9/29/2008

#189 The Problem with Predictions

In the 1950s, a statistician named William Edwards Deming who had been successful in improving American production methods during WWII, tried to convince American manufacturing executives that consumers could recognize quality and would naturally gravitate to the best quality products in a global market. American executives blew Deming off as a quack and continued to direct their companies toward shoddier products and higher costs. Deming took his math and his methods to Japan with McArthur, where he became a national hero and where his analysis tools allowed Japan to leapfrog past US manufacturing capabilities. While most Americans reflexively prefer Japanese manufactured products over American-made versions, most Americans have not come to grips with the fact that Deming predicted this preference and the economic impact it would have on American manufacturing more than 50 years ago.

Minneapolis FBI agents repeatedly tried to warn Washington that Arab operatives were up to something major. In 1997, right wing author Tom Clancy wrote a book about a future when "the President, Congress, and Supreme Court are obliterated when a Japanese terrorist lands a 747 on the Capitol." The Clinton Administration kept its eye on Bin Laden and Al-Qaeda's activities because they were certain that those characters were planning significant terrorist activity in the US. When the planes struck on 9/11, the fools in the Bush Administration all brayed "nobody imagined something like this" could occur. Nobody without an imagination imagined it, I guess.

In 1968, Paul Ehrlich wrote a book called "The Population Bomb." Ehrlich famously predicted "in the 1970s and 1980s hundreds of millions of people will starve to death." He was wrong, although a few "hundreds of millions of people" have starved to death since the 1970s. Ehrlich also predicted a dramatic increase in fatal plagues, although HIV/AIDS had yet to be discovered when he wrote his book. In 2006, 2.9 million people died of AIDS. The disadvantage those starved and sick millions had was that they were not in the US or Europe. Most of them were in Africa, South America, and Asia, where Faux News is rarely interested unless the military industrial complex tells them to be interested. The rightwingnuts have often cited Ehrlich as a "liberal" doomsayer whose "failed" dire predictions prove that the world's resources and human ingenuity are limitless. I guess this is an example of the political theory that states if A≠B then B≥∞?

In 1980, Ehrlich and Julian Simon made a bet that the price of metals would rise (Simon bet against that proposition) during the 80s due to shortages and cost of production. Ehrlich lost the bet and paid up. If the terms of the bet had made it to the late 1990's, Ehrlich would be the winner. If it were renegotiated today, Ehrlich would be winning consistently, possibly, for the rest of human existence. The prediction was accurate, the timing was not.

In 2006, 852 million people went "hungry," according to the Food and Agriculture Organization of the United Nations. In 2006, more than 9 1/2 million children died before they reached their fifth birthday. Everyday, about 16,000 children die from starvation. Since they aren't starving in the US, we figure they don't matter.

Ehrlich's I = P × A × T (Environmental Impact, Population, Affluence, Technology) formula is proving to be true in an unexpected place, though; global warming. Maybe it will turn out that human population's cultural impact will go unnoticed as it is overwhelmed by massive global impact. The IPAT formula is simplistic and probably needs some exponential components to be accurate, but it's a start.

Dr. M. King Hubbert predicted, in 1956, that the United States would reach peak oil production in the late 1960s and that the world would reach peak oil production in the first decade of this century. He was right on the money with his first prediction and close enough for practical purposes in his second. Many people have dismissed the importance of Hubbert's predictions because while oil has become exponentially expensive in the last few years, it is still more-or-less affordable. However, world starvation is rising along with energy prices and it may be the real "end of oil" realization will come from the food shortages that result from high energy costs.

A little research would find hundreds of accurate, dire warnings that have been issued by clever people investigating everything from energy to finance to education. Usually, those predictions come true but they rarely come true as accurately as Hubbert's calculations. Hubbert had the advantage of working in a field with no practical alternatives. Oil is the "bear in the closet." McSame can whimper that nuclear energy is the only workable alternative to our oil addiction, but the byproducts of fission nuclear energy are still an unsolved problem. We have no current alternative to fission nuclear power, so ramping up nuclear energy production guarantees a collection of future environmental catastrophes. Since we are still ignoring the result of Three Mile Island and Chernobyl, it will be easy to ignore the warnings of nuclear catastrophe until disaster strikes and our "leaders" can whine that "nobody told us."

The problem with predictions is that human adaptability and gullibility make it difficult to figure out how a catastrophe will play out. In 1968, Ehrlich probably didn't imagine either our willingness to sacrifice future generations by decimating agricultural land for current production or the inventiveness of petroleum engineers and their ability to apply toxic chemicals as "fertilizers." I suspect he is a little baffled at the world media's willingness and ability to ignore the starvation in developing nations, too.

The hysteresis in human activities is unpredictable. Who would have thought that our phony banking system could have propped up its fake walls this long. Most economic observers figured the housing house of cards would come crashing down in the 1990's. Our corporations have been paying millions for non-performing executives for thirty years. What keeps this incompetent system of incompetents in place? Our economy has been slipping toward socialism and an abundance of unearned entitlements since the Johnson Administration. We are quickly approaching the point where more people work for local, state, and federal governments than work for product-producing, productivity-enhancing businesses. Including the military-industrial complex, federal and state contractors, retired government workers, and current government employees, a significant portion of the country's "gross national product" is a closed loop money stream. None of this makes any sense, but hysteresis keeps it all spinning long beyond when it should tip over and collapse on its own.

I've worked in a couple of companies like that. Initially, the products were good, the service was excellent, and management was, at least, not in the way. For several years, the company's success was understandable but not overwhelming. After a few years, the reputation exceeds the performance but humans are slow to change and we aren't nearly as bright as we like to think. After a certain amount of economic momentum, it takes extremely talented management to break the connection between customers and products. The products have to go from good to awful before some customers will start looking for an alternative. Sometimes, management has to engage in blatant abusive behavior before customer realize they've been buying crap.

So it goes with stupid behaviors on a macro scale. There appears to be no significant political or media figure willing to admit (in public) that our addiction to oil is so selfish that we are willing to search out and burn up every drop without a second's consideration of the next generation's needs. We are so concerned with our current markets that we'll pack the world to standing-room-only before we limit our population growth, even with the obvious knowledge of what that will do to future generations. Making accurate predictions requires some really clever estimates of the effects of cultural hysteresis and that will require a lot better understanding of human behavior and, more importantly, misbehavior.

September 2008

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