Sunday, December 7, 2008

The Recession - What's Different This Time?

OK, so President-elect Obama lowered our expectations by declaring that the recession we are in will be worse before it gets better. Now it is official.

So, we tighten our belts for the next twelve months or so, and then everything will be better, like in the previous recessions in the past 50 years, right? Not so fast. This downturn already has swallowed entire industries, with more lining up for government bailout so they won't disappear. Half million jobs disappeared in a month, the most in modern history. Did this happen overnight? Hardly. This witch's brew has been brewing for a couple of decades, and it has several other firsts to its credit, some that are not so obvious.

1. Highest total debt/GDP ratio in history. During the great depression, the total debt/GDP hit 260%. Now it stands at 350%. A healthy ratio is 150% or lower. Which means we have 200% of GDP's worth of debt to pay off (that is about $29 trillions, with a "T". Boils down to about $100,000 per capita, or $400,000 per family of 4).

2. Hollowed out industrial base: Almost every consumer item besides food, drugs and shelter is made somewhere else. Even in rare occasions something is made here, it is designed and engineered somewhere else. During the last depression, the US industrial base was one of the tops in the world.

3. Not enough brainpower left to build the 21st century economy: Jobs of the future need more college graduates, and yet we are going to graduate fewer students out of college. College is out of reach for many middle class families, and is only getting more unaffordable. More striking is the number of engineers coming out of our universities, which has steadily dwindled in the last three decades. The social scientists have defined what "math" and "science" our kids should learn (or not) in our K-12 system. So, many come out of high school unprepared for a technical career.

4. Global competition: The US was pretty much isolated with few other global competitors during the last depression. Trade was a fraction of what it is today, given the lack of jet, container, and surface transportation infrastructure. But since the internet took hold, competition in services became reality, adding salt to the wound, since competition in manufacturing has been lost already.

What about the solutions being talked about? I have heard the new administration proposing a massive public works program like the New Deal of the FDR days. I think the building of highways worked in the 1930s because it was one of the big bottleneck to internal trade. But today's infrastructure, especially in the area of communications, has figuratively flattened the world. That is why I think the traditional '30s style rebuilding won't work this time. Yes, we need to fix our roads, bridges and school buildings. Will it help the rest of the nation to be competitive when the recession ends? I think not. What is sorely needed is focus on unique value added technologies like clean, renewable energy, cleaner transportation technologies, and better wireless communication infrastructure. This will give us something of value that we can trade with the rest of the world in exchange for consumer goods, instead of piling up trade deficits.

But to do this, we need more unique technologies we can all our own, and which have a ready global market. Which means we need more patents. Which means we need more PhDs in Science and Technology, who can invent these technologies and file for those patents. Which means we need more K-12 student candidates who want to be PhD Scientists and Technologists. That will be the house that Jack built. We are missing the bricks for this house that are needed for the first layer of this house, so any talk about building the superstructure is likely to provide only superficial results.

I have not heard talk yet from the administration as to how we will accomplish this.

Monday, December 1, 2008

On 21st Century Jobs

In K-12 education circles, has been fashionable in the past few years to talk about 21st century jobs. Every school district official I met had something to say about how his/her district was preparing students for “21st century jobs”. When I probe a little deeper, however, I get the feeling that the depth of understanding as to the nature of these jobs is very superficial. When asked, I get what sounds like a canned response “jobs involving creativity, critical thinking skills, learning how to learn”, and so on. That got me thinking about how our education system can deliver on the promise of true 21st century jobs.

Let me set the context. Our universities seem to be doing a great job of creating graduates that can compete globally. Others are catching up, but we seem to be still on top. Never mind that we have mostly foreign born science and engineering professors teaching in these universities, to mostly foreign born graduate students. For the moment, we can bask in the glory that we are #1. So, the problem of turning out college graduates for 21st century jobs does not appear to be with our institutes of higher education.

Now let us go a little deeper into the rabbit hole. What about our high school graduates? I have already written a piece about “How To Turn Out World Class High School Graduates” from the perspective of a customer. Clearly, there is a broken link between our K-12 system and its view of 21st century jobs, and our university system and its view of 21st century jobs. I will continue to assert that this is one broken link that we cannot afford to have. If it is not obvious now, it will be obvious a few more years into the greatest economic downturn since the last great depression. To peel this onion, we have to start with what we have been historically good at, and what we have left to chance.

Let us start with all the great ideas that we came up with. In no particular order, I can rattle off at least a dozen history-altering 20th century inventions credited to the US: the transistor, atomic power (for energy generation), a dozen or more computer languages, statistical process control, genetically engineered drugs, wireless technologies, the photocopy machine, the SLR camera, the TV, the VCR, ,the integrated circuit, the computer and the list goes on and on. One funny thing I noticed is that each one of these inventions is keeping hundreds of millions of people gainfully employed in well paying jobs IN OTHER COUNTRIES – in the 21st century. Let me elaborate some that I have listed:

The Transistor: Invented by William Shockley and Pearson in AT&T Bell Labs, (later confirmed by Brattain and Bardeen from the same labs) one of the premier private research labs, in the 1940s, for which they won a Nobel Prize. Attempts to commercialize the transistor in the US were unsuccessful, until Sony of Japan licensed it and perfected large-scale manufacture. Other Japanese companies followed suit, and the rest, as they say, is history. Today, there is no large-scale consumer electronics industry in the US to speak of. AT&T Bell Lab itself is no more, having been broken up into parts and sold off to foreign companies.

Nuclear Power for Energy: Peaceful uses of nuclear energy have been a good byproduct of the technology that literally started with a bang. But after 3-Mile Island and Chernobyl, the perception of this as a source of energy has declined. In the meantime, France, Japan, and developing countries like India have accelerated deployment to reduce dependence on foreign oil. The cure for bad technology, according to them, was better technology. Our answer: no technology. Now new nuclear plants have been built here in the last 30 years.

Computer Languages & the Internet Browser: This has been the single largest generator of high paying jobs worldwide. Universities and corporate research labs in the US led the development of almost all the ideas behind the connected world we have today. And yet the job growth in this field has fled this country. Most of the programmers are in other countries. No country has benefited from this than India, where one private university, the National Institute of Information Technology, turns out more programmers per year than the entire nation of the United States. Back in this country, I have not seen any recent math text books with Basic algorithms to solve problems. Instead, there are screen shots of calculators where students just punch buttons. Nor have I met many math teachers who can teach true programming. I wonder whatever happened to critical thinking we talk so much about? If the K-12 system does not create excitement in this field, who will supply the graduates to our university system?

Statistical Process Control: This is a concept that was lost on the US industry for a long time. Championed by US thinkers like Deming and Juran, these ideas never caught on, until Japan Inc. decided to use these techniques to improve their cheap, and shoddy product image. And improve they did. And the Koreans followed suit. Based on a deep understanding of mathematics and statistics, these techniques propelled Japanese car brands to the top of the quality charts. The US auto industry has always trailed in this aspect, and had to rely on laws and truck subsidies to survive. Part of why the “Big Three” are at the verge of bankruptcy is the failure to follow these concepts in the early stages. Waiting in the wings is Tata motors of India, with a car that sells in India for $2500, and gets 50 miles per gallon. They promise plenty of 21st century high paying jobs – in India.

Genetically Engineered Drugs: One other field that was pioneered in the US, and treated with suspicion by the public. While companies like Genentech seem to be doing quite well, the growth has come from other countries. Ranbaxy labs in India grew tremendously in the last few years, and is on the verge of passing global giants in this field. Recently, a Japanese company acquired a large stake in this company, probably since Japan’s aging population will needs a reliable supply of quality drugs.

Wireless Technologies: Spearheaded by the meteoric rise of the cell phone, this field is just getting started. Once the undisputed territory of US companies like Motorola, this industry is now dominated by Finnish and Korean companies. This is one industry that is forecasted to grow, in double digit percentages, well into the 21st century, providing high paying, high tech jobs for their employees. Meanwhile Motorola just announced that they were exiting the cell phone business. The only other US company that makes cell phones, Apple Computer, has only a few percent global market share. Interestingly, Korean and Finnish high school students routinely come in first or second in math and science in worldwide comparisons. Coincidence? I do not think so.

Do we see a trend here? Can we connect the dots? Needless to say the remaining industries such as cameras, the TV, the VCR (or DVD player), computers, and so on, are creating high paying 21st century jobs elsewhere in the world, while our domestic industries are turning into hollow sales and marketing organizations. One common thread in the places where such industries flourish is a razor sharp focus on creating the best mathematical and scientific talent in the world. I will assert that if our focus, especially in the K-12 education system, changes to match or better theirs, we will also create the same high pay, high growth environment in this country. The downside of not doing so will be an economy that we have today. Other than food and shelter, we are forced to buy what other countries make, with money borrowed from them. There will be jobs here too, but with subsistence wages and no benefits to speak of. Our system has been turning out high school graduates, 50% of who cannot pass an 8th grade math test. I will assert that it is a big part of what led to the mess we are in. The time to act was in 1983, when the “Nation at Risk” study came out. We failed to produce results then. The result I think has led to economic bondage of sorts, for our kids and grandkids, and no amount of apologizing is going to make their lives any better. I will maintain that only if we act like our lives depend on rectifying the current sorry state of math and science education can we redeem ourselves. One thing that we appear to be good at, is to come together at a time of crisis and commit to a solution that leads to common good. My hope is that most people who read this can make this connection, and drive changes in their schools and communities.