All Forum Posts by: John Nachtigall

Great.   So we all agree, technology has not cause a decrease in employment.   Because your comments about  quality of life is completely different than the original argument (and I will address below).   Before I moved on I just wanted to confirm that we all agree that up to this point, technology has not factually caused a reduction in employment, as your graph shows and you admit.  You can believe whatever you want about going forward, but as far as human history to this point it is clear technology has created more jobs than it has eliminated.

Now, as for your arguments you are all over the board but I will try to systematically address them.

1.   I never argued that AI or other technologies won't replace workers.   That has already happened and I hope it continues to happen.   Technology has replaced lot of jobs, some dirty and dangerous (mining and agriculture) and some simply boring and repetitive.   I am not going to yearn for the days when warehouse sized rooms where filled with women in a typing pool having now been replaced with PCs and printers.   Jobs will be eliminated...and replaced with higher and better callings.   If AI can be a better engineer than me, then I will have to find a new job.    Such is the advancement of technology.   Individuals will be hurt, but overall it is best for society.   Honestly, would your really want to freeze the advancement of technology even if you could?   In your 20-30 year time frame think of the amazing things we will see and be able to do!   Why would you want to stagnate?

2.  Since there is no subjective measure of "quality of life" I will just provide counter examples.   We live in an age where 96% of the US population owns a pocket sized computer capable of instantaneous wireless worldwide transfer of information in the megabyte per second range.   92% of households own a car which is capable of traveling hundreds of miles per day at a whim.   Smallpox, Polio, measles and a variety of other diseases have been effectively  eradicated.   99.8% of the US population is housed.  So few people starve in the US every year it is not even on the statistics.    Simply put the quality of life in the USA is the highest it has ever been and that is thanks to technology.   Again, the facts just don't support the argument.

The quality of life rankings using voter participation and "community engagement" are great for headlines.   They only show that the actual things that kill and hurt people are so low in this country we have had to make up problems just for something to complain about.  

3.   As for wages....well others have written about it better than I can

https://www.forbes.com/sites/timworstall/2016/10/03/us-wages-have-been-rising-faster-than-productivity-for-decades/#2bf98c077342

It is a free country Wes, you can believe the end is coming I cant convince you otherwise.   But I would suggest an objective review of the data shows a much brighter picture and that light is due to technology.  

Certainly absolute numbers can be misleading.   I readily acknowledged the post that labor participation is down a from its high, but that was an all time high.   The participation rate in the 50s and 60s was sub 60%.   It is now at 63% (hit max on the graph below)

https://tradingeconomics.com/united-states/labor-force-participation-rate

So if you want to look at percentages go right ahead, it shows the same story.   Technology advanced in the last 70 years, productivity went up, and the % labor force participation is actually higher.    So despite huge advancements in technology there are (as a percentage) more jobs.     

How many ways do you want to argue this.   Where is the drop?   Where is the mass replacement of workers?   There is no data supporting the position that technology causes net job loss.   

First, lets take your argument at face value.   That "this time is different" and technology is now replacing "thought" work not manual labor.   But you ignore that manual labor (or unskilled labor) is the larger part of the pie.   So if technology has been systematically destroying manual labor jobs for decades (actually centuries) why is total employment higher.  Up 30% since 1990.

https://www.statista.com/statistics/192356/number-of-full-time-employees-in-the-usa-since-1990/

Does a job know it is being replaced by AI or a machine? No it does not. So why then, has the constant advancement of technology not resulted in a reduction in employment. Where did all those farmers from 100 years ago...representing 40% of total employment go? They went to new jobs...jobs that technology has probably erased again already. 

Since 1990 technology has completely transformed almost every aspect of the US economy...but total full time employment is 30% higher.  Is technology causing people to be unemployed and discouraged (U6)...why yes it is.    Has labor force participation fallen, you betcha.   People who lost their jobs in the last recession, the worst since the great depression, will never be employed again.   The older workers, the unskilled workers unwilling to learn new skills...they wont recover.    But total employment is up, that is a fact.   And a lot of those jobs didnt exist in 1990.   There were not Wi-Fi network engineer jobs in 1990....because that technology didnt exist.   No Uber drivers, no social media influencers, etc. etc. 

Also, lots of skilled jobs has been eliminated by technology.   Example: Given computers, spreadsheets, and automated reporting do you think that more or less accountants are needed?  3 axis mills and machinists.   Travel agents.   Librarians.  etc.  

Technology causes winner and loser, individuals will be impacted.   But your argument that total employment will decline has be repeatable proven wrong.  You think your company built machines that replaced human labor?   The cotton gin has you beat by billions of man hours.   ATMs replace more in an hour than your company probably did for its entire existence.   This is not new.  And it remains wrong

At no point in the entirety of human history has the advancement of technology reduced total employment.  Never.   Just one example, since WWII technology has advanced more and faster than any time before.   Entire industries of both blue collar and white collar workers have been eliminated.   But total employment grew.   

Another example.   The agricultural industry has been almost completely automated.   about 100 years ago it represented 40% of jobs in the US and now it is 2.5%.   So the number 1 industry in the US was eliminated (as far as an employment base)...and total employment grew.  

It is just a myth, perpetuated each generation, that technology will cause the widespread elimination of jobs (look up the Luddites).   And each generation they argue "this time is different", but it is not.  Technology provides more new jobs than it eliminates.   i.e. it eliminates newspapers, but there is more news, and it is more accessible, than ever.   So the very premise of UBI is easily proven wrong

Second point, adding money to the system does not change the fact that humanity lies on a bell curve.   There are people who are "good" with money and people who are not.   And giving the "not good" people $1000 a month will only result in the redistribution to the other side of the curve.   Soon enough they will be paying higher rents and taking out loans that cost them their monthly stipend.  It will not eliminate poverty, it will only reinforce the fact that you can't force people to be individually accountable.  

As far as the housing market, they never take into account how the increased taxes will cause this to be a wash.   If you look at the proposal they are not actually adding money, they are redistributing it from one end of the curve to the other.   So the total available remains the same.   I would expect a short term disruption as the market adjusts, but in the end the total housing will remain the same. 

These are the stories of "gentrification" that never get told.   You literally lifted this duplex from chaos and decay and not just made money for yourself, but improved the neighborhood and gave a grand old building another 50+ years of life.  

The large upscale apartment buildings in my town offer 1 month of free rent to anyone from my company that signs a 1 year lease.   So at month 13 you don't pay then sign a new 1 year lease for year 2 (it only applies to the 1st year).   At the time I didn't really understand why, since you had to pass the income and credit checks regardless and there were only 2 companies that owned all the upscale places so not a huge supply.       

However, I saw the point over time.   50-70% of the tenets all work together.   We are all white collar professionals.   Easier to work out problems without getting management involved.  It is a big company so the paychecks always arrive on time and they set up auto-deposit the day after our pay day.   They were grooming the property to be a certain thing.   And renting to employees of one of the biggest employers in town didn't hurt with the government either.  

I would say if you are trying to turn around a property, or keep it in a certain class (A or B) targeting cops or firefighters or teachers could be a good strategy.   I agree there is probably a line there for discrimination, if you exclude others, but offering a discount is not the same as refusing anyone not in that category.     

Good Thread, My $0.02

1. Do you think gentrification is an issue?

Like gravity is an "issue".   It is an economic force, it is neither good or bad, it just exists

2. Do any of you ever struggle with the reality that we collectively price people out of their communities?

No, It is a downside of capitalism, but given the alternative it is the best available economic system.   Even "Democratic Socialist" countries are actually capitalist (with very strong welfare states).   Socialism, communism, even feudalism just leave everyone poor.  

3. Do you ever think of it that way?

Again, I acknowledge it is true.   San Francisco has gentrified 10x over, as one example.   When do you "stop" it.   I recently saw an article where a person who moved to San Francisco was mad because they moved during the dot.com boom/bust in 1997.   Now they were being priced out by the Uber people.   They were oblivious to the fact they priced out someone in 1997 the same way.    

4. Do you ever feel bad about contributing to the gentrification of communities?

No, given the alternatives this is a net good.   

5.  What are the alternatives?

The alternative is no gentrification

https://www.politico.com/interactives/2017/obamacare-cleveland-clinic-non-profit-hospital-taxes/

The above example with Cleveland Clinic is the perfect "no gentrification" story.   They have had almost zero affect on the neighborhood around them.   The rent control/gentrification/anti-capitalists should be ecstatic.   Rents are low, people are not being forced out in droves.   The elderly and poor are economically allowed to stay in their homes for decades.   No new development (outside of the hospital expansions) is buying up real estate.  When you listen to the anti-gentrification crowd that is everything they are asking for.  But they don't...they hate it.   Because that state of stagnation is actually awful for everyone.   

To steal a line from Churchill.   Gentrification is the worst alternative, except for everything else.  

The School of Hard Knocks would like to welcome you to Adulting 501: Advanced Life Decisions

Syllabus

• Mixing Friends/Family/Lovers with Money
• Talking about Politics with your Boss
• Divorce
• Caring for Aging Parents
• Toilet Paper: Over or Under

Welcome to the part of life with no easy decisions and no set answers.  And before you ask, no you can't drop the class.

Simply put, you can't successfully live with someone if you can't have a conversation about money.   If you are going to share a household (married or not) you need to set the parameters and that includes the costs.   Set time aside, in advance.   Lay out an actual budget and go through it and decide what each of you can each live with.   If you can't have this conversation then I think it is obvious you are not ready to live together.   The good news is that research has conclusively shown that couples that handle finances together are much more likely to stay together.   So get to studying, your final is in 40-60 years.

@Jay Hinrichs

I think it is the economics of Zillow offers that makes it interesting.   They are seeking big deals on the front end.   They sell for almost exactly what they buy for.  It is not the "normal" wholesale economics of APV x 70% - renovation.

https://seekingalpha.com/article/4259178-zillows-m...

"Going back to Exhibit 4, renovation, holding, and selling costs have averaged 3.0%, 0.9%, and 4.5% of sales so far, leaving a return before financing of 1.6%. Interest has eaten up 0.8%, leaving a 0.8% margin after interest.

Clearly, bottom line profit margins are thin, but that is by design. The overarching strategy is to give homeowners the best deal Zillow can afford while still breaking even on the transaction. That will maximize adoption of Zillow Offers, and will drive lots of ancillary revenue streams."

It is very common for a company like Zillow to enter a market at zero to negative margin to take up market share. If people hit the Zillow Offer button instead of go to wholesalers that could sink a lot of individual business models.   Even if they eventually fail it is a lot of disruption.   And they are leveraging the brand.   So a normal wholesaler has to spend a ton on advertising to find a distressed seller.   But it is not unthinkable that a distressed person looks on Zillow to see what their house is worth first when they decide to sell.   Will Zillow get the 1st shot?

Like I said, I think the economic dynamics are the interesting part

I saw this in depth analysis of the Zillow Offers product.   This struck me

"Going back to Exhibit 4, renovation, holding, and selling costs have averaged 3.0%, 0.9%, and 4.5% of sales so far, leaving a return before financing of 1.6%. Interest has eaten up 0.8%, leaving a 0.8% margin after interest.

Clearly, bottom line profit margins are thin, but that is by design. The overarching strategy is to give homeowners the best deal Zillow can afford while still breaking even on the transaction. That will maximize adoption of Zillow Offers, and will drive lots of ancillary revenue streams."

Given that the typical wholesale offer is APV x 70% - renovation theoretically Zillow would offer a lot more to the typical "distressed" home seller.

Thoughts?   It is very common for a company like Zillow to enter a market at zero to negative margin to take up market share.   If people hit the Zillow Offer button instead of go to wholesalers that could sink a lot of individual business models.