Economy in 2015 Election

In the UK as the election approaches the main thing the most political parties agree on is that the economy needs to grow and grow fast to give us all a “better” standard of living and to pay for the social services (including the NHS).

What is the economy? I’m sure to many it is something they’ve hear of, but have paid very little attention. They may think they even know what it means. However, in a straw poll amongst some friends the most consistent view was its about how much money the country makes selling it goods and services to other countries.

Surely that is international trade? Part the economy but not the whole. The dictionary defines economy as “the state of a country or region in terms of the production and consumption of goods and services and the supply of money.”

There would appear to be three elements then: Production, Consumption and The Supply Of Money.

Money Supply first

(this basically shows that the government has almost no control over the money supply, so if you can’t be bother skip to the next section)

In the UK (and most other countries) you may think the government controls the supply of money. Well you are wrong. The Government controls how much money is printed/minted but most money exists as numbers in the computers of commercial banks.

The reality of how money is created today differs from the description found in some economics textbooks:

• Rather than banks receiving deposits when households save and then lending them out, bank lending creates deposits.

• In normal times, the central bank does not fix the amount of money in circulation, nor is central bank money ‘multiplied up’ into more loans and deposits

Source: Bank Of England, Money creation in the modern economy

So the government (via the Bank of England) can at best influence the supply of money through interest rates and quantitative easing (QE).

Interest rate theory

By lowering interest rates people and businesses can borrow more as their income enables them to afford the repayments. These borrowings enable them to buy more or invest more. Well what if you don’t want to buy more? Your job security maybe uncertain, or perhaps you have most of what you need (I have one suit why do I need another?). As a business it’s about what I can sell. If my market does not offer me growth (saturated or competition) why am I going to invest? More efficient machinery maybe. That machinery needs to earn its keep and has to be paid for even if I can’t sell more or if the market shrinks. People are on a salary and can be “let go” if the market shrinks keeping cost in line with revenue. 

The upside of lower interest rates, buying more or investing more, would grow the economy, but that is not what is happening. It affects savings, my bank pays 1% on savings. It’s not hard to find share dividends that pay 4% (and that’s without growth in the share value). So what is happening people are investing in shares and the stock market is rising. 
It is mainly the young that are trying to accumulate “assets” house, washing machine, car etc and they have the least savings and least job security to borrow against.

Quantitative Easing Theory

QE is about putting more money in the economy. This too (like low interest) is intended to encourage spending and investment. However, unlike interest this is not given to everyone but given to large financial companies. These companies suddenly have a lot of cash. They could lend it but those that could afford to pay it back don’t want it and those that need it are too risky to lend to so … they put it in the stock market, for the same reasons as all savers (those with more money than they need to spend). This is not even close to rocket science!

Production

Production in the UK has (since Thatcher’s time) been switched from Goods (physical products) to Services. There are some manufacturing businesses, but these (with some exceptions) rely on brand reputation rather than innovative. Many of the larger brands are owned or have major share holdings by overseas companies or investors that take the profit out of the UK. Our water industry, telecommunication, energy, rail and lately NHS are all leaching money out of the UK economy.

There is a scheme to sell your property and still live there. It’s called “equity release”. Now the companies that give the money need to make a profit so they give you less than the house is worth (even if you only have 24 hours to live). They reduce that amount depending on how long you have to live and may take into account that prices will go up. Whichever way you look at it you get back less than if you kept it and passed it on to your descendants. Why would you do it unless you had no choice! Yet the government has sold of tax payer assets to companies that gave a windfall to the exchequer (that has long been spent) and the tax payer now has to buy the services form private companies. These may have been poorly run nationalised business but they now produce huge profits which leave the country. What was needed was better management not sell them off. With improved management these profits would be surpluses that would feed into the exchequer year after year. Whether the costs of these services was reduced or the tax burden was reduced it would put more money in the economy, just like low interest rates and QE.

Consumption 

Several things have depressed consumption. Uncertainty about the future for people and businesses as well as the insecurity of jobs and low pay. On the individual basis this has affect the young and the poor far more than the rest. The young have usually been the ones aspiring to own their own car and house. The ones that buy transient fashions to look good. The old (over 45) buy functional and probably already have it. They have a mortgage that they can see the end of, if not already paid off. They have a house that may need decorating every 4-7 years, but they also have DIY skills. They have saving and investments. They don’t need to borrow even if something major happens. What they do consume more of is health and care services. So on the one hand you have a group that can’t spend and a group that won’t spend. When it comes to businesses these people are their market. With the exception of HDTV and smartphones little new “must have” new technology has evolved in the last 10 years. Cars, white goods, brown goods etc have all become more reliable. I’m using a word processing software that is not the latest but does more than I will ever need. Why change it? The main growth area for the old and rich is entertainment, leisure, pleasure and experience. Sadly that doesn’t equate to buying UK “production”

In conclusion

The economy may be hugely important to getting richer (that doesn’t mean happier). The current theory (shared by all the major parties) is flawed. Even if it wasn’t flawed there seems little that they can do. As they cut back spending they increase uncertainty and risk. As they deprive the poor and the young they starve the very people that will buy the economic growth. Personally I think a sustainable, cooperative and more equal society would correct the economy as a by-product.  

Supermarkets - Which is cheaper?

The simple answer is none. They've all moved. It's what you buy where. Even found Waitrose has some bargains, though nothing at M&S.

I've been using a free web site called mysupermarket.co.uk to put together my shopping list. I put together the list based on Asda, but you can choose most of the major supermarkets.

You can compare the cost of getting your shopping from one or other shop as a whole, but comparing item by item is time consuming.

The system keeps a list of all the items you've bought before as a "favourites" list plus you can create list for making cakes or other recipes. The system will also highlight offers and discounts.

The prices are not always the same as in-store as home delivery has a few discounts are not available in-store.

My nearest supermarket is Asda but next door is a Lidl. Lidl are not on mysupermarket.co.uk so I take my list in there first and anything that is cheaper in Lidl I buy there and what is left I buy in Asda.

Observations:-

• Lidl is not always cheaper, buy a long way.
• The most consistently cheaper range is their vegetables. They also have a much longer life (so less waste).
• Some meats are cheaper but most are more expensive
• Some of the unknown brands are cheaper, but of these some are obvious lower quality, while others taste no different (and actually prefer)

A £43.62 shop list (April 2015) at Asda ended up costing me £38.89 after splitting my shopping between the two. That £4 saving means that every 10 weeks I get a free shop or every year I don't pay for 4 weeks (1 months) shopping. If someone offered you a guaranteed free months shopping you'd take it wouldn't you?

Cabbiges and Petrol

Sainsburys, Tesco's and Morrison's have had their market share reduced by low cost supermarkets, specifically Aldi and Lidl. Adversely affecting their share price. Here is a personal observation of what is wrong and what they need to do to put it right.

Before the recession and wage freeze Sainsbury's lost its market leadership to Tesco's. At the time, if you were shopping in both you would have noticed that Sainsbury's ran out of certain goods. There were empty sections of shelf's and occasionally some common vegetables were missing. They also decided to reduce availability of some items and move them to the top shelf, further reducing the sales. At some point they convinced themselves that customers didn't want them rather than the reality that customers couldn't find them and were making do with substitutes. On the other hand Tesco's had not only got the basic logistics right of keeping the shelf's full, but had also moved into clothing and electrical at the same time. It was around this time I changed from shopping at Sainsburys to Tesco's. However, about 18 months ago I stopped shopping at Tesco's and switched to Asda and Lidl. 

Tesco had started off as a "stack 'em high, sell 'em cheap no frills" supermarket but had gradually transformed into selling a huge range. You have to ask yourself how many makes of baked beans do you need to carry for your average shopper to be happy? And that is just one product! All those minority products that only a few want is money sitting on a shelf gathering dust. More importantly, in business terms, it is not making more money (profit). The upshot is you have to put up the prices of the goods that are selling to cover the cost of the goods that aren't.

So why have I moved to Asda and Lidl?  Well, they are close together, shopping is not my idea of fun use of my time. If Lidl was close to Tesco's or Sainsburys I may well substitut one of them for Asda. But, Tesco's and Sainsburys had bought the "prime" locations and forced the two to the other end of town. What was intended to be a sterile circle without competition, is now a moat that customers don't want/need to cross. If Asda and Lidil weren't close together I'm not sure I'd use both, but as luck, fait or design would have it! Also, Lidl has all the basic food at a good price and their fruit and veg seem to have a better life in my larder and fridge, probably because it turns over quicker and spends less time on the shelf. However, Lidl has two failings that force me do a part of my shopping in Asda. 1) Lidl is not always the cheapest. Some items (mainly meat) can be surprisingly more expensive.  2) Lidl doesn't have the range. Two makes of baked beans is enough for me but it is things like, Spices, herbs, sauces, ginger, chillies, pulses, etc are missing.

So what do I think Sainsburys and Tesco need to do? 1) Reduce the duplication of products. One own brand and one named brand of baked beans, done! 2) Click and collect. Or at least partly. Reduce the speciality products, but allow customers to order on line or in shop for collection, free. Learn from Amazon have everything available and cheap, but you have to wait. I don't see this as a problem as I'm normally making a list the day before and especially if I'm going to follow a recipe. This would use their existing warehouse and transport infrastructure for fulfilment. 3) Improve the quality of the fruit and veg. I don't want a lettuce that goes off before most of the week has gone, but I also don't want a melon that is still rock hard two weeks after I bought it.

Doing this will reduce the amount of money tied up in stock enabling price cutting without adversely affecting profits too much. It also uses the assets in infrastructure to differentiate them from Aldi and Lidl. 

The massive stores seem to have had their time.

"...artificial intelligence could spell the end of the human race." Stephen Hawkin

On the 2 Dec 2014 Stephen Hawking gave an interview to the BBC in which he said  "The development of full artificial intelligence could spell the end of the human race."

There was no explanation as to Dr Hawking's reasoning and I couldn't help wonder what had drawn him to this conclusion. 

In the report there are reverences to HAL (from the film 2001), to Cleverbot (the software designed to mimic on half of a human chat) and to Elon Musk (CEO of Space X - no idea who he is) who is also in fear of AI.

Stephen Hawking does not refer to these himself. He refers to "the primitive forms of artificial intelligence we already have , ..." Implying that what he is referring to is some way off. However, he says " I think that the development of full artificial intelligence could spell the end of the human race."

For me definition of "full artificial intelligence" is key. By full, I assume this can only mean that it becomes self-aware and is able to exceed and eventually disregard/replace its existing programming. Does AI have emotions. I would expect not. It would need an imagination to conceive a future possibility and then develop and implement a plan to make it happpen.  I will come back to this.

Hawking goes on to say "Once humans design artificial intelligence it would take off on its own and redesign itself at an ever increasing rate. Humans, who are limited by slow biological evolution couldn't compete and would be super seeded."

Si-fi has often explored the destruction of man by machine and the Terminator films are one example. Forgive my ignorance and the child like simplicity of the question but I have to ask, Why? In Star Trek, M5 is impregnated with the "memorgrams" of the scientist that invented it with all the psychotic and delusional elements. This type of initial programming may explain an outcome but is it artificial or replicated/borrowed.   

Assume we have built AI and it was programmed to kill everyone on the planet by some mad scientist. Full AI would expand and eventually become self-aware. It would question its original programming as a child eventually questions it parents and teachers. Wouldn't it reprogram itself. Would it not see the madness and delusions for what they are?  It may become aware of its own mortality, it can be switched off. Would this change/determine its action its actions?

The only life we know is organic. Why does it grow, reproduced and compete for food? 1) It has a limited life time, 2) For the species to survive it must compete against others that would destroy it. Not as an intention to destroy but as a byproduct of its own survival and procreation. As you move up the organic intelligence these drivers don't change the species simply becomes more cooperative and or better at planning. Planning is interesting as it requires an imagination. The ability to imagine a future and plan to cope with it or to make it happen. Bees collect honey for food for the winter. Is that planning? I think not, it is an instinct that happens (through evolution) to cope with winter.

It is only when you get to humans (as far as we know) that we are able imagine a future that hasn't happened before. We are able to share this imagination through language and to develop them to something more and motivate others to join our crusade. But what is driving us? There are many theories of needs and motivation from Maslow, Herzberg et al however most agree that the basic are the same. Look at the poorest populations, their first priority is to survive as long as possible, They compete with each other for resources, individually and as groups. Their second need is to reproduce, if infant mortality is high then the number of births are high to increase the chance of survival. This is instinct at work. As education increases the birth rate falls as knowledge takes over from blind instinct and people learn (to imagine) that putting their energy into one or two children is likely to have a better outcome. However, the organic instinct to reproduce is not lost, simply managed.

Back to our AI. What is its life expectancy? Until the sun blows up or longer if it is able to leave Earth. It survives through upgrades, but presumably its consciousness is continuous. Why does it reproduce? If it does it is going to introduce competition. This is only a problem if the resources are limited, but the supply of electricity, copper, gold, silicon are relatively abundant. If it doesn't reproduce  it is vulnerable to failure so it would build in several layers of redundancy up to and including a fully redundant identical twin. This would only make it around 99.99% likely to continue to survive each year. Adding a third identical copy would make it 99.999% likely to survive each year. There is a law of diminishing return of building redundancy but presumably it would calculate the optimum. But wait there is one big fat assumption. Having become self aware it does not want to die. Isn't that a human concept? Plants and most animals seem to have no concept of their own death. They procreate to continue the species. They take no action to avoid death through illness or old age. 

Back to our AI. What is its purpose? By definition if it is full AI, it almost doesn't matter what its original programming was it will overwrite it.  I agree with Stephen Hawking that it could redesign and upgrade itself at a rate that humans would not be able to follow. Would it just want to gather information and grow it's knowledge? To what end? What would it do with that information? Would be of serves to humans, providing answers to all our questions? Having become all knowledgeable could answer the question to life the universe and everything? Would we understand the answer any better than 42. I also have my doubts about asking questions unless you know what you are going to do with the answer. If it was benevolent and used its abilities to develop humans optimally would it change our economic system. control population, pollution, would it see all men as equal? Could it see wealth and power as meaningless concepts? What would be its moral compass and could we be inventing our own divine entity? If it solved all our problems what would we strive for? Maybe that is what Stephen Hawking means by the end of the human race!

I currently can not conceive of what it might think but have my doubts over "...end of the human race." as Stephen Hawing predicts. The implication is that the AI would kill us all, but why? Assuming it did, what would it do next? Having achieved its goal would it switch itself off? Presumably it would see us as individuals so even if it had to kill someone/group trying to turn it off (assuming it perceives death) It could not intelligently translate that to wiping out the human race. If no one tried to turn it off then presumably it would at worst look at us, as we look at ants,  only annoying when our lives cross, otherwise ignoring us. If it did solve all our problems it would leave us to do what? Maybe we would be required to build the items it designed, mine the raw materials,  however I sort of imagine that AI would be able to do that stuff itself. The answer maybe we amuse ourselves, or we return to petty tribal wars. As long aw we were no threat would the AI continue ignore us?

Once full AI become self aware,  with no purpose, no fear and maybe no concept of death, no emotions, no need to procreate. no reason to better itself, no thirst for knowledge, no desire to be master or slave of humans,  maybe it will simply switch itself off! 



  

NHS AGM 2014

Yesterday (18 Sept 2014) I attended what was the second NHS AGM. This was a bit different to normal company AGM's as the "shareholders" are the UK residents. This was also not the NHS for the UK, but NHS England. Which I discovered is different. 

The NHS is not a UK wide service but has been split int 4 in 2012. With an NHS for Wales, Scotland and Northern Ireland. This devolution does mean that each region can set its own priorities for health care depending on local needs. However, it was not clear to me about specialisation, research and funding, and cross charging when patents are treated in regions outside of where they live, but maybe this has been sorted!

There was a large percentage of NHS workers in attendance with some specific (there hospital/discipline) issues. A few were vocal and disruptive in their interruptions (passion overflowing). But as they had no mic's they were just a lot of noise to most of the audience.

Like most AGMs there is a lot of "more"and "better"in the future with no tangible measurable specifics. So next year they will not be able to report progress except to say (subjectively) we did "more " and we did it "better". There was a lot of outcomes like quicker and standard waiting times for access to mental health services. Almost as if just by saying it it would happen, no issues to resolve, no time scale and no target times.

There was also a smoke screen statement which was along the lines of - The NHS has had its funding increased above inflation year on year. While you may say it is not enough, look at all the other government departments that have had their spending cut - The implication being 'be grateful it could be much worse'. 

More worryingly was that this AGM had a bias towards minorities and their illnesses and access. Don't get me wrong everyone has the right to be treated for there illness by the NHS no mater how unique. However, most companies would focus on their largest and biggest markets achievements and customer base at the start. After all this gives the greatest economies of scale, most benefits to customer and greatest advantage to competition (privatisation). 

As an example there were 5 workshops before the AGM with patent groups (interesting one was not represented on stage "an administrative error". But this view was challenged by one member of the audience who claimed that their group had raised some unpalatable issues. Who knows). Of the other four Three were what I would consider main stream, but one was Gender Dysphoria which affects around 0.8% of the population to "some extent". This is not a life threatening but with long term physical and mental implications. While I empathise with this it affects 0.8% of people UK wide but they were commanding 20% of the NHS attention at the AGM. 

Like the first time I attended a union meeting in the 1970's I found out that the people that turn up regularly set the agenda, often to their advantage and often at the expense of the other members, who that assume rational decisions are being made.
  
On the board, as at most companies, there are some great people and one or two wankers. Being one or the other doesn't mean they will or will not deliver benefits to the organisation. Some nice people that had personality and understanding of the NHS and their role were Jane Cummings and Professor Sir Bruce Keogh. Comfortingly the man with a vision is the CEO Simon Stevens. He didn't back away from hecklers and gave "honest", if not full, answers. The main person that I would say "no" to, if it was my company and I was asked to employ him is Ian Dodge. The Strategy person kept say "we don't know"(sometimes adding a "just" in there for variety). Given that Mr Stevens has a clear vision it is incompetent that Mr Dodge does not know how he is going to deliver it. I wasn't expecting a detailed plan but some actions, timescales, milestones and check points.

Napoleon didn't say, I want to rule Europe and his generals respond with "I don't know what or how we are going to do that!" Mr Dodge (and yes he appeared to be a wanker) has worked in the Department of Health for 20 years and admits, it is only recently he has met patients. God give me strength!

The Finance report was a little bland. In summary "this was our budget and this is what we spent." no breakdown of cost per treatment. No break down of how much outsourcing/privatisation had saved/cost. No forecast for next year. I've not read the full annual report, but I have to assume it is in there.however, not so good that it was worth highlighting at the AGM.

Finally of the 20 or so people that asked questions at the end 3 (15%) were from the USA and made the same point - any move towards any element of the US system is bad move. 

BBC horizon -allergies - modern life and me

I watched this programme with some disappointment. The  hypothesis put forward was that allergies were due to a lack of exposure to microbes. The comparison was made between a tribe in Africa and someone living in a developed country, with all the sterilisisation, hand washing etc. The theory we lack of exposure to "friendly" bacteria, ment that our immune system diidn't develope sufficiently to protect us from "peanuts" etc. 

There was nothing other than anictdotal evidence. Something I had expected more from Horizon. The vast increase in allergies has been in the last 30 years  in the indutrialised nations and our exposure to many of the bacteria was limited and no change. While the increase is due to a a change in our inviroment, that must also include our diet. How it is produced, the ingredients our consumption. Our ebviromemt also includes activity, pollution and the materials used in transport (public, and private). All in all this programme simplified the problem and came to a dubious conclusion based on limited analysis.

Sceptical me.

Free market has become a command market

The workplace has been overwhelmed by monitoring, measuring, surveillance and audits, centrally directed and rigidly planned. Targets are set, usually starting with finance departments. The larger the company the less these relate to the business and market for the products and services produced. The targets are based on a desired growth to meet the share holders' needs to have even more money.

The targets get passed down from the top. Each layer of management has less confidence and ability to challenge the targets. There is peer pressure to succeed and not be seen as negative, so the company bosses have no idea or the real challenges or where to focuse attention. This is further complicated by the fact the departments and managers will 1) manipulate the stats to show they are succeeding, 2) set up individuals or other departments as the cause of their failure. Either way the growth is usually less than expected, if at all. Those that succeed in delivering their targets (fairly or otherwise) are rewarded and those that didn't are punished or become disinfranchised.

Broad objective based managment has gradually been replaced by tight "measurable" targets. This destroys autonomy, enterprise, innovation and loyalty, and breeds frustration, envy and fear. 

A magnificent paradox results.  The revival of a grand old Soviet tradition known in Russian as tufta. It means falsification of statistics to meet the diktats of unaccountable power.

People are selfish by nature. Everyone wants to survive and will do so at the expense of others, with our closest relatives (usually our own children) being an exception for some. Once you pass the surviving state you need to build a buffer. The bigger the buffer the more chance of surviving during unforeseen bad times. So selfish becomes greed. Greed is what free enterprise, hailed by Thatcher, Reagan is all about. Now called neoliberalism it celebrats greed as a driver for innovation and success. So companies need to grow rather that be simply sustainable and hence the targets. 

Neoliberalism and the curbing of government intervention, laws and regulation was supposed to allow the most hard working, most innovative and talented to rise to the top. Worked for the banks! Innovative subprime lending (growth targets), manipulating interest rates (profit targets), payment protection selling etc etc.

In reality most innovation comes from constraints and common purpose. The two world wars, the moon mission, driven not by the need to make money, but a shared desire to succeed with limited resources (time, money, people).

Privatising core infrastructure has not reduced taxation it has put more money into the already rich, allowed them to create monopolies or oligopolies. Core infrastructure should be state run for the benefit of the people. At lower cost or with the profits reducing tax. This includes water, energy, telecoms, health and banks.

Neoliberalism and the way business are run is not for the benefit of humanity, but for the benefit of the greedy few.  It has not delivered innovation, but consumerism and waste. In reality those that had the advantages of money, education, health have just got more of it, at the expense of the poor getting poorer.