Quotulatiousness

March 30, 2013

All those manufacturing jobs are never coming back

Filed under: Britain, Business, China, Economics, USA — Tags: , — Nicholas @ 08:37

Tim Worstall explains why this is at the Adam Smith Institute blog:

I’m always rather puzzled by those who shout that we’ve got to bring manufacturing back to the UK. Apparently this will solve all our problems over what to do with dim Northern lads or something. Once they’re all hammering out whippet flanges then we just won’t have a problem with unemployment ever again. The problem with this idea is that modern manufacturing simply doesn’t provide many jobs. And if it were to provide mass employment it would be very badly paid employment too:

    Americans working to produce traded goods and services earn, roughly, according to their productivity. If low-skill workers in America aren’t much more productive in manufacture of traded goods and services than low-skill workers in China, then they can’t earn much more than workers in China while being employed in manufacture of traded goods and services. They can earn a rich-world wage in production of non-traded goods and services, like sandwiches and haircuts, so long as there is sufficient local demand. In other words, the only way to get less-skilled Americans a good wage in a manufacturing industry is to significantly raise their skill and productivity level. If that can’t be accomplished, they can only hope to find good wages in non-traded industries. At least, that is, until wages of less-skilled workers across the developing world come much closer to converging with those in America.

Of course, that’s all about America but the same logic pertains here as well. Chinese manufacturing wages are around $6,000 a year at present. Meaning that if we had mass employment in manufacturing, as they do, then wages would need to be around that level. Or, alternatively, UK based manufacturing would have to be much more productive to support higher wages. And “more productive” is the same as saying “uses less labour”. Thus you can have few well paid jobs (in the Rolls Royces etc of this world) or you can have many badly paid jobs (Shenzen). It isn’t actually possible to mix and match between the two.

QotD: Stupidity

Filed under: Books, Humour, Quotations — Tags: — Nicholas @ 08:29

“No one would be that stu—”

Susan stopped. Of course someone would be that stupid. Some humans would do anything to see if it was possible to do it. If you put a large switch in some cave somewhere, with a sign on it, saying “End of the World Switch. PLEASE DO NOT TOUCH”, the paint wouldn’t even have time to dry.

Terry Pratchett, Thief of Time

The impact of a bayonet charge

Filed under: Britain, Middle East, Military, USA, Weapons — Tags: , , , — Nicholas @ 08:22

Strategy Page on one of the most antique weapons still regularly issued to infantry troops:

Although the U.S. Army dropped bayonet training three years ago, most ground troops world-wide still get some of it. Some army personnel want to bring it back. The U.S. Marine Corps still trains riflemen on how to use the bayonet, as does Britain. In fact, British troops were the last troops to actually use a bayonet charge in combat. This happened in 2004, when a patrol of 20 British troops in Basra, Iraq were ambushed by about a hundred Iraqi Shia militiamen. Help was still on the way when the commander of the British troops realized they were running out of ammo and the Iraqi gunmen were moving closer. So he ordered his troops to fix bayonets and charge. That thoroughly demoralized the Iraqis who after some close combat with the British (Scots, actually) left 35 of them dead, all ran away. Some of the British troops were wounded, but all survived. This, however, was one of the very few such incidents of bayonet use in the last decade. The problem is that Western troops tend to be well trained marksmen and Iraq or Afghan gunmen have learned not to get too close. So opportunities for launching a bayonet charge are increasingly rare.

While the U.S. Army eliminated bayonet drills from basic training, the U.S. Marine Corps has not. The marines did this not so much for developing weapons skills, but for mentally conditioning marines for combat. The bayonet drills are part of larger program emphasizing one-on-one combat. The army does this, to a lesser extent, and now without bayonet training.

The army attitude towards close combat is a bit different, and always has been. While the bayonet and the bayonet charge have a firm place in military history, the reality is rather different. This has had a heavy influence on the army bayonet training decision. Bayonets are often still carried, but rarely attached to the front of a rifle. Most modern bayonets are simply knives, which are handy for all sorts of things on the battlefield. Sticking them in the enemy is rarely one of them. Army leaders saw training new recruits in the battlefield use of the bayonet as misleading and a waste of time. The marines looked beyond the weapon, to the spirit and enthusiasm with which it, and many other implements of destruction, are used in close combat.

Looking at crowdfunding as a replacement for venture capital

Filed under: Business, Economics, Technology — Tags: , , , — Nicholas @ 07:43

ESR looks at where crowdfunding fits in the traditional tech start-up food chain:

In How crowdfunding and the JOBS Act will shape open source companies, Fred Trotter proposes that crowdfunding a la Kickstarter and IndieGoGo is going to displace venture capitalists as the normal engine of funding for open-source tech startups, and that this development will be a tremendous enabler. Trotter paints a rosy picture of idealistic geeks enabled to do fully open-source projects because they’ll no longer feel as pressed to offer a lucrative early exit to VCs on the promise of rent capture from proprietary technology.

Some of the early evidence from crowdfunding successes does seem to point at this kind of outcome, especially near 3D printing and consumer electronics with a lot of geek buy-in. And I’d love to believe all of Trotter’s optimism. But there’s a nagging problem of scale here that makes me think the actual consequences will be more mixed and messy than he suggests.

In general, VCs don’t want to talk to you at all unless they can see a good case for ploughing in at least $2 million, and they don’t get really interested below a scale of about $15M. This is because the amount of time required for them to babysit an investment (sit on the company’s board, assist job searches, etc.) doesn’t scale down for smaller investments — small plays are just as much work for much less money. This is why there’s a second class of investors, often called “angels”, who trade early financing on the $100K order of magnitude for equity. The normal trajectory of a startup goes from friends & family money through angels up to VCs. Each successive stage in this pipeline is generally placing a larger bet and accordingly has less risk tolerance and a higher time discount than the previous; VCs, in particular, will be looking for a fast cash-out via initial public offering.

The problem is this: it’s quite rare for crowdfunding to raise money even equivalent to the low-end threshold of a VC, let alone the volume they lay down when they’re willing to bet heavily. Unless crowdfunding becomes an order of magnitude more effective than it is now (which seems to me possible but unlikely) the financing source it will displace isn’t VCs but angels.

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