Why Net Neutrality is bad for Western Civilization

Western civilization at its foundation is built on the pillars of equality, hard work paying off and fairness. Fairness & equality are different sides of the same coin, by means that everyone should have the same opportunity to achieve great things, if they want – hence the hard work paying off as a central pillar as stated above. Every other concept we have in the Western World (e.g. anti-discrimination laws, human rights laws, property rights) kind of build off these foundational pillars and really create the world we live in. I would argue Eastern & Western religion are also built on the same pillars. I’ve grown up in the Western World but come fairly well read in Eastern Religions and can very firmly say that these concepts are well grounded in both Christianity & Hinduism. So how does this tie back to Net Neutrality? To begin, let’s give a brief overview of the history of Net Neutrality, like what it is and how it came to be, then we’ll describe the effects on the Economic world of today and I will even tie this back into Public Transit and why it’s so pitiful in Canada (in particular). I believe the underlying concepts I’m talking about can be applied to many other countries in the West.

So what is net neutrality? We have Internet. Internet runs on wires – for those of you who do not believe me, check out this cool map showing where all current underwater fibre optic lines run. At it’s core, net neutrality wants to treat these wires as a common utility so data (movies, shows, news & other things transmitted over the Internet) is not discriminated against. What does that mean? This means that the companies that own the wires (Internet Service Providers or ISPs) can sell you a certain allotment of Internet but cannot slow down speeds if you choose to say watch YouTube or Netflix with all that Internet – again at its core Net Neutrality wants to ensure that every has equal rights to Internet. There were fears that ISPs could throttle (slow down certain websites like Netflix or Youtube) or give preferential treatment to certain content creators & hence discriminate against other content creators – this even pushed Google to start investing in Fibre Internet and they even invested in a few cities with a company named (you guessed it!) Google Fibre. In a capitalist society, this is exactly what should happen! You have certain companies (ISPs) who have incentivized other companies (content creators) to vertically integrate (fancy term for invest in their own wires) and through competition, the best solution to delivering data (the service) would have risen to the top. Again this is through my own assumptions that competition would breed the best solution & you may disagree with this and in that case, you believe the solutions we currently have are the fully optimized and cannot be improved.

So what’s wrong with a policy that seeks to equalize opportunity to such an essential resource? The answer is, you don’t have competition. You don’t have the best solution rising to the top – innovation is hindered and there are severe externalities due to this. There were actually many instances of arguments where people on the Left thought Net Neutrality would bring about faster speeds – here’s a nice chart I found online that seems to counter this viewpoint. Now what are other ramifications of Net Neutrality? What I described above, regarding the company vertically integrating is an important concept as it describes what all companies should be doing. All companies should be defining metrics (or knowing what’s important to your customer) & optimizing the metrics that affect their business. There should be a direct relationship between the metric and revenue and in the Google Fibre case, Google recognized that speed delivered to customers was an important metric and decided to invest in hard resources (Fibre wire in cities) to make that happen. I’ve been listening a lot to the scare mongers who speak of Huawei and how they’ve been terrible for the world but Huawei has reinvigorated data transmission speeds all across the world. Huawei is now in over 70 countries and growing. In the 5G space, Huawei is leading the world and making it so US companies, who previously neglected 5G investment, have to reassess where to invest. Again it’s very difficult for politicians who are not well read in technology (like most decision makers in Canada at least) to look at a policy like Net Neutrality and take the side of the coin that would incentivize investment – the reason behind this is simple, Canadian internet is owned by private industries and to invest companies must be profitable so to ensure fast internet speeds would mean a politician would have to support policy that maximizes revenue (sounds like capitalism to me). This stance also seems to counter all the talking points that politicians usually support because to take that stance (an anti-net neutrality stance) would put belief in a countries group of Engineers to innovate and deliver results. 5G or a change from the current state of Internet is not possible without Engineers so I was surprised when growing up (during the early 2010’s) every tech company seemed to come out in favour of Net Neutrality. This was one of my first instances of understanding that powerful people (or companies) will support a policy that is counter to National growth just because they are the current market makers. Why would Google, Facebook & Netflix support innovating in Internet Infrastructure when faster speeds will just create more competition for them? Once 5G is a thing, Broadband Internet speeds in Rural areas will also fly through the roof. Internet will be available everywhere and the issues we have with 4G (e.g. slow speeds) will not longer be a worry.

In the first paragraph, I described Public Transit and why there are parallels between Public Transit & this Net Neutrality issue – the parallel is that with Public Transit, there seems to be a detachment between this identification of a KPI and the direct investment in hard resources. I would argue that identifying a KPI is pretty simple (time it takes to get from one place to the other) but what is lacking is change management that enable municipalities to optimize this KPI. Why do I say this? Well city bus schedules rarely change and even when I use buses now, they’re not at capacity. They should be at capacity. If you want to read more about Public Transit and ideas on how to optimize the service, read an older article I have written on it. A more important reason why there’s a detachment is because at least in Toronto, TTC (Toronto Transit Commission) revenue goes back into the General City coffers so instead of revenue staying inside of the TTC there’s a detachment of cash flows. Instead of user fees directly paying for future TTC projects, projects are paid in a circular way. User pays fees –> goes into city fund –> TTC asks city for money for projects and maintenance. I am suggesting that the revenue process should just go User Pays fees –> TTC manages its own money. Because there’s a direct tie between revenue and services rendered (or future services) people would be more likely to use public transit as the leaders of local transit authorities would know exactly where the money should go.

Why JT-SNC is an Election Issue for 2019 [Canada]

The last 2 weeks have provided Canadians with monumental instances of events that will surely shake the political foundations to the core. What happened? & Why?

The highest lawyer in the land, the Attorney General (AG) for the Government of Canada, has accused her government of high-level white collar corruption. Not just her government but the Prime Minister’s Office (PMO) office; the office that directly controls the the current government and if AG’s accusations are proven right, Trudeau should be given the same treatment as would Donald Trump, if Trump is found guilty of obstruction of Justice (what Trudeau is being accused of). Interesting that a month ago, the odds would have been on Trump to be guilty of crimes like the following:

1. Pay-to-play
2. Changing Federal bribery laws to preferably treat a corporation that has donated money to their Political Campaign

Now buying access (Pay-to-play) is quite an accusation. To say that if you give me more money, I will hear your concerns over others – this is a primary reason our government is not currently working & a reason why Hillary lost to Trump. To accomplish anything, you must remain focused on what stands in the way of progress, of attaining a future state from your current state. In the meantime you have to assess the divide between states and close gaps. In general, this is the cycle of innovation, so if you have 80+ hours of talk, during work hours, between key stakeholders in society (Government & High Technology Firms C Suite individuals) – some questions can be answered. Questions like why you/we don’t have high speed rail, or some investment which requires a technology input – it is because for the last 2-3 years 80 work hours have been used by Canada’s biggest Engineering Firm (SNC Lavalin), lobbying the government to have a law changed because of bribery wrongdoing, instead of innovation and technology.

Referencing point 2, SNC has been accused and charged with bribing foreign government even when they knew their corporation had to adhere to certain laws against bribing foreign governments. In some sense this absolutely why doing business in the Middle East/Africa is so complicated for Defense companies – cash figures and contracts need to essentially be handled hand-in-hand with Federal Governments. For defence industry companies, once you get into paying stakeholders and not competing on specification, then it doesn’t really matter what you are selling. Without proper oversight, corporations can lose control of individuals and combined with the willful ignorance displayed at SNC Mgmt, they have landed themselves in this sticky situations. To reiterate this was totally of SNC’s doing, bribing a government official is not cool and there’s a reason these laws were instituted in the first place. SNC mgmt is offloading the responsibility of managing because they made a boo-boo (or chose to willfully ignore emails… one of the two). Increasingly, it looks like SNC would have been found guilty of some form of bribery, barring them from bidding on Federal Government contracts, the lifeblood of their business. Consequently this puts good High-Tech Canadian jobs at risk. You can see why the Federal Government is showing compassion. In the point definition above, I make reference to the Libs accepting money from SNC & there’s an inherent conflict of interest in accepting money and having meetings and then changing a law to benefit said company. Now here’s where some light needs to be shed on additional inefficiencies that transpire in society as the result of this action.

Nothing happens once. For a Federal Governments whose given preferential treatment once, it will not be the last time this happens. Unfortunately this speaks to evils in society because not only does a corporation need to be the best at what they do, but they also need to pay to either cover up mistakes or be involved in tax breaks to trade (Corporate Welfare – Explained under Production Efficiency). At the end of the day, bribery is bad, it’s not good if laws are changed because a Canadian company “accidentally” bribed a foreign Government. SNC is essentially getting to have their cake and eat it as well, they want all the benefits that bribery brought the organization yet not face a consequences of bribing a foreign government to win contracts – in recent news, this seems like a trend (google Montreal bridge contract), not a one off instance.

However on a completely separate point, in the case of Huawei CFO case, this kind of contradicts the claim that governments need to be an arm’s length of the government. For those who do not know, Canada recently arrested the largest Chinese Tech company in the World’s Founder’s Daughter and are readying her for extradition to the USA. All the while perpetuating the myth that the Federal Government’s hands are tied because the Judiciary is independent from political influence, i guess in the case of Chinese Company’s? I don’t have a real opinion on the Huawei case, it just flies in the face of consistency when we have an instance where a company spent 80+ hours to lobby the federal government to get a law changed so the justice department would look more favourably on them. So in a way, this domestic issue is turning into an International one, since our second biggest trading partner China, has even more reason to use this issue as leverage (or disdain) in their relationship with us.

I don’t even think Jeff Sessions (previous US AG) has claimed that he’s witnessed Donald Trump obstructing justice and yet Mr Trudeau finds himself in the hot waters of this claim. In my opinion, Government serves the People, so if the government is spending 80 plus hours talking bribery and changing bribery laws, then they should be more focused on delivering us what we want. The People decide what they want and right now there seems to be disconnect between what we want and what is happening. In October, when Canadians go to the Polls, this may be the beginning of the tide of system self correction that’ll mean Prime Minister Scheer!

 

What the new NAFTA means [Mexico][Canada][USA][Trade][Economy]

Whether it’s called USMTA or NAFTA 2.0, this is a significant trade agreement that will be impactful on all aspects of North American life. Speaking from a CDN perspective, I can give assurances that this agreement will further cement North American Nationalism which can better challenges the Global South Asian & European Economic Blocs. Canada and Mexico both needed this and can better develop each owns economy by focusing on investing in high technology & manufacturing industries. I am writing this Blog entry on the eve of a potential agreement.

Let’s talk 4 of the highest impact measures this agreement should address.

• Potential changes to the TN VISA program

Regardless if it’s job classification changes (adding more job types to the list) or allowing the spouses to work while in the USA – currently spouses of TN/H1B (main technical skills based visas the US grants) are not allowed to work. Depending on how you view this, could be bad or good, but it is the way it is.

Even seeing more of a Schengen visa system for a complete free flow of people (to live & work) in North America would be nice but not sure if this is a reality. The reasoning for a free flow of people would be it would allow easier deportation for criminals back to their native region (like in the EU) so theoretically it should make the entire region safer – again if you allow an orangutan, the job of warden in a prison, you’ll see failure no matter the environment, but Schengen style policy should make the whole region safer.

• Cross border spending limits

Potential lifting of the 24 hour cross border spending limit (also called de minimis rate) charged by Canada for commercial goods purchased by CDNs in the USA from current rate, of $20, to what the USA wants it to be, $800. That is, US wants it to be the same dollar figure that it charge USA citizens, when they buy goods in Canada.

• Greater US access to Canadian Dairy market

Cheaper milk, & cheese & pizza – does this mean we’d be more likely to see obesity rates go through the roof? Should Canada be prepared for the overabundance of hormone and antibiotic laced dairy ready to flow through our grocery shelves? No matter the scenario, Canadian cheese is going to have to get cheaper, to compete, and already super duper cheap US Dairy goods will sell, & sell fast in Canada.

• IP Law overhaul

Easier for ISPs to sue for copyright. More corporations owning copyright and actively seeking out people to sue. I assume there will be progress in this avenue, but I predict nothing overly intrusive. Either that or just buy a VPN.

We’ll see what this agreement brings.

 

Dangers of Virtue signalling

So this post could also be titled “Why Marketing is Important in Politics” because it’s based on how people in power use their own statistics or their own personal stories to either write their own narrative to make it look like they’ve accomplished what they’ve set out to; or to mask greater failures with viewpoints that everyone agrees with as a distraction mechanism. Usually these viewpoints are inherently non-value add. To the first issue, here’s the power in statistics, you can’t fudge them when they are known to all involved, at the onset of process improvement… key work: onset. When defined at the onset, the statistics represent what they’re supposed to (from a customer { or citizen} perspective) and you don’t need this extra type of “marketing”, to tell you what to think. This is why the people in power do not want to establish KPIs, once KPIs are established, it’s very very difficult for politicians to “write their own narrative”.

This article goes hand in hand with the Great Job Fallacy article I wrote previously because that article explicitly defines the disconnect between what is expected and what is actually done. Let’s just look at some elected representatives who spend their time making the rounds at events, “listening to their constituents”, where is this data stored and how does this data drive change in political office? That is the key question. Where is the criteria for doing a good job defined? When this criteria is hidden, how do we know if the right objectives are being pursued by those in office? We don’t & with the onset of the Internet this is unacceptable. Information has never been easier to store, transmit and analyse, yet there’s no indication that politicians are pursuing positive change the right way (notice positive and right). Politicians will say they’re spending their time listening and doing what constituents say, but there’s no literal proof to support this. This is the exact definition of the “Great Job Fallacy” and no mater what cross country tours certain politicians are doing, if this does not drive any noticeable change in policy, does that mean politicians have always been right? That is to say, external inputs had no affect on the process output. The hardest thing for many people who are new to private industry to understand, is that client objectives and risk are continuously-evolving animals, animals that must be maintained and understood by those who call themselves problem-solvers. If the problem-solvers in society are not keeping current with the latest and greatest news in their field, this can lead to a lag between what action is required to satisfy market demand and the action itself. A key skill by those who call themselves problem-solvers is to be able to sniff out bullshit and with this inherent ability, I don’t see how problem-solvers can do their jobs. In industries (e.g. politics) where there’s a clear disconnect between the problem solvers (MPs) and the people affected by the problems (the citizens they’re supposed to serve), the root cause is the self-anointed problem-solvers having not kept their knowledge and documents that should be living documents (PFMEAs and control plans) current. Again this is where the marketing is absolutely required. Of course, if you believe there are no problems in society and that MPs are doing a suitable job, then ignore my Blog Posts.

There are two different kinds of marketing employed by the politicians of today; one is KPI correction and the other is the aforementioned virtue signalling. Virtue signalling has many used cases. Case number 1: helping masking promises of $10B annual deficits turning into $20-$30B annual deficits with new KPI inventions. Notice, I had never heard of GDP-to-debt ratios until the Greeks got caught fudging their numbers and the EU had to put a positive spin to it. Well the Greeks were not the only ones to do this, as it was an exercise the Spanish and Italians also used to hide the debt they had borrowed. All of a sudden because the numbers were SO bad, they invented a new metric and Canada, all of a sudden got a get out of jail free card because we weren’t as bad as some of the worse offenders, if judged through the GDP-to-Debt Ratio lens. Let me tell you this, with extreme confidence, it’s very myopic to look at 1 statistic and use it to lead government policy. Notice that countries like Greece, Spain & Italy, all countries who have been employing Socialist policies in many of their Government Processes all suffered the same fate and were forced (indirectly) to join the Euro. In the Canadian case, it’s very irresponsible to use this KPI because Greece (& it’s other failed Euro states) are in a completely different Economic situation compared to ourself; we are not a small player in the EU and if we head down the path of Greece, we will very soon turn into a vassal state of the Chinese or 52nd state of the good ol’ USA. In a previous article, I mentioned how people should negotiate from a point of confidence and if you’re all of a sudden basing your economic policy on a made up statistic that could nosedive if automotive/or oil and gas went away (e.g. through the rewriting of NAFTA or the mass production of electric vehicles) then were clearly not negotiating from a point of strength. Go to Greece and ask them how hard it is to open up a business, find out how they’ve had to fire sale their public assets to the Chinese and Germans, find out how there’s a lost generation of young people who’ve been out of work because they have no work to do in Greece. Then ask yourself if voting for the incompetence of those who virtue signal is worth the price that’s paid by the eradication of your civilisation. I’ve touched on how Greece is in the unfortunate situation where their industry (outside of tourism) is no longer competitive, Canada can very easily head down the same path.

Now we get to what Virtue Signalling actually is, a collection of empty gestures not limited to selfies with people (India’s Modi does this as well and I find it to be odd), viral photo ops with just about anyone (from high school senior’s prom trips to all the way to suspected terrorists, looking at Joshua Boyle) and just the overall propensity to post on Twitter and have the “popular” opinion on nearly every issue. I just mean to say that he offers a lot of opinions on a wide wide array of topics and it’s really not necessary – there is no consistent fact based message he pitches. I guess that’s what you get when you elect a rolodex to office, & maybe it has to do with his looks, I’m not against pretty people running for office (I know many pretty people who are great) but I feel like his marketing is distracting people from the issues. It’s crazy to even say this about someone in that kind of office because you would not expect someone to get to the Prime Minister’s office based on Marketing but that’s why Trudeau is there. They say getting your first 1000 votes is the hardest thing to do and JT has never had to work for it, life has come easy to him; the fact that he rode his father’s coattails to the PM’s office really speaks to how desperate we were to elect someone who could deliver results. I really wanted to put more effort and give instances of his virtue signalling but I do not want to put the work into such a BS topic. I’ll just try to periodically update this article with instances of it in the future, don’t worry, I’ll add date stamps.

Edit 1: I do not get the RIPs to all his ex Liberal donors (Apotex guy and Shaw guy). I just don’t see the point. Why doesn’t he write RIP to all people. Again it’s to gain sympathy to show that he’s more virtuous than all those politicians who don’t even think to offer compassion to those who have passed.

Edit 2: Apologies to LGBTQ, Komagatu Maru, Residential Schools… what’s the value in this? Does the government not have better things to do than apologize for things that happened 30-100 years ago?

Edit 3: Bill M103 – Does this really decrease racism against Muslims? Why even create a division between Muslims and other Groups, doesn’t the Charter offer equal protection to all CDNs? Why pass a bill to provide certain people with more protections? I do not understand.

Edit 4: Worst of all when he said that Canada was open to all refugees than Canada had record illegal border crossings from the USA. I’m sorry but there’s countering the Donald’s very negative stance on immigration and then this is the act that’s financially probably had the greatest impact via a single tweet

Edit 5: The fake Muslim hoax issue. He tweeted right away how incidents like this have no place in Canada and it ended up being a fake event. This actually increases racism towards Muslims because again it shows favourable treatment and no one likes favourable treatment

Edit 6: http://vancouversun.com/pmn/news-pmn/canada-news-pmn/canada-will-push-g7-partners-to-sign-no-plastics-pledge-to-save-the-oceans/wcm/e0d927da-f986-4ce3-ba9f-8006eafb1232

Virtue signalling at its finest, ban it in the industrialized world, outsource it to the developing world. On the surface it looks like a great piece of legislature that has a noble goal but you realize, it’s strictly for marketing purposes as it will not curb consumption and have a noticeable impact on consumer behaviour – point being, consumers will still demand plastic.

My Nature vs. Nurture article

My Nature vs. Nurture article. To me? Nature plays a part but Nurture plays a role that is misunderstood. If you imagine a video game reference, it’s like drafting a random player in Madden or 2K’s MyPlayer mode, and developing “that player” as the centerpiece to a 20 year dynasty (mode in sports video game where you play owner and run a player through a simulation of 20 years, so this year it would be 2018 to 2038). Even in those video games, ‘Developing’ being the key issue.

Development is the result of your environment. Whatever you define to be you, and whatever you, define to be environment. The magical variable missing from this equation is time. So you have ‘whatever’ affecting ‘whatever’s’ evolution over the course of ‘whatever’ (the system, the individuals, time). You can literally take this statement and analyze any time-series event, with that mentality, by really focus in on defining what potential means and then how to extract the max potential from a system. This speaks to whatever manufacturing companies do and now do so well – modern day manufacturing firms have adopted the mantra to optimize and & all productivity measures to increase their total throughput. Modern corps focus just as much on improving what they already do compared to doing new things. This type of progress, between pursing new ventures & optimizing existing ones, is completely a result of the required knowledge and financial capital control, that is available for a firm to perform their service for the market. I love learning about the concept of control. Control is desire, control is ego – however, in the corporate world, mixing control and transparency can create a powerful monster. Control is having the ability to do something without having any preconceived biases, since they’ve been disproven by daya. Control is also knowing how long it will take you to successfully do something. How to get an item from State ABC to State XYZ, it is all about really understanding your environment and how to get your environment to work for you. This type of mentality should persist in people across all different industries, societies and regions – the simple belief structure that:

1. If you have a goal
2. Plan for that goal
3. Try that goal
4. If you don’t succeed
5. Adjust and try again Try again

.

.

.

• Success

If you evolve, you learn and you understand, your goals, customer & one self better. Corporations do this exact analysis but control is only possible through some kind of quality management system. When I say QMS, I mean that you’ve been born (as a business) now just continue to understand your market and how to best serve it and you’ll survive (hopefully thrive). Very often this kind corporate ego can ultimately bring about a businesses downfall and that will likely be the result of losing track of your quality and corporate control.

This is ultimately where I think government is at, in terms of the state of their QMS. They say they focus on the customer, but do they really? What kind of value-add does another lawyer bring to a political party? Canadians have to know about a concept called “law of diminishing returns”. It means you can have too much of one thing, especially in the current government system we have right now. It is one that is not led by metrics, KPI, or other tangible measures of progress. I believe the ultimate downfall of politics is just ever present in the nurturing system of the day. Nurture is supposed to mean that we have systems and processes that overlay synergistically on top of one and another and I don’t believe that they presently do. Our processes are broken and our systems a mess. Throwing money at a problem is better, easier and faster than taking the time, learning about the problem, and making it actually go away.

I fear in due time, people from across the world, especially the most vulnerable, will be put in sticky situations, and they will not survive. The beauty about control is that when you don’t have any, you’re essentially useless. Everyone understands or at least, will understand, the concept of the rational consumer. I’ve heard a lot of people say rationality is the basis of making a good decision and markets very often act rationally – this is one of the beliefs so many people entrust the free market. Rationality is a good thing because it assumes consistency. It assumes that, if a user, is at a process step, and is under similar conditions, it assumes that the user will make the same decision. This is the raison d’etre of consumer marketing, by those skilled in the 5Ps and 8Ms, to turn rationality on its side and to be able to describe an experience so vivid, that you don’t mind the 50% premium – that’s okay especially when without the sales pitch, you wouldn’t have had the desire to want and having stuff is nice. This is the definition of the marketing pitch.

When a system is rigged (politics) start asking why. These politicians of today, I especially fear because they act irrationally and it’s because they’re put in extenuating circumstances. Ahh yes, “extenuating circumstances” – the ever-appropriate 2 word euphemism that’s paid for more law school degrees than the concept of the bar mitzvah. When incomplete knowledge is at hand, bad decisions are made at an ever increasingly pace. This is current climate in the modern day politics, mistakes are lesser in the corporate world. In my last week’s article, I touched on this. One incident can change how companies function, this is due to an ever increasingly used corporate feedback processes. Companies are learning from their mistakes at a higher rate and consequently implementing lean industry led processes. All the while government is sitting on the sidelines. Government is not private industry because government does not play in the same environment. Again, control is all about the current level of quality you can provide and that is based on your environment. If you do not play in the same environment, unless forced onto you from above, you will not be able to deliver the same level of services. What’s ironic is that government always claims to be ethical and always pursuing the public interest but this is the exact brush private industry is painted with. The thing about private industry is that if I’m treated unfairly, I can always switch companies and spend my life at an organization that cares for its employees. One of the primary motivators for private companies to create a fair and equitable working environment – but this internal environment goes hand in hand with corporate learning. As corporations learn and spread best practices, this is only due to greater communication skills between internal business units. Everybody working proactively and continuing to achieve a corporate culture of universal nurturing. For this reason, Nurture versus Nature is not even an argument to me, it is a discussion. Nature always gives certain people a head start but the environment is what allows people to do great things.

 

To learn more about QMS tools and training, see below:

I will present some introductory reading, which will answer questions like:

1. Why do inefficient systems exist in the first place?
2. What kinds of inefficiencies are there?
3. Intro into control plans and PFMEAs

Reach out to me at gurpsb@icloud.com for additional inquiries.

Why the West has lost jobs [Inefficient Government]

Marginal product of labour & marginal product of capital. Two phrases you won’t often see in economic analyses but two concepts that must be understood in the wide scheme of implementing a formal QMS. This article will touch on why China is innovating faster than the West and more importantly answer the following questions:

1. Why has the West lost jobs
2. Why people (economists) think that that’s no big deal
3. The destructive effects long term of this short term thinking

Let’s face it, the number one issue in the Western World is not food security, water shortages or border disputes, it is jobs. We’re not talking about Steve here, but actual jobs and even China & India seems to thinking along the same lines. It’s something that Thomas Piketty has pointed out in his Economic Analysis also and it is, as countries mature and start solving the relatively easy problems (e.g. how to feed and educate their population), they will be able to compete with the West for industry. We’ve already seen the destructive boom that Chinese Manufacturing has laid upon the Western Manufacturing World and it’ll only get worse. China is very focused on controlling and creating a cost advantage when it comes to delivering goods to the world at large (google OBOR initiative). I have covered this a little in separate articles but let’s be a little more clear here. There’s a few reasons why the West has lost jobs, the primary reasons being:

1. Minimum wage laws
2. Lack of transparency for goods imported into Canada
3. Chinese SOEs

Let’s briefly touch on each of these factors. Minimum wages laws – they are touted by the Left as the way to bridge the gap to wage inequality – decreasing metrics like the Gini Index (an index that reps how much wage inequality is present in a country). The increase in the Gini Index is supposed to tell people how much more inequal in income a country is getting and apparently it’s gone up in the last few decades in the Western World. People have correlated this with decrease in taxes and other “right-wing” tactics but that’s all talk. I do not think there’s a definitive controlled experiment to validate this relationship because there are many inefficiencies present in the world we live in. I do not dispute the increase in the Gini index, but the question is how do you decrease the Gini index so there’s more income equality across jobs and borders. I argue Minimum Wage laws actually increase the Gini Index. The reason for this is simple, you have a cohort of high school students all at the beginning of their careers and the number one metric used by people before they choose a career, is how much money they’ll make and minimum wage complicates this. At the beginning of people’s careers, everyone earns around the same, it’s not until people are around a year into their careers that they see opportunities for advancement or not. This early low pay across the board is due to high schoolers just not having the marketable skills at their age. Other avenues of misinterpreted data can come directly from high schools themselves; in Canada, I took a grade 11 careers class that really failed to communicate tangible information, I know for a fact this influenced a lot of people my age to go into careers with minimal pay. Again pay is not everything in life but you need to get paid to make a living and have flexibility and when your misdirected from the beginning that is a massive deficiency in the system. Getting back to minimum wage, it introduces inefficiencies that cannot be quantified because you don’t know what percentage of people would’ve taken the hard road and realized that at the end of the day, if you work hard, all the time, you will get rewarded.

Now let’s touch on the lack of transparency for goods imported into Canada. I’ve touched in my Economist’s Moment from this article and illustrated it with a very rudimentary example. In that article, I explain how legislative differences across borders can create manufacturing arbitrage scenarios for large multinationals who can create products in one country and import them into another with relative ease circumventing local laws that add to domestic country costs. This is a deep sentence, so let’s take a step back and explain it a little further. All it means to say is the following, Country A has lax labour standards, so Company XYZ takes advantage of these lax labour standards and produces goods there & imports them for sale in Country B. The goods would have been created for a higher cost in Country B but this can be mainly attributed to labour and employment standards. This is where the free traders (every modern day economist) would go and say that well that’s how free trade works, one country specializes in one activity and another country specializes in another activity and everyone is better off. I would agree with this, had it not been for basic industry standards that stress workplace safety and human rights that large multinationals are able to circumvent through outsourcing production. To get back to the paragraph matter, if there was greater transparency during the goods creation process in external countries to ensure that labour standards and environmental standards are adequate (to Western Standards),  then there will be greater fairness applied to domestic manufacturing industry (large or small corps). In Canada, Canadian manufacturing will be on the same footing as the developing world and consequently, the developing world will attain our industry standards faster. Currently when a company wants to go abroad, there’s very little incentive to ensure that products are made in factories that are safe and honest (see worldwide manufacturers exploiting Bangladeshi garment factories).

Chinese SOEs (State Owned Enterprises). Imagine, you’re worldwide manufacturer based in Canada/USA of a good with Steel as a primary input. In the Canada/USA market, you buy this steel at the free market price since you buy it from a separate company & it makes up 30-40% of your total product cost. You have a fully automated line so you think you have your costs controlled. You put in a bid and notice you’re bidding against a Chinese company. The Chinese company puts in a bid that’s very much at your level of cost. Questions start to flow across your company as you wonder how this Chinese company could’ve outbid you so easily. There’s one clear solution, the Chinese company has leveraged SOEs, whose primary goal is to employ people, not play in the free market – but again due to the lack of transparency required in the supply chains of manufacturers, this can all be hidden. This is the path to the slow and steady decline as in nearly every manufacturing industry private market organizations will go up against Chinese SOEs  who use shoddy engineering, integrated SOE supply chains, and loss leading contract bids to bankrupt domestic industry. As the Western World loses contract-by-contract to Chinese SOEs, remember that this steady decline will be marketed by government as a non-issue because government will slowly take on more debt and raise taxes on the remaining private industry. This will increase costs for private industry as well since they will have to pass on these costs to consumers. Remember this will likely happen when interest rates rise because then debt carrying costs will increase. I have touched on this topic in a previous blog article but I feel the need to further expand on this. The impetus of government to focus on short term thinking is one of the most destructive long term effects on a nation. Again this can be seen by initiatives of the Provincial Liberal Government led by Kathleen Wynne to deliver short term hydro cost savings to people through borrowing free money. Free money being the Trojan horse of borrowing money at today’s interest rate while not factoring in clear evidence of interest rate increases in the future. This type of short over long term thinking is also used and abused by government to push their marketing initiative. They market Annual budget surpluses like it’s something to be proud of, all the while ignoring all the small problems that are creating massive inefficiencies elsewhere in government & society. Let’s take the example of schooling again. Remember education is the bedrock of a nation, it should be the primary goal of nations to fully educate people for minimal cost so that we can create a system where people can be fully educated. Education is also the primary driver that will create a just, free & open society – noone dare challenge a man/woman with an education because work is by definition, non discriminatory. Anyone can do work and it’s up to the education system to be as fair and open as possible so that people can learn and free themselves from the shackles of persecution. Now let’s talk about education in Canada, the decrease in education standards and how this is manifesting itself in unpaid internships that are being blamed on private industry. Blame is being transferred from one group (people responsible for education) to another group, modern day corporations. This kind of falls hand in hand with minimum wage laws because if people knew that certain careers had a cap of $15 bucks an hr, people would likely not go into them. Sometimes you cannot know this until you start working and you’ve already invested years into a field & at this point the realization of greener pastures in another field, are just not present anymore.

Short term over long term. Notice the silence from Government on the lack of investment by the Automotive Industry in Canada. The only way the CDN government is able to keep auto manufacturing here is by bribing large multinational organizations because there’s such a cost advantage in producing in Mexico. Examples are below:

• $1200M Ford investment to support 800 jobs  (March 2017)
• $86M Chrysler investment by the Ontario Guv (Oct 2016)
• $84M Honda combined investment by Fed & Prov Guvs (Jan 2017)
• $100M Toyota combined investment by Fed & Prov Guvs (July 2015)

Forget helping Small to Medium Enterprise business succeed, the government only cares about the big dogs. They’re able to mask their inefficiencies through outright bribing companies and that’s wrong. That hides the inefficiencies and it is not a scalable business practice. Bribing companies is wrong. There is a reason that defense contractors face stiff penalties for bribing developing nations in weapons contracts. Recently SNC Lavalin was blacklisted from bidding on government contracts and it is because bribing is not a scalable business practice, all it does it put government in a bargaining position that it does not deserve to be in.

Today, in the Western World, the Public Sector makes up 30-40% of total spending and this is basically a fixed cost for any company wanting to do business in the West. With growth in the Public Sector, countries are transitioning costs to a monster that cannot deliver services efficiently and in turn, a culture of laziness has developed in government – this is a primary by-product of inefficient organizations. It’s a snowball effect where people who cannot solve problems are given more of a responsibility to solve problems. A culture of zero accountability also manifests, where the message that if you work for government, you’ll get higher pay, a pension and relatively easy work, so why not take the path of least resistance. The path of least resistance is marked by zero focus on KPIs and consequently zero focus on the customer. Cultures where there is ample idle time also lend themselves to greater instances of sexual harassment, bullying & other non-value add tasks and this can be solely attributed to people having too much time on their hands. Just as a side note, I don’t partake in workplace gossip because once you go down this road, you keep driving.

No government entity truly focuses on its customers and no government entity changes fast enough to keep up with tech and customer changes. Let’s be clear. What I mean here is that 1 instance of a process breakdown can completely change the way private organizations function – this would likely never transpire in government because government does not have a formal QMS. Customer pushes as well as cost saving exercises regularly happen in private industry but that is with the assistance of a corporate QMS, that allows for companies to change internal processes while still focusing on the customer and product. For example, how easy would it be to cut travel and meeting costs by employing a teleconferencing initiative among government entities. Again there’s third parties who are clearly stopping these kinds of process improvements but I believe that ultimately the government will be forced to decrease non-value add costs but this will be difficult without a QMS.   I hope this article has been able to summarize why the West needs QMS and Quality Standards to play a bigger & bigger role in government.

Marginal product of labour & marginal product of capital

So let’s get to the meat of the article, I have written on this topic before but I like to educate people that what Governments worldwide need, is a formal QMS in order to drive inefficiencies out of their organizations. Voters need to understand that money spent is money lost. If we’re allowing our governments to spend money inefficiently, we as voters have to stand up and say, “enough is enough”. I will touch a little more on why I think free traders need to reassess their mindsets. In today’s world, automation plays an ever increasing role in production. Compared to the 70’s we can not employ 1/100 of the required labour to attain the same levels of production with ALL products. I can say ALL products here because with the advent of PLCs, IOT (Internet of things), Control systems, and other Quality Standard Processes (ISO 9001, AS9100, ISO16949), manufacturing has been revolutionized. In Industry, people are given more data and more responsibility when it comes to what they’re hired to do and there’s absolutely NO reason why a nation cannot produce all domestic products it needs. We need to hire more engineers, technicians and skilled tradespeople because the needs of our world are not decreasing but increasing.  This paragraph has summarized the concepts I’ve detailed in the heading better than any economics class could but it’s based around the fact that labour is no longer as required as previous. If you have $1M dollars to invest in a factory, compared to the 70’s, capital owners realize that they need to invest more in technology and skilled trades to create products more robustly at lower costs as compared to the 70s when you would’ve just hired 1000 people to do the work.

Dive into the deep, no lifejacket necessary [Canadian Housing] [Inefficient Government]

Supply and Demand stupid. The reason given for the recent upshoot in home prices. Seems simple enough, a very obvious solution to the giant elephant in every Canadian who hasn’t bought real estate’s life. How can we not understand, the supply of homes is low and more immigrants are coming into the country therefore prices will rise. Even a simpleton can understand that. Try to go to a Real Estate Agent, and they’ll tell you the same thing, forget inflation, forget unemployment, forget the economic argument (because there isn’t one) and buy now otherwise pay 20% more next year. Forget the fact that if house prices fall, guess who’ll be under water in their mortgage? Not the realtor.
Unfairness defined
For those who remain homeless, should’ve bought when the economic fundamentals behind 10% YoY house price increases were weak at best (think 2015). Now that the fundamentals are even shabbier, young people are supposed to throw themselves into an even more twisted market and over leverage themselves more to barely afford a mortgage, property tax and utilities. Even for condos this ratio can make up at least 50% of a single earners income. Most people I know who are looking to buy only have between 5-8% saved up to put down on a house. Now in most situations this would be considered crazy but in Toronto, that represents approx. 1.5 years of savings, and that’s if you live at home. Right now prices for townhomes are between 400-600k. That means to have 30-40k saved up, I’d need to save for about a year and a half. But here’s where the situation becomes even more unfair. I’m supposed to throw myself into a bubble of prices competing against people who weren’t born in this country and made their money elsewhere for what reason exactly? I’ve paid income taxes and property taxes and HST on the income I’m putting my money down with. I’ve had it documented through T4s and Notice of Assessments for the last few years, yet I have to compete against people who come in from other countries where they made money in those countries systems. This is fundamentally unfair. There’s no level playing field. Vancouver just implemented a foreign buyer’s tax and their property market fell by 40% but the people over in Toronto will tell you that foreign buyer’s only make up 5% of recent sales. This is a bullshit fact. Notice they (CREA, specifically Tim “Lost 3 elections when my party was up in the polls a month before the election” or “I’ll cut 100k public sector jobs” Hudak) tell you the amount of sales but they don’t tell you the total percentage of sales volume. What I mean by this is that what if the 5% is at the top end of the spectrum, what if it’s driving higher prices? They don’t tell you this because they (real estate) wants to keep it’s closed garden of data hidden because if it was open, Realtors would not make as much money. Tim Hudak is incentivized to lie or misconstrue facts to fit his narrative. This is why having people of authority who happen to be uneducated people spewing facts is dangerous. Now everyone who hears that only 5% of purchases are made by foreign buyers will take this to be gospel but no one has asked the important followup question of what percentage of the market (in $ terms) does this make up.
I’m used to paying tax, they’re not
Also who’s to say that “foreign investors” actually lead to more prosperity after their initial splurge on real estate. Think about this. Think about how welfare rates in the richest parts of Vancouver shot up after “foreign investors” invested in the real estate there. This is documented by Statistics Canada (Google ‘Thousands of Metro Vancouver mansion owners avoiding taxes’). We have people who have never paid tax in their lives (this is the Blog writers opinion) who come to Canada, buy a house and take advantage of our system. Again as a Canadian who has made money in Canada, my net worth is documented. Yet when the spigot is finally closed and property does not increase at a 20% YoY pace, how is real estate going to be marketed to sell? We are selling our financial future for short term gain that is going to the least deserving of our labour class (e.g. Real Estate Agents). This is also skewing our labour output as a nation because why be an Engineer or Doctor or other skilled trade when you can just go be a real estate agent. Again these kinds of trends do not manifest over a short time period but rather over the long time horizon. This artificially makes certain trades more expensive because we have a period in time where our young people were herded into becoming realtors. This is the exact same thing that happened to Alberta during the oil expansion, where many young people bypassed University and College for the six figure salaries on the oil rigs.
I explained this to a realtor friend of mine recently. Canada and China are supposed to be 2 separate systems. Free trade untangles this definition but forget even that. Think about this. You have 100 people in China & 100 people in Canada. In China, those 100 people are doing things. They’re working in factories, they’re working on developing needle work skills, they’re working on expanding their technical skillsets. In Canada, there’s a higher proportion of people doing real estate. This is partially due to lack of capital controls that allows foreign capital to come into Canada and devour our real estate market, artificially increasing the value. But since there’s an artificial increase in the value of Canadian real estate it’s a double edged sword because that cost is baked into each and every single corporation’s rent costs. So now we’ve identified 2 areas where costs are artificially higher in Canada due to the influx in Chinese money:
1) Labour rates are higher because there’s more realtors
2) Real estate costs are higher because land is artificially increased in value
Free trade – a globalist’s saving grace
But free trade actually blindsides you into thinking that Canada is still a manufacturing powerhouse. This is because we can still get stuff for cheap. But guess what? We don’t have control over that production and since our consumption isn’t likely to decrease, this makes us more likely to bend over backwards to satisfy Chinese demands. Remember this is an undemocratic country that I wish Canada to not emulate. I’m not going to touch on this but increasing immigration to make up for the fact that Canadians are not procreating at a respectable rate is also a farce of a stat. Since housing is such a big cost, how can anyone afford kids? How do you afford kids without a house? How do you afford kids when there’s such a high daycare cost. Again politicians want to take the easy route to prosperity. Not the one that requires work. These issues were the same issues from 10 years ago but now they’re even worse & the answer is plain and simple, free trade.
Here’s where we get to a common sense problem, one that I’m not really sure why it exists. But it is the ability to apply for a mortgage. I don’t understand why T4s are not the basis for applying for a mortgage. It’s what we use to pay taxes, yet there’s other means of income declaration that we can use to increase the value of a mortgage we can buy. When you have shoddy practices for income verification in the mortgage process, this will likely increase the value of dishonest mortgages. This will also increase the size of a bubble because you’ll have a certain percentage of people carrying mortgages they cannot afford. Again I’d love some government data here but they’re too busy arguing Bill M103. Stopping bad mortgages that seems to be an obvious KPI that the government should minimize. Now I’m not someone who believes in government intervention for private industry. But when the government buys mortgages off banks (who issue the mortgages) and guarantee them, I get nervous. I’m a tax payer and when my future tax liabilities are going to go up because of government inefficiencies, I get irritated. For those who say this doesn’t happen (google “1 in 5 Canadian Homeowners commits mortgage fraud, says top broker”). Again this isn’t Statcan releasing data but just go to a mortgage broker and try to take out a mortgage that’s bigger than you can afford, see if you can get away with it. Now the reason I get irritated is because the same type of system that almost brought down the US Banking system has the same type of underlying system present in Canada. That is the Federal Government has a Crown Corp (CMHC) that is responsible for buying mortgages from Banks. This frees up capital on the banks’ balance sheets and makes it so banks no longer have those liabilities on their balance sheets. The banks transfer the risk of default from the private industry to the CMHC and tax payers. Again life is all about incentives and now you’ve taken away the incentive to only write good mortgages from banks.
So what can the government do in order of effectiveness
1) Implement foreign buyer’s tax – BC had the balls. Ontario has ovaries in the Premier’s Office and Canada has them in the PM’s chair. No chance of this.
2) Lessen mortgage fraud – again will require work. Politicians don’t do work, so no chance of this
3) Increase interest rates – very little chance of this happening. The reason is plain and simple, it’ll increase interest payments the government has to make to service debt (both provincial and federal guvs are deep in the red). No incentive but would be most effective behind foreign buyer’s tax
3) Enforce tax on primary residency – thegreaterfool seems to think this I what the government will implement. Again, it’s uncertain how much this will lessen the market. It’s the least effective of the top 4 government actions
4) Come up with some convoluted law that enriches their buddies and makes it so they do as little work as possible. Bingo bango now everyone go back to work…

Why Metrics are Important

The majority of this post will be devoted to the title matter, of why metrics are important. The rest of the post will be attributed to why deficiencies in a system can overwhelm and cause disproportionate damage to a system.

Why Metrics are Important

What I’ve learned by working in a manufacturing environment is the continued proliferation of data driven results is driving productivities higher and higher. One specific KPI that is often used is the number of parts made or services delivered per hour. A simple metric that lets you judge very quickly how much money a company (or person) can make. When you break a process down in steps (Hi Control Plan), it’s also a metric that allows one to understand an end-to-end process and see where the gate in a process exists. This can drive down process cycle times and allow for throughput into a process to be maximized. Remember throughput being maximized.

For when services are delivered, you can scan geographic zones and quickly find out where the quantity is most demanded and where demand may be weak. You can see similarities into how services are delivered, but you can also very quickly see how services delineate in different regions. It is easy to identify KPIs and observe how KPIs differ. This may be the result of differing political conditions, skillset concentration, foreign relations between countries or other variables, but generally in a country, conditions should be standardized. This is to say no matter if I open up a plant in Mississauga or Inuvik, the costs should be the same, so the services that I deliver should not differ much region to region. Now that we’ve kind of created a baseline for nations, what about if external stressors within a country caused services to be a delivered a certain way. Let’s say in the non competitive areas, regions which have slower growth and sparser populations (e.g. Nunavut), services are delivered with services technicians who don’t really have to focus on payment of a mortgage as one of their principal payments. It’s not a stressors in the noncompetitive region day-to-day lives, since this stressor does not exist (or is limited) where they live. I would argue a definite advantage, since we’re talking about finding a place to live, not picking out strawberries. Also if the money stressor is minimized on people, who knows how the service they deliver might evolve. Again this is something that could be better understood with additional (or any) KPI supervision. If you think about your healthcare & how sometimes you don’t feel like the doctor has listened to you (or spent the full 1 hr of a physical with you even though they charge the province for a full hr), I feel this kind of exercise would be an appropriate root cause to see if your doctor has acted in an efficient manner. These complaints are all symptomatic of a broken system and the only way to fix a broken system is through the implementation of a formal QMS. A formal QMS allows you to define customer needs and document tailor made skills that serve that need so that costs are not wasted (or hidden). A short term fix could be increased vigilence when it comes to dealing with doctors, however this will not solve many of the inherent inefficiencies in the Canadian way of delivering medical care. Many will give the excuses that, ‘well doctoring is such a specialized skill and that’s the reason there’s a skills shortage’. But Cuba did it, and they have some of the lowest healthcare costs in the Western World & guess what? Hospitals there are ISO 9001 certified. Now I haven’t been able to view any audit specifications, or control/risk documents so I’m only going by the sentence on their website, but they’re QMS certified so it is an interesting coincidence.

The point of this article, is that when optimizing processes, I can see a quick dashboard of relevant KPIs to ensure service standardization. The reason I mentioned throughput maximization above was because that can point out any service abnormalities. For example, if doctors with a mortgage and substantial debt, have higher throughputs, is that because they’re spending less time on clients or because of a different reason? If you incorrectly identify an unrealistic baseline throughput this could act as an additional stressor, cutting the quality of canadian healthcare.

However we will never be able to define this grey area without the work and we haven’t done the work as of yet. The introduction of a QMS would allow for cost transparency and eventually cost feedback into the process of delivering medical care. This is where I’m going to state, I love my Canadian healthcare and certain aspect of it (as summarized by Ralph Nader. But costs are going up, and to be ignorant of costs is setting the Canadian public down the path for failure – and if not failure, then longer wait times and less options. No analysis is done to ensure sustainability or cost effectiveness (or at least public papers). It seems like the only analysis I ever see thrown around is how Canadians (& nearly every other country with socialized medicine) pay significantly less for healthcare compared to the USA. But as someone with a background in Data Analysis, I always question a single stat that is supposed to summarize everything. For example, simple questions like, does that include R&D spending towards healthcare as well? Do the exact same services cost more or less in the USA? Questions like these.

The rest of this article, I will discuss failure and what happens when something small fails in a big system. To think about idea, I’m going to illustrate eating food in a way you probably haven’t thought of before. The concept is general enough that it can be applied to any process with subprocesses that interrelate. If one of the subprocesses fails to work, then it can put excess load on other subsystem components and cause them to fail prematurely.

Think about when you eat and chew your food to a sufficiently ‘mushy level’. Your body performs best when it is focused on one task at a time. Meaning, if you chew your food slowly and allow the food to enter your stomach little by little, your body can extract maximum nutrition from the food because your body first focuses on chewing, then transporting the food down your throat into your stomach then the rest of the digestion process. You might actually end up feeling more full from less food by this means as well. But if you don’t chew your food properly, then this one habit can end up having long term debilitating effects. You can end up overeating and over the course of many years this can put excess strain on everything from your esophagus to your colon. This is because the body now has to act more to digest the food because the work centre responsible for mushing the food (mouth) did not do its job. This can cause early failure of ‘other’ subsystem components because they were forced to do the work they weren’t designed to do. This exact phenomenon can be present in company documentation and also in government service documentation as well. It’s frustrating to see inefficiencies in a government service that you see present as a service recipient, however since the system doesn’t account for this potential feedback, the system will never get better. The system also does not account for visibility of continuous improvement exercises but that is a step 2 behind setting up a formal QMS.

The “Great Job” Fallacy

As someone who’s worked with a few “large” manufacturers (revenues ranging from 50M-500M), I’ve observed a key constant, & that is how different org groups work together to deliver value to their customers. Before Quality Management Systems were “a thing”, organizations discovered best practices through having a customer complaint travel up the org structure, until someone was sick enough of hearing these same complaints, that they established a best practice for it. If the complaints died down, then the corrective action worked and if the complaints did not die down, then maybe it was just something the worker was going to have to permanently deal with. (or they could be like me and continuously tinker with their environment until the complaints died down)

These inefficiencies were the end result of a couple of things:

1. No formal oversight in the service/product delivery cycle
2. Companies who grew too fast
3. Protected industries

Now I could just summarize all three as competition not rearing it’s ugly head (yet) as it’s obvious to Quality Engineers that if you get it right the first time, you don’t need a QMS to correct (internal or external) services since no inefficiencies exist. But this is unlikely and hence the need to document processes to deliver services.

Before we discuss the “Great Job” fallacy, we’ll do a deep dive of how responsive and flexible organizations come to be, by discussing the inefficiencies introduced above. Regarding the first point, this is often the case when a company is delivering parts & services and there’s no active (or passive) feedback mechanism from the customer or its users. This is synonymous to having a closed-loop feedback system as compared to an open-loop feedback system.

Relating it back to the paragraph just above, imagine having two companies who deliver tires to their customers and they both have the exact business processes and similar cost structure. Assume that one of the companies, decides to invest some money and distribute a survey to their customers and then they use their data to improve their product or even to give better advice as to how customer behaviour (e.g. getting tires rotated or maintaining a certain level of PSI) can lead to increased product performance. This is an example of oversight being created and using the data to improve the product reliability stats. This can provide competitive advantages for companies as it helps them improve internal processes to better suit the needs of their customer. Systematic problem solving has been an industry focus since the 70’s with industry tools ranging from Control Plans, PFMEAs, 8D Problem Solving and PDCA problem solving cycles all being developed.

To the second point, companies that grew too fast, can often have holes in their documentation. It’s a good problem to have since being ahead on the technology curve is usually the root cause for growth. As a result of innovation pushing the limits of the organization to new heights, this gives them a leg up on the competition. However, it’s important to note that this increase in product adoption, will only take place until the competition catches up to the new product technology. It’s hoped that the innovative companies were able to cash in on their advances in technology, as catch-up is being played by industry competition. It’s important for innovative companies to document processes so that inefficiencies can be rooted out during a revenue growth phase. It’s hoped that companies who are already large, have processes, that can appropriately oversee new tech innovation, so this block of knowledge is targeted at companies who truly found a new market for their products.

Protected industries do not face competition. This is important to note because this eliminates an incentive for those organizations to reduce their cost structure.

So here’s where we talk about the subject matter of the article, the “Great Job” fallacy. Let’s say your company’s processes could be more thorough and indepth, or they don’t really cover the reality of what a job is presently doing. This can happen as processes mature, process documents need to become live and require updating regularly. The reason for this is that for an auditor or a QA, those documents need to be an accurate representation of what an employee’s labour input is actually being used for. If they’re not periodically updated, then this is impossible. During updates, when gaps are identified, such as a gate process being overseen – this can lead to inefficiencies, and the premise of any audit, is to drive these inefficiencies into the ground.

For example, let’s say an employee has specific job duties that could cover some customer service aspects as well as some engineering aspects. Now let’s say employee X’s manager thinks he’s spending 75% of this time engineering and the remaining on customer service duties but this is far from reality. Since employee time is a scarce resource (~40 hrs a week) and the primary input into satisfying the needs of his/her manager, it can get neglected in the daily grind of a 9-5. This is what I mean by gate process that gets overseen. The customer service aspect might be taking upwards of 50% of employee X’s time, so it’s the gate between what the manager (& upper mgmt) wants, and what the employee is actually doing. The employee can still being doing a “Great Job” but because process flows are ill-defined, it’s difficult for that employee to delegate tasks without going through a ‘learning period’ with whoever they train. Employees who are not especially fond of these ‘learning periods’, might just bite the bullet and inadvertently create that gap between what’s expected and what happens. Over time, this gap between what the employee is actually doing and what the manager needs the employee to do for the organization to succeed, widens. This can rear its ugly head since without a proper organizational QMS, these inefficiencies often go by the wayside. This is an organizational problem that gets overlooked and it’s primarily because of ill defined processes. Proper QMS control can lead to a more flexible organization that better knows its own capabilities and can react better to unexpected events. Knowledge capital can be more effectively reallocated to high priority events, while not affecting the day-to-day ops of a business.

Economist Moment – Protected Industries

The OPG (Ontario Power Generation) is a prime example of an organization that is completely protected, has no focus on implementing QMS and therefore fails to accurately reallocate their engineering resources. Once a thorough analysis is done of the OPGs processes, I would put money on the “Great Job” fallacy being systemic across the OPG. I only say this because OPG is solely responsible for delivering electricity to the domestic (Ontario) market and costs are going up. When engineering is a key labour input, costs should never go up. Unless it’s a completely unforeseen circumstance that affects global supply chains, costs to engineer a product usually go down over time. OPG has not reinvested profits back into solar or other high capital Green forms of energy either. This is due to non-Engineers creating Energy & Policy decisions for Ontarians without adequate input from Engineers. The Ontario government’s plan to increase the amount of Green Energy was the Green Energy Act of 2007, this led to long term cost commitments that cannot be neglected. It’s equivalent to the 1998 privatisation of the 407 by the Ontario PC party. The Green Energy act has tied the Provincial Government to 25-year contracts with select providers, paying them out upwards of 10x the amount of money, for electricity generated from green energy sources (with rooftop residential receiving the highest payout of 81cents/kWh). I would argue that paying out contracts as large as 100-300k at a 16% interest rate (effectively what the contracts ended up being) was a terrible policy move. Why not just invest in a giant provincially owned solar field? This is why Quality Engineers need to be more included in government. A competent Quality Engineer would’ve flagged the risks of paying out capital projects at a 16% for 25 years.

Is Stephen Poloz setting up Canada’s Economy for Failure in 2017?

A key decision made by the Bank of Canada head, Stephen Poloz, to keep the Overnight Interest Rate at 0.50% for another quarter continues to affect regular Canadians in key ways. This rate is essentially the fixed cost for much public & private borrowing that occurs in Canada; whether it be borrowing for a mortgage or an auto loan; maybe even government parties borrowing to finance an annual deficit. When this rate increases, borrowing is made more expensive and when this rate is kept low, then borrowing is made cheaper. How this affects housing prices is if borrowing is made more expensive, people are unable to overleverage themselves or take out big mortgages, so prices stay low. Interest is a tax (inefficiency) on not having full payment today. That much is obvious to some, but to the new generation of Canadians we had to learn the hard way.

Inefficiency Currently Present in Society

Untold millions of dollars of profits have been made in the credit industry in the last decade due to Financial Illiteracy. These are ‘Beginner mistakes’ occurring to a class of people who were not aware of the penalties because no one taught them the basics of that industry. Imagine going scuba diving or even starting at a new job, you must sit through some form of mandatory training where the basics of the activity, and risks associated with the activity are explained. But when getting a credit card, you’re just thrown in the deep end right away. I would argue this is why blame for financial malfeasance lays only partially on end user behavior, since there’s no mandatory kind of personal finance/credit class that can currently be taken in the public school sector. This directly hurts end users. Public education is supposed to be a chance for people who don’t always have the means to pay for that level of training and it’s getting squandered. People are spending 12-15 years of their life in public education and are graduating these public schools not knowing the basics behind credit.

The Bank of Canada might be complicit in not fostering this ideal of Financial Literacy because more people find out about Economics and the faster they’ll realize how having such low interest rates is not necessarily a good thing. We’ve had 0-1% interest rates for 8 years now, (since the US Housing Recession of 2007) and this is training my entire generation of people that cash is forever cheap & it is driving more people to over-leverage themselves. Fancy way of saying that since the cost of carrying cash is so cheap (<1%) bake that into your business plan. Low interest rates are also doing away with training my generation that saving is the way to future wealth. So what happens when rates finally do rise? What’s going to happen to an untold percentage of market players, especially those that bought in late? They will be forced to liquidate (or eat the loss of the value of their properties) and that’s when the bubble bursts. There’s evidence of this in the Canadian Market as of late with the high-ratio mortgages increasing in the Toronto/Vancouver real estate markets. Once interest rates start to rise what will become of housing?

So every month that Stephen Poloz sits back and let’s money stay cheap he’s fueling this addiction to cheap credit, one that has led to Housing accounting for a $7.4 billion increase in GDP — about half of Canada’s economic growth in 2015. This could be described as political football since the Bank of Canada is supposed to make monetary policy decisions that ensure long term Canadian Economic Growth. But it could also be looked at as Stephen Poloz setting up the CDN economy for failure. By setting up this generation for a bubble to pop, he did not ensure growth was unsustainable. The reason I say this is because housing has had such a dramatic growth, and brought in so many tax dollars, a fall in housing activity will lead to a fall in tax revenue and would force tax rates up on those who can still pay. Inadvertently this will kill a lot of private industry because the private industry who’s still making money will end up paying a higher tax bill. This is the series of activities that has occurred in Greece over the last few years and has decimated their private sector leading to a lot of long term unemployment. Now Greece also doesn’t control their own currency so Canada might just see our currency debased by a further 20-30%. Stephen Poloz may be setting the stage for either one of two things to occur in 2017:

1) Keep rate the same which will see the CDN dollar fall so the real estate sector can continue to grow

2) Increase rates and raise the fixed costs for debt penalizing people with high-ratio mortgages disproportionately

Damned if you do and damned if you don’t, I guess that’s why you don’t base your monetary policy on perpetuating a bubble.

Now we switch gears to discuss Public Debt. All levels of government will be affected by this increase in the Overnight Rate as this increases borrowing costs for governments financing of deficits. I bet that the Ontario Liberal Party is not accounting for this risk of increasing debt service costs in their deficit projections even though it’s likely to happen in 2017. The reason I say this is because the US just decided to raise their Interest Rate to the %0.75 level as well, thereby increasing pressure on our dollar to depreciate relative to theirs. We usually try to mimic US interest rate behaviour but this time we may not. Now this will be good for Canadian Export driven corps but if the USA increases their corporate tax rate to 15% (from 35%) and provide a one time amnesty clause to corps holding foreign funds, this may lead to further long term structural currency depreciation.

Economist’s Moment – the Carbon Tax

I’ve spoken to how Free Trade can affect a nation’s Economy before and I will use this Economist’s Moment to further add on to this.

Free trade benefits:

• Comparative advantage allows for net consumption to increase because individual countries are specializing in what they’re good at
• Consumers can afford more with less
• Supposed to lead to a net increase in people working

Free trade negatives:

• Since countries are now specializing in the production of goods and services, entire technology skillsets get outsourced
• Domestic production will not be allowed to innovate on current designs out on the market because the opportunity will not be there
• Costs and labour practices are hidden since they happen in a different country (how can we send food inspectors half way across the world if that’s where our food is made)
• Allows for corporations to pick up and move operations easier
• Labour mobility is clearly hampered because corps can move but the labour cannot
• Countries have to give up sovereignty to be signatories to many free trade agreements

I’m not a fan of free trade. I believe that perfect competition can lead to the lowest prices for consumers and the only reason Western societies are more pro-Free Trade (until Trump was elected) is because the costs to start up a business in the West are so high. I would argue government regulation has a big part to play in this but I cannot pinpoint an exact percent cost attributed to government. Governments are careful to not audit themselves, or show cost transparency and implement a series of measures to ensure secrecy so they can hide the costs they pass on to their citizens. For these reasons, perfect competition is impossible to attain in the West and that’s why Free Trade is such an easy thing for bureaucrats to campaign on.

But here’s the part where they don’t like to talk about and that is once all the auto jobs are outsourced, what happens to the supporting infrastructure (engineering, skilled trade & post secondary education jobs) for that industry? They leave too. All the future innovation that would have happened in Canada disappears as well. This is the reason why free trade does not make sense for countries like Canada. Once we outsource an industry completely, we not only lose the ability to innovate on that industry but all of a sudden we are also dependent on foreign countries. Kind of like how Trudeau cannot risk to damage Chinese-Canadian ties. He cannot bring up Human Rights Abuses carried out by the Chinese. They control his purse strings and the ability to deliver product to our domestic industry. When dealing with a country like China, it’s important to understand that unfair government subsidies are also a temporary way for Chinese goods to gain a foothold in the Canadian market. Deceptively tricking the Canadian Market into believing that cost savings are greater than they would be if those subsidies did not exist. Again disadvantages of free trade.

Now we get to the carbon tax, that the Trudeau government has advocated for. This will kill Canadian jobs because he’s pursuing a policy to tax dirty industry and chase it from Canada. Again he’s not focused on utilizing information to educate Canadians to change consumption habits (e.g. discussing the impact of carbon intensive food manufacturing). I get the overall point, which is he’s hoping for corporations to invest in green energy so that carbon footprints can be minimized. But again that’s discounting free trade. Let’s look at the example of Chyna selling phone cases at the local mall. She has a successful business where she sells 200 cases a month and sources all her phone cases from a Canadian manufacturer. She pays $1 a case in costs and this happens to be the same cost as Chinese producers. Now with the incoming carbon tax, costs will rise to $1.3 per case from the Canadian manufacturer but because China does not have an equivalent tax, those cases will remain at $1. Who is going to lose out? This is going to happen all across the economy because we don’t tax incoming product the same way. We unfairly penalize Canadian manufacturing then wonder why manufacturing is moving overseas. I understand why free trade exists and why it’s important to foster free trade relationships worldwide, but politicians too often don’t know when to strike a balance with free trade partners. If free trade partners are using child labour, or 16 hour working days to churn out cheap product, how is that fair to Canadian workers? This is where I don’t understand how only 1 Canadian Premier stands against the incoming Carbon tax. You can’t just ship ALL industry out of Canada. There will be no jobs left. Time has come where we need to stand up on our own two feet and see domestic manufacturing flourish.