A celebration of wealth

While it is fun to throw stones at the wealthy, they are generally loaded because they have created value.

Value is created in many ways. Entertainment and sports may be frivolous, but people are willing to pay vast sums in order to be amused or distracted from everyday life. Who in New England can deny that Tom Brady deserves his wealth? And Jeff Bezos, the fabulously wealthy founder of Amazon, pleases us every day when our toiletries and groceries are delivered promptly or we stream “The Man in a High Castle.” Or, by the way, purchase a book.

But it is interesting to note the sources of wealth in our vast country. A study of wealth creation by Arizona State Professor Hendrik Bessembinder, as reported in the Wall Street Journal, gives us a fascinating look into the process. The professor’s analysis shows that only thirty companies created a full third of all the stock market wealth since 1926. And that’s out of 25,782 publicly traded companies.

Who are these engines of prosperity and why do we care?

At the top of the list is Exxon Mobil, the energy behemoth that Attorney General Healey loves to hate. While we can argue anthropomorphic global warming till the cows come home, it is indisputable that the energy economy built up over the last century has enabled the plush lives that we live today. Plush, that is, in comparison to anyone living in an energy vacuum, such as our ancestors or today’s tribesmen.

Next on the list is Apple. Who would have guessed in April of 1976 what Apple would become? The awesome power of networked, interconnected supercomputers in everyone’s pocket has transformed our lives, in some ways even for the better. Apple has become the most valuable company of all time. And the end is nowhere in sight as Apple invests in such things as autonomous cars and augmented reality.

In third place is General Electric. Another energy related company, but focused on the infrastructure to bring usable energy into our homes, offices, and factories. GE was created in 1892 when the Edison Electric Company merged with the Thomson-Houston company (led by Charles A. Coffin, a former shoe producer from Lynn, Massachusetts).

Fourth on the list is Microsoft, founded by Bill Gates in April of 1975. Microsoft is the butt of many jokes, some well-deserved. But it undeniably enabled the personal era of computing, bringing the wonders of Solitaire and the internet into our homes. More seriously, Microsoft created a fabric of servers supporting business functions in thousands of worldwide businesses, and they have established a very credible beachhead in Cloud computing.

In fifth is IBM, the rock-solid purveyor of commercial computing. IBM is synonymous with mainframes, the computers which powered our information economy in the last half of the twentieth century. IBM has fallen on hard times lately, but is gamely fighting back with artificial intelligence (Watson) and Cloud computing.

These five firms, alone, account for over ten percent of the wealth created in the last 90 years. To a materialist, who believes that the universe consists of nothing but information and energy, this is no surprise. All five are either energy or information companies. We need to move a way down the list before we come to a Walmart or a Coca Cola.

Why do we care? Why should we cheer success and great wealth?

The bromides of jobs created and taxes paid by these companies and their stakeholders, while true, seem unconvincing in the face of social justice warriors such as Bernie Sanders and Elizabeth Warren. Economics and rationality don’t stand a chance.

But here is why teachers care. And firefighters, police, and an army of government workers. Their pensions are  paid from invested funds, and when the market does poorly, that is, wealth creation falters, there is less in the retirement pot. In a very real example, the Providence Journal recently reported “Rhode Island’s $7.9-billion pension system will expect lower future investment returns and larger taxpayer contributions to pay for public employee retirement benefits.”

It is simple, really. If the stock market can’t fund the retirements of state workers, then taxpayers will shoulder a greater burden or retirees will take a haircut or both.

So while it’s entertaining to stone the wealthy, remember that there are consequences. Wealth creation is good for us all and we should celebrate it.

Projecting the future is a fool’s game. So let's try...

“The Jetsons” was a Space Age science fantasy cartoon premiering fifty five years ago to the delight of young baby boomers and their parents.

As seen from 1962, the future was to be radically different. This was not surprising based on the rate of change that our grandparents had already witnessed. The electrification of America had just recently been completed. Television was opening a window on the world. The atomic bomb had been invented, and used. Humans had traveled in space. New-fangled jet airplanes roared through the sky. Computers calculated the census and projected election results. It’s no wonder that the future appeared so strange and wonderful.

As The Jetsons creators saw it, we would have space colonization, flying cars, towering futuristic buildings, nearly human robots, video phones, flat-screen TVs, and conveyor-belt sidewalks, all in garish color and with lots of laughs.

While the phones, TVs, and even the moving sidewalks met or exceeded prognostications, the rest of the forecast fell flat. Why is that?

There are two major reasons:

1. People cling to things they like, and;
2. Physics is a hard master.

Look at New York or Boston or London. There are buildings hundreds of years old. And many of them will be still be there for hundreds of years more. The wiring will be different, the wifi systems upgraded, the thermostats and appliances all smart, but the buildings will look much the same. Not replaced willy nilly by towering, radically modern edifices, but remaining old, retaining character, perpetuating community. People like what they like.

What about the flying cars, or space colonization? Both are strictly limited by available energy. While we are beginning to make progress, the physics of energy production versus weight has been an extremely tough barrier. It is one thing to fill up a Tesla Model S with lithium ion batteries, but the power-to-weight ratio would be prohibitive to allow that car to fly. Although Tesla is to be commended, we need still further energy breakthroughs.

What if we were to make our own projections of the future, say fifty years hence? It is very difficult to do so, but here are some technologies that will drive real advances.

1.       CAS9/CRISPR gene editing

This is a truly remarkable capability, allowing scientists to make custom alterations of genetic material. Although we have been modifying genes for ages by selective breeding (note dogs from wolves), this is nearly instant. It will allow us to genetically alter Zika-bearing Aedes aegypti mosquitos so they become infertile and gradually die out. While this seems a good thing, the power to act as God is immense, and has deep moral and ethical considerations.

2.       Quantum computers

We are already seeing the impact of a million-fold increase in computing power. How do you think the Segway keeps its balance, or Space-X boosters are able to return to earth and land gracefully? What about autonomous cars, which already possess dynamic cruise control and lane departure warnings? All of these are driven by massive increases in computer power, sensor development, and Artificial Intelligence (AI) advances. Quantum computers will help drive the next million-fold increase in computing capacity, with yet unknown breakthroughs to come. It is quite possible that all cars, flying or not, will be controlled autonomously. Allowing a human to drive will be just too darned dangerous.

3.       3D-printing

For millennia, we have manufactured things by removing unwanted material with lathes and saws and drills. Then we bolt parts together into a thing, like a refrigerator. 3D-printing is the opposite – it is called accretive, or additive, manufacturing.  A computer model of a thing is provided to a 3D-printer and it builds up the finished product, slowly, layer by layer. But here lately, it’s not so slow, and the materials being accreted have vastly expanded. It is possible to envision 3D printers being used to create a genetically accurate beefsteak, ready for the grill. Or a human heart, suitable for transplant. Or an entire high definition LCD TV. Perhaps 3D printers in the home are how the Amazon of the future will deliver your goods.

4.       Urban agriculture

There are now grocery stores in New York City which are hidden among  grim factories and warehouses. They are not meant to be visited by customers, who enter their orders online and then await the delivery of their orders in the comfort of their homes. And some of those warehouses contain forty-foot high agricultural systems, urban farms, with the sun replaced by LED lights and water and nutrients optimized and delivered to thriving plants by computer. California was made famous by delivering fresh lettuce to the east coast by rail. But now the lettuce can be gown literally a stone’s throw from its consumers.

Projecting the future is a fool’s game. The fact that it depends on people, and that people are just so unpredictable, makes it nearly impossible. But we know that several nascent technologies have real legs, already proven, and will shape our world in wild and wonderful ways.

If only we can keep it. We have been, and will remain, our own worst enemy. God bless us, every one.

A beautiful mind redux

Charles Steinmetz with Albert Einstein and other engineers

It’s almost impossible for us to imagine a world without electric power. The very oldest among us might remember a time when kerosene lanterns provided light for cooking and eating and reading. But not many, and then only on rural farms or lake camps in Maine.

The electrification of America began in the late nineteenth century and by 1930 “70% of American households were electrified in the U.S.” according to Wikipedia. The rapidity of this deployment rivals that of the internet in recent years and was driven, as you might expect, by economics.

Both in factories and in homes, electricity was far cleaner and more efficient than the power sources that preceded it. And other than lighting, the most important use of this new power source was rotary force, that is, motors. The advent of electric motors revolutionized American life. Imagine the motors in your home – ceiling fan, dish washer, clothes dryer, washing machine, vacuum cleaner, kitchen blender, air conditioner. In the garden shed there are weed whackers, power saws, sanders, and electric drills. The list is nearly endless.

Likewise in factories the use of electric motors was instrumental in vastly improving industrial output. Lathes and milling machines and drills and grinders – again, an extremely lengthy list. It’s almost impossible to imagine what came before, how we managed to cope without electricity for light and heat and motive force.

Electric motors displaced steam engines and water wheels and even dogs on treadmills as sources of power. And as any kid knows, a lot of elbow grease, as human manual labor was common and cheap and gruelingly used in farming and manufacturing.  The electrical revolution fundamentally changed human life on earth.

And while Thomas Edison and Nicola Tesla are famous figures in the history of electrification, a little known German scientist and engineer had enormous direct impact on your life today.

Charles Proteus Steinmetz was born in Germany in 1865 and showed enormous promise as a student in mathematics and physics. He had a beautiful mind but was physically afflicted, having suffering from polio, dwarfism, hunchback (kyphosis), and hip dysplasia. After attending university in Poland, he emigrated to the United States in 1889.

Steinmetz first worked in the burgeoning electricity research and development community in New York City and soon ended up at General Electric, where he was considered a prodigy. While his work contributed to advances in a wide range of electrical theory and application, it is his development of Alternating Current (AC) theory that shaped the world we live in today. AC generators and motors and the transmission lines that move power into our factories and homes were all greatly influenced and facilitated by Steinmetz.

Steinmetz moved from New York to Lynn, Massachusetts, where he continued his work for General Electric. Eventually, he moved once more to Schenectady, New York, another GE site and a community into which he was embraced. Steinmetz served on the Schenectady city council and the board of education, and taught at Union College until his passing in 1923. He was an important part of his adopted community, loved and respected and mourned when he died.

Steinmetz was not an attractive man. He was short and misshapen and often smoked smelly cigars. In our age of beauty worship, he would not compare well to Brad Pitt or George Clooney. But it is undebatable that he had an enormous, positive impact on your life, far more than Brad or George ever will.

There could not be a more powerful example that beauty, indeed, is only skin deep.