Disrupt or disrupted--the reality of the next 20 years.

Musings Report #11  3-14-15  Disrupt or be Disrupted

    
You are receiving this email because you are one of the 500+ subscribers/major contributors to www.oftwominds.com.
 
For those who are new to the Musings reports: they are basically a glimpse into my notebook,the unfiltered swamp where I organize future themes, sort through the dozens of stories and links submitted by readers, refine my own research and start connecting dots which appear later in the blog or in my books. As always, I hope the Musings spark new appraisals and insights. Thank you for supporting the site and for inviting me into your circle of correspondents.
 

Thank You, 2015 Contributors

Key supporters of Of Two Minds continue to make their annual outrageously generous contribution in the first quarter. I am in awe of their support  and can only hope to repay their generosity with content worthy of their commitment: W. Anthony W., Lewis D., Bryce W. and Ernie C.


Disrupt or be Disrupted

"Disruptive technology" is a tiresome cliche, as every Facebook/Twitter wannabe declares itself a "disruptive technology." 

That the vast majority of these are over-hyped and derivative should not distract us from the larger reality that some technologies do in fact disrupt how things are done.

In the long-term, fossil-fueled mechanization turned an overwhelmingly rural farming society into a highly urbanized services-dominated economy.

In the more recent past, CraigsList single-handedly turned the newspaper industry from a license to print money (via costly classified ads) to a struggling sector with an unclear future.

Digital file-sharing turned the $14 billion music industry into a $7 billion industry. 

And now driverless vehicles are poised to disrupt the taxi and trucking sectors in ways few predicted.

The core idea of "Disrupt or be Disrupted" is that every sector and industry that avoids being disrupted just becomes a fatter target for disruption. 

Higher education is a prime example. The industry has successfully staved off disruption by maintaining a lock on credentialing/accreditation--the famous "signaling value" of a college diploma, which verifies nothing about what the student actually learned or knows.

Now that student loan debt is $1 trillion and the administrative bloat of higher education can no longer be obscured, the industry is becoming a fatter, juicier target for massive technological disruption by the day.

As I outlined in my book "The Nearly Free University," it is now possible to lower costs by 90% and improve the actual education process. Employers should receive more than a worthless "signal"--they should be offered an accreditation of each individual's actual skills and knowledge. This is self-evident.

Healthcare is another sector with bloated costs and protected fiefdoms that is ripe for fundamental disruption. Reductions of 50% or more that lead to better overall health do not require whiz-bang science fiction advances; simply eliminating the paperwork and cartels, making patients responsible for their care and making the costs of the treatments transparent would be enough to unleash a disruptive revolution.

What few in these protected industries dare admit is the cost structure is now so burdensome, the nation can no longer afford these services.  Healthcare has risen from 5% of GDP to 19%.  The more burdensome and intractable the systemic costs, the greater the gains to be reaped from disrupting the status quo.

In other words, protecting bloated, ineffective fiefdoms and cartels will be a losing strategy in the next 20 years.  These costs will come down, one way or another, either by the erosion and collapse of the funding sources or by technological/sociological disruptions.

That leaves everyone depending on any existing sector/industry that hasn't yet been turned upside down with a choice: either join the disrupters or prepare to be disrupted.


Summary of the Blog This Past Week


Heroine/Hero: Anna May Wong & Bruce Lee  3/14/15

What Happens to the Stock Market if the U.S. Follows the World into Recession?  3/13/15

Why I Don't Want an Apple Watch (and it's not the battery life)  3/12/15

The Fed Blew It  3/11/15

Why Is Per Capita Energy Consumption at Recession Levels After Six Years of Recovery?  3/10/15

New Orders Look Recessionary  3/9/15


Best Thing That Happened To Me This Week

Doing touristy things in the San Francisco Bay Area with visiting family from Hawaii. Most of us only visit tourist sights when family or friends are visiting, and these are welcome excuses to revisit some fun tourist destinations.


Market Musings: Choppy Volatility

Markets are chopping around in basically trendless fashion--not just stocks, but gold and oil. The only clear uptrend is in foreign exchange (FX) markets, where the US dollar keeps rising despite calls from many for a reversal or end of the advance.

Even Goldman Sachs is finally getting on board, projecting a drop in the euro from 1.05 to .84.

So where does that leave investors in stocks, energy and gold?  

It seems that the primary trends of the past few years are now in jeopardy: interest rates can't be pushed much lower than zero (though the Europeans are trying), and the returns on more monetary easing are diminishing rapidly.  China's solution to every spot of weakness--lowering interest rates and flooding its economy with more credit--is only unleashing more malinvestment and increasing the risks of a credit crisis.

As major multi-year trends and "sure things" start becoming less sure things, daily battles between bulls and bears erupt as each side seeks to solidify a tradable trend.

The Dow 30 soaring 250 points in one day and promptly losing most of that gain the next day is not a sign of a healthy trend.

That leaves players with stomach-churning options: either daytrade to skim gains from advances or declines that last a day or three, or hope that the position you're holding (long or short) will be proven the correct one when a trend finally emerges.

Hoping to identify the next trend in a choppy, volatile market is risky. The lowesr-risk strategy is to stay safely in cash and let the trend establish itself firmly before placing capital at risk.  

When will the next trend declare itself? It could be months, or even several quarters.  The potential gains in a choppy market look modest while the potential losses could be substantial. When in doubt, stay out seems like a prudent way to play choppy, trendless markets in a multi-year transition that is far from clear.


From Left Field

The biggest biotech discovery of the century is about to change medicine forever -- interesting....

Inequality and Politics in Thailand -- lessons that extend beyond Thailand...

The Behavioral Sink (via John D.) "The point was that crowding itself could destroy a society before famine even got a chance."

The East India Company: The original corporate raiders -- interesting book review...

California farmers resign themselves to drought: 'Nobody's fault but God's' -- this is getting serious...

The lost history of New Orleans' two Chinatowns -- fascinating...

The Cost of Paying Attention: Silence is now offered as a luxury good. (via many readers)

The Global Dollar Funding Shortage Is Back With A Vengeance And "This Time It's Different" -- some analysts contest this, but however you slice it, demand for USD is high and supply is being reduced by falling deficits and the end of QE...

Robert Hunter on Grateful Dead's Early Days, Wild Tours, 'Sacred' Songs

The Mystery Of America's Missing Wage Growth Has Been Solved -- top 20% garners most of the gains, and I bet the top  5% skimmed most of those gains...

Look at what our obsession with white meat has done to chickens -- yaoza! These don't even look like the same species...

In L.A., Now You Can Use City Land For A Free Vegetable Garden -- a step in the right direction...

"If you do not change direction, you may end up where you are heading." Lao Tzu

Thanks for reading--
 
charles
Copyright © 2015 Charles H Smith, All rights reserved.