In this multi-part series, Gregg Kervill applies scientific methods to the practical realities of our existence. He analyzes America’s place in the world and takes us on a journey through history to find solutions to problems we have faced many time before. In his quest to identify the problems and solutions facing the US (and countries facing similar economic delinquency), Gregg takes no prisoners and is not averse to killing the odd sacred cow. He is a firm supporter of Isaac Asimov’s belief that: “Anti-intellectualism has been a constant thread winding its way through our political and cultural life, nurtured by the false notion that democracy means that ‘my ignorance is just as good as your knowledge’.’”
As engineers we are accustomed to taking control of our environment. To test a hypothesis we change one variable and then, after experimenting and understanding each influence of this singularity on our design/product, we introduce another variable. Gradually we build up a tapestry of causes and effects until we have characterized our “baby”. We can predict and foretell its behavior and what is necessary to make it work in a required way. The real world is seldom so considerate. We have little or no control over constantly changing environmental, social and physical variables, so we must adapt as we consider many changing scenarios to understand the parameters that will shape and drive the sequence of our evolution.
In this article, we consider economic patterns including the retirement of experts and resultant loss of core knowledge, changing education requirements of an evolving world, and global economy realities that shape employment. These considerations lead to the questions:
- Where does the US rank in the world?
- How do we resolve our economic and national debt?
- What will be the nature of jobs and employment in the future?
- How will our education systems change?
- How will employment and recruitment policy change”?
- What will be the role of entrepreneurs and small business in the next 10 years?
Linking Our History to Our Future
It has been said that “…unless we study history we shall be forever doomed to repeat it…” Yet found here in these somber words is a positive twist; we can foresee our future in our history.
Trends and Patterns
By studying history, we can find patterns that shaped our past. Understanding these patterns gives us the ability to predict future trends and thus influence and prepare for our future. In fact, can we not analytically deduce a valid statistical assessment of our history (psychohistory) from the patterns of societal development and collapse? [Psychohistory , postulated in “The Foundation Trilogy” by Isaac Asimov, is a fictional branch of science that used elements of mathematics, history and sociology to help predict human behavior over long periods of time.. “It is the invariable lesson to humanity that distance in time and in space … lends focus. It is not recorded, incidentally, that the lesson has ever
been permanently learned.”]
Such a study of history may be more fiction than science, but much science fiction has become science fact, so join me in taking a leap of faith and a step back into the past. Consider the concept of applying a statistical analysis to social behavior. First we must divorce ourselves from contemporary politics and everyday noise as we examine past trends to determine what parallels may influence our social and business future. In so doing, we will be able to understand what steps can be taken to ensure we come out on the right side of history. By focusing on the underlying factors that cause ideas and technology to spread, we will see how different factions of society have been able to capitalize on those technologies.
Back to Our Future
We are turning our time travel clock back before 1861 and the US Civil War, before 1762 and the French Revolution, before 1460 and the Wars of the Roses, before the Crusades, the ancient Civil Wars of Rome, and even before the first recorded conflict, a war between Iran and Iraq in 2,700 BC. At that time, just as now, mankind was a gregarious animal living in groups while trading goods and services with other groups. Within these groups were leaders, hunters, healers, elders, weapon makers/forgers, makers of clothing and everything else a nomadic existence required.
As settlements formed, trade flourished. This trade was not only internal, but also between settlements as well as with nomadic groups and individuals. As undoubtedly happened before, conflicts arose, usually over food, land, goods, and, of course, revenge. The new factor was the ability to store large quantities of surplus food (grain). Then as now, the stated purpose of this large-scale food storage was to provide for the coming winter and insure against potential famine. But this excess storage also allows for increased leverage in trading for other goods. However, in times of hardship, the system of trade supported by stored commodities breaks down, ultimately with an outcome of either civil or external war.
It is important to consider that wealth-generation was not the original objective of trade. Initially, trade was imperative to a group’s survival and to the survival of individuals within the group. The lesson from this initial objective of trade is that fair trade helps everyone. The concept of fair trade is that, as wealth flows to and from trading countries, it permeates all levels of society in all regions of the world. But even in our brief, pre-Mesopotamian utopia, it was not long before trade was used as a weapon.
Those first land-grabs of ancient Persia, Nubia and Sumeria culminated in the colonization by empires in the 19th and 20th centuries. Whereas many indigenous cultures have not conceived of land as ownable and unavailable to some, economically “advanced” nations have grown rich from slavery and the exploitation of resources. What we are faced with now is the inevitable problem of cleaning up a mess engendered by unresolved inequity, dwindling resources, and excessive waste.
Most significant to notice in our passage through time is that wherever there has been perceived imbalance, there has also been violence. The wars that are our signposts through history are in equal parts for the aggressive taking of land or property and the backlash of civil revolt. Writings from the prelude to any of the wars referenced earlier support this inevitable result of gross inequality of the distribution of wealth. But there is an ironic result of our current globalization of both trade and information. Some countries, once abused by richer nations, have learned from their experiences and become masterful in the techniques once used against them.
Societal Changes through Innovation
Although feudalism, capitalism and entrepreneurship are vastly different in practice and their impact on the community differed greatly, they shared one outcome – employment.
Under the feudal system, population growth was gradual and life was strenuous if not austere. Still, by tbe 1300s, the population of the UK had risen to 6 million. The Little Ice Age (1560 to 1660) devastated European and North American settlements, decimating the population. Some estimates claim a mortality rate of more than 30%. Harsh conditions and a compromised food supply left the remaining population with reduced resistance to infection by the Black Death and other diseases. After the Little Ice Age and plague reduced the population by almost 2 million in so short a space of time, it took only 150 years, until 1750, for the population to rise again to 6 million.
This marked change in population growth indicated some new influence. In Europe, the Agricultural Revolution expanded, making inventions like the plough and water pumps (critical to recovery of the UK fenlands) more widely available. Improved farming methods, including crop rotation (as promoted by “Turnip” Townshend) and hedgerow-enclosing fields, increased food production from existing farmland.
Notice that technology led to increased efficiency in agriculture. Increased efficiency in farming methods led by stronger local management, plus greater food production through crop rotation, made more food available to keep pace with an increasing population. Agricultural output had grown to match the UK population of about 17 million in 1850. Increased efficiency eventually led to a reduction in the number of laborers necessary. By 1850, many laborers were being evicted from land they had previously farmed. This surplus reserve of cheap (unemployed) labor helped kick-start the British Industrial Revolution. Technological innovation created a bridge from feudalism to capitalism and entrepreneurship.
Technology and Economic Division
This was a bad time for the individual, whether he or she had left the fields for fame and fortune or merely to survive. Overpopulation and overcrowding were rife, with entire families (plus their animals) sharing a single basement room. Wages were suppressed as large numbers of displaced agriculture laborers grappled for poorly paid industrial jobs. Such jobs provided subsistence only, without the opportunity for saving that would allow for a return to the farms, families and friends they had left behind. In this highly competitive economic environment, businessmen, inventors and innovators also fought fierce campaigns for survival.
For example, as the early UK transport system of canals was replaced by railway lines, many rival (duplicate) railway tracks began to spring up between towns and cities. Rail war broke out. The rival railway lines stole sections of track from each other, attacked the staff of their rivals to drive them away, and even extended to forcing passengers to use a particular rail provider. Competition and duplication eventually waned, and fortunes were lost. As surviving companies gained economic stature, they began to standardize track gauge. Eventually, non-standard trains had no tracks on which to run. Increased economic strength led to greater availability and control of technology, thus widening both the economic and technological divide.
What Lessons Can We Learn from This Period of History?
- There are no safe jobs, businesses or positions.
- Every group, skill set, and person is subject to the same forces.
- Standardization may not be a driving force, but it can be a serious limitation on survival outcomes.
- Some groups will survive better, i.e., the Resourced (those with money, wealth or power), the Resourceful, the Leaders, and the Lucky.
- The Resourced, those with resources, have better options but will need to compete with their peers of lesser or greater power and wealth. They also need to use their resources wisely; remember the railways that failed? During that epoch there was a great redistribution of wealth as fortunes were squandered and lost.
- Few of us share the predispositions of the Lucky and the Resourced, so let’s look to the Leaders and the Resourceful for it is in them that we shall find ourselves and our colleagues.
- One important lesson to take with us is that the Leaders (managers) and the Resourceful (inventors and engineers) have characteristics that can be learned and taught.
How Does This Help Us?
- Desirability has been the basis of our trade and economy. We naturally desire bigger, better and newer versions of what others have, so there is a continuous drive for new inventions and products. In other words, “bigger and better” sells.
- Trade within our community allows us to buy things we need but do not have (food, cars, televisions, houses, healthcare, etc.).
- The ability to trade is essential, but if one group begins to own all the wealth then the ability of the whole community changes. Members of that community will be unable to buy luxury items like cars, TV’s and houses. The result is that trade will be stifled; the whole system will break down. There are sound economic arguments for supporting the working and middle classes; without them trade will eventually cease.
- In extreme conditions or when a paradigm changes, some traditional parts of an economy will die off. (Think about the people who dug canals). People earning their livelihood from an obsolete trade needed a financial safety net, not just to survive but to retrain for a new and useful occupation.
- Selling to poor economies tends to be stable, and have a low return on investment, whereas selling to rich economies makes it easier to yield larger returns, but there may also be a higher risk offset. However, if we are to support higher wages then this must be our market.
- On the other hand, a perceived imbalance can lead to other problems. Just refer back to the list of wars we chronicled in our earlier time travel.
- Innovation is our only escape from a slide into poverty. It is the only path to high employment and prosperity.
Export Value and Patents
We have become individually selfish in a “What’s in it for me?” society. We have lost sight of the value revered by Gandhi that “a nation’s greatness is measured by how it treats its weakest members”.
Don’t misunderstand me; I am not being accusative and this is not intended as a derogatory comment. I am simply making an observation about human behaviour in the past and in the present. I am making this observation because we must accept what drives us before we can go forward with an objective analysis.
How Can We Measure Future Income?
So if profit and riches are what drive us, how can we create a measure of future income for each world leader? How can we compare or rank countries by future income? How can we do this while being inclusive, fair and sustainable, for history shows us that without perceived fairness our economic system will not be sustainable?
We could use history to predict gross domestic product (GDP), but if that was a valid methodology then everyone with an internet connection and printer would now be a millionaire. So we must be more inventive in our strategy for using our historic knowledge. We know that if our wealth is to be based on exporting and trade, that “desirable” products will be essential for our success. Understanding that desirability is vital for our prosperity is one key for our future. It will also create a measure that will predict future sales value of any country with a manufacturing economy. If new inventions and new ideas are to be the wealth generators, then the number of patent applications filed will be a measure of a country’s future sales.
Patents and Patent Applications
We have records of new patent applications and new patents granted from across the world. Of these two statistics, the new patent application will be the better measure of new ideas. This is based on the simple logic that all patent applications include at least some new idea; and while all patents granted were also patent applications, not all patent applications become patents granted. (Of course, not all new ideas will result in new patent applications, but we have no measure for the ideas not acted upon.) Note also that patents granted will limit capitalization to just one company, whereas a new, nonpatented idea will be capitalized by many companies. So, the number of patent applications filed will be a measure of a country’s level of innovation and thus future sales.
Income “per Capita” As a Measure
Using the number of new patent applications as a measure of total wealth may be valid but to ask that familiar question, “What’s in it for me?” we need a different measure. Given human nature, future income per capita is a good measure. If we consider “trickle down wealth” for each person and compare our finding of number of new patent applications relative to national populations, we get to see how well we are succeeding on the world level (Figure 1, from Richard Florida article “The World’s Leading Nations for Innovation and Technology”, http://www.theatlanticcities.com/technology/2011/10/worlds-leading-nations-innovation-and-technology/224/). In his article, Mr. Florida goes on to produce a global innovation map which proposes R&D budgets as a measure of future innovation. This is perhaps not as valid as considering new patent applications for two reasons. New patent filing is a measure nearer to the point of commercialization and the point where profit will be taken. Also, the same R&D dollar will purchase more R&D hours in India or South Korea than it will in the US or Germany. Hence we will stick to our measure of new patent applications.
What About Our National Debt
Another factor we must not forget in our quest for future wealth is how much debt we have. Translating this to the family level with which we are all familiar, “Annual income twenty pounds, annual expenditure nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery.” – Charles Dickens, David Copperfield. Until we have paid our mortgage, car payments, insurance, credit card interest plus some minimum payment, gas and food, etc., we do not have any surplus from which to buy luxury items. On a similar basis, we should make a calculation based on new patent applications/nation debt because this will reflect the portion of our country’s wealth that we can spend on luxuries.
And, the Results for the Top Industrialized Countries Are …
Establishing one measureable fact by which we can judge the future income of a country is not difficult when we consider that industrialized countries’ earnings rely on exporting, manufacturing, selling, and licensing new products.
New Patent Applications – Normalized
As discussed above, new patent applications will provide a measure of a country’s innovation and ability to generate new products and ideas. In Figure 1, we see that the US is ranked second (80%), just behind Japan (100%), for the highest number of patent applications filed. Unfortunately this is not the whole story.
Figure 1: New patent applications by national population
Patent Application per Nations Debt – Normalized
Just as some of our personal income is used to pay our bills, the GDP of a country will be reduced by factors like the national debt. So whereas patent applications give an indication of future revenue, we cannot ignore national indebtedness. Just as when using a credit card account you must pay off your balance before your account goes into collection.
When we compute new patent applications (our future revenue) and factor in the national debt of each country, another picture emerges (Figure 2). Here we see that South Korea (normalized at 100%) is the new leader, China (62%) moves up to 2nd, and the US (5.4%) has slipped from 2nd to 7th place in the world.
Figure 2: Patent application adjusted for national debt and compared by national population
These graphs forcefully illustrate how the US is held back by its debt and why it is so important for engineers to take a leading role in wealth generation.
New Patent Applications per Capita – Normalized
There is another way to slice these figures. Patent applications per capita should give a crude measure of future wealth per person, but this curve is even more depressing with the US in 9th place and having only 7% the projected future earning of South Korea. (Figure 3).
Figure 3: Patent applications per capita by national populations
What Can We Do to Generate More Wealth?
In comparison with countries like France, which has not balanced (The Economist, 2012 November 17th) a single budget since 1981 and whose public debt has risen to 22% of GDP, the US has not done so badly. But being contented by not being at the bottom of the class will not impress the electorate, in much the same way that a poor report card did not impress our parents. Being content and safe at the bottom of the class is not a strategy for improvement, nor does it present a pulpit from which we can lead the world.
Going Forward and the National Debt
To resort to family economics again, what can we do when our expenses exceed our income? We can cut back and we look for better paying jobs. How do we find those better paying jobs but through innovation.
Kervill started out as a physicist but has spent all of his career in electronics because, as he puts it, it was more fun. Gregg career as an electronics design engineer began in the industrial controls, consumer electronics, space and military markets. He completed a Diploma in Industrial Management (the forerunner of the MBA) in the 1980s with a thesis on the application of Kan Ban and JIT to highly variable product lines. Also in the 1980s, he became involved with product safety for military products, and became a CSA design verification engineer for Digital Corporation. In 1993, he formed GK Consultants Ltd, with whom he has maintained a web presence.
A registered consultant to the European Union (advising on Slovenia’s entry to the EU), Gregg has contracted to NIST and the US-Consumer Electronics Association, and has advised the UK, Northern Ireland, Slovenia and Hong Kong governments. He has also provided pro bono support to Virginia Governor Mark Warner’s VALET export program, as well as the planning and strategy committee of the City of Austin, Texas. Since 1995, he has lectured and consulted on three continents, published three engineering books, and created the first multi-media training software for electrical product safety. Currently he is developing web-based training material from world-class subject matter experts (SMEs) for the Phoenix Technical Group, an internet-based company with a presence in the US, UK, and Brazil.