology workers are at odds with the economic interest of the people who pay them.
Those of you who know me know that there are more than a few pharmaceutical SAS programmers who are quietly hoping that I get run over by a bus, and that I am not shy in pointing out that their response to a recent computer science breakthrough is the height of irresponsibility. What did I do to earn their contempt? I created a new programming language that runs circles around SAS syntax , in terms of worker productivity, for a certain common type of statistical work. They do not like that, and they do not want me allowed in the building. Because the SAS language has serious worker productivity problems, that costs pharmaceutical shareholders a lot of money. SAS programmers have made it very clear that they do not want this problem to be solved.
So when are computer programmers jerks (or, more specifically, Luddites) and when are they rather nice people? Computer programmers fall into what I'll call cliques (the PHP clique, the C++ clique, etc.), or if you prefer, tribes. Computer programmers are a lot like high school students - they are very cliquish. And their behaviour is all about protecting their clique. If you say nice things about PHP, the PHP clique considers you a friend. If you are a beginner (who doesn't ask questions that are too obviously stupid) who is trying to learn the ropes of a certain clique (say PHP or Javascript) you may find the members of that clique to be very helpful. Welcome to the club!
When are computer programmers downright nasty people? When a new technology platform emerges that can be seen as a threat to their clique (often because of differences in worker productivity), when the new technology shows, by comparison, certain flaws of the clique's favored technology. In that situation, computer programmers have a strong economic incentive to stop change and stop worker productivity growth. In this context, computer programmers are Luddites. In addition, the fact that corporate executives are so ignorant of this dynamic does make the American economy more sclerotic, because corporate executive's ignorance of this behavior means lower worker productivity growth across the economy.
One of the economic guidelines I've discovered over the years is:
TECHNOLOGY WORKERS ARE LUDDITES.
Insulting? Sure. But it is, sad to say, oh so true. Of course, how true it is depends on the context, and depends on when certain economic incentives apply. But it is indeed often the case that technology workers simply do not care about worker productivity, and it is often the case that the economic incentives that drive technology workers are at odds with the economic interest of the people who pay them.
Those of you who know me know that there are more than a few pharmaceutical SAS programmers who are quietly hoping that I get run over by a bus, and that I am not shy in pointing out that their response to a recent computer science breakthrough is the height of irresponsibility. What did I do to earn their contempt? I created a new programming language that runs circles around SAS syntax , in terms of worker productivity, for a certain common type of statistical work. They do not like that, and they do not want me allowed in the building. Because the SAS language has serious worker productivity problems, that costs pharmaceutical shareholders a lot of money. SAS programmers have made it very clear that they do not want this problem to be solved.
So when are computer programmers jerks (or, more specifically, Luddites) and when are they rather nice people? Computer programmers fall into what I'll call cliques (the PHP clique, the C++ clique, etc.), or if you prefer, tribes. Computer programmers are a lot like high school students - they are very cliquish. And their behaviour is all about protecting their clique. If you say nice things about PHP, the PHP clique considers you a friend. If you are a beginner (who doesn't ask questions that are too obviously stupid) who is trying to learn the ropes of a certain clique (say PHP or Javascript) you may find the members of that clique to be very helpful. Welcome to the club!
When are computer programmers downright nasty people? When a new technology platform emerges that can be seen as a threat to their clique (often because of differences in worker productivity), when the new technology shows, by comparison, certain flaws of the clique's favored technology. In that situation, computer programmers have a strong economic incentive to stop change and stop worker productivity growth. In this context, computer programmers are Luddites. In addition, the fact that corporate executives are so ignorant of this dynamic does make the American economy more sclerotic, because corporate executive's ignorance of this behavior means lower worker productivity growth across the economy.
Wednesday, July 31, 2013
CFOs don't care about worker productivity.
There are a lot of things about the American economy that economists and high-profile journalists (Andrew Ross Sorkin, Jesse Eisinger and so on) do not see. In general, the American economy is far more sclerotic than the economic establishment realizes.
1. Chief Financial Officers don't care about worker productivity.
2. Corporate executives have a lack of respect for the poor and the middle class - this damages total factor productivity.
Regarding worker productivity, CFOs want to do the easy stuff, but avoid the hard slog.
Layoffs are easy: you reduce costs and also reduce the productive potential of the affected departments. Worker productivity remains unchanged. Transferring to an outsourcer is also easy: but the worker productivity problem remains unchanged and you could make things worse. (Executives claim that outsourcers have an incentive to solve worker productivity problems, that is often untrue, think "law firms' billable hours model").
The above is short-term cost cutting, and is of limited benefit to long-term shareholders.
Solving long-term cost efficiency problems and worker productivity problems requires executives to work a lot harder and be more curious. Corporate executives don't want to do that.
Now what about the disrespect for the poor and middle class, if you are a long term shareholder why should you care? Here's why:
A CFO has two choices:
A political insider, almost a member of the corporate elite himself is making a pitch. He has a technology solution of limited benefits (or none at all). The new technology framework certainly does not solve the worker productivity problem. But the fellow has an expensive suit and tie and the CFO is impressed. They shake hands and have a deal.
A political outsider sends a letter to the CFO. He solves the worker productivity problem, in fact his solution increases worker productivity by a factor of five (five hours of work becomes one hour of work). But the CFO is an important guy and he has no time to waste with people of low socioeconomic status. He tosses the letter in the trash.
Are corporate executives really that shallow? Yes they are. I'll give some examples in the next post.
1. Chief Financial Officers don't care about worker productivity.
2. Corporate executives have a lack of respect for the poor and the middle class - this damages total factor productivity.
Regarding worker productivity, CFOs want to do the easy stuff, but avoid the hard slog.
Layoffs are easy: you reduce costs and also reduce the productive potential of the affected departments. Worker productivity remains unchanged. Transferring to an outsourcer is also easy: but the worker productivity problem remains unchanged and you could make things worse. (Executives claim that outsourcers have an incentive to solve worker productivity problems, that is often untrue, think "law firms' billable hours model").
The above is short-term cost cutting, and is of limited benefit to long-term shareholders.
Solving long-term cost efficiency problems and worker productivity problems requires executives to work a lot harder and be more curious. Corporate executives don't want to do that.
Now what about the disrespect for the poor and middle class, if you are a long term shareholder why should you care? Here's why:
A CFO has two choices:
A political insider, almost a member of the corporate elite himself is making a pitch. He has a technology solution of limited benefits (or none at all). The new technology framework certainly does not solve the worker productivity problem. But the fellow has an expensive suit and tie and the CFO is impressed. They shake hands and have a deal.
A political outsider sends a letter to the CFO. He solves the worker productivity problem, in fact his solution increases worker productivity by a factor of five (five hours of work becomes one hour of work). But the CFO is an important guy and he has no time to waste with people of low socioeconomic status. He tosses the letter in the trash.
Are corporate executives really that shallow? Yes they are. I'll give some examples in the next post.
Monday, December 31, 2012
SAS programmers are preventing cost-cutting reforms
If the pharmaceutical industry wants cost-efficiency reforms in statistical programming services, by raising worker productivity, they must evaluate, test, and use alternatives to the SAS programming language.
The pharmaceutical industry has tried to solve this worker productivity problem over the past two decades by writing one SAS MACRO library, after another, after another. When the latest library doesn't solve the productivity problem, write another library. This approach does not work. (How has the cost per statistical table in a Clinical Study Report changed from 1990 to 2012, if at all?)
Senior pharmaceutical SAS programmers do not want any non-SAS product design to be examined, tested, or used. That is their position today, and has been their position for decades. The logical conclusion is that pharmaceutical SAS programmers are preventing cost-efficiency reforms.
The Vilno Table programming language gives much higher worker productivity for complex statistical table production than the SAS programming language does, often a table that needs 400 lines of SAS code needs less than 20 lines of Vilno Table code (and the logic of the Vilno code is also easier to read). That's not a typo: you reduce the amount of code you have to write by 20 times (400 divide by 20 = 20)! Higher worker productivity leads to lower costs.
The evidence, logical arguments, and illustrative examples showing this are rock solid.
The response of most (but not all) senior pharmaceutical SAS programmers is, for all practical purposes:
"We don't care. And we prefer you not talk."
With a few exceptions, the response is apathy, silence, and in a few cases more obvious obstructionism and censorship (moderators of professional internet forums such as PharmaSUG and PhUSE have the power to censor). And they don't have a counterargument that makes logical sense. (But some will say "You can write a macro for that" but not provide the macro library external APIs).
Pharmaceutical shareholders would benefit from such a change. Pharmaceutical SAS programmers do not want change.
The pharmaceutical industry has tried to solve this worker productivity problem over the past two decades by writing one SAS MACRO library, after another, after another. When the latest library doesn't solve the productivity problem, write another library. This approach does not work. (How has the cost per statistical table in a Clinical Study Report changed from 1990 to 2012, if at all?)
Senior pharmaceutical SAS programmers do not want any non-SAS product design to be examined, tested, or used. That is their position today, and has been their position for decades. The logical conclusion is that pharmaceutical SAS programmers are preventing cost-efficiency reforms.
The Vilno Table programming language gives much higher worker productivity for complex statistical table production than the SAS programming language does, often a table that needs 400 lines of SAS code needs less than 20 lines of Vilno Table code (and the logic of the Vilno code is also easier to read). That's not a typo: you reduce the amount of code you have to write by 20 times (400 divide by 20 = 20)! Higher worker productivity leads to lower costs.
The evidence, logical arguments, and illustrative examples showing this are rock solid.
The response of most (but not all) senior pharmaceutical SAS programmers is, for all practical purposes:
"We don't care. And we prefer you not talk."
With a few exceptions, the response is apathy, silence, and in a few cases more obvious obstructionism and censorship (moderators of professional internet forums such as PharmaSUG and PhUSE have the power to censor). And they don't have a counterargument that makes logical sense. (But some will say "You can write a macro for that" but not provide the macro library external APIs).
Pharmaceutical shareholders would benefit from such a change. Pharmaceutical SAS programmers do not want change.
Sunday, December 30, 2012
Flexibility and Productivity
Vilno Table gives a simultaneous combination of high flexibility and high worker productivity that no SAS MACRO library can come close to achieving.
Senior pharmaceutical SAS developers who have a vested interest in preventing change retort: "A SAS MACRO can solve that problem. Non-SAS product designs are unwelcome in the pharmaceutical industry".
A SAS MACRO library might (even here there is difficulty) work for a small subset of tables that satisfy a very strict set of assumptions. But for the wide variety of statistical tables that statisticians and physicians ask for every day, a SAS MACRO library simply does not work.
The problem is the flexibility of the SAS programming language goes only so deep: whenever you try to solve the productivity problem with a SAS MACRO library, flexibility collapses. Any candidate for a standard SAS MACRO library is rigid and difficult to use - it lacks flexibility.
The Vilno Table programming language has high worker productivity: the worker can do a complex statistical table in 20 lines of code (instead of spending 3 hours writing hundreds of lines of code, as with SAS). But Vilno Table combines high worker productivity with high flexibility: summary statistics and advanced statistics on the same page, advanced statistics from different models in the same table, different parts of the table are allowed to use different data sources and different computations, and so on.
Take the framework of tree data structures, blend it in a very careful manner with the types of concepts in a statistician's head just before she says "I want you to code for me a table that's BLA-BLA-BLA", and what you get is a product design that completely blows the SAS programming language out of the water. In terms of worker productivity, it's not even a close call, even if many senior SAS programmers do not want to admit it.
Senior pharmaceutical SAS developers who have a vested interest in preventing change retort: "A SAS MACRO can solve that problem. Non-SAS product designs are unwelcome in the pharmaceutical industry".
A SAS MACRO library might (even here there is difficulty) work for a small subset of tables that satisfy a very strict set of assumptions. But for the wide variety of statistical tables that statisticians and physicians ask for every day, a SAS MACRO library simply does not work.
The problem is the flexibility of the SAS programming language goes only so deep: whenever you try to solve the productivity problem with a SAS MACRO library, flexibility collapses. Any candidate for a standard SAS MACRO library is rigid and difficult to use - it lacks flexibility.
The Vilno Table programming language has high worker productivity: the worker can do a complex statistical table in 20 lines of code (instead of spending 3 hours writing hundreds of lines of code, as with SAS). But Vilno Table combines high worker productivity with high flexibility: summary statistics and advanced statistics on the same page, advanced statistics from different models in the same table, different parts of the table are allowed to use different data sources and different computations, and so on.
Take the framework of tree data structures, blend it in a very careful manner with the types of concepts in a statistician's head just before she says "I want you to code for me a table that's BLA-BLA-BLA", and what you get is a product design that completely blows the SAS programming language out of the water. In terms of worker productivity, it's not even a close call, even if many senior SAS programmers do not want to admit it.
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