Wednesday, March 17, 2010

Monopolies took my job and this guy's fingers

Yesterday I read a very long, thorough article in the Washington Monthly called Who Broke America's Job Machine? (Barry C. Lynn and Phillip Longman) To boil it down for you, apparently it was Ronald Reagan. No net gain in jobs in the years between 1999 and 2009. From the 1940's to the 1990's every decade saw at least 20% more jobs at the end than they started with.

The article outlines some of the debatable answers for what went wrong and then goes into a long explanation of how monopolization is to blame, effectively because it hinders innovation and invention. During the tech-stock bubble jobs were created like crazy. All of us scientists were employed. It was awesome. During the housing bubble most of us lost our jobs. Over 100,000 electrical engineers just stopped being electrical engineers, which they don't mention in this article. They point to small business innovation being the key to job creation. But they don't mention that engineers are the innovators. In the past these displaced engineers might have started their own company based on some brilliant idea. But in addition to the monopolies in the industry related to their invention they are hindered by the monopoly of the insurance industry.

In the 1990s I had my own company. I invented, sold, and produced (in that order) a dozen new products to solve short term problems for Scientific-Atlanta. I bought my health insurance through a group policy with the IEEE. By the end of the decade the cost of my insurance was more than all my other overhead expenses combined. I had to just let it lapse. Then Scientific-Atlanta moved their factories to Mexico, got bought up by Cisco, and generally followed the trends discussed in this article and ceased to be a customer of mine. I have to say my personal experience backs up the authors' assumptions here, with the additional emphasis on the health insurance problem. They mention it as a monopoly, but they don't emphasize enough the detriment to innovation caused by health insurance that costs more than your car payment and mortgage combined (both of which require insurance, but it's still far less than my health insurance? Yet my body has free built in antibodies and healing properties that neither my house or car even have.) The other ridiculous monopoly problem is the telecommunications companies. Right now my telecommunications cost more than any other budget item. Yet I pay far less than my friends in cities because the one rural provider's broadband price is regulated. Because my city friends have choices in what provider to use, competition is supposed to lower the price. Quite the opposite is true.

So I'm already behind this article pointing to monopolization as a barrier to innovation. Then I get a link in my Fine Homebuilding email - Man Wins Big Money in Tablesaw Lawsuit. The comments after the article are strongly against this lawsuit. The majority of tool users accept that they are responsible for their own fingers. They recognize that lawsuits like this will make their tools more expensive. Well, maybe, but maybe not? All cars have air bags and anti-lock brakes now. When I bought my car they were new features and not all cars had them. I chose to spend the extra money on them. New Honda Accords cost less than mine did in 1996. It just seems that given time the price for safety will go down.

But back to what this has to do with monopolies. The argument that got this man $1.5 million dollars was that Ryobi knew about a technology that would stop the saw from cutting his fingers but they didn't include it in the saw -- negligence. This technology was invented and patented by Stephen Gass and unveiled in 2000 at a woodworking fair in Atlanta. He and his two patent attorney friends got such a great reaction at the show they quit their jobs and set about licensing the technology to all the big saw companies. None of them bought it. Ryobi started to enter into an agreement with him but in 2002 backed out -- "Safety doesn't sell." Well based on the comments in Fine Homebuilding they're right. Low price sells. The inventors finally raised enough money to make their own line of table saws that includes the device for humble people with money.

Personally I'm terrified of table saws. When I heard about SawStop in 2000 I swore I wouldn't buy a table saw that didn't have it. I actually had a really good 220V Jet table saw that was pretty safe by virtue of sheer power and the quality of the fence. But I sold that saw to my brother because I wanted a saw with SawStop or nothing. My brother hurt himself really bad with that saw last year too, but it was from kickback. The wood cut his fingers, not the blade. A riving knife would have saved him, but not the SawStop. Now I am not interested in any table saw that doesn't have both. I have been waiting this whole time and I still don't think the saw I want is on the market yet. I wonder if this lawsuit will shake things up. I suppose if you allow the monopolization of the market then the only way to get them to innovate is to regulate it. Either way, it doesn't seem like the free market system works that great when it's really free. Right now it is all extremely broken.

I think an important thing to take away from this monopoly story is that they blame Ronald Reagan. It's about the big picture, the long term. What if Ronald Reagan had left the solar panels on the White House and not changed the rules for monopolies? We might have less carbon emissions right now and more sustainable energy and scientists wouldn't be out of work. I am very uncomfortable with the tendency of people to only recognize instant cause and effect. Economics, climate change -- the long term effects are not properly understood or considered. Policies Ronald Reagan pushed through in the '80s can ruin my career 20 years later. If powerful entities get the big head and go ahead with geo engineering trials all kinds of stuff can cascade down from that -- like the iron fertilization in the ocean to sequester carbon turns out to encourage this one specific domoic acid producing algae that could kill off who knows what. Fortunately scientists kept studying this. I know that big systems can change unexpectedly with drastic changes. In nature there are checks and balances that will return things to a relatively stable point. Kind of like how I have the ability to get sick and better all on my own with no health insurance. But the economy, I'm sure it's not going to heal itself.

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