Monday, September 28, 2015

Defense Spending Increase

Whoever the next president is going to be, this person is going to have to make a decision about defense spending and whether to increase it, decrease it, or maintain the current rate.

Donald Trump, a Republican candidate, has made increasing defense spending one of the pillars to his campaign’s platform.  In doing so, he was brought the defense spending debate to the forefront of the 2016 Presidential Campaign.

From 2010 to 2015 the total defense budget has deceased over 25% based on numbers from the U.S. Department of Defense (National Defense Budget Estimates).  If what is budgeted for FY2016 is included, it would be a 31% decrease over those 6 years.

The year 2010, was extraordinary, in that we were in the middle of 2 conflicts.  So, perhaps that 2010 number is an anomaly.  The question then becomes, have we cut back too far?  Have we gone from one extreme (spending too much) to another (spending too little) or have we just “righted the ship”?  Only time will tell.

Monday, September 21, 2015

Tag! Soon Artificial Intelligence Will Find You.

In May, 1997 the world's chess champion, Gary Kasparov, lost a 6-game challenge to Deep Blue, an IBM supercomputer. An advantage to the computer's programmers was the full history of Kasparov's previous public matches -- his style -- as well as that of dozens of other grand masters and their moves in various opening-, middle-, and end-game scenarios.

To give Deep Blue credit, its moves were the result of algorithm-driven analyses (e.g. how important is a safe king position compared to a space advantage in the center, etc.), according to the results of 700,000 or more grandmaster games. The machine could explore up to 200 million possible chess positions per second in this way. This wasn't just a memory exercise.
The rest is history.

Since then, developers have combined various forms of data (financial, scientific research, social, etc.) with application algorithms and massively parallel processing to aid human observation, pattern recognition, detection, forecasting, and decision making. Meanwhile, improved software and heuristic decision making have permitted much smaller dual I-Core microcomputers to perform as well as or better at chess than Deep Blue.
But, until recently, a computer's ability to truly "learn," that is, to write its own algorithms and rules according to data presented, has not been achieved -- and here comes the part you may not like....

You see, processing and working through mountains of data is no problem for computers these days. The problems arise when the rules (algorithms) become so complex for certain tasks that they just can't be written -- by a human. And, as it happens, identification of people and other objects by comparisons of characteristics or traits (for example, five pictures, same person, different pose) is an incredibly difficult set of algorithms to write.

Now, who might have access to those five mug shots of you, as well as your name "tagged" in each one? And who might have the same data on 50 million or more additional individuals? In a word -- Facebook. We and our Facebook friends have created a huge data garden from which to enable algorithm development via AI. 

Just wondering. How does that make you feel?

We at E.T.I. are looking forward to the day when AI in a supply chain gives us five more days notice on a rush order for a difficult part, or, when our AI can talk to your AI. Until then, from our point of view, caution is required on where AI is heading, who's taking it there, and whose rules they're following.

Tuesday, September 8, 2015


On August 14th, Greece received its third bailout since May 2010. The troubled country will get up to €86 billion ($95 billion) in rescue funding over the next three years.

This is the conclusion of a very interesting drama through late July and early August, which even included (in effect) a popular referendum to "vote down" a deal with the major Euro contributors/creditors (France, Germany, Britain) that included continued harsh economic austerity measures.

You've got to love the Greeks for their spirit. But three weeks of bank closures, credit card restrictions, and little or no cash was apparently enough to soften popular resolve, as well as that of their recalcitrant leader, Alexis Tsipras, the Greek prime minister.

And so begins the third bailout, which brings us around to that "b" word. What is a bailout?

In the case of the U.S. and the auto industry, a "bailout" took place to prevent collapse of GM and Chrysler -- and to prevent the huge social costs of large-scale layoffs by the automakers and their support industries. The "bailout" took place in the hopes that -- with some painful but necessary restructuring and loss prevention and some bona-fide improvements -- along with some authoritative oversight -- the companies would turn themselves around and once again become profitable.

Important -- the hope of a turnaround (if not confidence) was real. And the likelihood of a second or third bailout would clearly have been quite small. For the automakers who took the help, it was clearly make-or-break. And the deal was very much grounded in arithmetic, dollars, and cents.
Most would say that, in hindsight, that the U.S. Government gamble on "Government Motors" and Chrysler was a good one. If the payback has fallen a little short -- a matter of contention -- the shortfall is debatably much less than the economic and social costs of the automakers' (and their support industries') collapse.

Does such hope for recovery exist in the case of this third "bailout" for Greece? Does anybody really think so? The IMF isn't buying in, thus far. Will the result of this third bailout be simply a homogenization of the eurodollar, and an absorption of the debt some time in the future? Stock markets around the world barely bounced with the new deal announcement -- apparently it was already anticipated.

The true elephant in the room is China -- as investors in multinational companies everywhere watch their nesteggs tank once again. Apparently, the great minds guiding publicly financed companies and currencies have continued to bet on China's remarkable economic growth and the increasing demand for goods and services accompanying it. This "bet" on an economy appears to have been a shaky one.

Somewhere along the way, the free-market world has become consumed with the hope that its approach to finance (invest, grow, create true wealth, reinvest) would become so inculcated in the Chinese economy that our financial rules would supercede theirs -- whatever they are. This long-term hope may have been fueled by short-term sentiment -- "if we don't jump on the train, others will."

Suddenly, just a few years later, we're reminded that China is a communist country. Public policy is dictated. Power comes first; yuan, dollars, euros, yen and the like come somewhere down the line. There's no "Fed" that is independent of political leadership -- no signals, no hard rules. "Value" as we agonize over it in U.S. and Europe is a different animal in China.

The Chinese government's ongoing infusion of yuan to support its companies' capital-equipment investments, its infrastructure development, and many other ventures has been huge and no secret. Who knew when it would slow down or end? Who really understood the limits of China's investment in itself, or when its leaders might say enough is enough? But now that the rein-in has started, the free-market world is experiencing China's new and considerable economic power and influence.

ElectroTechnik Industries is privately held. Nevertheless, our companies benefit from healthy and real economic growth around the world. Nobody anywhere benefits from uncertainty and surprise -- especially as dealt out by the second-largest economy in the world.

Our complaint isn't that China devalued the yuan, which simply amounts to a sugar boost for its economic troubles. Our fear is that their leadership, in fact, has so little to lose for doing whatever they choose -- and that the "global economy" is ignoring this.

Greece may be burden on the EU. That's understood. The question is, who's bailing out China; and are we starting to do so already?

If so, on who's terms?