Innovating to Solve Problems

The 2017 hurricane season was one of the most active of the new century, and scientists are predicting hurricanes will likely get more intense in the decades to come.1 But these predictions for worsening conditions in the future may pave the way for stronger innovation.

For example, the governor of Puerto Rico, which was devastated by Hurricane Maria in September, suggested the island rebuild its power resources into a microgrid. This strategy means that power outages caused by storms would be more localized so a huge area isn’t impacted when one system goes down. It also would accurately pinpoint which grids need repair and better assign resources so that power can be restored more quickly.2

The microgrids could be powered by alternate and renewable resources such as wind and solar energy, which would be better for the environment and less expensive for residents. This type of innovation could avoid the need to completely rebuild infrastructure the next time a major hurricane hits the region.3

There are two issues when considering the catastrophic nature of a disaster like a hurricane. The first is societal – how do we restore power and other infrastructure after a crisis? The second is personal – how do we recover when our homes are damaged or demolished? While we seek and embrace innovations that can lessen the damage caused and hasten our recovery, the current solution is to insure against losses that can devastate us financially.

Other issues that are cropping up in today’s society are spurring innovation. For example, researchers say the U.S. workforce participation rate is declining. In fact, a recent analysis found that one-third of prime-age men not in the labor force have a disability. Rising incarceration rates have impeded the workforce even after release, due to criminal records.3

Furthermore, increasing numbers of baby boomers are retiring each day, and younger generations might not have, at this point, the skills and experience to take their place.4 With so many critical issues converging, who will work America’s jobs?

Enter robotics, artificial intelligence and machine learning. Today’s technology not only has robots and computers performing a wide range of routine physical work activities better and more cheaply than humans, but they are increasingly capable of providing cognitive insights that were once considered too difficult to automate. This includes sensing emotion, driving vehicles and even making decisions.5 Scientists project that automation is poised to change the daily work responsibilities for a spectrum of jobs, including miners, landscapers, commercial bankers, fashion designers, welders and even CEOs.6

It’s worth considering both the pros and cons of automated labor. While this type of innovation may create a less expensive workforce for American companies, it also reduces the overall tax base. Which leads us to the question: Will the remaining human workers have to pay higher taxes to cover government programs and expenses, or will companies need to pay taxes on robot workers?7

Content prepared by Kara Stefan Communications.

1 Michael Greshko. National Geographic. Sept. 22, 2017. “Why This Hurricane Season Has Been So Catastrophic.” https://news.nationalgeographic.com/2017/09/hurricane-irma-harvey-season-climate-change-weather/. Accessed Nov. 9, 2017.

2 Brad Jones. World Economic Forum. Oct. 6, 2017. “Puerto Rico is using an unusual method to restore power after the hurricane.” https://www.weforum.org/agenda/2017/10/puerto-rico-is-using-an-unusual-method-to-restore-power-after-the-hurricane. Accessed Nov. 9, 2017.

3 Eleanor Krause and Isabel V. Sawhill. The Brookings Institution. Feb. 3, 2017. “What we know – and don’t know – about the declining labor force participation rate.” https://www.brookings.edu/blog/social-mobility-memos/2017/02/03/what-we-know-and-dont-know-about-the-declining-labor-force-participation-rate/. Accessed Nov. 9, 2017.

4 Dona DeZube. Monster.com. “Bye Bye Boomers: Who Will Fill your Workforce Gap?” https://hiring.monster.com/hr/hr-best-practices/recruiting-hiring-advice/strategic-workforce-planning/baby-boomer-workforce-gap.aspx. Accessed Nov. 9, 2017.

5 James Manyika, Michael Chui, Mehdi Miremadi, Jacques Bughin, Katy George, Paul Willmott and Martin Dewhurst. McKinsey Global Institute. January 2017. “Harnessing automation for a future that works.” https://www.mckinsey.com/global-themes/digital-disruption/harnessing-automation-for-a-future-that-works. Accessed Nov. 9, 2017.

6 Ibid.

7 Kari Paul. MarketWatch. Sept. 28, 2017. “Why robots should pay taxes.” https://www.marketwatch.com/story/why-robots-should-pay-taxes-2017-09-12. Accessed Nov. 9, 2017.

We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

Global Trade: Problems and Potential Solutions

Global trade and investment have increased dramatically over the past 30 years.1 On one hand, importing lower-cost goods from other countries has saved Americans money. On the other, it has cost American jobs.

How many jobs? About 6 million from the manufacturing sector alone between 1999 and 2011, according to the Bureau of Labor Statistics. However, while outsourced jobs to China explains 44 percent of the decline in U.S. jobs from 1990 to 2007, automation and more efficient processes have also played a role.2

Some experts claim innovation, automation and new technology are responsible for up to 80 percent of manufacturing job losses over the past two decades.3 There are also economists who believe global trade is crucial to American prosperity and disagree with Donald Trump’s plans to implement tariffs or cut down trade with countries like China and Mexico.4

Thanks to the digital revolution, smaller companies have the capacity to compete on a global level, but comparatively few are doing so. It is estimated that fewer than 1 percent of the nearly 30 million U.S. companies registered to sell abroad actually engage in global sales.5 This means more U.S. firms have the potential to expand growth and productivity to global markets.

Digitization makes it easier for small startups to reach global customers; consider how eBay and Amazon got their start.6

Global expansion advocates say the U.S. government could play a role in connecting individual cities and smaller companies with foreign investors. It also could introduce more policies and funding to help job losses with reinvestment in affected communities.7

In one of his first acts as president, Trump signed an executive order to withdraw the U.S. from the 12-nation Trans-Pacific Partnership trade pact. This withdrawal gives China — not a participant in the TPP — the opportunity to forge leadership in Asian trade agreements. The president has indicated that he is interested in negotiating individual trade deals with TPP countries in order to procure better terms for the U.S.8

Some analysts believe the U.S. should renegotiate agreements to lower tariffs and other regulatory barriers to encourage various nations to specialize in certain exports in which they have operational expertise.9

Presently, the U.S. imports about $500 billion more than it exports.10 However, the U.S. remains the world’s largest economy and, despite the loss of manufacturing jobs to other countries, its share of global gross domestic product has remained relatively consistent over the past 36 years, ranging from 26 percent in 1980 to 25 percent in 2016.11

Content prepared by Kara Stefan Communications

1 Gary Pinkus, James Manyika and Sree Ramaswamy. Harvard Business Review. Jan. 10, 2017. “We Can’t Undo Globalization, but We Can Improve It.” https://hbr.org/2017/01/we-cant-undo-globalization-but-we-can-improve-it. Accessed Feb. 12, 2017.

2 Mark Broad. BBC. Jan. 25, 2017. “Will Donald Trump mean the end of global trade?” http://www.bbc.com/news/business-38731812. Accessed Feb. 5, 2017.

3 Kirtika Suneja. Economic Times. Feb. 8, 2017. “WTO provides the means to deal with trade concerns: Roberto Azevedo.” http://economictimes.indiatimes.com/opinion/interviews/wto-provides-the-means-to-deal-with-trade-concerns-roberto-azevedo/articleshow/57033349.cms. Accessed Feb. 12, 2017.

4 Jason Margolis. PRI. July 21, 2016. “Trump’s trade policies are worrying economists.” https://www.pri.org/stories/2016-07-21/trump-s-trade-policies-are-worrying-economists. Accessed March 9, 2017.

5 Gary Pinkus, James Manyika and Sree Ramaswamy. Harvard Business Review. Jan. 10, 2017. “We Can’t Undo Globalization, but We Can Improve It.” https://hbr.org/2017/01/we-cant-undo-globalization-but-we-can-improve-it. Accessed Feb. 12, 2017.

6 Ibid.

7 James Manyika, Gary Pinkus, Sree Ramaswamy, Scott Nyquist, Jonathan Woetzel and Arvind Sohoni. McKinsey Global Institute. November 2016. “Can the US economy return to dynamic and inclusive growth?” http://www.mckinsey.com/global-themes/employment-and-growth/can-the-us-economy-return-to-dynamic-and-inclusive-growth. Accessed Feb. 12, 2017.

8 Fox News. Jan. 24, 2017. “What Trump’s trade and geopolitical moves mean for China.” http://www.foxnews.com/world/2017/01/24/what-trump-trade-and-geopolitical-moves-mean-for-china.html. Accessed Feb. 12, 2017.

9 Peter Morici. Fox News. April 25, 2016. “How to fix free trade.” http://www.foxnews.com/opinion/2016/04/25/how-to-fix-free-trade.html. Accessed Feb. 12, 2017.

10 Ibid.

11 Bob Davins. Fox Business. Nov. 9, 2016. “Trump Will Need to Leverage Power of U.S. Economy to Remake Global Trade.” http://www.foxbusiness.com/politics/2016/11/09/trump-will-need-to-leverage-power-u-s-economy-to-remake-global-trade.html. Accessed Feb. 12, 2017.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. 

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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