No Going Back

By Jim McNiven

When we read about the Great Recession of 2007-11, there seems to be an assumption on the part of commentators that as soon as the economy ‘turned around’, we could get back to normal. That’s not how it is turning out and that should not be surprising. There is no going back.

When the US economy came out of the recession, one of the things most noted was that this was a ‘jobless recovery’. Somehow, companies were producing a lot of stuff, but hiring growth was dismal, unlike other recessions. The truth was that US manufacturers gained back all the sales revenue they had recorded before the recession, but they did it with 5 million less jobs. Since the softness of demand during the recession meant they could not raise prices much, if at all, there had to be some kind of productivity growth to account for this situation.

The answer, for the most part, turned out to be robotics, by and large. Different kinds of robots: big arms doing welding; little ‘saucers’ scooting palettes along a floor; advertising robocallers pestering and selling products—all kinds of machines that replaced most any function that is repetitive. Some of the machinery is so cheap to install that manufacturing is leaving Asia for North America. Robots are cheaper than Chinese.

For years, I have been spending a couple months of the winter in Arizona. That’s why I am a ‘poster boy’ for the Boomerswork concept. When I am home, I want to be busy, but when the desert calls...see ya!. Last weekend, I spent a couple of days at the Tucson Festival of Books, something like Halifax’s Word on the Street, only immensely larger. 2012’s Festival drew an estimated 120,000 people. I went there to look into what has been going on in book publishing. Clearly, with Kindles, Nooks and Kobos as well as with iPads, book publishing has been leaving paper for bytes, which has wrecked the bookselling business. The Borders chain in the US went bankrupt last year. If you go to your local Chapters, you will find the gifts section growing. Even used bookstores are moving into DVDs, musical instruments and gifts.

As I understand it, the book business, like a lot of others, consists of production, marketing, distribution and retail. E-books tend to cut out a lot of production, distribution and retailing, with the exception of producing content and putting it into an acceptable form. The big publishing houses used to act as gatekeepers on content that was sellable. Also, they did some marketing of the books they published. Now, everything is falling apart. I went to a presentation by a Silicon Valley company called Smashbooks. The Marketing Director presented some amazing facts. In 5 years (2012-5=2007, remember from above?) the proportion of e-books went from zero to 30% of the market. But these were not just electronic copies of the publishers’ paper books. A lot of these were done by ‘Indie’ publishers, namely, anyone with the software to produce an e-book or who contracted the task out to Smashbooks or its competitors like Amazon.

Unlike the traditional publishers who understand as well as possible, what sells, these e-publishers are clear that they will get your great Canadian novel up in the cloud, but it is up to you to sell it. In 5 years, Smashbooks has published a quarter of a million titles from 50,000 authors. They distribute these to the new e-retailers, the Apple Store, Amazon, even the dot-coms of some traditional publishers. Their favorite pricing point is $2.99. Half the company’s revenues will soon be coming from non-American authors. This thing has global reach.

The book industry is the latest to go through a wrenching change, but watch out for education as well, especially higher education. It is an information industry like banking, real estate and media and eventually subject to the same rules. Universities have monopolies on certification and government money, but these are dwindling.

When a Stanford professor offered a free engineering course a couple of years ago, 50,000 people from around the world signed up. The MOOC (massively oversubscribed online course) was born. Now Harvard appears to be outsourcing its basic accounting course to another university, so its faculty can concentrate on higher level stuff. The California legislature passed a law this month requiring the state universities to offer and accredit online equivalent courses where there are required courses that are oversubscribed by their students and where faculty are not available to teach them. Finally, I am reminded of a comment made by a University of Phoenix (private for-profit institution) that he saw his major competition coming, not from other universities, but from Disney.

So, the Great Recession is over, but there’s no going back. There are dozens of industries that will never be the same again. If any of you are in the vicinity of the Dalhousie Library, go in and ask to see the 3-D Printer and think what this ‘toy’ will do to manufacturing in the near future. Make your own iPhone, anyone?  

Bill, Shane and Jim

By Jim McNiven

Chances are, you’ve never heard of any of these guys. They changed your life in the past decade and you may never have seen any of it. That’s ok, because almost no one else did either.

When I was in grad school at the University of Michigan in the 1960s, I took a job as a foreign student advisor for the Catholic student association. There were a lot of Latin American students there and I was supposed to help them in terms of settling in and having a good and somewhat religious experience. A popular activity was to take them into Detroit to see the Tigers play baseball. One night, my very pregnant wife went with us and about the 7^th inning, she started to feel ill. I took her down to the clinic just off the gate onto left field. They wouldn’t let me in to be with her (different days, then, and our son was born 2 months later), so I went out of the gate and stood and watched the game from ground level. When ‘Stormin’ Norman Cash hit a monster home run out past centerfield, I was awestruck. Simply awestruck.

That was the romance of the game. A decade or so later, a guy named Bill James, who called his analysis, sabermetrics, started to publish a compendium of what were then offbeat baseball statistics. Official baseball tended to ignore him and his ardent and noisy followers. Then in the early 2000s, the general manager of the Oakland A’s, facing a ruinous season because of the loss of a lot of good players to big-budget teams, decided to test James’ theories out. You can read the rest in Michael Lewis’ “Moneyball” or watch the movie of the same name. I suggest you read and then watch. The Oakland bunch of ‘losers’ managed to win 20 games in a row, breaking the all-time American League record.

Next, Bill James’ approach was translated into basketball. Applying a version of James’ notions about winning games led to noticing former Duke forward, Shane Battier. Battier, who was not much of a scorer, was valuable in a different way. You have to follow me on this. Basketball games are normally statistically close. If a game finishes at 104-103, the difference between winning and losing is less than 2 points out of 207 scored. What Shane Battier was good at was messing around with the opponent’s superstar. It turned out that the big scorers averaged many points less per game with Battier defending against them than when they were defended by anybody else. Somebody scoring 30 points a game might only get 25. That game noted above would then have ended 103-99.

Another big sport has taken up Bill James’ approach. We saw a bit of ‘big data and the superior ground game’ in the 2008 US election, but it really got turned on in 2012. From my point of view, that election was all but over the January before, when I read that the Obama campaign had established offices in all 50 States. What that meant to me was that Jim Messina, the operations guy behind Obama’s campaign, was going to combine heavy statistical demographic analysis with a ‘full-court press’ in the neighbourhoods of key States. Using 2010 census data to find where the 2008 Obama voters might be living in 2012, combining this with repeated house-to-house canvassing in those neighbourhoods, would get out enough of what should be the Democratic base to enable victory. Nate Silver, a sabermetrics expert and author of the recent “The Signal and the Noise”, followed Messina’s use of big data and accurately predicted the outcome of the election.

Now Jim Messina got some advice from Silicon Valley sources, such as Eric Schmidt of Google. Google lives by matching ads to your interests, based on what they know of your activity on the internet. It isn’t hard to make the jump to political organization sabermetrics. What appeals to your potential voters and what doesn’t? What social groups using what social media are likely to vote your way? How do you get them to the polls?  An election that in an old-style campaign probably should have been lost by an incumbent was won by superior organization and knowledge. Romney’s campaign depended on an air war while Obama’s began six months earlier on a ground campaign. Any veteran of any modern war will tell you that the air is vital, but soldiers still have to go in on the ground to succeed.

We can expect ‘big data and the ground war’ to come to Canadian campaigns soon. Normally, things political spread across the border with a lag of about 5 years, but this time is different. No one in politics here can ignore the Revolution of 2012. It will change political campaigning in many ways, not least in the rise of a professional and permanent party analytical and turnout organization. A good candidate is vital, but not organizing the campaign until after your candidate is selected will just be Romneyite old school. While you wait for Messina to publish his book, read Michael Lewis’ and Nate Silver’s.  

Half of Boomers not interested in downsizing homes

A September survey by Leger Marketing delivers some interesting results: 43.5% of respondents who were born between 1947 and 1966 want another primary residence that is a similar size or larger than their current property.

The February 26th article in the Financial Post shares some interesting insight into the new normal for Boomers in Canada: "...some Baby Boomers prefer to keep big homes for when the children and grandchildren flock home for the holidays; with the dissolution of marriages, kids frequently return to roost."

Read the full article here.