FT, when helping covering up for bank regulators’ mistakes, do you lie awake, or do you sleep like a baby?

Sir, Sarah O’Connor writes “We could use more leaders in politics and business who doubt themselves, who seek the opinions of others and who lie awake worrying about the consequences of their actions.” “A spot of ‘polish’ is not going to transform the lives of state school pupils” May 8.

Indeed. The regulators in the Basel Committee decided they had the right to distort the allocation of bank credit because they thought that what was ex ante perceived as risky is more dangerous ex post to our bank systems than what is perceived as safe.

As the 2008 crisis provided more than sufficient examples of, this is clearly not the case.

But, do these regulators lie awake because of the consequences for the real economy of what they did, or do they do so because of the consequences for themselves, if their mistake is found out?

Sir, let me ask, since with your silence you’ve helped cover up for this costly mistake, so much that it has not yet been corrected, do you lie awake, or do you sleep like a baby?

@PerKurowski

If universities and professors had in payment to take a stake in their student’s future, you can bet students’ merits would mean more than parents’ wallets.

Sarah O’Connor writes: “Those in the top 1 per cent of the income distribution complain that the growing wealth of the “0.1 per cent” has priced their children out of the sort of private education and housing that they themselves enjoyed.”“We must stop fighting over scarce educational spoils” March 27.

They are wrong! All the income of the growing wealthy “0.1 per cent”, is immediately returned to the real economy, when they buy a lot of assets, like yachts, and services, like yacht crews, which are all really not of much real interest, or use, to the 99.9 per cent rest of the economy.

And if there is anything that really has helped price out private education and housing, that’s the excessive availability of financing. For instance if the risk weights for the bank capital requirements when financing residential mortgages, 35%, were the same as when financing an unrated entrepreneurs, 100%, houses would be more homes than investment assets, and people would have more jobs with which service mortgages or pay utilities.

But that truth does not stop polarization and redistribution profiteers from stoking the envy levels in the society, especially when it can often be done on social media in an anonymous way, and at zero marginal costs.

Now if you really want less discrimination against those who poor might use education better, align the incentives better, and don’t let universities and professors collect all upfront.

@PerKurowski

Will there now be opportunities for gig unionists?

Sir, Sarah O’Connor thinks the unions might have a good chance to adapt to the gig economy “Gig economy deals promise a brighter future for trade unions” February 27.

I am not so sure. There is a de facto class war in the real economy between those with jobs wanting better conditions and those just wanting a job. And that is what nourishes the gig economy.

Imposing on the gig economy benefits, is just like raising minimum wages, it just raises the bar for the offer of jobs. An unconditional universal basic income would instead provide a step stool to better reach up to whatever jobs are offered.

Of course those who benefit, politically or financially, from a conditional redistribution, or from negotiating on behalf of workers, do not like that option as it clearly erodes their job opportunities. 

How will unions handle it? I have no idea; perhaps there will be some gig unionists.

PS. In the same vein, perhaps Alexandria Ocasio-Cortez is a gig politician. We’ll see if she lands a second term. Having helped New York lose Amazon’s 25.000 well paying jobs does not bode well for here there. Perhaps she will get a call from another state.

PS. Amazon is one of those entities automating and robotizing the most. So it is a bit surprising to read that Alexandria Ocasio-Cortez opines “We should not be haunted by the specter of being automated out of work. . . . We should be excited by that”

@PerKurowski

There's a new class war brewing, that between employed and unemployed.

Sarah O’Connor, discussing the challenges of the Gig economy writes, “Offering employment benefits to drivers might well help to snap up the best workers and hang on to them. But if customers were not to shoulder the cost, investors would have to.”“Uber and Lyft’s valuations expose the gig economy to fresh scrutiny” January 2.

Sir, to that we must add that if the investors were neither willing to shoulder that cost, then the gig workers would have to do so, or risk losing their job opportunities.

That conundrum illustrates clearly the need for an unconditional universal basic income. Increasing minimum wages or offering other kind of benefits only raises the bar at which jobs can be created, while an UBI works like a step stool making it easier for anyone to reach up to whatever jobs are available.

Sarah O’Connor also mentions how a collective agreement was negotiated between a Danish gig economy company and a union. Great, but let us not forget that in the brewing class-war between employed and unemployed, the unions only represent the employed… and we do need decent and worthy unemployments too, before social order breaks down.

PS. There's another not yet sufficiently recognized neo-class-war too. That between those who have houses as investment assets and those who want houses as homes.

@PerKurowski

A Universal Basic Income could turn many marginal jobs into decent employments.

Sir, Sarah O’Connor writes: “One of the defining economic challenges for today’s policymakers is how to make service sector jobs more decent, with better pay, security training and opportunity for progression”, “Payday lender’s demise will not free workers from the labour trap” September 5.

I do not agree. Few years ago I wrote that before our policymakers invest (waste) scarce resources trying to guess were the markets are going and create jobs, we need to build the floor and create decent and worthy unemployments. 

“Better pays” raises the bar, something that could even kill jobs. A Universal Basic Income, that could start at a very low and absolutely sustainable level, could help many to reach up, more decently, to whatever jobs were available.

That would allow employment to be much more “the answer to financial distress, not the cause of it.”

@PerKurowski

Even after the crisis there has been no change in who are represented when deciding on bank regulations.

Sir, Sarah O’Connor writes: “If we want groups to make fair decisions, our best shot is to make the groups representative of the people who are subject to those decisions.” Hear hear!, “Diversity coaching from the Olympic dressage event” August 22.

In the matter of bank regulations, where were all those who perceived as risky by the banks, like entrepreneurs, suffered the Mark Twain realities of bankers lending you the umbrella when the sun shines and wanting it back if it looks like it could rain?

Had they been present perhaps regulators would have understood the concept of conditional probabilities, and therefore had realized that assets perceived by bankers as risky become safer, not riskier; while assets perceived by bankers as safe become riskier, not safer.

Can you imagine how much tears, sufferings and lost opportunities that would have saved the world, primarily our young?

The saddest part of the story is that even after the crisis should have evidenced to all the regulators had no idea of what they were doing, there has been no changes at all in who are being represented when analysis and decisions are taken, so they still keep seeing and considering the risks in the same or quite similar way, the bankers are perceiving the risks. 

How good it would have in the Basel Committee some representation of the young who know that risk taking is the oxygen for the development they need, and that the older do not have the right to “safely” extract all equity from the current economies.

@PerKurowski

More important than giving millenials affordable housing, is to help them afford houses. C'est pas la même chose.

Sarah O’Connor writes, “Home ownership rates for young people have been declining for decades as house prices have detached from incomes.” “It’s time for millennials to fight for our rights” July 25.

Not really so! It is the price of homes that have become detached from the price of houses, as these have turned into investment havens.

Access to credit in preferential terms (like generating for the banks low capital requirements) and the support O’Connor mentions of “Bank of England [with low] interest rates and quantitative easing [tried] to shore up the economy, in part by propping up house prices” has made houses “safe” investments in a turbulent world.

When O’Connor mentions, “Loosening credit standards to help more millennials buy homes would be one method” my answer would be in the form of the following riddle:

How much easy financing has now to be provided to house buyers, only in order to finance the easy finance provided all house buyers previously? 

O’ Connor recommends “It would be better to build more houses in areas of high demand, including more social housing” and to “take measures to boost productivity so incomes rise”.

The first is indeed a sensible recommendation, for all times, but the second requires among other to stop favoring with the risk weighted capital requirements for banks the access of credit for the safer present (consumption - houses) which means de facto disfavoring that of the “riskier” future (production - entrepreneurs).

Let me be clear much more important than helping to give the young access to affordable housing, is to help them to afford houses; which of course c'est pas la même chose.

What I most miss though in O’Connor’s article is a reference to a Universal Basic Income. If the society is not able to generate decent and worthy unemployments, then increasing social conflicts will prove to be the greatest menace to the millennials (and to us oldies too)

@PerKurowski

When analyzing labor markets, do not ignore the time being wasted/used consuming distractions.

Sir, (as usual) I read with much interest Sarah O’Connor’s article on “labour shortages being reported gloomily all over the developed world” “Labour scarcity helps heal workers’ deep financial scars” July 11.

I think she forgot to include in her analysis the fact that more and more time is used during working hours in distractions. On a recent visit to a major shop in the Washington area, 8 out of the 11 attendances I saw were busy with some type of activity on their i-phones, and I seriously suspect they were not just checking inventories.

Less hours effectively worked, should translate not only in labor shortages but also into higher real salaries. And I also frequently ask myself what would our economic data be telling if treated the distractions as consumption. Could productivity have been increasing fabulously without us noticing it?

@PerKurowski

We need worthy and decent unemployments

Sir, I refer to Martin Wolf’s “Work in the age of intelligent machines” June 27.

In 2012 (while I was still not censored in Venezuela) I wrote an Op-Ed titled “We need worthy and decent unemployments”. In it I held “The power of a nation, and the productivity of its economy, which so far has depended primarily on the quality of its employees may, in the future, also depend on the quality of its unemployed, as a minimum in the sense of these not interrupting those working.”

That is the reason why I am absolutely sure our societies have to start urgently, even if from a very low level, to implement an unconditional universal basic income (UBI).

And referring also to Sarah O’Connor’s “Minimum wage laws still fall short for those on the bottom” June 27, let me point out that while minimum wages raises the bar for the creation of jobs, UBI is a stepping stool that allows you to reach up to the mostly low paying jobs of the gig economy. 

PS. You want to increase the minimum wage $2 per hour? Better pay $2x40x4 $320 in universal basic income to all.

@PerKurowski

Preferential access to bank credit for those buying houses have also turned houses in attractive investments, and so a house is no longer just a house

Sir, I refer to Sarah O’Connor’s “Cities only work if they accommodate rich and poor” March 21.

She is correct although it would be more precise saying that cities only work if they accommodate all those workers required to make a city work.

Here is my take on this issue.

By politicians and regulators giving so much preference to the purchase of houses, the prices of houses have been inflated beyond reflecting the need of houses, and so have also turned houses into attractive investments. That has created a financial disequilibrium because most workers who would anyhow struggle to pay for just houses, will find it impossible to service mortgages that also reflect the value of investment assets.

Most politicians would naturally want to be seen as helping people buy affordable houses, but they do wrong in that. What they should do is to help people to be able to afford housing, something which is absolutely not the same thing.

Before we clear out this distortion, our cities will suffer from what O’Connor’s describes. Alternatively, current house asset owners, might be required to start building houses where they allow the indispensable workers to live at a reduced rate… something that could affect the value of their houses.

In many places that are too distant for the firefighters to arrive in time, we have already heard of building houses in order to provide homes close by to these.

PS. For the purpose of the capital requirements for banks regulators have risk weighted  residential mortgages with 35% and loans to entrepreneurs with 100%, which means bank can leverage much more with residential mortgages than with loans to entrepreneurs, which means banks earn much higher expected risk adjusted return on equity with residential mortgages than with loans to entrepreneurs, which mean we will end up sitting in houses without the jobs that could provide the income to service mortgages or utilities.

PS. How much of current house prices is the direct result of easy financing? I ask because it would be interesting to know how much we are financing with easy financing of houses the easy financing of houses.

PS. One of the biggest pension crisis will be when we see all those who trusted houses to be safe investments, trying to cash out in order to convert these back into main-street purchase capacity to use in older days L

PS. Too much preferential finance for the purchase of houses, which increases demand for houses, which increases houses prices, and turns safe homes into risky investment assets, also promotes inequality as those without a house are further left behind… until L

@PerKurowski

We would all benefit from algorithms tempering our bank regulators’ human judgments.

Sir, Sarah O’Connor, discussing the use of algorithms when for instance evaluating personnel writes: “The call centre worker told me the software gives lower scores to workers with strong accents because it doesn’t always understand them.”, “Management by numbers from algorithmic overlords” February 7.

What, should we assume that the capacity of someone in a call center being understood would not be one of the most important factors considered by a human evaluator?

And when O’Connor refers to “the subtle flexibility of human judgment; decisions tempered by empathy or common sense; the simple ability to sort a problem out by sitting down across a table and talking about it.”, I must state that is absolutely not what happens all the time.

Any reasonable algorithm, with access to good historical data, would never ever have concluded, as the human Basel Committee did, that what is perceived as risky is more dangerous to our bank systems than what is ex ante perceived as safe.

PS. Could we envision a world in which more predictable algorithms managed our wives reactions… and, if so, would we then not miss their lovable unpredictability?

@PerKurowski

The distraction factor forces us to redefine entirely our concepts of working hours and real salaries

Sir, I refer to Sarah O’Connor discussion of “bureaucratic limits on working hours” “Symbolic victories over Brussels will not help Britain’s workers”, December 27.

But, when we read in Bank of England’s BankUnderground blog that “we check our phones 150 times per day, or roughly once every 6½ mins; and that the average smartphone user spends around 2½ hours each day on his or her phone; and that we are distracted nearly 50% of the time,” then of course we have reasons to suspect that all our usual thinking about working hours, or even about real salaries, have entered into a completely new dimension and are up for major revisions.

Sir, never ever did we chat around the coffee machine that much in our days… or did you?

What does going from a 10% to a 50% level of distraction signify for full-time employees’ real salaries?

Sir, Sarah O’Connor writes “Males in well-paid full-time employment, earning 2.5 times the median wage, are now working slightly longer hours on average than two decades ago, according to the Resolution Foundation, a think-tank.” “Robots will drive us to rethink the way we distribute work” November 29.

In Bank of England’s “bankunderground" blog we recently read: “With the rise of smartphones in particular, the amount of stimuli competing for our attention throughout the day has exploded... we are more distracted than ever as a result of the battle for our attention. One study, for example, finds that we are distracted nearly 50% of the time.”

So if 50% of the time is now spend being distracted, and since those not employed full time are not equally remunerated for distractions, that of “earning 2.5 times the median wage”, could de facto be a serious understatement.

Sir, just think about what going from for instance a 10% to a 50% distraction signifies to full time employees’ real salaries. Fabulous increases!

PS. And what is its impact on productivity in terms that less effective working time is being put into production?

PS. Or what would the real employment rate be if we deduct the hours engaged in distractions? A statistical nightmare? Will we ever be able to compare apples with apples again?

PS. And how should all these working hours consumed with distractions be considered in GDP figures?

PS. Robots will not only drive us to rethink the way we distribute work. It also forces us to think about how to create decent and worthy unemployments.

@PerKurowski

What if banks could earn their highest expected risk adjusted returns on equity where they are most needed, like in Blackpool?

Sir, I just read Sarah O’Connor’s harrowing description of what is going on in Blackpool “Left behind: can anyone save the towns the economy forgot? FT Magazine, November 16.

It all sounds like Blackpool belonging to what we read more and more about, that termed as scrap land or junk land.

Sir, can we really afford to abandon those places to who knows who or to what knows what? If we do so what truly bad (or good) things could brew there? We might have some unexplored tools to help stop that or at least not to worsen it.

For instance, our banks, by means of the risk weighted capital requirements for banks are currently allowed to leverage more their equity when lending to what is perceived as safe than when lending to what is perceived as risky; and so banks earn higher expected risk adjusted returns on equity on what is perceived as safe than on what is perceived as risky; so banks, naturally, lend much more to what is perceived as safe than to what is perceived as risky.

That is doubly stupid. First because why would you like to help those who are perceived as safe and that because of that already have more access to credit to have even more access to bank credit? Likewise why would you like to cause those who are perceived as risky and who because of that already have less access to credit to have even less access to bank credit? In other words “safe” London earns banks higher ROEs than “risky” Blackpool.

And secondly because from a bank stability point of view you are acting against what history proves, namely that those perceived as safe are a hundred times more dangerous to bank systems than those perceived as risky. In other words London is riskier to the bank system than Blackpool.

So let us suppose we instead based those risk weighted capital requirements, and the distortion they produce, on where we think bank credit could most be needed or most productive. Then we could perhaps arrange it in such a way that a bank lending to an entrepreneur in Blackpool would be allowed to leverage more than when lending to an entrepreneur in London. And then Blackpool could have a better chance to regain some of its former luster or at least not lose it all.

@PerKurowski

If chefs cannot obtain effective intellectual protection for their recipes, how can they beat robots armed with AI?

Sir, Sarah O’Connor writes: “The risks to workers from ever smarter computers are clear, but the opportunities will lie in maximising the value of their human skills. For some people, such as talented chefs, the battle is already won.” “Machines do not have to be the enemy” November 1.

Oh boy, is she not a romantic? How on earth will individual chefs survive against robots and AI, unless it is for those few the 1% of the 1% is able and willing to pay for their human artisan cuisine creations protected by patents?

That “In most jobs, people combine cognitive skills with other human abilities: physical movement; vision; common sense; compassion; craftsmanship… that computers cannot match”, that unfortunately sounds like wishful thinking.

Much better is it if we accept that robots and AI can supplant us humans, in way too many ways, and instead look for ways how they should be able to work better for all humanity. And in this respect she is right, "machines are not the enemy".

I say this because since many years I have held that we do need to prepare decent and worthy unemployments, in order to better confront a possible structural unemployment, and without which our social fabrics would break down completely. Capisci?

That might begin by taxing the robots so at least humans can compete on equal terms.

Of course a totally different world might be out there in the future, but I can’t but to stand firmly on my western civilization’s stepping-stones, those that got me to where I am.

@PerKurowski

Do we want to settle for working or middle class robots? I want the 1% top ones to work for my grandchildren

Sir, Sarah O’Connor while discussing the issue of jobs, for humans or robots, sensibly concludes that it is not “the routine jobs” taken over by robots that should bother us but “the basic stuff — homes, security, prospects — that we lost along the way” “The middle class is not shrinking as much as it thinks” July 11.

O’Connor brings up an interview from a 1974 book “Working” written by social historian Studs Terkel. In it a steelworker says: “I want my kid to be an effete snob . . . If you can’t improve yourself, you improve your posterity. Otherwise life isn’t worth nothing.”

I sure agree with this steelworker’s general concept, but, if my grandchildren must turn into effete snobs, I hope it is not because they have been replaced by some low or middle class robots, but by the 1% absolutely best ones… or the smartest ever artificial intelligence.

Sir, it should be clear that the better the robots that work for us the more they could produce for us. The marginal contribution of robots that substitutes for bank tellers must surely be less than that of robots that substitutes for bank CEOs.

Just as an example, let us suppose current bank regulations had been carried out not by Basel Committee technocrats, but by some smart artificial intelligence. Then the 2008 crisis and the ensuing slow growth would never have happened. Mr. AI would of course first have looked at what causes major bank crisis and so determine that excessive exposures to something ex ante perceived as risky, never ever did. He would also have understood that allowing banks to multiply with different leverages the net risk adjusted margins, would completely distort the allocation of bank credit to the real economy.

So what can we do? I would say first to make sure to keep the competitive pressure up on robot manufacturers. If we increase minimum wages for humans and do not begin taxing what the robots produce, we will not get the best robots we want.

An updated Chinese curse would be: “I wish your grandchildren live attended by 3rd class robots and dumb artificial intelligence.” And Sir, I would hate for that to happen to my grandchildren, because of something that I did or did not do.

Of course then we would come to the very delicate issue of how do we redistribute robot and automation productivity to humans. That is going to be awfully contentious. The only thing that occurs to me, before social cohesion breaks down, is to being by trying out a universal basic income.

That UBI should start out low and be very carefully designed. That is so because an UBI would become de-facto the robot that substitutes for the current redistribution profiteers, and so these would love to see it fail.

@PerKurowski

Church organists, lapdancers, Uber drivers. What follows? Some Prime Ministry gigs?

Sir, in this day with so much dourness, it really brightens up the day to read such a solid British humored phrase as Sarah O’Connor’s: “Does Britain really want to be a country that defines its chocolate gingerbread men more carefully than its 32m-strong workforce? “Blurred job definitions serve nobody’s interest” June 28

What fun article. Many thanks. As I see it Sarah, or Ms. O’Connor, I am not sure on how to refer to her, could be greatly qualified to console us FT’s readers after the announced retirement of that equally good-humored gem that is Lucy Kellaway.

Now when she writes: “Before Uber drivers were compared with lapdancers, those lapdancers were compared with church organists” might she be implying a strange progression into a sort of underworld? If that’s the case, it would be interesting to hear what she believes could come after Uber drivers. Perhaps some Prime Ministry gigs?

But down to the business of the blurriness of definitions: To me, if you work when you want you work, in such a way you want to work, and nobody but you impose some specific targets that need to be achieved, then you work for yourself. If you work when someone else wants it, according to some imposed unnatural standards, or you must meet some clearly specified work targets, then you are an employee.

By the way, does Uber require any minimum number of drives per month?

PS. But what we most might need, is decent and worthy unemployments

@PerKurowski

How many more human jobs would there be in xxx, was it not for the unfair competition from robots or automations?

Sir, Sarah O’Connor writes “Britain has been remarkably successful in raising the minimum wage (introduced in 1999) without causing job losses.” “For clues to the productivity puzzle, go shopping” February 22.

How does she know? I have not been in England for some time but when I go shopping in the US and Sweden I sure see plenty of jobs having been taken over by robots and automation. And one of the direct reasons for that is that there is no obligation to pay minimum wages or payroll taxes when employing robots.

PS. Also in order to make sure we get really competitive robots, and do not end up with 2nd class robots we need to tax them, quite a lot

@PerKurowski

Why has society ignored for so long the structural unemployment that is already here, and that will grow so much worse?

Sir, Sarah O’Connor does all of us an immense favor putting forward data such as “America’s unemployment rate may be close to the lowest in a decade at 4.8 per cent [but] the rising share of people in their prime years (between 25 and 54) who are neither working nor looking for work, now stands at about 20 per cent” “‘Jobs for the boys’ is just half the story in America” February 7.

History is sure going to analyze the question of how a generation that prides itself from having so much knowledge and information at its disposal, could have turned such a totally blind eye to one of the greatest challenges it faces, namely the structural unemployment caused by robots and automation.

Where can we find data about how much robots and automation have substituted for human jobs and salaries, year by year, during for instance the last 20 years? It might exist, but I certainly have not found it.

In 2012, having been worried for quite some time about this issue I wrote an Op-Ed titled “We need worthy and decent unemployments”. But only quite recently are possible remedies to a real inexistence of jobs surfacing into public debate, like that of a Universal Basic Income. Though much too late that is good. Nonetheless the “whys” or the “how comes” of all social blindness to this issue, needs also to be studied.

PS. Why is there no concern with that humans have to so unfairly compete for jobs with robots that are not handicapped by having to carry weights like payroll taxes?

PS. Just like the “whys” or the “how comes” about the silence on stupid bank regulations, based on the silly notion that what is perceived as risky is more dangerous to the bank system than what is perceived as safe, needs to be studied.

@PerKurowski

If Uber drivers are considered workers, are not driverless cars, or robots, workers too, to be taxed accordingly?

Sir, Sarah O’Connor, Jane Croft and Madhumita Murgia report on how “Uber drivers in the UK have won a crucial legal battle with a tribunal ruling they are “workers” entitled to the minimum wage and holiday pay.” “British court rules Uber drivers are ‘workers’ in setback for ‘gig economy’” October 29.

Yes, but if so, why are not those driverless cars that are expected to soon be supplanting all drivers not considered workers too?

Sir, as I have written to you before, if we do not tax what will represent lost work opportunities for humans, something’s going to have to give.

I have nothing against artificial intelligence or robots replacing human workers. That’s great, that will leave us humans much more time to enjoy life. But our non-human replacement workers need to be taxed too; and all those tax revenues re-distributed to all of us humans, by means of Universal Basic Income. That so that we humans will be able to afford enjoying all our additional spare time.

And it is all a case of simple justice. If a company does not employ me because of the payroll taxes I generate for him, should not my robotic substitute be charged with those same taxes?

And a Universal Basic Income would make it so much easier for all us humans to adapt to the gig-economy… we would not have to work 16 hours a day to make a living, perhaps 4 hors would do.

PS. I pray for my grandchildren not having to live surrounded by dumb artificial intelligence and lousy 2nd class robots  

@PerKurowski ©