August 2017

Episode #156: Free-rider Friday - August 2017

Ron’s Topics

The Myth of Technological Unemployment,” Deirdre N. McCloskey, July 11, 2017, Reason

Lot’s of economists think we’ll lose jobs due to technology:

  • Robert Gordon, The Rise and Fall of American Growth

  • Tyler Cowan, Average Is Over

  • John Maynard Keynes and David Ricardo believed it, too

They were all wrong.

Walter Reuther, long-ago president of the United Auto Workers, touring a factory with newly installed robots with Ford:

  • How are you going to get them to pay union dues, Walter?

  • How are you going to get them to buy your cars, Henry?

This is a fallacious argument according to McCloskey because employees of car companies are a trivial share of the car buying public.

The point of an economy is production for consumption, not protection of jobs.

McCloskey writes, “If the nightmare of technological unemployment were true, it would already have happened.”

Each month in the USA, out of 160 million jobs, roughly 1.7 million vanish! That’s over 1%, each month.

In just a few years, at such rate, one-third of the labor force would be standing on street corners. We need flexibility in labor force mobility, not government programs, according to McCloskey.

“Hot Stuff,” The Economist, August 12, 2017

Flying at Mach 5 burns hot—3,000° C, which could take you from Britain to Australia in about two hours. This is above the melting point of most materials.

Two researchers, one at the University of Manchester, England, and one at the Central South University in Changsha, China, have created a novel substance: a ceramic, that contains strong bonds between their atoms: a carbon-carbon composite.

Infused in the composite with a liquid mixture of zirconium, titanium, carbon and boron.

The world’s Air Forces would love it, and so would commercial passengers.

1843, Aug & Sept, 2017, “Turn On, Tune In, Drop By the Office”

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Remember Timothy Leary’s “Turn on, tune in and drop out”?

Well, Nathan, age 27, a venture capitalist in San Francisco, ingests 15 micrograms of LSD, every three days. A normal dose to get high is 100 micrograms.

He does it because it makes him feel more productive and creative, calling it “my secret vitamin.”

Americans age 30-34 are the most likely group to have tried LSD, even though drug use has dropped across board; LSD risen a little.

Researchers have traced the development of the personal computer industry through the 1960s counter culture.

One research center in Menlo Park (Xerox PARC?), observed 350+ scientists, engineers and architects, in experiments with psychedelics—how it affected their work.

Tim Ferris, an angel investor, says “billionaires I know, almost without exception, use hallucinogens on a regular basis.”

Steve Jobs: “Taking LSD was a profound experience, one of the most important things in my life.” He use to joke that Microsoft would be a more original company if Bill Gates had dropped acid.

Today, groups of friends rent a place in the countryside, take LSD or Mushrooms and go for a hike: a “hike-a-delic.”

Popular among technologically aware individuals because they are interested in science, nutrition, and their own brain chemistry.

It can also reduce social awkwardness!

Data on the number of people doing this is non-existent, but a group on Reddit has 16,000 members, up from 2,000 a year ago (most use 10 micrograms every 3 days).

LSD is not thought to be addictive.

Since there is a lack of medical research on microdosing, it’s touted as a panacea for depression, menstrual pain, migraines, impotence, etc.

Yet compared to America’s opioid epidemic, and 3.5 million children prescribed drugs for attention disorders, LSD doesn’t seem as threatening as it once was.

“The New Old,” The Economist, Special Report, July 8, 2017

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During the 1940s, society coined the label “teenagers,” which was recognized to be a big market for goods and services.

Today, we need a new name for those 65 and older, but who are not yet elderly (by 2100, the 65+ group compared to working age folks ratio will triple).

In 1950, 65+ were 5% of the world’s population; in 2015 it’s 8%; and by 2050 it’s projected to be 16%. The share in OECD countries, is 16% in 2015 to 25% by 2050.

Today, in the rich world, 90%  of people will celebrate their 65th birthday!

The UN estimates between 2010-2050, the 85+ group will grow two times as fast as the 65+ group, and sixteen times everyone else labeling it a silver time bomb, or grey tsunami.

Doomsayers predict economic stagnation, asset-market meltdown, dearth of innovation, public spending increases, etc.

The Economist Report argues the opposite: this can be a boon if societies turn them into more active participants.

The financial industry needs to update its life-cycle models.

The so-called gig (or sharing) economy seems to help the 65+ group participate in the economy:

  • ¼ of Uber drivers are 50+

  • ¼ of those who work in the sharing economy are over 55 (according to PWC)

  • Wahve (Work at Home Vintage Experts)

  • Airbnb, the 60+ are the fastest growing group and have the highest ratings

  • The 65+ group does a lot of unpaid work, volunteering 3.3 billion hours in 2016

  • They may be slower at jobs, but they make fewer mistakes

According to the Kauffman Foundation, the  55-65 age group are 65% more likely to startup new companies than are 20-34 olds.

The 50+ age group have 70% of the disposable income in America. Global spending by the 60+ is projected to be $15 trillion by 2020, two times the 2010 amount, much of it on leisure.

So-called “Silver splits” are soaring: the 60+ are divorcing at twice the rate from 1990, and in Briton it’s three times the rate. 25% of Match.com users are between 53-72, growing faster than any other group.

Long-term care: 47 million people worldwide suffer from dementia, which could grow to 132 million by 2050 without a medical breakthrough.

Proposed new labels fro the 65+ group:

  • Geriactives

  • Pre-tired

  • Sunsetters

  • Nightcappers

  • Nyppies (Not Yet Past It)

  • Owls (Older, Working Less, Still earning)

  • Hopskis (Healthy Old People Spending Kids’ Inheritance)

  • Indy: I’m Not Dead Yet?

Life stages are social constructs, triggering deep changes in attitudes.

Rock stars used to rely on royalties but due to the digital revolution they are back on tour.

Lloyd’s has “Non-appearance products.” For example, Disney had it on Carrie Fisher, who died at 60 before completing Star Wars, resulting in a $50 million claim.

Keith Richards of the Rolling Stones, 73, has his hands insured for $1.6 milliion.

Underwriters are ready to accept their clients’ lifestyle and work hazards, arguing that where there’s risk, there is reward—if the price is right.”

They do have exclusions for pre-existing conditions, alcohol abuse, failing livers, etc.

Ed’s Topics

The Brave Browser

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Ron asked Ed to take a look at this browser based on blockchain technology. It is okay, but not ready for primetime. Plug ins do not work. 

Nine words or phrases that predict where you grew up

Ed ran through them with Ron and predicted eight of nine correctly. 

EconTalk episode with linguist John McWhorter

Fascinating conversation about how language is never static. Give it a listen and see if you change your mind about some of your pet peeves. 

The Confusing Way Mexicans Tell Time

Understanding this word takes not a fluency in the language but rather a fluency in Mexican culture.

Reminder

The VeraSage Symposium and Art of Value Conference are coming up in November. For more information visit - http://thesoulofenterprise.com/verasage 

Episode #155: Free-Rider Friday - July 2017

Ed’s Topics

New York Urban Planning in 1898

Ohio in 1895 Theory of History: in 1895, there were two automobiles in the entire state of Ohio. They collided.

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In 1898, in New York City, there was the first ever urban planning meeting. The topic: Horse manure. The conclusion: All cities will be gone in 50 years, certainly 100 because the manure pile wold be too great. All (100 percent) of the experts agreed!

Why is milk in the back of the store?

Russ Robert’s article on this topic.

Bitcoin’s Jump

Last Friday, Bitcoin broke $3,500 and $3,600 while we were on the air. Now it is over $4,000. When can we call this "real!"

GOP Healthcare Failure

Coyote Blog proposal

Up to 10% of Adjusted Gross Income, you pay, after that Single Payer

Ron’s Topics

Fuel of the Future,” The Economist, May 6, 2017

Oil refinery and data centers much in common: crucial feed stocks to world economy.

https://theidpblog.files.wordpress.com/2016/01/data-is-the-new-oil-1000.jpg

By 2025, data every year will reach 180 zettabytes (180 followed by 21 zeros). It would take 450 million years to pump through a broadband connection.

Oracle: Data will be the ultimate externality; we will generate them whatever we do.

Google: Information allows it to target ads better; use for AI, and cognitive services.

Tesla possesses 1.3 billion miles worth of driving data, far more than Alphabet’s Waymo (its self-driving car division).

Flows of data are not a commodity; each stream is different (lack of fungibility):

  • Unlike oil, it’s a non-rival asset

  • Easily used for other purposes than agreed

  • Adds confusion over who owns it (e.g., with driverless car who owns the         data: sensor makers, owner, passenger, auto manufacturer?)

We are only starting to develop pricing methodologies. When Caesars Entertainment filed bankruptcy in 2015, its most valuable asset: data on 45m customers.

Will the future bring personal data account that can be bought, sold, and managed personally?

Google’s chief economist, Hal Varian says data exhibit decreasing returns to scale, collecting more doesn’t add anything. What matters is the quality of the algorithms, and the talent that develops them. “Google’s success is about recipes, not ingredients.”

3 Policy problems:

  1. Antitrust (broke-up Standard Oil; will Google suffer the same fate?)

  2. Privacy

  3. Social equality

The Economist, Free exchange, “How to be wrong,” June 10, 2017

We did episode #147, Changing Your Mind on June 16, 2017.

Real trouble leads to a refusal to grapple with contrary evidence.

Beliefs are like other economic goods. We spend time and resources building them, they become part of our identity (Endowment effect—we value that which we own or possess, sometimes called the IKEA effect).

People engage in three “motivating reasoning” to manage such challenges:

  1. Strategic ignorance, avoid information that contradicts your beliefs

  2. Reality denial, troubling evidence is rationalized away

  3. Self-signaling, believer creates his own tools to interpret the facts in the way he wants (e.g., an unhealthy person goes for a run everyday which proves he’s well)

“It is rarely in the interest of those in the right to pretend that they are never wrong.”

The Economist, “Not so Froogle,” July 1, 2017

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Margrethe Vestager, the EU’s competition commissioner has fined Google 2.4 billion Euros ($2.7 billion), a record antitrust penalty in Europe and the USA, for abusing it’s monopoly.

One business owner complained. NPR’s Planet Money podcast, Google Is Big. Is That Bad? discussed this issue.

In 2002 Google launched price-comparing shopping, called Froogle, later renamed Google Shopping. It was found to systemically favor Google’s own results.

Supposedly, Google has a 90% market share in Europe. Of course, that’s because the EU doesn’t count other sites as search engines for shopping, such as Amazon, eBay, etc.

Competition is just a click away. Compare the convenience of shopping on the Internet with that of driving around comparing prices.

One EU commissioner said, “We need these super-platforms to adhere to a principle of neutrality.” But competition isn’t neutral; there’s no such thing as “perfect competition,” which is the outdated model antitrust regulators use.

Economist Thomas Hazlitt’s new book, Political Spectrum, argues that net neutrality would have meant no iPhone.

EU has fined many USA tech companies: Intel, Microsoft (3 times), and Facebook. This is a form of blackmail, from unaccountable bureaucrats who are economically illiterate.

George Gilder is currently working on a new book, Life After Google (available in June 2018). Here’s a talk he gave at the Blockstack Summit 2017, where he argues that Google’s business model is not sustainable.

Charlie Gard, RIP, July 28, 2017, 11 months old

Parents: Connie Yates and Chris Gard wanted to try experimental treatment in USA for their infant son’s rare genetic condition, encephalomyopathic mitochondrial DNA depletion syndrome (MDDS). There are 16 known cases worldwide

The British government refused the parents to take their son to USA. Staff at the Great Ormond Street Hospital received death threats, which shows there’s at least some resistance in the UK who understand liberty.

The Parents raised £1.4 million from crowdfunding.

On April 11, the British High Court judge ruled that Charlie’s doctors to turn off life-support. Parents appealed to the Court of Appeals, the Supreme Court, the European Court of Human Rights, and lost at all three.

Two Congressman introduced legislation to expedite Charlie’s trip to USA.

On July 24th, Dr. Michio Hirano, at Columbia University, who was to carry out the experimental treatment. When he saw the scans of Charlie’s brain, he was no longer willing to provide the treatment.

In the UK, adults can consent to experimental treatment, but courts can overrule in cases of children. In the USA, courts are reluctant to go against the parent’s wishes.

This can mean doctors performing treatments they believe go against the best interests of the patient.

In Texas, the futile care law says that if doctors feel the treatment would be of no benefit the parents can appeal before an ethics committee. If the committee agrees, the parents can seek another doctor within a specified time limit.

Fortunately, only 10% of cases involve severely ill babies—hardest of all.

Charles Krauthammer wrote a column and offered this: Two truths must guide any decision cases such as these:

  1. The parents must be sovereign

  2. The parents are sometimes wrong

He believes the parents were wrong in this case. However, he would have allowed the parents take the child to USA. Since there are no definitive answers, so must we fall back on sentimentally, on love.

What’s the best for the child: The best guide is a loving parent, their motive is most pure.

Is death is in the child’s best interest? Dr. House: “Yeah, I’m trying to save her life, I’m morally bankrupt.”

National Review editors wrote: “Horrifying precedent: In the UK and, by extrapolation, throughout Europe, every child belongs, finally, to the state.”

John C, CPA, TSOE Listener Question, 8/2/17

Gentlemen,

I really struggle when I get the response that my price is too expensive.  I don’t get it all that often, which tells me my pricing is okay I think, but I wanted to see what your best responses would be to that response/question.

Thanks guys and keep up the good work!

John E. C, CPA, CGMA – Principal

Ron’s Answers

  1. We’re not the cheapest CPA firm in town, during the value conversation

  2. Reiterate value (value conversation is critical, excellent questioning)

  3. Reiterate your value guarantee, fixed price, change request policy, no surprises, unlimited access

  4. Often times, price isn’t wrong—the customer is

  5. Also, often they don’t understand the value, not so much questioning the price

Ed's Answers

  1. "Sounds about right."

  2. As the President of Snap-on Tools once said, "I would rather explain my high price once, then apologize for skimping on quality later. 

Other Resources

Ron’s recent post on LinkedIn: “Why Timesheets Focus Firm Leaders on the Wrong Things.”

Episode #154: Innovation at the AICPA and CPA.com

About Greg LaFollette, CPA, CITP, CGMA

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Greg is one of the most recognized and respected voices on technology within the accounting profession. He is also a sought-after speaker at trade shows and conferences. Prior to joining CPA.com, Greg was a consultant to public accounting firms and to technology vendors with a focus on the accounting profession. Additionally, he was the Executive Editor of TheTechGap — the country’s first blog specifically created for the tax and accounting profession and for vendors who seek to serve that community, and Senior Manager of Tax and Technology Consulting with the Top 25 firm of Eide Bailly, LLP.

Earlier in his career, Greg served as the Executive Editor of The CPA Practice Advisor (formerly The CPA Technology Advisor), VP of Product Strategy at Thomson Reuters Creative Solutions, and founding partner at LaFollette, Jansa, Brandt & Co., LLP in Sioux Falls, SD. He served on the AICPA’s CITP Credential Committee (Chair), the National Accreditation Commission (ad hoc via the Credential CITP Committee), and the Top Technologies Task Force, the TECH+ Planning Committee. He serves on the Technology Advisory Board of the Journal of Accountancy where his column, “What’s Your App-Titude,” is printed monthly.

He appears on Accounting Today’s list of the Top 100 Most Influential People in Accounting, the CPA Practice Advisor’s Top 25 Thought-Leaders, and was inducted into the Accounting Technology Hall of Fame in 2011. Greg completed his professional training at Augustana University (SD) and is a CPA, a CITP, a CGMA,, and a member of the AICPA Information Technology Division. He is a graduate and former staff lecturer at the AICPA’s National Tax Institute. He and his wife Kaye have one grown daughter and choose to live in their hometown of Sioux Falls, SD where he chairs the City’s Board of Ethics and is a volunteer’s as a high school speech coach.

About Mark S. Brooks

Mark is the Senior Manager, Innovation with the Association of International Certified Professional Accountants where he co-founded and now leads the organization's first ever Startup Accelerator, a particular model of corporate venture capital designed to accelerate R&D and growth into adjacent markets by investing in and partnering with startups within the global accounting ecosystem.

He has helped the AICPA increase revenue, organization learning, and enhanced collaboration with 13 state-level partners by exercising significant cross-functional leadership in piloting 5 new business models in emerging markets; resulting in 1,800+ new student members and new sources of revenue in <1 year.

Mark has had a role in enhancing the internal culture of innovation by developing and executing an innovation tournament, an innovation training program for staff in 9 countries, dedicated innovation spaces, and other high impact cultural initiatives that have engaged over 70% of global employees and significantly improved the internal culture (recognized with award from the CEO for these accomplishments).

As a skilled consultant, Mark routinely collaborates with senior executive leadership and 50+ global internal teams to identify and exploit adjacent market opportunities and develop go-to-market plans, resulting in strategic insights and revenue growth. He plan is to  develop a platform for idea sharing within the Accounting profession; awarded $10k innovation grant to implement from the American Society of Association Executives.

Within 2 years, he became a routinely sought after thought leader with 20+ accepted invitations to speak at conferences, publish magazine articles and blog posts, and ad-hoc consulting requests. Mark drives high performance and high caliber output of millennial direct reports through focused professional development and coaching.

Ron’s Questions for Mark and Greg

What does innovation mean to you?

Grade the profession A-F on innovation, in the past 50 years, or even shorter, the last 25 years.

Are there are any other programs or initiatives in the works to foster innovation in the profession?

What is the number one issue facing the CPA profession?

  • Greg answered: Change management

  • Mark answered: Sustaining its relevancy

Ed’s Questions for Mark and Greg 

What is happening with the AICPA and CPA.com Startup Accelerator?

Is this going to be Shark Tank type of program, with Greg playing Mark Cuban?

Greg: In your capacity as a thought leader to the profession, what are your thoughts on the Sage acquisition of Intacct?

Are we ready almost ready to call Bitcoin (not just blockchain) a technology of the future?

Have you heard anything about the results of H&R Block and its relationship with IBM’s Watson to help file tax returns?

Other Resources