Technology – The Most Overlooked Aspects of the U.S. Financial Crisis
For myself and a fast growing segment of the nation, the financial crunch is hitting home. Jobs are disappearing at unprecedented rates in all sectors of the economy. The finger pointing is everywhere and many of us are shell-shocked at the news we’re getting from the news and from our weary managers with walking papers in hand. The one buzz word that rang out in a previous small recession was a burst of the technology bubble. Technology speculation was all the media talked about that market correction, but I haven’t heard it mentioned once in this one.
I really don’t have proof about what I’m about to write, just a gut feeling from years of observation of how technology is used and misused in modern business. I think the lending institutions misused their technology to make speculations in the market. I think that the ultra-rich like Madoff, with the resources to gain ultra-intelligence have used technology to scam. I think that the auto industry has underused technology in their production model, while overusing it their lending targeting. I think that insurance companies have misunderstood how software should improve their business and they write software for some strange manipulation for underwriting. I think the small business sector is undertrained. I think that even the home computer user has been hoodwinked into overspending on software and gadgets that are of very little use. Most of all, I think that information technology is not being used efficiently to correct the business problems we are facing today.
Since the housing lending institutions are being credited for this failure. I’ll pick on them first. Every amount of information a bank needs about a borrower is available and it is inexpensive. They know everything about us, and they ask us to verify in great detail for any home loan. If you’ve ever bought a home, you know the anal examination I am referring to. Would I be out-of-line to suspect that the banking industry used computer models to gain the knowledge of to grab at high risk customers and knowing when to run? They obviously knew that there were very high risks and they sold those risks to overseas lenders and other unsuspecting orginizations easily with their unusually high and steady growth. Somehow, many of the ultra-rich remained relatively unharmed and bailed in time. How did they know when such a tangled web would begin to unravel? I feel that they had to have obtained the information from their computer models.
Then I look at the auto industry. These companies were making serious gains from the financial sectors. They figured out exactly where to set the price and manipulate buyers into leasing and purchasing cars under very appealing financial terms. Many were buying cars that were way out of price range on vehicles that are very overpriced, simply because the monthly payment could be shoehorned into their budget. The cars themselves seem to break down, just after the warranty runs out. Computer aided design and testing can easily model the design for a car to break down shortly after the warranty runs out. Computer controlled fuel systems are tuned for high fuel consumption and power, when older non-computerized system got much higher MPG. So I ask, was the technology really used to create a better product and to produce a better lending system? No, they used it to produces high immediate gains and to know when to run. Now the U.S. citizens who were their victims are going to “bail” them out. If they put the same amount of effort using technology to improve their product as they did to scam customers, there would be no need for a bailout.
As for Wall Street in general, it’s obvious that the very wealthy are privy to unprecedented levels of knowledge. The system should allow for anyone to get into the market on fair playing field with any amount of investment. Technology provides the tools to make this happen. I never have put money in just because I know that any decision making information I get is tailor made to make the average investor put his money where it shouldn’t be. When a company gets in trouble, that’s when the news sources start touting how good that company is doing, and they use some pretty flaky data to persuade. Guys like Madoff are working off of an entirely different set of information, and they’re even capable of manipulating the information the rest of us get at will. And if anyone, like Madoff’s Son-In-Law, a fine SEC official, sees the misdeeds, they couldn’t explain it to us if they tried. The average investor will not know until it’s to late. Technology used for good, could correct everyone of these problems and make Wall Street thrive for all of us. The data made to elite few, simply needs to be made available to all. If you own a publicly traded entity, with all of the benefits that a priveledged corporation gets, there needs to be stiff penalties for withholding data from the public. The technology is here, it’s just a matter of current laws being updated to allow for use of today’s technological advancements.
Technology provides Insurance companies methods to calculate risks at a very low cost. The computer models have been improved to such a high level that the cost of underwriting has dwindled to a very minimal amount. An insurance company can figure out the underwriting for huge groups cheaper than they can pay the janitor to clean the building. All that an insurance company wants to work with is large groups. The same technology can be applied to large numbers of individuals, but that breaks tradition and would require some investment in modern applications. They want to pump up profits by finding ways to skim off of those large groups. They improve their programming to find ways to not pay for anything that they possibly can find reason to deny. They use their software to shave payments to health care providers, but never pass that savings on to the individuals in the group health care plan. They’re supposed to be providing a service and producing a profit, but using technology only for profits and reducing the service level is the focus. How do you think that will work out in the long-term for them?
The home and small business users, always the most savvy, are finding ways out of the technology snare. Open source, Web 2.0 applications, and others are increasing our knowledge and communication abilities. We’re starting to be our own best news source. Everyone knows that you can’t believe much on the Internet, but we’re changing that by creating groups of trusted friends. If you need computer goods, you can go to your favorite Web 2.0 apps and find groups that will inform you of their experiences. If you need your computer repaired, you can find a remote repairman that can fix your situation for a fraction of the usual service call. The list goes on and on.
The main point of this post is that people need to think about how technology is being used with the companies they do business with. Check their websites, ask employees, and see who their business partners are. Look at who the failures are partnering with. For example, you can bet that there is no Open Source software at General Motors, none. I would lay money on it. They partner with IBM, Microsoft, and numerous fancy consulting firms that have special ways of influencing the purchasers. The cost of all of this is passed onto the customer. In contrast, many new startups are doing some similar tasks with software that is completely free of charge! Open Source doesn’t charge for the software because the vendors contribute to the product and make their money providing support! They realize that the software license itself is a ridiculous thing to charge for.
Occasionally I’ll post information about some common Open Source software, but there is so much of it, that the “Google is your friend” action really should be considered. Keep your eyes open for companies breaking out of the 1980′s IT molds and do some research before you ridicule their methods. You can bet AIG, Madoff, and the Big 3 Automakers really, really enjoy things 80′s style.
Looking at Owens Corning in 2009. This Used to Be a Place to Get a Job
On a geocashing excursion today with The H Man, we stopped to overlook the Owens Corning Plant in Newark, Ohio. I actually looked at the plant with a little bit of disgust. I thought about all the people that had worked there making a good living, but now it’s just a handful. They take advantage of some folks with temp service types of deals. The area around the plant is pretty much as much of a slum as you would expect in this semi-rural area. I noticed a burnt out house with no efforts being taken to rebuild, it was just abandoned.
After reading the history of the plant, the story with Owens-Corning isn’t as bad as it would seem looking at the place today. At one time this place served a vital function in the technological advances, energy savings, and even the country’s naval warfare capabilities. It is so ironic to find out they truly were on the leading edge of the “green” movement, from way back in the 1930′s. They were doing their best with what they understood at the time, without knowing what mess they were creating and how many lives they were effecting with their pollutants. I would estimate that overall, they helped much more than they hurt, and the company has made huge efforts to be as clean as possible now. The were hardly wreckless or irresponsible when you look at what they were trying to accomplish with the knowledge they had. Owens-Corning made many people wealthy for a LONG time too. You can’t really blame them for not being able to keep it going forever.
Owens-Corning and other leading edge companies had the type of innovators that the country needs now. Instead, the corporations are pulling greedy financial stunts, producing poor outdated products, and wondering what’s wrong with the system. The rest of us that should be supporting companies with the new world changing technologies are powerless to help them. We let our government fund crackpot “green” companies and the politicians retire on yachts with the kickbacks. To calm us all down, they tell us that manufacturing is no longer our forte’ and that we should all concentrate on the service sector. Meanwhile, any innovation is being squashed. The old tech companies want no mention of them because that could destroy their Chinese and Vietnamese operations. They can make crap while still relying on the good name their employees of the past created for them.
So while we are out looking for jobs in this great “service” sector, we can take some unemployed days off to gaze at the last plumes of smoke belching out of the once great companies of the past. We can watch the last American jalopies lumbering off the assembly lines, the last jumbo jets gracefully edging out of their hangers, the last Peterbilts coming out for the short hauls in place of the usual coast-to-coast runs, and the lasts of many other great American industrial innovations as they fade away. We can take our place as busboys, waiters, lawncare technicians, and handymen out in this great service sector world.
Maybe we need to forget all this “service sector” talk and get back to making real products again. Maybe this economic downturn will wake some people up. It would certainly brighten up the skies over Owens-Corning if we did.
