Measuring inflation

Inflation is caused when a one-ounce coin of pure silver is diluted and is now made with 50 per cent silver and 50 per cent nickel. That same size coin now contains half as much silver and, if known to the person accepting the coin, it should be worth half as much as the pure coin. Buyers would need to pay two diluted coins for the same product that one coin bought before the dilution.

This is the classic definition of inflation and while other theories exist, this has been accepted as holy writ since money started being made from intrinsically valuable materials. The theory continued when gold backed paper currency; then each unit of paper currency is worth some known percentage of one ounce of gold. Print more paper and each paper unit can now be redeemed for some percentage less in real gold.

That definition has been outmoded since US dollar stopped being backed by gold, since without that gold, only someone’s opinion of what that paper is worth sets the value. In 1971 then President Richard Nixon eliminated the fixed gold price for US currency.

I’d like to challenge that classic definition. I believe a better measure of inflation is when my hour of labor, how ever paid – silver, gold, or paper dollars – buys me less of the same goods. If I have to work 15 minutes to by a quart of milk today but have to work 16 minutes tomorrow, then the cost of a quart of milk is inflated by 1 minute of my time.

Why reduce it to hours of labor? First; because that’s the product that most of us sell, our time, and I only have so many hours I can sell. Before you start shouting that you are paid for your skill, how is your paycheck calculated? If you’re expected to work 40 hours and your boss will get upset if you only show up for 30 hours, you are really selling time. Commission sales is not tied to the number of hours worked but directly to results. While those exist and some jobs have a mix of hourly rate and commission or piecework schemes, the vast majority of workers get paid for showing up for a fixed number of hours.

Secondly; because if the price of the products I need goes up and I can’t pass that on to my employer in real time, I will have to absorb the cost increase by reducing what I buy or by working more hours.

My theory is that the general population will always be the financial losers in any financial system that doesn’t holed their labor as the measure of economic health.

Current financial theory includes the “rising tide lifts all boats” concept, where any increase in the economy will result in an increase for the majority of individuals. This rising tide theory fails to include the rope tying the boat to the anchor dug into the mud on the sea bottom. The rope represents your salary, and if the rope doesn’t get longer to allow the tide to lift your boat, the bow gets pulled under and that rising tide swamps and sinks your boat. As the tide rises the rope must get longer - in other words, your salary must increase.

Whether your income increases from an individual raise or a general cost of living allowance (COLA) your salary must keep pace with costs or you get sucked under.

If you buy that, whose wage do we use as a standard; the president of General Motors, the national average of all wages, or the official minimum wage? The extreme high and low wage represent outliers while the average by its nature incorporates those extremes, but if the high is too far from the low the average gets distorted. Even the mean wage is distorted if the high is too many multiples of the lowest wage.  The official minimum wage would be a fair measure of salaries in general since there is a direct link between the minimum and the higher wages for harder to find skills.

One complaint against raising the minimum wage is that it drives up all wages. As the minimum wage goes up, then the cost of goods and services created by the minimum wage worker go up and everyone pays more for those goods. That in turn drives up the rest of the salaries to account for those costs increases.

If the theory of spiraling costs caused by raising minimum wages is real; then the buying power of the minimum wage would be a better measure of inflation than the arbitrary value of a US dollar estimated against other currencies by a limited number of currency traders.

Changing the measurement of inflation will help display what the economy is actually doing with greater clarity and precision, supporting better decision-making by planers. It will also create a more obvious link between effort and reward, between labor and purchasing power.

A bold statement you say? If your theory is correct, that changing the minimum wage really does change prices and labor costs across the economy, then using my idea of the ratio of minimum wage to the cost of goods you buy daily will display those changes more closely to real time. The closer our measures are to cause and effect and in real time, the more quickly we can identify and respond to economic changes.

I submit that current economic theory is clinging to outdated theories to measure economic health. Just as checking the oil on your car tells you nothing about the condition of the brakes, using this outdated measure of economic health tells us little about the economy. If you check the oil and think that reports the brakes as good, you are much more likely to have brake failure. In the same way, looking at the wrong economic indicators means that you are much more likely to be caught by surprise and make the wrong decisions.

The Hero’s Journey

Wikipedia defines the hero’s journey as:

A hero ventures forth from the world of common day into a region of supernatural wonder: fabulous forces are there encountered and a decisive victory is won: the hero comes back from this mysterious adventure with the power to bestow boons on his fellow man.

I’ve read several articles recently expressing the viewpoint that we should view our live and how we live it as a “hero’s journey”. In that view we begin our journey and encounter various obstacles that we must overcome. In overcoming those obstacles we grow and become more competent giving us the resources to overcome even greater obstacles.

While this may be a great metaphor for teaching us to persevere in the face of adversity there is a counter unspoken message that since life is a never ending struggle, why try to overcome those obstacles?

In reading those articles I am reminded of the little boy who went to his first day of school and when ask by his father at the end of the day “How did it go?” Answered, “Not very well, I have to go back tomorrow!”

While amusing, this child’s eye view of their world can be instructive. After some period of time you just get tired of striving and look for a lower level of stress. Even an army is pulled off the line and sent to rest and recuperate after extended periods of combat.

At the same time, just cruising through life without a challenge gets boring. The key is to strike a balance between the obstacle-laden path of the hero’s journey and the clear sailing of an open road. For business the trick is to challenge your employees with difficult work and yet give them some less challenging times to allow that period rest and recovery.

What was the end of Ulysses journey nn the hero’s journey described in The Odyssey by Homer? He went home to Penelope and his son and became a gentleman farmer again.

What the most common explanations of the hero’s journey don’t tell you is that it has an end and that in most cases the end is not 30 or 40 years away. Even Ulysses journey was limited to a few years; remember his son was still a child when he returned.

You can’t view your entire career as a hero’s journey. It must be viewed by both you and by your boss as a series of heroic sprints separated by periods of normal living. 

Knowledge is not enough

Knowledge is not enough

I just finished a book called Proving You’re Qualified and a book called Training Yourself: the 21^st Century Credential, both by Charles D. Hayes, and found a huge gap in his premise. I looked into a website called Zero Tuition College and another one called UnCollege and found that both suffer from the same missing element as Mister Hayes’ books.

A credential is important not just for the knowledge it supposedly represents, but for the person you are talking to. Only a small percentage of the work force will end up starting their own business and following in the footsteps of Bill Gates or Steve Jobs to succeed without a degree. Most will end up working for large companies.

While everyone may aspire to start their own business or work for that super startup, big companies have lots of employees so that is where the bulk of the jobs are. HR departments in big companies are swamped with applicants and are scared to death of making a mistake and recommending a “bad” candidate.

That being true, the poor HR clerk reviewing applicants is looking for a quick and safe way to wade through that mountain of resumes. The first thing they can do that is fast and safe is to screen for an accredited degree. What can be safer than saying to your boss, “She must know how to do the work, she has a degree in that very thing from XYZ College.”

If you pursue self-education as recommended in both books, how do you prove to perspective employers that you really can do the work? While a portfolio (even as an online website) works well for designers, photographers or artists this non-traditional approach really doesn’t work very well for engineers or mangers.

While Mr. Hayes is absolutely correct in his ascertain that everyone will have to invest significant time and energy in continuing their professional education, even that must come with some kind of recognized credential. Why? Because when it comes time to assign work or look for the worker ready for promotion, your boss is going to look for that same safe and easy differentiator as he or she does when hiring a new candidate.

A qualification that they can point to so that when their boss asks why they picked that that person, they have some recognized “thing” to point to; something beyond the selector’s opinion that this is the right applicant.

While there is much to support the position that far too many people graduating from college today have memorized facts that they forget as soon as the test is over, no one has yet come up with a better way to prove that people can do what they say they can do.

Yes, a person’s demonstrated experience could be used. But remember that the screener is looking for a fast, safe way to select candidates. Reading resumes is not fast; you can’t really read a resume in the time it takes to scan for a degree. It’s not safe; the screener has to make a judgment call as to which experience is relevant and how complete the experience seems to be.

Before the current system can be replaced, someone is going to have to come up with something to replace it that will validate experience gained outside the current formal classrooms.

Still more Carrier IQ madness

Everything I read about the Carrier IQ bruhaha is way off base.

My big fear is that all the keystrokes are being recorded on the phone and held in a log. Never mind how much is downloaded to Carrier IQ or the cell service provider.

What happens if I loose my phone and someone just plugs in and reads the log? Any websites I log into and my passwords are in that log and the potential thief now has access to my BANK ACCOUNT!

That scares me a lot more than them selling my location at 10 AM Friday morning to some mythical third party.

Once again the media is watching the hole and missing the donut.

Passion for the work

Buffalo Wild Wings CEO Sally Smith: When interviewing job applicants, Smith looks primarily for one thing -- passion, no matter what it's for: "Is it a sport, is it reading?"

This only works when the company is willing to invest in the employee to create a passion for the product/service/customer. If you expect the employee to show up with a full set of skills, expect them to act like a hired gun with a passion for their pay check and if you're very lucky a passion for doing their job very well.

You can’t hire passion for your product, you can only grow it!

Why can't the press report the facts?

Births in the United States in 1985 were 3.760,000. 17 years later in 2002 approximately 2,900,000 students graduated from U.S. high schools. Divide those 2,900,000 students by 12 months and you get 241,666,667 people entering the work force every month.

Some may go to college but the ones graduating in the same year just replace them. There might be some minor variations in the numbers starting and finishing in any given year but that should be such a small number that we can safely ignore it.

Some may not enter the work force at all for a lot of reasons, some may become housewives or house husbands, some may not get a job for health reasons, some because they have independent means and don’t have to work. So lets cut that number to 200,000 new jobs every month.

The point being that any month that we don’t hire roughly 200,000 workers we are loosing ground. While the June 2011 number of new hires (117,000) represents “only” 83,000 first time workers who can’t find a job it’s an increase of exactly that number of people who are out of work.

This number is represented as a gain because more people found jobs in June than in May. That’s always good, but if we accept the June figures as representative then over the course of a year 996,000 more people will be out of work over that 12 months.

And that’s before we even talk about getting jobs for those people who were out of work at the beginning of the year!

We expect politicians to quote only the most favorable numbers so I won’t fault them. But it took me less than an hour on the US government web site to dig up these numbers AND to write this. So how is it that trained professional reporters can’t do the cursory fact checking to put the statements into perspective to show what is really happening?

If I believed in conspiracy theories I’d think the press was in collusion with the government, but my common sense tells me that it’s just too many journalists to ever get them all to “toe the party line”. So I’ll fall back on a quote:

Never ascribe to malice that which is adequately explained by incompetence.

Napoleon Bonaparte

How come?

Quick question: if a 0.3 percent decrease in unemployment in May (2011) was a noteworthy trend, how come a 0.3% increase isn’t equally noteworthy? If a .3% change is noteworthy then the statistics watchers should have caught that one as a leading indicator before the job market crashed.

Had the watchers paid as close attention to that tiny drop way back when, we might have been able to make the necessary changes when it was easy and cheap.