Saturday, February 14, 2009

Complacency and Scalability Traps

February 14, 2009

In addition to a baseless faith that yesterday's prosperity will magically reappear on its own, there is another kind of complacency: "This is the only way this system can work."


To help us grasp just how deep complacency runs in the U.S., I turn to knowledgeable correspondent K.D., who recently filed this report:
"I visited a friend of mine who lives in Fountain Hills Arizona. Nice 5000 sq ft house with a huge pool in back, and if you walk outside his house you can see the fountain in the middle of town shoot water about 500 ft. in the air. I think the rainfall in the area is abut 9 inches a year (qualifies it as a desert) with a summer temp of 105 or so.


I visited him a few years ago and there were many 5000+ sq ft houses under construction. At that time, he mentioned his house had doubled in value in just two years and people couldn't buy lots fast enough. This visit, as I went for a morning jog around the area, I couldn't help but notice that every other house or lot was for sale.


He had a Superbowl party and many of his neighbors came over. These were all highly educated affluent people, ages from 45-65ish (hard to tell the upper limit, plenty of nip/tuck work). I made it a point to ask a few of them about: 1. general state of the economy, 2. housing bubble, 3. energy/peak oil, and 4. water resources.


The unanimous responses (in order above): 1. just a blip, things will start looking up this summer once the stimulus hits, 2. no way prices will drop much more, it is a great time to buy, 3. there is plenty of oil, the recent price spike was do to speculators ("saw the same thing in the 70's..."), and if it does start to get expensive, we can run off of solar, 4. we have plenty of water - no way we can run out.
I won't bother with an analysis of the above - good times ahead for Fountain Hills, no doubt.... ;-)
I think this "scalability trap" that we find ourselves in (i.e. the more advanced we become, the more things scale, the fewer jobs we need) is like a hidden compounding tax on modernity (emphasis added: CHS) - and we are about at the place where that tax is going to break the current model of tech innovation and entertainment consumption. A new model will surely replace it, let's just hope it is not some kind of Mad Max paradigm."


Based on a Google search of "scalability trap", I believe K.D. has coined a new and tremendously insightful concept. If I understand the concept correctly, it refers to the inevitability of new scalable technologies replacing human labor.


The example that first comes to mind is agriculture; once the scalability of fossil-fuel equipment and fossil-fuel fertilizers was in place via assembly-line production (of tractors, etc.) and industrial-scale chemical plants. then it became inevitable that farm/agricultural labor would fall from 20% of the U.S. workforce to 2%.


In a completely different model with the same results, the entertainment industry is being gutted by the scalability trap of the Web. It now costs almost nothing (to the end user, not the economy as a whole) to bypass the gatekeepers and oligopolies of the recording industry and eliminate the entire staff of the Capitol Records tower (the iconic round building in Los Angeles which calls to mind a stack of old 45 RPM vinyl records).


As one example of this, here is a recent Wall Street Journal piece. Musician Finds a Following Online: Word-of-Mouth on Blogs and Other Sites Attracts Fans -- and a Record Deal
"In late 2006, Justin Vernon, a musician in Eau Claire, Wis., recorded nine songs while staying at his parents' hunting cabin in northern Wisconsin after a breakup with a girlfriend and his long-time band. He used just a desktop computer with recording software, a three-piece drum set and a guitar.
A few months later, Mr. Vernon posted the songs on his MySpace page, hoping to get some listeners and feedback. He also printed 500 copies of a CD with those songs to sell to friends and fans and send to music bloggers for review.
He got that and much more.
Thanks to the buzz his online tracks generated on music blogs and social-networking sites, Mr. Vernon has played at numerous venues and appeared on the "Late Show With David Letterman." He signed a record deal in October 2007, and his first album, "For Emma, Forever Ago," sold about 87,000 copies through mid-December, with about half of those downloaded online. With a band he formed early this year, called Bon Iver, Mr. Vernon is now playing sold-out concerts across the U.S. and abroad."


Was Justin's creative session in the cabin scalable? No; but his direct access to listeners and potential customers is not just scalable but even exponential. Furthermore, the tools he used to record are scalable; every PC is now a recording studio, with the addition of a decent microphone (which can be borrowed if need be).


Was his recording "work"? Of course it was, but not in the same sense as a paid A&R (Artist & Repertoire) employee in the Capitol Records Tower is "working": Justin wasn't paid, nor was he directed in his work toward some higher corporate function or goal.


And A&R is itself being taken out of the hands of record companies: Taxi: the world's leading independent A&R company.


I would agree with K.D.'s brilliant assessment that "we are about at the place where that tax is going to break the current model of tech innovation and entertainment consumption." For really, what exactly is the zeitgeist of complacency based on but the twin ideas that tech innovations will "save" our lifestyle of 24/7 entertainment consumption?


Speaking of jobs vanishing: Astute reader R.D. recently critiqued my call for the inevitability of white-collar staffing being slashed in this recession/Depression: (White Collar, Blue Collar, No Collar February 9, 2009)
"Today's entry does, as usual, stand to reason. However, it also is, as usual, reductive and superficial. The best way to keep cops on the beat is to have a large support staff to do the time consuming paperwork following any arrest. An arrest at the beginning of a shift meant hours at the desk filling out forms; at the end of a shift it meant the same hours, but on overtime. In the military, for every combat troop in the field, there are 10 support troops-medical, culinary, clerical, supply, legal, transport, etc., etc., all essential. Get a job in the real world and see! "


As I wrote R.D.: excellent point, and I did not do a good job of making my primary point, which was: is all this "work" necessary or even useful? Examples that spring to mind:


1. Since R.D. mentioned the Armed Forces, we might wonder why the number of generals and other staff officers exceeds the number of generals, admirals, etc. in World War II when the military had 10 times more enlisted personnel.


2. We might also inquire why the Navy's new DD(X) destroyer ship design slashes crew size by more than two-thirds: DD(X) specifications (navy.com):
Crew: Many of the functions performed by crews on conventional destroyers will be automated on the DD(X). That means a reduction in crew size – 330 fewer sailors than the Spruance class destroyers and 200 fewer sailors than the Oliver Hazard Perry class frigates. The crew will also be able to focus on fighting versus ship maintenance. "

Why is reducing crew size critical to the future of the Navy? Here is the GAO's answer: Military Personnel: Navy Actions Needed to Optimize Ship Crew Size and Reduce Total Ownership Costs:
The cost of a ship's crew is the single largest incurred over the ship's life cycle. The Navy's goal is to cut personnel on the DD(X) by about 70 percent from that of the previous destroyer class--a reduction GAO estimated could eventually save about $18 billion over the life of a 32-ship class."


Is that "real world" enough for you? The U.S. Navy cannot afford to overstaff its ships, period.
Now let's turn to two other "real world" examples from my own family. My cousin is a senior police officer in a California city police department with a budget of around $46 million. His department is facing an $8 million reduction.


So where do you cut? Not cutting, i.e. the status quo, business as usual, is no longer an option. Every employee of the department, uniformed and support staff, could take a 20% pay cut; I doubt that would prove the most popular option.


Or the PD could look at what my cousin noted: the department has more physical paper than ever before, and computers seem to have only added to the amassing of paper.
Hmm. Does this situation seem ripe for some major ESSA--eliminate, simplify, standardize and automate, similar to what the Navy has managed with the DD(X) design? To deny the potential of ESSA to cut duplicate, inefficient or unnecessary "work" is denial of the first order.
This is complacency of the "this is the only way the system works" variety.


Here is another example from the "real world." My sister works for a large healthcare non-profit. Her division of about 130 people recently went paperless, as in, no printing of files, period. As a result, 17 file clerks no longer have "work." Roughly 15% of the entire division's staff has been eliminated by rather straightforward ESSA procedures which, while complicated on a software level, are extremely intuitive: leave digital files digital, eliminate procedures whose origins or purpose has been lost in the accretion of "prosperity," simplify, standardize and automate what is truly essential.


Prosperity enables all sorts of inefficiencies, redundancies, complexities and self-serving self-absorption (i.e. endless meetings in which little is actually decided or accomplished). We as a nation are entering a period in which a 10% reduction in income/revenues is not followed the next year by a 20% increase back to prosperity, but by another 10% cut in income/revenue. The third year requires another reduction, as do years four and five.


Is ESSA (eliminate, simplify, standardize and automate) scalable? Absolutely.


That is "the real world," and complacency/denial on all levels is slowly being eroded by reality. The 500-foot useless fountains are about to be turned off because the water and money have run out.

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