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jerryking : greg_ip   6

China Started the Trade War, Not Trump
March 23, 2018 | WSJ | By Greg Ip.

Even free traders and internationalists agree China’s predatory trade practices—which include forcing U.S. business to transfer valuable technology to Chinese firms and restricting access to Chinese markets—are undermining both its partners and the trading system....starting in the 1980s, economists recognized that comparative advantage couldn’t explain success in many industries such as commercial jetliners, microprocessors and software. These industries are difficult for competitors to enter because of steep costs for research and development, previously established technical standards, increasing returns to scale (costs drop the more you sell), and network effects (the more customers use the product, the more valuable it becomes).......In such industries, a handful of firms may reap the lion’s share of the wages and profits (what economists call rents), at the expense of others. China’s efforts are aimed at achieving such dominance in many of these industries by 2025.
China  China_rising  comparative_advantage  Donald_Trump  Greg_Ip  increasing_returns_to_scale  myths  network_effects  predatory_practices  protectionism  tariffs  technical_standards  trade_wars  U.S.-China_relations  winner-take-all  WTO 
march 2018 by jerryking
We Survived Spreadsheets, and We’ll Survive AI - WSJ
By Greg Ip
Updated Aug. 2, 2017

History and economics show that when an input such as energy, communication or calculation becomes cheaper, we find many more uses for it. Some jobs become superfluous, but others more valuable, and brand new ones spring into existence. Why should AI be different?

Back in the 1860s, the British economist William Stanley Jevons noticed that when more-efficient steam engines reduced the coal needed to generate power, steam power became more widespread and coal consumption rose. More recently, a Massachusetts Institute of Technology-led study found that as semiconductor manufacturers squeezed more computing power out of each unit of silicon, the demand for computing power shot up, and silicon consumption rose.

The “Jevons paradox” is true of information-based inputs, not just materials like coal and silicon......Just as spreadsheets drove costs down and demand up for calculations, machine learning—the application of AI to large data sets—will do the same for predictions, argue Ajay Agrawal, Joshua Gans and Avi Goldfarb, who teach at the University of Toronto’s Rotman School of Management. “Prediction about uncertain states of the world is an input into decision making,” they wrote in a recent paper. .....Unlike spreadsheets, machine learning doesn’t yield exact answers. But it reduces the uncertainty around different risks. For example, AI makes mammograms more accurate, the authors note, so doctors can better judge when to conduct invasive biopsies. That makes the doctor’s judgment more valuable......Machine learning is statistics on steroids: It uses powerful algorithms and computers to analyze far more inputs, such as the millions of pixels in a digital picture, and not just numbers but images and sounds. It turns combinations of variables into yet more variables, until it maximizes its success on questions such as “is this a picture of a dog” or at tasks such as “persuade the viewer to click on this link.”.....Yet as AI gets cheaper, so its potential applications will grow. Just as better weather forecasting makes us more willing to go out without an umbrella, Mr. Manzi says, AI emboldens companies to test more products, strategies and hunches: “Theories become lightweight and disposable.” They need people who know how to use it, and how to act on the results.
artificial_intelligence  Greg_Ip  spreadsheets  machine_learning  predictions  paradoxes  Jim_Manzi  experimentation  testing  massive_data_sets  judgment  uncertainty  economists  algorithms  MIT  Gilder's_Law  speed  operational_tempo  Jevons_paradox  decision_making  steam_engine  William_Jevons 
august 2017 by jerryking
The Economy Needs Amazons, but It Mostly Has GEs
the country as a whole badly needs some rules-defying risk-taking. For business, that means a bit more Amazon in the boardroom and a bit less GE....The purchase of Whole Foods by Amazon introduced a level of volatility and turmoil (at least singularly to the retail sector) which had been absent from the market for a long time....The rest of the market remained placid. And months of historically low volatility has begun to look like dangerous complacency....... another, potentially more troubling explanation: stagnation. Muted markets may be an inevitable product of steady, sluggish growth, low and predictable interest rates, declining business startups and failures, and decreased competition. In other words, the problem is, there aren’t enough Amazons disrupting the stock market and the economy.....Jeffrey Bezos founded Amazon in 1994, he has prioritized expansion and innovation ahead of profit. In its early years, free cash flow—cash from operations minus CAPEX—hovered around zero. Mr. Bezos approaches new products like a VC. Many will flop (like the Fire smartphone), but some will be home runs (e.g. AWS). Amazon launched Prime, which offers free delivery in exchange for an annual fee, in 2005. John Blackledge, notes Amazon has repeatedly innovated in ways that make Prime even more valuable to subscribers.......Amazon is now profitable, yet cash retention remains secondary to building great products and delighting and retaining customers.

....If Amazon is one extreme in how companies invest, General ElectricCo. is the other. It has long been fastidious about capital and cash deployment......CEO Jack Welch perfected this approach in the 1990s.. it continued under Jeffrey Immelt. Last week, Mr. Immelt said he would retire, after 16 years struggling to restore growth. In part, that reflected how financial engineering had inflated profits under Mr. Welch. Yet Mr. Immelt ’s investment decisions too often chased the conventional wisdom on Wall Street and in Washington. ...........growth is hard for any company that dominates its markets as much as GE does. GE’s size also attracts debilitating political scrutiny. ....In response to new regulations and pressure from Wall Street, Mr. Immelt largely dismantled the business...........Investors still want GE to return cash to shareholders, and it has obliged,.....while good for shareholders in the short run, this is no recipe for growth in the long run. GE’s cash flow is shrinking despite the company’s focus on preserving it, while Amazon’s is growing despite that company’s readiness to spend it.......North American boardrooms desparately needs some rules-defying risk-taking. For business, that means a bit more Amazon in the boardroom and a bit less GE

[ See John Authers article which references Vix]

The "Minsky Moment" occurs when investors realize that they have paid far too much for the credits that have bought, no buyers can be found, and the system collapses. Aka Wile E. Coyote running-off-a-cliff....The greatest dangers to us are not from things we perceive to be high-risk, because we generally treat them carefully. Trouble arises from that which we perceive to be low-risk.
digital_economy  Amazon  GE  Amazon_Prime  risk-taking  volatility  Greg_Ip  stagnation  cash_flows  long-term  growth  start_ups  complacency  instability  conventional_wisdom  Jeffrey_Immelt  Jack_Welch  conglomerates  delighting_customers  capital_allocation  Jeff_Bezos  financial_engineering  rule_breaking 
june 2017 by jerryking
Lessons of the '30s: Long Study of Great Depression Has Shaped Bernanke's Views; Fed Nominee Learned Perils Of Deflation, Gold Standard And Pricking of Bubbles; A Grandmother's Explanation
Dec 7, 2005 | Wall Street Journal pg. A.1 | Greg Ip. "In
1983, Mark Gertler asked his friend and fellow economist Ben Bernanke
why he was starting his career by studying the Great Depression. "If you
want to understand geology, study earthquakes," Mr. Bernanke replied,
according to Mr. Gertler. "If you want to understand economics, study
the biggest calamity to hit the U.S. and world economies." "Lafley was
in charge of the company's Asian operations during a major Japanese
earthquake and the Asian economic collapse. That's when he discovered,
he says, that "you learn ten times more in a crisis than during normal
times.""
10x  Benjamin_Bernanke  economists  U.S._Federal_Reserve  bubbles  financial_history  Greg_Ip  Great_Depression  disequilibriums  geology  earthquakes  '30s  anomalies  crisis  deflation  lessons_learned 
november 2009 by jerryking

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