Want to help VirZOOM?

[thriftyandboringinohio]

Re: Want to help VirZOOM?

And here's where it starts:

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The #1 or #2 ranked issue for US business in recent surveys is finding and retaining qualified staff.

This is where I usually make my flippant remarks about wage inflation.
But I seriously believe a dose of wage inflation would be a good tonic for our economy.
Any problems we might have had with unaffordable labor holding back business must be resolved by now, here's a chart of wages as a percentage of GDP.
Below it is a chart of the same data along with corporate profits.
A dose of wage inflation appears to be affordable right now, and we might enjoy it when millions of wage earners start throwing around a little more money.

[GRG55]

Re: Want to help VirZOOM?

This is where I usually make my flippant remarks about wage inflation.
But I seriously believe a dose of wage inflation would be a good tonic for our economy.
Any problems we might have had with unaffordable labor holding back business must be resolved by now, here's a chart of wages as a percentage of GDP.
Below it is a chart of the same data along with corporate profits.
A dose of wage inflation appears to be affordable right now, and we might enjoy it when millions of wage earners start throwing around a little more money...

I don't think those without the needed skills will have enormously better chances to find employment or increasing wages. For them, as santafe2 put it somewhat indelicately on another thread, it may get worse with the advent of more robotics and other technologies. It is a bifurcation that is significant, with nearly half the nation living paycheque to paycheque.

I saw this dynamic first hand in the early 1980s "double recession". It was the first economic downturn after I entered the workforce post graduation from engineering. Those of us who were fortunate to keep working (and I moved out of engineering for a few years to do so) fared better than those that got laid off, but as the recovery finally started the most skilled were hired back and many of the unskilled workers were never hired back. The cost reductions needed to stay in business accelerated both the development and the pace of adoption of productivity improving technology.

An oil rig driller, who in 1980 needed to know how to run a throttle and a brake handle on the rig floor, has for many years now needed to be a video games expert as today the rig controls are a computer joystick and multiple monitors crammed with real-time information streaming into a command center remote from the rig floor.

[thriftyandboringinohio]

Re: Want to help VirZOOM?

I think you are clearly right, GRG55. Every era has it's sail makers and buggy whip companies.
And I further agree that the trend seems to be accelerating, so that it's hard to stay useful over a whole human lifetime.
Still, I think things would go better if those who do have jobs get a bigger paycheck.

When I'm at the pub and these topics come up, I like to tell people that I'm a businessman, so I harvest people's paychecks.
If people don't have paychecks, what will businesses harvest? Broadly, poor pay turns into poor sales.

[jk]

Re: Want to help VirZOOM?

Yes. And before that it was with oil and gas sector workers and particularly technical staff such as engineers, geologists and geophysicists.

to continue to hammer on the same point made in the last several posts, there aren't that many jobs for "engineers, geologists and geophysicists." those kinds of jobs will pay well for a relatively few qualified job-seekers.

If growth is overvalued then it makes sense that high-growth companies can spend aggressively to drive further growth & then that spills out into the local economy.

I don't think tech workers are scarce so much as there are many companies competing for them in a small geographic area.

going back to analyses of e.g. the development of the button industry, there's a benefit to having regionalization of industries. that benefit is the availability of skilled and knowledgeable workers who can move easily between employers in the same industry as those employers' needs change. i'm not sure if growth is being overvalued, but it is clearly highly valued. so for all the talk about telecommuting and remote working, there's a local bubble in real estate reflecting the high compensation of the specialized tech workforce.

There was an article in TheInformation (paywall, but certainly worth it for those in the tech industry) a week ago about how a couple brothers leading the Apple self-driving car software were moving back to North Carolina because of the absurd living costs in the bay area.

were those brothers going to work remotely or did they just leave the company? and are you sure it wasn't because they missed friends, family and carolina-style bbq?

bottom line- there are a small minority of highly qualified workers who are experiencing growing demand for their skills and are able to command growing compensation. "wage inflation" appears to be highly concentrated - a 1% vs 99% phenomenon which just increases inequality. the spotty locally mandated increases in minimum wage obviously are of broader if local effect.

i'll believe the wage inflation meme when it shows up in median incomes.

[thriftyandboringinohio]

Re: Want to help VirZOOM?

...i'll believe the wage inflation meme when it shows up in median incomes.

+1

[seobook]

Re: Want to help VirZOOM?

going back to analyses of e.g. the development of the button industry, there's a benefit to having regionalization of industries. that benefit is the availability of skilled and knowledgeable workers who can move easily between employers in the same industry as those employers' needs change.

Right, but if it triples the cost of employment then eventually talent will be willing to work for less & live elsewhere. The higher wages are coupled with higher state & federal tax rates along with more expensive residential & commercial real estate rental prices (which also include higher property taxes as a side effect of the higher prices & that feeds into the rent even if you are not buying).

i'm not sure if growth is being overvalued, but it is clearly highly valued. so for all the talk about telecommuting and remote working, there's a local bubble in real estate reflecting the high compensation of the specialized tech workforce.

It is being over-valued. How does someone like Vice Media or Buzzfeed reach their current valuations in a lower margin business model while being valued like high growth tech platform plays?

The idea that Google or Facebook will be a permanently friendly platform is sort of pure fantasy.

Zygna was big, then it wasn't.
eHow was big, then it wasn't.

There are many businesses which might seem strong on the surface which are still overly reliant on Google or Facebook & either of them can pull the rug out any time.

And what did Facebook do after they got many big media outlets to implement Facebook Instant Articles? They shifted "the algorithm" to favor posts from friends & shifted to promoting live video.

Even the New York Times saw digital ad revenues contract in the most recent quarter.

Just like Facebook, Google also crushed expectations on their most recent quarter.

Google's click volume is up huge as they displace the result set with ads, but their average CPCs are down due to mixing in more lower quality clicks to the overall pie (mobile clicks typically lower value than desktop, YouTube autoplay video ads not as valuable as search clicks, shopping ads added to Google image search, etc.)

Now here is sort of the interesting bit from the partner network...it is being outright squeezed out of the ecosystem by mobile ads eating the search interface & such

yoy organic growth.gif

googlemobileown.gif

so what would you expect to happen to partner CPC & clicks?

The logical thing would be clicks would be down, but the clicks that happen would be for a higher value.

But actually both are down.

google q2 2016.jpg

were those brothers going to work remotely or did they just leave the company? and are you sure it wasn't because they missed friends, family and carolina-style bbq?

in the article it explicitly stated out of control living costs was the primary reason for moving.

they will still be working for Apple, but doing so remotely.

bottom line- there are a small minority of highly qualified workers who are experiencing growing demand for their skills and are able to command growing compensation. "wage inflation" appears to be highly concentrated - a 1% vs 99% phenomenon which just increases inequality. the spotty locally mandated increases in minimum wage obviously are of broader if local effect.
i'll believe the wage inflation meme when it shows up in median incomes.

this is inline with the point I was trying to state. the wage growth & labor negotiation power is still highly concentrated.

[GRG55]

Re: Want to help VirZOOM?

+1

You are not recognising what is underway already and that is being reflected consistently in the business surveys now. It is not just a few Apple employees or tech sector 1%ers. Businesses in the service sector are finding it difficult to find and retain qualified staff now.

And you may be correct in being sceptical. It does not escape me that if business cannot find skilled people in the USA it will simply look elsewhere, and move the investment there too.

[lakedaemonian]

Re: Want to help VirZOOM?

I'm finishing up the Summer here in Silicon Valley.

During my time here I've had a great opportunity to visit many of the big name goliaths here as well as a few unicorns.

I also studied alongside a good few local Palo Alto area tech executives and under a professor who arguably possesses the broadest and deepest data set on Venture Capital in the world.

Some of the things I learned:

It takes $300-$400K in annual salary or equivalent to enjoy a very good quality middle class lifestyle in Silicon Valley.

Entry level tech workers here usually share apartments until such time as they can ever get on the property ladder thru salary increases(good salaries to be had here) and/or thru exercising stock grants/options.

Local veterans are KILLING it in real estate if they bought 8-15 years ago. But even they get noxious about local property taxes, but it does fund very good quality schools.

Despite the high cost of living and taxation in Silicon Valley, it still "feels" like it makes more sense(or at least a bit less insane) than the insanity that is Vancouver, Sydney, and Auckland based on wage inflation being an option here, unlike elsewhere.

Stanford University is like Disney World for Asian and Indian families singularly focused on education. 3 generations of Grandparents, tiger parents, and their little nerd offspring cleaning out the Stanford Bookstore's huge apparel section on a daily basis.

The greatest job in the world is that of a Stanford GSB tenured professor. They get paid well, a heck of a good deal on leasing land for a house on campus insulating them from the insanity, and they get to consult to the entrepreneurial magic on the side.

You simply will not believe some of the comments I heard from a senior White House insider as the GFC was cooking off. Truly, truly frightening stuff.

-----

There are currently 436 "unicorns"(valued > $1 billion, pre-IPO/M&A)

232 in the US
91 in China

92% of VCs polled consider unicorns to be seriously overvalued, most of whom are themselves invested in the unicorns.

Sounds like a correction is coming in 12-24 months.

[thriftyandboringinohio]

Re: Want to help VirZOOM?

You are not recognising what is underway already and that is being reflected consistently in the business surveys now. It is not just a few Apple employees or tech sector 1%ers. Businesses in the service sector are finding it difficult to find and retain qualified staff now.

And you may be correct in being sceptical. It does not escape me that if business cannot find skilled people in the USA it will simply look elsewhere, and move the investment there too.

Thanks for those insights, GRG55.
Perhaps you see the edge of a wave that I can't see yet.

Any business is always free to pull up stakes and just leave the U.S.
If lots of businesses do that over the long term then the U.S markets for most goods and services will be greatly diminished, because there will be an ever shrinking pool of wages to buy ever fewer things corps wish to sell here.

None of my comments here argue against your observations at all - you are reporting what you see, while I am wonder how things work.

jk's point about looking at median incomes helps us to distinguish between pockets of high wages like silicone valley which might drive up average wages, and widespread low wages.
I'm sure you know the old joke that when Bill Gates walks into a bar, the average income tells us all the beer drinkers are millionaires.

My only point is that if there is trouble in the economy, then the cause of the trouble can't be that wages are too high for corps to make profits.
In the aggregate, wages are taking less and less of GDP, while corp profits are taking more and more of GDP, and both have been true for more than twenty or thirty years.
If there's a problem, it's caused by something else.

Therfore a period of rising wages is nothing to fear, and there are reasons to believe that it may increase business activity.
.
.
.

[jk]

Re: Want to help VirZOOM?

You are not recognising what is underway already and that is being reflected consistently in the business surveys now. It is not just a few Apple employees or tech sector 1%ers. Businesses in the service sector are finding it difficult to find and retain qualified staff now.

can you give us some examples of the service industries/service jobs which you see having trouble finding staff?

[GRG55]

Re: Want to help VirZOOM?

can you give us some examples of the service industries/service jobs which you see having trouble finding staff?

Here's one source. The 2016 survey results are not yet in public domain.

http://www.manpowergroup.us/campaign...Whitepaper.pdf


Under "skilled trades" there are shortages of chefs, which one might surmise has an impact on the restaurant business. Drivers. Office admin. It's not just IT dudes and duchesses in Silicon Valley any more.

[Chris Coles]

Re: Want to help VirZOOM?

None of you seem to have to hand a full command of the underlying trends that have brought the US economy to where it is today. As many will know, I call the US economy an Feudal Mercantile Economy based upon the suppression of direct competition; forcing all investment through into one mindset; Venture Capitalism; in turn feeding M & A.

The only investment is through those channels. The result is you have lost a vast raft of tiny start - ups; those well below the radar of the Venture Capital industry. The US economy has lost its true seed bed. Today, every employable job seeker has to target a Google; when by far the majority want to live within a much better life stile. That fact is something we here in the UK are VERY familiar with; feudalism suppresses the desire to succeed, for the very simple reason; it is unattractive to the mindset of a free individual. It is that aspect of feudalism that always eventually destroys the economy of every nation that has set out down that path. And that simple aspect of the human psyche is EXACTLY the reason why so many moved to the US in the first place; to escape feudalism.

Without those millions, yes, millions of tiny businesses, each employing just a few of their local people; you lose the feed of the few that are attracted to work in such an intense working environment as Silicon Valley. The best example I had seen was when problems arrived in the petroleum industry suddenly needing to repair a large refinery, only to discover that they did not have enough highly skilled welders. The underlying reason being the loss of countless thousands of metal working shops across the rust belt when all their previous work was farmed out to "globalism".

Turning to the debate surrounding Google; did any of you think about the simple fact that Google represents a classic monopoly? Yes, some people make huge gains from such a monopoly; but what about the rest of the surrounding economy dominated by what is a feudal relic? It goes into free fall, simply because it becomes unattractive as a way of life.

Eventually, ordinary people reject feudalism and find any way forward for their own lives; will take up any challenge to avoid it. The best example being the hardships endured by the founders of the United States of America.

You have all come full circle; yet have not recognised that simple fact of life.

[touchring]

Re: Want to help VirZOOM?

Turning to the debate surrounding Google; did any of you think about the simple fact that Google represents a classic monopoly? Yes, some people make huge gains from such a monopoly; but what about the rest of the surrounding economy dominated by what is a feudal relic?

As someone who uses both Adwords and Adsense, Google ad model is not invulnerable. If someone can come out with a free marketplace where's advertisers and content owners can bypass Google, something like an Alibaba or eBay for ads and leads, google's margins will be greatly jeopardized.

[GRG55]

Re: Want to help VirZOOM?

None of you seem to have to hand a full command of the underlying trends that have brought the US economy to where it is today. As many will know, I call the US economy an Feudal Mercantile Economy based upon the suppression of direct competition; forcing all investment through into one mindset; Venture Capitalism; in turn feeding M & A.

The only investment is through those channels. The result is you have lost a vast raft of tiny start - ups; those well below the radar of the Venture Capital industry. The US economy has lost its true seed bed. Today, every employable job seeker has to target a Google; when by far the majority want to live within a much better life stile. That fact is something we here in the UK are VERY familiar with; feudalism suppresses the desire to succeed, for the very simple reason; it is unattractive to the mindset of a free individual. It is that aspect of feudalism that always eventually destroys the economy of every nation that has set out down that path. And that simple aspect of the human psyche is EXACTLY the reason why so many moved to the US in the first place; to escape feudalism.

Without those millions, yes, millions of tiny businesses, each employing just a few of their local people; you lose the feed of the few that are attracted to work in such an intense working environment as Silicon Valley. The best example I had seen was when problems arrived in the petroleum industry suddenly needing to repair a large refinery, only to discover that they did not have enough highly skilled welders. The underlying reason being the loss of countless thousands of metal working shops across the rust belt when all their previous work was farmed out to "globalism".

Turning to the debate surrounding Google; did any of you think about the simple fact that Google represents a classic monopoly? Yes, some people make huge gains from such a monopoly; but what about the rest of the surrounding economy dominated by what is a feudal relic? It goes into free fall, simply because it becomes unattractive as a way of life.

Eventually, ordinary people reject feudalism and find any way forward for their own lives; will take up any challenge to avoid it. The best example being the hardships endured by the founders of the United States of America.

You have all come full circle; yet have not recognised that simple fact of life.

Chris: You really need to spend a few months travelling around the USA.
That Google is out competing others in its space hardly makes it a monopoly. Last time I checked there were ample other alternatives if I choose to use them.
The financialisation of the USA and the global economy has been unwinding slowly since the financial crisis. That process still has a long way to go. Your stereotype of the US economy as feudal VC-M&A appears to be trying to paint the entire economy with a tech sector brush.

[touchring]

Re: Want to help VirZOOM?

Greenspan is right. The next surprise is inflation.

Somehow I have this feeling that the entire American Kleptocracy is working hard to make Clinton the President, and the Fed is delaying rates hikes to support the stock market.