Elizabeth Warren: How greedy political parties corrupts our best hopes.

I was rummaging around in the depths of my file system today and found this old video of Elizabeth Warren’s presentation to the UC Berkeley Graduate Council explaining changes in the economy leading up to the collapse of the Industrial Economy in 2008.

At about the same time that she gave this lecture she she was interviewed on “Conversations with History”, an interview series presented by University of California Television (UCTV). In it, she talks about her childhood on a Nebraska farm and her unlikely journey to the upper crust of American business elite.

She tells the story of what life in a typically modest rural family living frugally, until Dad suffers a heart attack. Suddenly everything turns upside down and mom goes to work at the age of fifty to keep the house out of foreclosure. Years later, during the run up to the Great Recession, Warren has an epiphany: the experience of her family is the same as the families she is helping Wall Street bankers to foreclose upon.

There are lessons in both videos.

One of the most powerful is that Warren was still an academic when sharing her research on consumer spending. There are no strident indictments against republicans, or emotionally laden rhetoric about the evils of business. She just explains her findings in a casual and interesting way.

Looking back over the last three-decade or so, Warren shows us where increases in the cost of consumer goods are concentrated. It’s not that we are buying designer clothes, or suffering through inflated food prices or paying exorbitant prices for huge SUVs. Those are not what has become more expensive. Home prices, taxes, health insurance — none of which we can control simply by cutting back on routine expenses — are what has made us poor.

The point Warren is really driving home, however, is how these expenses have gone up so suddenly that the two-income households come precariously close to bankruptcy if one of those incomes is lost or delayed.

She does an excellent job explaining how our consumer economy is an unsustainable house of cards. At the time she gives this talk in 2007, the economy was in the beginning stages of a slow motion train wreck. The consumer economy of the last third of the 20th century created very wealthy industries in education, housing, mortgage lending and health insurance.

These industries enjoyed great wealth but suffered greatly during the Great Recession.

Now are now working hard to attach themselves like barnacles to our new emerging economy.

But there is another issue.

Contrast Warren’s demeanor in that 2007 lecture her 2016 reaction to Donald Trump’s election in a presentation to the AFL-CIO. She no longer explains how she calculated the statistics she presents. In fact she presents few objective facts at all, and gives an emotional speech on the unfairness of our public polices a greed of bankers and others.

Not that I disagree with her. If I were to lose control of myself and surrender to the strident 13 year old we all hold subdued in our inner psyche I’s probably sound the same. But, that is not how reasoned and articulate intellectual presentation are created.

Think about this for a minute and it leads to some sobering insights.

Why would Elizabeth Warren — probably our most informed politician on matters of economics and finance – make such a dramatic change in her delivery? One would think that if she wanted to inform us about complex issues she would do it in the most effective time tested way – like a scholarly lecturer.

But she doesn’t.

I think it is because she is no longer focusing on helping others in an objective search for truth. Now she is in the political arena, where money and power intertwine to provide a pulpit and a price, and demands a price for the privilege of speaking from it. As much as one might resist “selling out” the temptation to do so is very great. You either go along with everyone else and are trusted with the keys to a national podium or go back to a lecture hall talking to a few hundred people.

Lindsay Mark Lewis pulls the covers off how politics corrupts good people in his excellent book Political Mercenaries: The Inside Story of How Fundraisers Allowed Billionaires to Take Over Politics

Lewis was a fundraiser for the Democratic Party, raising millions from incredibly wealthy donors running some of the biggest corporations and social welfare conglomerates that have ever existed. He also worked with the machinery that distributes those funds – the Republican and Democratic National Committees. He tells us how party fund raising machinery coerces our representatives into supporting their party caucuses to the tune of tens of thousands per month.

It’s not pretty and there is nothing to be proud of in his story. Like Warren, Lewis had an epiphany also, but his led him to turn away from a lucrative gig as an industrial/political bagman and live a more respectable life.


Check it out and tell me what you think:

Elizabeth Warren: UC Berkeley Graduate Council Lecture

Elizabeth Warren: Conversations with History Interview

Political Mercenaries: The Inside Story of How Fundraisers Allowed Billionaires to Take Over Politics, Lindsay, Mark Lewis

The Two-Income Trap: Why Middle-Class Parents Are (Still) Going Broke, Elizabeth Warren







How are we going to manage the growing and invisible gig labor market?

The Industrial Economy finally sputtered out in 2008, but the chaos of a faltering international banking system on the verge of collapse obscured the consequences of that historic event.

In case you don’t remember or are too young to recall that agonizing slow motion train wreck, here is how Mohamed El-erian characterized those days in his fascinating examination The Only Game in Town:

“In the last three years plus, central banks have had little choice but to do the unsustainable in order to sustain the unsustainable until others could do the sustainable in order to restore sustainability.”

We now live in a new economy, one in which the old rules and way of doing things no longer work as they once did. The way we measure economic output and activities no longer works like it once did. I recently wrote about this in a blog article, Why the Fed is playing with fire when it increases interest rates.

The same challenge is happening in management, and recruiting.

(See this recent LinkedIn post from a forward thinking recruiter for new ways to address this problem.)

One of the most prominent examples of the move from the past to the future is happening in the education industry. Colleges and universities are replacing traditional full time faculties with part time adjuncts. The trend is not included in strategic planning, but seems to be a gradual piecemeal move towards an all-adjunct faculty. The Chronicle of Higher Education recently published a good overview here.

At the community college where I teach, adjuncts outnumber full time instructors by about 3 to 1, and teach the majority of courses and carry the majority of credit hours offered by the school. The college pays us about one-third the hourly rate of full time professors, but we are limited to about two thirds of the hours. Like most gig work, this is not produce a living wage, has no benefits and offers no job security.

That is typical of higher education and other occupations as well.

How do recruiters include these people in their networks? Is it even realistic to think gig workers might ever hold a traditional full time job?

Probably not, but I hope recruiters address the issue.

If all this seems like it is a relatively minor problem – that 3.8% unemployment number misleads many people – look to the current news on suicide trends. It’s not just fashion designers and celebrity chiefs taking their own lives.

According to CDC statistics, the highest increase in successful suicides over the last fifteen years – roughly spanning the time the economy has been in upheaval – is among men 45 to 64 years old. This is the generation whose most lucrative working years happened to coincide with the collapse of the Industrial Economy and the nightmare of the Great Recession. Those numbers represent the ongoing struggles of people left behind even by the gig economy.

Jessica Bruder chronicles the lives of older people living a life right out of Grapes of Wrath in her book, Nomadland. (Click here for the C-SPAN interview.)

From this perspective, gig workers in the education industry aren’t doing so badly. Questions remain, however.

These highly educated gig workers will likely never afford to pay their student loans; consequently, taxpayers will increasingly foot the current $1.5 trillion student loan bill. This debt is from students to the government, but the government has already transferred this amount to the educating industry. Taxpayers are now reimbursing the government.

(The University of Arizona here in Tucson is a very nice campus.)

How big is the gig economy? How many people are shifting into this labor market?

The short answer is that we don’t know. A 2015 Government Accounting Office (GAO) report estimated about 40% of people classified as employed by the Bureau of Labor Statistics (BLS) as employed were actually gig or “contingent workers”.

A 2018 report from the Federal Reserve Board of Governors puts the number at 31%. Other estimates are from about 10% to 15%.

The confusion stems from the same measurement challenge facing economic analysis examined in the blog post noted above. We have not settled on a uniform way to define and measure the gig economy. Economists are working on the question, (see here and here), but there will likely be no answers any time soon.

The important take away for the recruiting industry is that the first to figure out how to exploit the huge emerging gig labor force could well dominate the industry for decades to come. This is why new ideas such as moving from the existing recruiting model to a networking model holds such promise.

No matter how the recruiting industry addresses these changes one this is certain:

We are living in exciting and interesting times.



The media might be celebrating, but let’s untangle the May jobs report before joining in

The Bureau of Labor Statistics (BLS) released its monthly Employment Situation today and the media predictably has seized on only one number — the U-3 measure of unemployment — and is throwing a party over it.

Unemployment is down to 3.8%, representing 6.1 million people and that is a good thing, but it is only one number of many. If you want to understand what is happening to the economy you have look a little deeper.

The BLS includes a section called the Household Survey Data in the Employment Situation. This section summarizes the data most of us find interesting.

Looking here, we can see that while unemployment dropped for men, Blacks and Asians nothing much changed for women, teens Whites and Hispanics. This means that positive changes benefit male Blacks and Asians, but not for males of other races, teens or women.

The 1.2 million long term unemployed, (jobless for six months or more), hasn’t changed, accounting for about 20% of the total unemployed. The good news is that long-term unemployment is down by about half a million over the preceding 12 months.

But don’t throw a party just yet.

That decrease may not mean that long-term unemployed (LTU) are finding jobs. A 2010 analysis in the Monthly Labor Review finds that the composition of long term unemployed changed dramatically since 1980. Increases in LTU came disproportionately from people over the age of 45, accounting for about 15% of the LTU, an increase of 185% since 1980. (See Allegretto and Lynch, 2010)

There are many reports from older workers of age discrimination and rejections based on “over qualification,” a term once considered a euphemism for “too old.” This might represent a decrease in the value employers place on work experience.

That sounds like a very strange thing, but as new technologies come and go ever more rapidly, it may that current experience is the only kind that has value. Experience older than maybe five years could be irrelevant.

At some point, older workers exit the LTU category for the Out of the Labor Force category when they begin drawing Social Security retirement benefits.

We don’t know how many people “retire” out of long-term unemployment and into Out of the Labor Force. We also don’t know how many people cannot find a good job and exit the labor force to go to school.

One BLS researcher has some interesting comments on these two related issues:

“The aging of the population would be expected to increase labor force exits, but the increase in the education level of the labor force would be expected to decrease it. For workers ages 25–54, increases in education would similarly be predicted to lead to a decrease in exits (with little effect caused by aging within this group) instead of resulting in the substantial increase we observe.” (Frazis, 2017)

The implication is that although people are returning to school they do not return to the labor market afterwards.

Next, we come to the category of “part time for economic reasons” totaling 4.9 million, unchanged from the previous year. These people can only find part time work even though they are looking for full time employment. The classic definition of contingent workers.

But contingent workers also work at full time jobs that may not last very long. These people are probably part of the “marginally attached” category — not in the labor force, wanting a job, looking for work in the last year, but not in the last month. There are about 1.5 million people in this situation.

Adding the 1.5 million in this category the 4.9 million considered “part time for economic reasons”, we get 5.4 million contingent workers.

Let that sink in for a minute.

The number of unemployed is 6.1 million, but the number of people hovering around financial catastrophe in contingent jobs or flitting in and out of part time/limited duration employment is about 5.4 million.

Put those two groups together and we can say that over ten million Americans who are in the labor force do not have full time jobs. They are either looking for work when they can, working at part time or short duration jobs, and sometimes retiring or going back to school, but not coming back into the labor market.

And let’s not forget that the average workweek in May was about 33 hours, and that wages increased less than 2%over the previous 12 months.

Let’s celebrate that 3.8% unemployment rate, and keep in mind it is about the only thing to celebrate.


Allegretto, S., & Lynch, D. (2010). The composition of the unemployed and long-term unemployed in tough labor markets. Monthly Labor Review, Bureau of Labor Statistics, 133(10), 16.

Frazis, H. (2017). Employed workers leaving the labor force: an analysis of recent trends. Monthly Labor Review, Bureau of Labor Statistics (May 2017). Retrieved from https://doi.org/10.21916/mlr.2017.16.

You are gambling with your families’ future when you take out a home mortgage

For reasons I’ve never been able to understand everyone seems to want to buy a home. This has never made sense to me.

It’s obvious to me that for most people buying a home is a bad idea.

The biggest problem with homes is that for most people they are too expensive.

It’s true that the average monthly mortgage payment is a little over $1000, but that just scratches the surface of home expenses. You need to pay insurance and taxes, plus the standards like water, sewer electric and garbage.

But don’t forget the costs of landscaping — even if you do it yourself, there are all sorts of supplies like fertilizer, plants and fuel for the lawnmower.

Remember to add in opportunity costs — the amount of money you could be making if it weren’t for all the time the house demands. You could hold down a part time job or creating equity is a side business if you had the time.

But you can’t. Instead, you have a house.

And let’s not forget one other financial burden of home ownership — about $5,000 in easily liquefiable assets to cover emergencies. Insurance doesn’t cover everything. The more you have insured, the higher your insurance premiums will be, so it’s tempting to cut back on coverage or deductibles.

Sure, you can cut back on the amount insured or increase the deductible, but that means you need a bigger emergency fund. If the heating system needs major repairs in the middle of the winter, you need cash right away to stay warm.

But that’s not all.

Now that you have that great house, you have to fill it with appliances and furniture. After closing fees, you will probably buy these big-ticket items on credit, so add those expenses, including interest charges, to the monthly bill. Add them to your home insurance policy also, and prepare to pay a bigger premium.

Real estate professionals are quick to point out the tax advantages of owning a home, and that is true, but only if you are making enough money that you need the deduction. The median family income is slightly less than $60,000, and tax advantages have only a minor effect. In fact, when mortgages require ten or twenty percent down and interest rates are increasing, home ownership is out of reach of most median income earners.

These days home ownership is more often and option for high wage earners, not those stuck in the median.

Something else to consider: How far do you have to go to work and how much does it cost?

Employment tends to be in the center of metropolitan areas, but homes get cheaper the further away they are from the center of town. What you save in mortgage costs you spend on commuting.

An apartment close to work means fewer miles driving and it might also mean that you can own a smaller more fuel-efficient car. If your commute is only a few miles a second hand sedan is fine. Living close to work allows cheap, low cost, green transportation, like public transit, bike, scooter or even walking become viable alternatives. And apartments are much cheaper than single family homes.

In terms of safety, a larger car is the better choice for a long daily commute on the freeway. If you want an SUV because the location of your home demands a long commute, add the cost and maintenance of a bigger car to the overall monthly cost of home ownership.

Even if you are lucky enough to find a house in your price range close to where you work, remember that jobs are not as secure as they once were. According to the Bureau of Labor Statistics, (BLS) the average salaried worker changes jobs about once every four years.

So a thousand dollars a month might sound like a great deal until you start looking at all the other costs that go along with owning a home. It is an expensive proposition.

One of the things to consider about home ownership that few people think about is this:

You have to live in a home just to keep it from deteriorating.

When the industrial economy fizzled out in 2006 and the housing market tanked, bankrupt homeowners abandoned thousands of homes. Without people living in them to turn valves and manage heat and air-conditioning, houses will slowly disintegrated.

Few other investments require daily human attention to maintain their value.

Drywall gets damp and falls off ceilings, plumbing starts leaking because gaskets get brittle, and rattlesnakes overrun vacant homes as they did in Scottsdale.

It seems obvious to me that you would be better off to direct your $1000 per month to an investment that might make money, instead of demand that you spend more. If you were to buy a thousand of dollars’ worth of gold every month the only added expense is a safe deposit box that might run $20 a month.

Either that or buy a house and charge someone rent to live there and take care of it. It’s the only thing that makes sense.

That’s what the wealthy people are doing.

Rana Foroohar, CNN Global Economy Analyst, does a great job of unraveling and explaining what is happening in the current economy in her recent book, Makers and Takers. She devotes an entire chapter, “When Wall Street Owns Main Street,” to the shift of home ownership form individuals to private equity firms.

Here is what’s happening in the real estate industry:

A private equity fund pops into existence when a group of wealthy people pools their money, buy an investment, and become stockholders. Blackstone is a private equity fund investing in real estate, specifically, homes.

Blackstone operates more than 70 corporate subdivisions, which is why you may not recognize the name in spite of its size. Between 2012 and 2014, when plenty of distressed properties were available Blackstone bought $20 billion dollars work of real estate. In 2016, Blackstone held $330 billion in real estate assets.


That was the same time that home ownership by individuals was at the lowest point in 20 years.

Blackstone and private equity funds like it are one reason real estate statistics can be misleading.

When you see a media headline celebrating an increase in home sales your first assumption is that people are doing well and buying homes. But, there is no way to know whether the sales reflect ordinary people doing well and investing in a home. It is entirely possible that private equity funds are buying homes from distressed homeowners.

(Look at my article Two Questions You Should Always Ask About Statistics in the Media.)

Private equity funds aren’t just sitting on billions of dollars’ worth of real estate assets. They are busy “securitizing” them. That means they use the cash income of their residential real estate holdings to create funds, and sell shares. Investors are buying the future value of the asset.

If you think that’s complicated, it’s only the tip of the iceberg.

For the full story on the causes of the Great Recession read Crisis Economics, by Nouriel Roubini. I’ve never seen a more readable economics book. Read his book and you will know what happened during the run up to 2006, and will see the danger we still face.

Private equity firms are not limiting their interest to residential real estate. They get very creative in other markets as well

For example in 2004, a group of private equity funds pooled their resources and bought Mervyn’s from Target. Well, it wasn’t quite that simple. They used the real estate the Mervyn’s stores sat on as collateral for an $800 million loan to pay Target, and then leased the real estate back to the Mervyns stores.

Got that?

There was no creation of value, except that of the future value of the newly created leases. That future income became securities and sold as shares in various forms such as Real Estate Investment Trusts (REITs).

Each store now had the suddenly added expense of a lease, and in order to make ends meet, the company started laying off workers in a desperate attempt to salvage its stock value and possibly attracted investors.

That is an example of how laying workers off can result in attracting investors.

It didn’t work though.

Mervyn’s filed for bankruptcy in July 2008, and thousands of remaining jobs disappeared.

Traditionally companies increase value by expanding, not contracting. The Mervyn’s story illustrates an ongoing problem in understanding what the media reports about the economy. We measure the economy the same way we did when we had an industrial economy, but now those measures do not mean what they once did.

This is easy to see with jobs.

When you see a news story that mentions jobs, you almost automatically think that a job equals a living wage.

Not anymore.

According to a report from the General Accounting Office, (GAO), about 40% of jobs are contingent and do not provide a living wage. The BLS reports that the average workweek was only 33 hours in April 2018, and half the people in the United States earn less than $30,000 a year. That’s why median family income is about $60,000 — both homeowners work. But, if one loses a job, the mortgage becomes unmanageable.

Elizabeth Warren does a masterful job of explaining why financial security now eludes the middle class in The Two Income Trap. Read this book and you will see what happened over the last thirty years to leave many families sitting precariously on the edge of the abyss into poverty.

Given all these uncertainties about real estate and it’s obvious that the wisdom of home ownership is questionable for many people. If you have the money it might be a good idea, but for most people home ownership is out of reach, and the dangers of home rentals are significant.

Take all this information in total and it’s easy to see that home ownership is not the road to middle class financial security that it once was.

If you are thinking about buying a house, think again.

If you found this article interesting and want to know more, I highly recommend these books:

Foroohar, R. (2016). Makers and takers: The rise of finance and the fall of American business (First edition. ed.). New York: Crown Business.

Roubini, N., & Mihm, S. (2010). Crisis economics: A crash course in the future of finance. New York: Penguin Press.

Warren, E., & Tyagi, A. W. (2003). The two-income trap: Why middle-class mothers and fathers are going broke. New York: Basic Books.

What Employment Statistics Really Mean

For the last week or so, I have been exchanging Linked In messages with a young college graduate who is very upset because he cannot find a job. His questions and statistical misunderstanding are common, so I thought I would address some of his questions here.

Here are his comments after looking at the Baccalaureate and Beyond Longitudinal Study (B&B), published by the National Center for Education Statistics:

“The things I zeroed in on were that regardless of race, major, or family status, however they grouped college graduates, at least 3/4 were employed full-time and the study said that full-time employees made on average $52000. Even social science and humanities graduates, the “useless” degrees, were employed on average at 3/4 full-time and the full time employees made over $40000 on average.”

Here he quotes the study, points out that ¾ of recent graduates found full time jobs and the average annual wage is $52,000.

He thinks this is a good thing, but he is wrong.

Here’s why:

First if ¾ of recent graduates are employed full time that means that ¼ of them are not.

Wait a minute!

One quarter of recent college, graduates cannot find a full time job? That is encouraging? After spending four years and $50,000 on an education to increase employability fully 25% of graduates have something other than a full time job? In an economy, claiming a 4% unemployment rate?

That is nothing to celebrate. It’s dismal. Embarrassing. Discouraging. It says something really bad about the value of an education and the state of the economy.

Numbers like that should motivate us to find about more about how job markets and economies are working in the aftermath of the Great Recession.

Next, he cites $52,000 as the average annual wage for a recent college graduate, but he does not seem to understand what that means.

Time for a short stats class. I promise it won’t hurt.

True, $52,000 is commonly cited as an average annual income for a college graduate.

But that is an average, or mean. The mean is just all the data points added up and divided by the total number of data points. Very similar to figuring fuel mileage — add up the miles; divide by gallons of fuel, and you get average mileage for that tank of gas.

The problem with using the mean is that extreme scores have an exaggerated effect on the final answer.

For example…

There is something called wage inequality. That means an awful lot of people are making next to nothing, and a few people are bringing in tons of money. Because of this, the mean is misleading.

We need to look at the median annual income instead. The median is the number right in the middle of a distribution, the point dividing the upper 50% from the lower 50%.

Annual median income from wages has been hovering around $30,000 for the last few years.

That’s right…


If the mean and median are very different we know that the distribution is “skewed,” that is, extreme scores are making the mean or average deceptive. That is exactly what happens with measures of income. Many people make very little, and a few people make a lot.

You can find out more about median and mean, (or average) wages at this very informative Social Security Administration site:

Measures of Central Tendency for Wage Data

Next, he asks this:

“How can someone be highly educated and unemployable? Being educated means that you either have skills that can be put to use immediately, or you are able to learn new skills fast in order to begin contributing soon after being hired.”

Here is why:

Now that we know a little about the numbers, the employment picture does not seem as rosy as it did but other things start making sense.

One of my gigs is teaching business, psychology and statistics at a community college. I love working there and a full time position would be a dream job. However, the school is not hiring full time teachers and they have not for years. Instead, they use “adjuncts” — fully qualified teachers limited to working only about half the time of full time teachers at about one third of the pay, and no benefits.

At my school, adjuncts outnumber full time instructors three to one, teach the majority of classes and carry twice as many teaching hours.

This is nothing new or unusual.

Admissions have been going down for years as people figure out that the Return on Investment for education is not very encouraging. Adjuncts are the personification of that poor ROI, and they are on display at the front of most classrooms.

Adjuncts are highly educated people who cannot find a job and are trying to avoid homelessness by working part time at a college or university.

Here is a CNN story about the issue:

University teachers are exploited, too

Now maybe you get the idea that there are a huge number of people looking for work, and education level does not seem to make much difference.

That means employers can demand exactly what they want. The days of “transferable skills” and “on the job training” are over.

If you have not already done the job for which you are applying you probably will not be hired. Odds are very good that someone else has done the job for a year or more and they will be the one hired.

Here is a real life example of how the glut of skilled and educated people results in hyper competition for entry level positions:

A couple of years ago I saw an announcement for a marketing assistant. It was an entry-level position.

A bachelor’s degree in business was required, but there was something more…

The announcement listed the specific classes candidates had to have taken.

Yes, there was a list of courses like this:

MKT 310 Marketing Principles

MGT 481W Strategic Management

FIN 300 Financial Management

Being that specific struck me as outlandish so I was curious about how stringent these requirements really were and called the hiring manager.

I told him that I had and advanced business degree, a Master in Business Administration, (MBA) and that I had taken graduate level versions of the same courses listed on the announcement.

Would he accept my application?

“NO!”, he said. I was “overqualified.”

Wait a minute, I said…

“…In order to be overqualified I had to be qualified first, so what was the problem? I don’t care if I am overqualified, why should you?”

He said that every time they posted a job announcement they were overwhelmed with applicants, and the course requirements were actually a screening mechanism to keep the number of applicants manageable.

Nothing to do with the skills the job required. A screening mechanism.

Employers can ask for exactly what they want and are confident they can get it.

If you liked this post and would like to explore further, consider reading these fine books:

Alpert, D. (2013). The age of oversupply: Overcoming the greatest challenge to the global economy. New York: Portfolio/Penguin.

Cappelli, P. (2013). Why good people can’t get jobs: The skills gap and what companies can do about it. (Kindle ed.). Philadelphia: Wharton Digital Press.

Florida, R. L. (2010). The great reset: How new ways of living and working drive post-crash prosperity (1st ed.). New York: Harper.

Neuwirth, R. (2011). Stealth of nations: The global rise of the informal economy. New York: Pantheon Books.

Forget Health Insurance; Live Healthy and Manage Your Own Healthcare Instead

Americans have been arguing about health care for the last couple of decades, and most of the discourse has not made much sense. It seems that a great many people think that it is possible to give all Americans gold plated health care. They seem to think that countries like Finland or Sweden have unlimited health care for everyone and that socialism or creation of a welfare state is how they did it.

Sad to say, that is not true.

Every country in the world rations health care in some way. Lifetime limits, bureaucratic reviews on procedures and rejections of insurance coverage for medications or procedures deemed too expensive are examples of European health care rationing.

Instead of just throwing money to the health insurance industry Europeans turned to government bureaucracy to deny treatment for individuals and refuse to pay for expensive drugs and procedures. Conservative Republican might not have been far off the mark with their talk of “death panels.” Here is the human tragedy that kind of rationing causes.

In a recent study of health care delivery in European counties, researchers summarized their findings by saying:

“…we find that while there is a strong association between low income and perceived access barriers across countries, within many countries, perceptions of difficulties accessing care are not concentrated uniquely among low-income groups. This implies that factors that affect all income groups, such as poor quality care and long waiting times may serve as important barriers to access in these countries.”

We have rationing here in the United States as well. Americans who do not have much money cannot afford routine treatment, although everyone receives treatment for acute health needs. You may be too poor to pay for labs and cholesterol medications, but when you have a heart attack, you will receive treatment at the emergency room and admission to the hospital. If you are too poor to pay, but not poor enough to receive indigent care, the hospital absorbs the loss and increases prices to cover it.

The solution offered by ObamaCare was simply to open the coffers of the US Treasury to the health insurance industry. Even guaranteed profits for the first three years of ObamaCare backed by the wealth of the United States economy was not enough to satisfy the health care industry. Americans may not have received the health care they thought they were going to get, but the health care industry got exactly what it wanted.

Almost 10 billion dollars when to CEO bonuses in the aftermath of ObamaCare, resulting in an incentive to increase costs instead of lowering them. So much taxpayer money flooded the health industry that an orgy of mergers and acquisitions ensued with power and money accruing to the biggest and most aggressive players.

California tried to create a universal health care plan similar to ObamaCare but price was higher than the entire annual budget for the state of California!

Healthcare in the United States is not going to change dramatically any time soon. Like so many other things no longer once looked after by government or large organizations, we will have to manage our own health care.

This should not be surprising. Institutions that once managed so many parts of our lives have morphed into very different things.

Paternalistic companies no longer mange careers. Younger people may find this hard to believe, but in the 20th century, the company managed careers by determining promotions, requiring trainings, and paying for education. In those days, companies offered on the job training, apprenticeships, and school to work transitions.

The introduction of easy educational debt shifted the cost of education to workers and created more debt than home mortgages or credit card balances.

Companies also offered health insurance. In the early days, the company usually covered the entire cost of premiums as a way to maintain a healthy workforce. As health care premiums increased, the cost has gradually shifted to workers.

These days, with almost half of the labor force working in low paying contingent jobs, employer paid health care is outdated.

The same thing is true of retirement funding.

For most of the 20th century passing probation meant employees would receive a slice of a huge retirement pie. The emergence of 401K plans shifted the burden of retirement funding from corporations and government retirement systems to individuals.

In the wake of the crash of the industrial economy in 2006, the result has been sadly predictable. Most workers have little or no money saved or invested for retirement.

We are still in the mist of this shift towards personal responsibility for personal needs — note the municipal bankruptcies resulting from unfunded retirement mandates — but the writing is on the wall. Health care is no different.

We have to take care of our own health care.

How do we do that?

Obviously, by developing a healthy lifestyle. That means eating nourishing food, getting some degree of exercise, minding our own mental health, staying out of relationships that are bad for us, and avoiding harmful drugs like alcohol and opioids.

But those are day-to-day habits. They may be hard habits to develop and maintain, and a basic understanding of science and biology is important, but we know the path to developing daily habits. On the other hand, managing our health care does not have a clear path. At least not yet.

That is because so few people have figured out how to create an induvial health care system for themselves. How do you get a blood lab done without a doctor to order it? How do you read a lab? Where can you get prescription medication without a doctor?

The basic information is easily available. Companies like Life Screening are a good place to start. They offer screenings for a wide range of physical dysfunctions, but no actual diagnostics. If it has been some time since you lost your health care coverage these services will look for serious problems.

After that, get a blood lab. Sonora Quest offer labs for everything from hormone levels to lipid panels to cancer detection. The prices for each test range from reasonable to outrageous, but like screening companies, there are many companies offering blood labs and competition is already lowering prices.

The results of your blood work will tell you whether the levels detected are high or low. With a little research, you can find out what medications treat your conditions. If you have records of previous blood work and prescriptions, the best bet is to repeat what a doctor has done in the past.

Next, find an online pharmacy, fill out the order form for the prescription drugs you want and if the staff doctor who reviews your lab report agrees you will get your meds in just a few days.

Do not forget herbal and “alternative” sources of health products, but be careful, especially if you do not have a background in science.

One of the wondrous things about the world we live in is the democratization of knowledge. Anyone who has an association with an educational instution has access to academic journals. This includes any employee or student of any college or university. Even membership in public libraries includes access to scholarly journals. Google Scholar is also an excellent source of academic research.

Before even thinking about using something publicized on the internet, Google the name of the product along with “review” or “scam.” If the product you are considering passes muster, search for professional academic research in Google Scholar or the academic databases provided by the educational institution with which you are affiliated.

If you do not understand the science, do not order the product.

This might seem very desperate way to get health care, but it seems to be increasing in popularity.

Recently one of my friends had this to say:

“I can’t believe that I am an American and I can’t get a statin to lower my cholesterol from an America doctor, but Germany has no problem creating a script and filling it more inexpensively that I can get it here.”

Maybe the future will hold the secrets to solving our health problem, but for now increasing numbers of Americans are shouldering the burden of supplying their own health care. That does not seem so startling in the context of managing our own retirement, education, and career, and maybe that is the most startling thing of all.

Why You Don’t Have a Traditional Full Time Job and Never Will

The economy has changed in some very fundamental ways in the last thirty years. It has been a gradual process, too slow to make sense as it was happening, but now there has been enough change that a few things seem obvious, at least to me.

The Industrial Revolution is over. Industry was too dirty and too dangerous, so we taxed and regulated it until it moved to Asia. Did you see what the air in China looked like during the Peking Olympics? That is what air in the Steel Belt used to look like in the 50’s and 60’s. Clean, safe factories are too expensive — we refuse to pay for the products made in them, so they went to places where labor is cheap and taxes are low. Blame whoever you like — greedy business people, cheap consumers, the Democrats, the Republicans — it does not really matter because industry is gone and it is not coming back.

With them have gone unions, and they are not coming back either. Unions work only with the threat of strike, and strikes are effective only when work revolves around the needs of a machine, (with an exception I will get to in a minute). The thing that made unions powerful was the threat of workers refusing to tend to the needs of machines that were all located more or less in one place. Service work does not lend itself to unionization because it is decentralized and does not involve machines. Unions are a relic of the age of industry and both are now irrelevant.

The end of industry has effects far beyond manufacturing. Consider how factories were organized. At the end of the 19th century, hundreds or sometimes thousands of people had to coordinate their efforts to make a factory run. Aside from armies in times of war, never before had there been any need to organize such large numbers of people. How did the managers of factories do it? By creating what we now call bureaucracy. The idea was that everyone had a specialized job, and those jobs were done according to rigid procedure. Each worker came to work at a precise time and tended to a specific machine according to an explicit procedure. Deviation from process or procedure was grounds for disciplinary action.

Notice that the only places where unions survive with any vitality are in government? That is because government uses bureaucracy as its organizational model just like factories did. Just about anyone who is paid with tax dollars — social work and defense contractors included — work in bureaucracies. But bureaucracies are relics of the 19th and 20th century. They are fading away in the business world because they are no longer relevant in the internet connected global economy of the 21st century.

Businesses today do not normally organize themselves on a bureaucratic model. Today they identify a core competency — the main thing they are really good at — and outsource the rest. Human resources, accounting, supply chain management, tech support are all contracted out to companies that specialize in those things as their core competencies.

I see a lot of people arguing about outsourcing, but I’m not so sure it is a bad thing. It gives us a chance to cash in on things we love or are really good at. At any rate, outsourcing is another one of those things that is not going away, so we have to learn to turn it to our advantage as best we can. I guess I tend to think about how to make a living in the economy that exists rather than to make judgments about whether it is good or bad.

However, I think it can be useful to think about the events and forces that created the economic situation we are in because understating those forces might give some insight to where we are going and what we need to do to make a living when we get there.

At the end of the Second World War, the industrial world was destroyed. Countries that had been emerging as world economic leaders were in ruins. That meant that anyone who needed anything had to buy it from the United States. We built our incredible country to a large degree on the backs of rest of the world rebuilding from the war. (Let’s not forget the Marshall Plan, however. This was not robbery. More like indentured servitude, but even that came to an end.)

By the 1980’s the rest of the world caught up and we were competing with the losers of the war. Japan made better cars, so we bought them and US auto manufacturing began its long death spiral. The few remaining US car manufactures are not really US at all — they are international consortiums that assemble what was manufactured somewhere else. Zenith was the last domestic electronic manufacturer, (sold to Korean firm in 1995), and now just about all our electronics comes from Asia. China now makes all the odds and ends we need for daily life and we gladly buy it at Wal-Mart.

Remember all those years we felt guilty about exploiting Third World countries? Guess what! They are not Third World anymore. We live in a global economy and now people, businesses, and countries on the other side of the world are as economically relevant as different states were in the past. When I graduated from college in 1980, it was a big deal for classmates to move to another state to start their careers. When I earned my MBA in 2003, some of my classmates were considering going to India or Asia to (jump) start their careers.

As those other countries increase their share of world wealth, ours declines. I do not think that is a huge tragedy; it is just a sign of changing times. Things are evening out in the worldwide economy, but this happened once before. Things are similar to where they were at the beginning of the 20th century, with the United States competing toe to toe with Europe. Now, of course it is not just Europe, but Asia as well. We are no longer the undisputed economic super power. Things are averaging out, and our standard of living is averaging out towards that of the rest of the world.

The United States is turning into a two-class society, with people doing either pretty well or not well at all. We have known that the middle class was declining for a long time. Now we are able to see the decline for ourselves because we are living though it. Why are we acting surprised? It’s not as if we have not been hearing about the decline of the middle class for the last thirty years.

For all these reasons, (and plenty more), the world is not what it once was. The things we grew up believing in and depending upon are no longer relevant. For the last twenty years or so there has been such a glut of educated and experienced workers that education and experience do not count for much. Employers can hold out for exactly what they want — no more and no less. Being overqualified is just as big a jobstopper as being under qualified. In 2006 12% of the people living below the poverty level in Tucson, (where I live), had at least a bachelors degree. Nationally, men over the age of 40 — the age were work experience is supposed to pay off — had longer spells of unemployment than those under 40.

It used to be that a professional was a doctor, lawyer, or maybe an engineer. Someone who was so highly educated that they could work autonomously. Now home health aides in my town are called “Home Health Professionals”. Hairdressers call themselves professionals. So what is a professional? Another concept that has become an anachronism, I guess.

So what to do? We can burn up the internet arguing over whether UP is elitist because it has “professional” in its title, even thought the concept of professional is so diluted it means little. We can hope for the resurrection of unions, but people have been waiting centuries for that other Second Coming and it has not happened yet either. We can demand the government save us, but until we start making money and paying taxes government cannot do much, (not that it ever could, even when it was not a trillion dollars in debt and on the verge of bankruptcy).

Here is what I think.

In one way, nothing much has changed. If you want the world, or the country or the neighborhood to be a better place you have to start working to make it happen. What has changed, however, is that nobody is going to give you a job. Traditional jobs are quickly becoming another relic of the past. The answer is obvious — you have to create your own job. In that way things are much like they were in the 19th century before huge factories and bureaucracies created jobs. Our ancestors in the 19th century were largely entrepreneurs. You probably have shopkeepers, farmers and trades people in your family history, just as I do.

Today we live in a global economy connected by the internet. What can you do on a computer that would be of value to your neighbor? And remember, with the internet your neighbor might be in Boise, or Calgary or Ft. Lauderdale.

No, it will not be easy. So what? Our parents and grandparents did not find the Depression, or the Dustbowl or World War Two easy either. Thank God we are not facing challenges of that magnitude.

I certainly do not have all the answers — or for that matter even a few answers. However, one thing is certain. We will not be able to work our way through the challenges of the 21st century by reinventing the 20th. We need to adjust our thinking to match the reality of the times. But first we have to accept that reality.

Two Questions You Should Always Ask About Statistics in the Media

There are two questions to ask whenever you see a statistic.

First, what exactly is being measured? The statisticians crunching numbers know what they are measuring, but the people repeating the numbers know what they want to promote. And promote they do! There seems to be a lot of temptation to misrepresent data promoting political and social agendas.

For example, we are repeatedly told that the unemployment rate is less than five percent. Politicians and pundits are beating us over the head with this number and arguing over which President should get the credit.

The only thing is, it doesn’t “feel” like full employment. I do not know anyone taking a loan for a new car, buying a bigger house or signing a lease on a new apartment. According to polling company Rasmussen 46% of us know someone out of work. Although that is less than it has been in the past, it does not support the idea of full employment. What can we do to find the truth?

This is where the first question comes in…

Question #1:

What exactly is Being Measured?

In other words, what does it mean to be employed?

According to the Bureau of Labor Statistics (BLS), people are employed if they work at least 15 hours a week. But they don’t have to make a living wage, or even be paid.

For example, a stay at home mom might help her entrepreneur husband keep the books on weekends, but she is not paid for it. However, because she benefits from her work, she is considered employed.

Likewise, contingent workers cobble together a living from as many gigs as they can find and make up about 40% of what the BLS considers employed, but they do not generally make a living wage.

We tend to think that being employed equals making a living wage, but that isn’t true anymore. A better measure of economic health of the average American might be the midpoint of all annual W-2 income. That number has hovered around $30,000 for years.

Question #2:

How are they collecting their numbers?

The way numbers are collected means a great deal.

For decades, the education industry insisted that the more degrees one has the more money one makes. But wait a minute! I work at a community college where all instructors are required to have at least a master’s degree, but more than half are part timers because they cannot find a full time job. This is a well-known crisis across the country that has been getting a lot of attention. Also, the Department of Education (DOE) follows bachelor’s degree graduates for years and tells us that about 30% are unemployed or completely out of the labor force four years after graduation.

That does not sound like more education necessarily means a better job or more income.

How can this be?

Just a little sleazy data collection…

The education industry surveyed companies in which people with advanced degree worked. Sure enough the longer these people when to school the more money they made. But these people were already working. The graduates who could not find jobs are uncounted. The education industry does not want to know how many had to take low paying jobs because they could not find jobs for which they studied.

Think about it. Do you know anyone with an advanced degree working in a job that does not require it? The roofer who fixed a leak in my roof had a master’s in public administration and the tech who hooked up my high-speed internet had two masters’ degrees. The education industry will never detect those people because they looked only at jobs requiring an advanced degree.

The DOE can tell us because it follows students for four years after graduation. That is a longitudinal study and it is the most accurate method of detecting cause and effect.

What do they find?

in 2012, four years after graduation, 15% of bachelor degree holders are unemployed, about half suffering long-term unemployment and the other half short-term unemployment. The other 15% have left the labor force, either going back to school or finding other ways to get by without a job.

You probably have never a funny book about statistics. Here are two — Drunkards Walk and Naked Statistics. I promise they will make you laugh out loud at the same time that they explain how statistics are manipulated and misinterpreted.

Wage Equality in the Wake of the Great Recession

It is the 21st century version of Plato’s maxim that owners should make no more than five times the wage of their lowest paid employee. We are quickly coming to the end of concepts like wages and hourly pay. The problem is that things have changed so much it’s hard to understand how things now work, not to mention how to create workable alternatives.

In my view, the Great Recession was more than just the housing bubble bursting — it signaled the last gasp of the industrial economy. Home building was the last labor-intensive assembly line to go out of existence, and there was no other path forward than leaving the industrial age behind. However, that means that all of our financial measures are no longer relevant, (or maybe relevant in a different way than they had been).

For example, productivity had always meant the degree to which workers could make their efforts more efficient. After 2006, it measures the degree to which machines are replacing humans. A job used to mean a 40-hour workweek and financial security. Now the average workweek is only 33 hours and about half the employed in the United States receive some sort of government assistance.

One of the most glaring casualties of the end of work is the end of traditional jobs. About 40% of all jobs are now contingent — that is, part time and/or short duration. Workers work only when there is enough work and are often paid piecemeal, not hourly. There are now fewer people in the labor market then there were in the 1970’s when women began entering the labor market.

One of the consequences is that full time jobs go largely to people who already have full time jobs. Recent studies from the Fed found that employers use other employers to vet job candidates, that very few people over 40 are ever hired, and that when unemployment lasts more than six months candidates are very unlikely to get hired. The number of good paying jobs has not expanded for years, so there is no need for large scale hiring; workers lucky enough to have a good job circulate within the job community.

So how does Wage Equity work when there is no work to generate wages? How will that affect the millions of people who have created a way to survive without a job? (Like going on disability, staying home to take care of kids, or like me, going to school forever.)

Wage Equity runs into complex tax issues, also. Under the new tax reform act the highest tax bracket for corporations is now 21% for firms claiming over $15 million in profit. However, up to that point there is a sliding scale and “percentage plus” calculation. To make things even more complicated tax attorneys and accountants have a lot of latitude in how they structure their tax reports.

For example, salary compensation is considered COGS, (Cost of Goods and Services), a deductible expense and therefore “free money”. Additionally, CEOs and others often accept stock option contracts — the chance to buy corporate stock at some point in the future at current prices. These can be very lucrative, but quite challenging to assess as compensation. I’m not even sure if stock options are considered compensation in the same way that salary and bonuses are.

This brings up the entire issue of “ ” class=”markup–anchor markup–p-anchor” rel=”nofollow noopener” target=”_blank”>financialism” — that is, the trend of large corporations to abandon their core service or product business model and switch to making profit by manipulating their financial activity. This is what led to the recent General Motors lock debacle. At GM the “finance guys” have pushed the “car guys” out of influential management positions; GM still makes lots of money, but most of it is from increasing stock prices rather than increasing sales or profit margin. Design and production mistakes are on the rise throughout corporate America as a result.

We are seeing a lot of this in the medical and health insurance industries. You may have noticed the surge in M&As in the health insurance and pharma industries in the wake of ObamaCare. Tons of tax dollars flooding the market, combined with guaranteed profits turned companies like Alergin and Health Net into finance companies instead of health or drug manufactures.

Something similar is happening in the housing industry involving the creative manipulation of debt. Private equity companies like Blackstone will put up $10 million in real estate as collateral for a $100 million loan. They use the loan to buy property of a distressed real estate company or a block of repossessed homes, and then lease the property to either the original owners or property management firms who collect rent. Then they claim the debt as a business loss and amortize it over a period of years to avoid taxes. (That is shadow banking by the way.) Figuring out how much senior manager’s benefit from that kind of arrangement, especially given the variable meanings of salary and compensation is a lawsuit-filled nightmare.

We live in an era that does not need millions of workers. Computers and software have replaced people. Imagine — For the first time in history, there are more people than there is work to go around! There is so much excess labor that its value has dropped to nothing. The median W2 wage is only $30,000, and that follows year’s long decreases following the collapse of the industrial economy in 2006–08. We might be heading for an economic culture like that of the Middle Ages — impoverished serfs working at the will of elites who own all the wealth.

Maybe the solution is Universal Basic Income. If we get rid of all the social service bureaucracies sucking up wealth and not passing it onto their clients we can afford to give everyone — yes everyone — enough money for food, shelter and basic health needs. Finland is experimenting with this idea, as are a few states here in the US. Eventually the entire tax bill to support such a scheme will come from the wealthy elites who write the laws. They might see this as a good business decision because the last thing anyone wants is a population of idle hungry –often the fuel for social upheaval.

The End of the Industrial Age: What Next?

The old economy gave its last gasp in 2008 when the “housing crisis” brought down Lehman Brothers and we found out that some businesses are “too big to fail”. At least that is what we have been brought to believe. The real story is more interesting and something we all need to understand in order to chart our personal paths into the next economy.

What happened in 2008 was the end of the Industrial Age. The Industrial Revolution that began with the steam engine in the early 18th century matured into the Industrial Age during the 19th and early 20th century, and ended with the emergence of an electronically connected global economy in the late 20th century. By that time the means of production, (that is, factories), began integrating with computerized robots, redefining the entire concept of “industry”.

Historians could easily choose the 1980’s as the beginning of the end of the Industrial Age. It was a time of stunning economic changes, when huge companies that were synonymous with the global dominance of the industrial strength of the United States suddenly when bankrupt. Tens of thousands of people who had worked faithfully for these industrial giants found themselves not only unemployed, but also without promised retirement plans. Thousands more who had already retried found themselves without their pension payments, dependent only on government old age benefits. The people who lived through that time had no inkling of the underlying causes of the financial chaos they endured or the end of an era it signaled.

Two completely different things happening at about the same time combined to drive a stake into the heart of US industry and ushered in the first glimmer of the global economy. At the time, neither of these things attracted much notice, but as the years went by their impact became clear. Individually, neither is much to take note of, but each one magnified the effect of the other, and over the years each matured into more efficient and ubiquitous forms; now more mature versions surround us, yet we fail to appreciate how dramatically they affect global business.

The first of these two occurrences was the fax machine. Fax machines are not a 20th century invention. The first business use of a fax machine was a devise that converted the dots and dashes transmitted by telegraph to letters and were used to send messages between Paris and Lyon in 1865. By the turn of the century an improved devise transmitted a wanted poster, complete with a drawing to the suspect, from Paris to London.

The problem with fax machines is that only one is useless; in order to send a message the person to whom one wants to send a message needs to have a compatible devise, along with electricity, telephone lines, and related infrastructure. It was not until the early 1980’s that enough people in the United States had fax machines to create a “critical mass” robust enough to support widespread business use. When that point was reached, however, it took very little time for fax machines to go global. Suddenly orders, receipts, and bills of sale could be transmitted instantly to whoever had a fax machine. Physical financial instruments delivered by the mail system established by Benjamin Franklin were no longer required to place an order when inventory got low or a market demand for an item emerged.

The financial industry began their move towards electronic financial transfers during this time. No longer, did physical checks need to be flown to and from central processing centers every night before credits and debits could be applied. The international banking system very quickly integrated the speed that fax machines provided into their business transactions. For a while in the early 1980’s international financial transfers were facilitated by clerks sitting at computer terminals. Popular culture featured these workers in movies like the 1986 Whoppi Goldberg film Jumpin’ Jack Flash, and Texas singer Michelle Shocked referenced her time as an international financial clerk in her song “Anchorage” on her second album “Short Sharp Shocked” released in 1988

The increased speed that orders and financial transactions could be made did not mean much without the second event. Not really an invention as much as a change in perspective it changed the world, but went largely unnoticed. In the early 1980’s goods were transported much as they had for the preceding century. Factories created products and stacked them on wooden pallets that were driven into railroad boxcars with forklifts. Once at their destination more forklifts would drive the pallets of goods form the boxcars to large delivery trucks that would transport the goods to warehouses. At the warehouses, the goods were organized and stored until ordered and delivered to retailers. Ocean transport was still a matter of cranes lowering large empty nets into holds of ships where strong men would use their muscles to place goods into the nets. Cranes would lift the filled nets out of the hold and place them on the dock where more men would stack the goods on pallets for the forklifts to drive into boxcars for transport to warehouses.

In the late 1970’s and early 1980’s Burlington Northern Railroad Company was becoming concerned about competition from more efficient means of transportation. It was losing freight business to trucks, and passenger travel was becoming dominated by cheap air carriers. In their book Wisdom of Teams, Katzenbach and Smith wrote a fascinating account of how a small group of experienced managers working for Burlington Northern inadvertently revolutionized international transportation. Their idea, a simple concept that became obvious only after a change in perspective, would not have had the impact it did except for the worldwide use of fax machines. Those two things taken together — a simple change in how rail transportation was thought of, and the advent of cheap international communication — combined to drive industry from the United States to Asia and to signal the beginning of the end of the industrial age.

For years, railroads had loaded semi trailers belonging to the trucking industry on flatcars, carried them close to their eventual destination, then unloaded them and turned them over to the trucking industry for final delivery. This was called intermodal transportation, but it had been viewed by the railroad industry with contempt because it involved cooperation with what they viewed as their direct competition, the trucking industry.

Burlington Northern saw truckers as brutish amateurs, upstarts in the freight hauling business who were unconstrained by fixed rail networks or interstate regulations, who had no tradition or reputation to recommend them. When a small team was assigned to upgrade Burlington Northern’s’ small inter-modal division little was expected. As the team studied the deficiencies of the intermodal system, it became clear to them that the company had not exploited a valuable possibility. The inter-modal system could be made more efficient in a number of ways, but a vague and unidentifiable piece was missing. It was not until the team looked at the problem from a different direction and in so doing redefined the entire situation.

For months, they had thought of themselves in the railroad business making a foray into the trucking business, but suddenly it occurred to them that they were not in the railroad business at all — they were in the transportation business. That simple change of view made all the difference.

Instead of viewing tucks as competitors they began to see trucks as a tool to be used. At first Burlington Northern contracted with tucking companies, and quickly bought their own fleet of tractors and trailers. They reorganized the network of ramps and cranes needed to move trailers from pavement to flatcars and made the entire system more efficient.

As diminishing costs and increasing business proved the value of the concept, someone came up with a new idea. Why use trailers? Why not use a container that was just as much at home sitting on a flatcar as being hauled down the highway behind a tractor? Or for that matter, stacked on a ship? Or rolled into a jet powered cargo aircraft?

And so started the era of container shipping. Now a container could be packed with products made in efficient Asian factories with cheap nonunion labor, placed aboard a ship with hundreds of other containers, off loaded on the west coast of the United States, moved by rail to a location near the final destination, and trucked the final distance to the eventual destination. Computers calculated the cheapest method of transportation every step of the way and products with the highest profit margins and shipping charges became a priority. Suddenly the cost of shipping goods fell dramatically.

So dramatically, that factories in the United States could no longer compete. Not only did Asian producers have much cheaper labor, but they also had the money for the most modern production facilities. US Steel was the benchmark steelmaker for every other producer in the world, an icon of American industry and the pride of US industrial might. However, the furnaces of US Steel were using the technology of the 1920’s, while Asian steelmakers were financing state of the art computerized steel mills. US Steel went out of business.

Thus ushered in an era in which Americans learned a new vocabulary of finance terms. “Arbitrage artists” launched “hostile takeovers” of factories because their assets were worth less than “net future value”. In other words, the property the company owned could be sold for more money than what it could ever be expected to make. The dawn of the global economy had arrived, and suddenly American factories and workers were competing with factories and workers in Asia.

“Arbitrage” is a financial term used when an imbalance exists between the values of two or more things. In the case of the US economy in the 1980’s the imbalance was between the cost of output between old American industries and newer industries in Asia using lower priced labor. Arbitrage artists were wealthy and well-connected Wall Street professionals who created complex deals in which investors offered enormous sums to shareholders of struggling companies. Shareholders were offered far more money for their shares they they could ever hope to gain by holding them. They had little choice but to sell, although companies often used bankruptcy a tactic to hold off these hostile takeovers. It did not matter if the arbitrage attempts were successful or if bankruptcy succeeded in maintaining the original owners of the company. In either case, assets — the physical property of the company — were then sold, often to foreign competitors. Entire factories were exported to Asia, Mexico and South America.

However, what sparked the ire of Americans against the arbitrage artists and the deals they made was that pension funds and other worker benefits were included as assets of the company. Bartlett and Steele, two reporters at the Philadelphia Inquirer, explained the details in America: What Went Wrong, published in 1992. They profiled hard working Americans who found themselves without pensions or health insurance because those assets had been liquefied during an arbitrage battle or bankruptcy proceeding. After working for decades in American factories that supplied the world with everything from freight cars to bubble gum, these people created the middle class, bought homes ownership, sent their kids to college and drove new cars. One the verge of retirement, however, these same people often found themselves selling all they had acquired in a lifetime of loyal labor in order to preserve their lifestyle. In the end many of them moved in with children or went on public assistance.