In today’s Creating Wealth introduction, Jason Hartman reads out loud about a Realty Times article about Zillow’s evaluations and gives his comments on this. He also talks about military drones, regular drones, and reminds the audience that you can still purchase Meet the Master home study courses on JasonHartman.com!
Dr. David E. Goldberg is today’s Creating Wealth guest. David has a background in civil engineering and is also an author who has written several books about engineering and computer algorithms. Jason talks to David about his most recent book, A Whole New Engineer as well as genetic algorithms, why there is a decline in engineers, and more on today’s episode.
Key Takeaways:
3:45 – Jason talks about when he first started in the real estate business.
7:45 – Single family homes appreciate a lot better than other real estate classes.
13:40 – Jason reads out loud a Realty Times article about Zillow,
17:25 – Zillow agents say their estimates are ‘just a good starting point’, but what does that mean?
19:12 – Reminder: if you have any comments or questions for Jason, you can now leave voice messages on the website.
20:10 – Appraisals and CMAs show the data points, Zillow does not.
27:15 – Jason introduces his guest, Dr. David E. Goldberg.
30:30 – Designing a kidney by hand is almost impossible, but by using nature’s genetic algorithms as a base, you can speed up the process.
35:10 – There will always be a good and bad side to technological advances.
40:00 – At one point in our history, engineers were seen as rockstars.
46:00 – Engineering is fairly uninviting and there’s bigger paychecks else where.
51:10 – When students feel trusted, they end up achieving a lot more.
Tweetables:
Mentioned In This Episode:
Zillow.com
The Singularity is Near by Ray Kurzweil
NoFlyZone.org
DoNotCall.gov
The visible hand by Alfred Chandler
http://www.amazon.com/David-E.-Goldberg/e/B000APHEJU
Transcript
Jason Hartman:
Welcome to the Creating Wealth show. This is your host Jason Hartman and this is episode number 479. 479. Thank you so much for joining me today. It’s Tuesday night. Fat Tuesday, as they call it and that is where there are Mardi Gras celebrations all over the world. I’m here in San Diego. I’ve been at a conference all day today and I’m just overwhelmed. I should be out with all my friends celebrating Mardi Gras and having a good time, but I got too much to do and one of those things I absolutely love to do and that is talk to you my favorite tribe, my listeners. Again, thanks for joining me. It is like 10:15 in the evening here.
So, what should we talk about first? Well, how about who’s our guest. We do have a guest today and that is Dr. David Goldberg. We’re going to talk about innovation and genetics and the amazing times in which we live. As you know, I always say it’s an amazing time to be alive, it really is. There are just so many things that are just changing our lives so dramatically, so quickly, and we’re living in a time of exponential..you know that hockey stick concept when you’re looking at a graph, the hockey stick concept where you reach this like exponential pattern. Of course, Al Gore, the hypocrite Al Gore, I will say it, because you know it’s true. The hypocrite Al Gore used that hockey stick graph and kind of made it famous in his movie in An Inconvenient Truth and I think there’s a lot of things that are inconvenient about his truth, but anyway, that is not the topic of this episode. So, we won’t really go there.
If you don’t think that kind of stuff matters, by the way, think again. In California right now, where I am, there are now weighing a whole new rash of legislation that would make it more expensive for people to sell their homes and what does that do to the price of real estate? Well, it ll passes through, it’ll all trickles through. All of these things are passed through entities, so just always keep that in mind. When one of the great things we have nowadays that we didn’t have in the past is evaluation technologies and of course this famously started with the company Zillow that you’ve heard of and I’d like to talk to you about Zillow and Trulia really because it’s very similar and there are other evaluation sites out there that help us understand the real estate market.
You know, I remember back in the old days when I got into the real estate business and I started my first 9 months in the business when I was all of 19 years old. I was going to college part time, selling real estate part time. I purchased my first new car, it was a Volkswagen Jetta, and I was actually impressed that I financed it myself and took on those $189 a month payments. I loved with my mom in our crummy little house in Santa Ana, California.
I remember I came home that night all happy about my new car, first new car I ever had, I had two used cars before that I saved up my own money to buy, because I was a worker, you know, even if I wasn’t always doing things right as a teenager, I always worked, because I wanted to earn money and I didn’t have that growing up. I remember when I came home and mom got really mad at me for agreeing to $189 a month car payments, because she was so debt-adverse.
Well, you know, we talk a lot about that here on the show, about the value, and the dangers, of leverages. Of course, great value when it comes to real estate investing, but I am digressing again. Tangent alert. When I first got into the real estate business, it was a big deal, like, one of the biggest advertising gamuts that realtors would use is the free market evaluation. You look back on that and think it’s so funny like nowadays.
Really, would a consumer really put any stock in that? You know, there used to be these little coupons, certificate looking things that Century 21 had for us that we could use in our marketing, pass out flyers, etc. It would be like something that you’d clip out. It would have, you know, kind of those like dotted lines around it and it would say, free marketing evaluation, $250 value. And I guess, really my point in saying this is this is another example of the way technology vastly improves life, but also has a very deflationary effect, because did a consumer really, a homer owner, really think that a free marketing evaluation or a CMA, which really stood for two different things; it stood for Comparative Market Analysis, you know, based on comps, because homes, one of the things I love residential real estate is that, you know, there are three basic ways to value real estate.
One is by comparison, that’s the way residential real estate is valued. The other is by income, okay, and that is the way commercial real estate is valued, by the income it produces and one of the reasons I think there’s so much opportunity, not most of the time, but not always; of course these things are complex and multilayer and we’ve discussed them on past episodes on before. The comparison value of a residential property can change in your favor, most of the time, more quickly than you can increase the income.
So, on a commercial property, including apartment buildings, by the way; it is based on income it produces and the income is usually tied to the consumer price index, the CPI, which understates inflation and so you usually can’t increase the income as fast as comparison prices in a given neighborhood will increase leaving a less perfect market in the market of single family homes or duplex, fourplexes or triplexes for that matter. That actually works for us as investors, so that’s why, you know, as unsophisticated and low-tech as it is, that good old single family home, I’ll tell ya, it has a lot going for it, it really does.
Historically, it appreciates better than really any other class of real estate. Before you get into one of these conversations that you’re bond to have some day as a real estate investor or maybe it’s a conversation you’re having it with yourself, okay, which is known has self-talk and self-talk is the most important conversation we will ever have and that is the conversation we have all the time with ourselves in our own head. Some of us have these out loud. We walk around talking to ourselves. Some people think people that do that are kind of crazy, so I’ll leave that up to you, but we certainly all do it in our own head, right?
And so, where was I going with that? Oh, yeah, don’t get into that conversation thinking that, you know, you’re just too sophisticated for single family homes, because that good old single family home has a lot of really unique, awesome characteristics that make it a very swank investing, okay, and swank is good.
Anyway, interesting article here I came across just today. Actually, I was at my conference and of course, you know, there’s that old thing about when someone is speaking, I can’t remember the number by the way, but you probably remember this in school. I mean, I certainly remember it from school. When someone is speaking they’re talking at a rate of about, I don’t know, I’m just going to guess from memory here, 200 words per minute if they’re a fast talker. Your brain has the ability to listen at like 6000-800 words per minute I wanna say, don’t quote me on the number of words, but the equation goes something like that.
Remember, what I always say, what it’s about is ratios. It’s not about the number, it’s about the ratio. The relative ratio. That’s why rent to value ratios – that’s what’s important. Return on investment ratios of income property versus whatever else, right? That’s the important ratio. It’s not really how much you make with income property, it’s how much you make compared to other things. It’s the relativity that really matters. So, your mind wanders when you’re listening to a speaker.
Now hopefully I’m so compelling and captivating and interesting that your mind is not wandering now, but my mind was wandering today, so I get on my iPhone, you know, I started surfing the net right on my phone there. While I was multitasking, kind of listening to the speaker half way and doing this half way, I came across this article that I thought I’d talk to you about tonight and that is a Realty Times article entitled, Starting With Zillow’s Zestimate May Not Get You Very Far. This was written by Bob Hunt and gosh, it just came out today.
You know, I’ll just read you some of this and throw in a few comments, because it’s interesting. You know, our clients are always talking about, you know, what they find on the internet and Zillow and Trulia and, you know, like I’ve said before, it’s great that we have these tools, but like anything, you gotta take it with a grain of salt. Maybe several grains of salt, because it’s marginally accurate. It’s better than nothing and it could be high or it could be low, I’m not saying it’s one way or the other, but this website, Realty Times, is for real estate agents and I have visited the website in a long time. For some reason today I just thought I’d looked there, because I haven’t been there in several years, actually, probably, and I found this article and I thought it was interesting, so I thought I’d share it with you.
It says, a couple of weeks ago real estate columnist Kenneth Harney reignited a heated real estate conversation. See, real estate agents, especially the traditional ones have big issues with these valuation sites, because, of course, the struggle they constantly have. Listen, I did their job for many years and I know it well, you know, the buyer always thinks the property is overpriced, the seller always things the property is under priced and is worth way more than it really is, okay, because their mind is up in the cloud, usually, and they have this personal attachment, because it’s usually their own home.
So, the job of that real estate agent is to create what’s known technically and legally as a meeting of the minds, a meeting of the minds; where the buying and the seller will actually agree and a deal can occur. You know, this is a reasonably valuable service, I would say, because without a meeting of the minds, you know, another word we could have in just the market place without the person, if we take the person out, is something I’ve talked about before, it’s called price discovery – that’s what economists call it, price discovery. That came up a lot when we were in the financial crisis because as prices were dropping and the government was interfering with the market, the government was perverting the market and not letting price discovery occur.
Now, I’ll throw in another phrase for you, market clearing, okay. It’s meeting of the minds, price discovery, and market clearing. Those are three phrases that are kind of a valuable and interesting to think about when you’re in the real estate market and how they impact economic decisions in every part of the economy. This applies especially in real estate because it’s a big ticket item, right. It’s not a widget; it doesn’t come off in an assembly line. Every house is different, every situation is different, every location is different. There are many varied complex factors, okay, so look, again, I’m burning up a lot of time here, so let me get back to the article and stop with my silly commentary for a moment, okay.
This is a heated debate for real estate agents, right, suffice it to say, throughout the real estate community agents complain about these Zestimates. That’s the Zillow estimate, okay. Zestimate through a cute marketing name for it, which — despite Zillow’s disclaimers — are often taken as gospel by both buyers and sellers. (Typically, of course, the Zestimate is accorded such status when it happens to support the position of the concerned principal. Buyers quote Zillow when the Zestimate is low, Sellers when it is high.)
Agents around the country have weighed in on comment posts and the blogosphere. Some say Zestimates are consistently too high, some say too low, and some say they are just too often erroneous — giving both low and high valuations.
In my own experience, a decidedly unscientific sampling of recent closed sales showed that the Zestimates had tended to be on the high side, with a median error rate of 10%. But, credit where it’s due, some of the Zillow estimates were, as far as real estate valuations go, right on the money. One Zestimate indicate a $480,439 value for a property that ultimately closed at $484,000. So, I mean, that’s pretty amazing. That’s only $4,000 apart on that $484,000 property. My comment by the way, pretty impressive for a remotely-located automated valuation system, the article says. I would have to agree.
Zillow — which makes its money on advertising purchased by real estate agents, make sure you notice that, okay. Now, these agents are on both sides of the transaction, so I guess that wouldn’t lend us to necessarily believe that Zillow had a conflict of interest. I hope you can tell where it’s me commenting and not the article, okay. That was me. I think you can kind of just tell by my voice. I haven’t had any complaints on that so far. I can’t just read something, I gotta throw in my snide comments.
Anyway, so here we go, advertising purchased by real estate agents who have supplied it with critical information (listings) in the first place. See, the real estate agents not only supply the advertising revenue for Zillow, but they also supply with the information, the listening, and is sensitive to the problems that Zestimates can cause for agents. It’s awkward to be an agent who appears to be endorsed by Zillow, and that’s what happens when you advertise with them, when your CMA, Comparative or Competitive Marketing Analysis, okay; indicates a value $50,000 lower than the Zestimate. To that end, Zillow recently made available to its agent-customers a document entitled “Talking Points: Scripts for Explaining the Zestimate to Clients”.
Now, interestingly, that is really interesting that they made this available just to agent customers, not the public, and by the way I have not read that document, but I’m going to take a look at it and I’ll try to discuss it on a future episode, okay.
Zillow spokespersons are fond of saying that Zestimates are not appraisals; rather, they are “a good starting point” or sometimes “just a starting point.” But what is that supposed to mean? Any number picked out of the air could be a starting point. Especially if we don’t even know if the Zestimate is liable to be high or to be low, how does it help us to start?
Presumably, the Zestimate is a “starting point” for a conversation that aims to get to a reasonably accurate evaluation. But, as a starting point, the Zestimate provides precious little help in that regard. Sure, if it is incorrect about some of the few public records characteristics (e.g. age, number of bedrooms, square footage) adjustments can be made accordingly. (There is a process for correcting such misinformation on Zillow.) But, outside of that, the Zestimates, allegedly based on “millions of data points”.
Now, my comment, how is that possible? Millions of data points? Are you freaking kidding me? Okay, millions of data points, what the heck does that mean? I mean, does it mean that because you had a listing that sold in Atlanta, Georgia that data point is influencing the listing in Los Angeles, California? What does that mean? I mean, millions of data points, does it mean that it’s taking the value from millions of transactions that happen in that price point, in that city, in that neighborhood, you know, over the last 5 years? I mean, what does that mean! That can’t possibly be true, okay. By the way, always, if you have any comments for me, just go to JasonHartman.com and use that little voice mail feature, make a comment, okay, because I’d love to hear your comments on any of this stuff that we talked about on the show or your questions, of course. I know we’ve got some questions that have accumulated. Thank you for posting them there and I will get to them, I promise.
Okay, so millions of data points, back to the article, provide no help as a so-called starting point. That is because Zillow doesn’t say what those data points were or how they were factored into the result. Very, very fair point, author, Bob Hunt, okay. Very fair point. If you have a disagreement with a CMA, or even a full-blown appraisal, you have something in hand that you can work with. What comparables sales were used? See, on an appraisal, shows the data points. On a CMA, it shows the data points, my words, okay. You know what they’re getting it from and you can evaluate that in your mind. You know what might have been overlooked, right.
How much value was attributed to this feature or that feature? Are features of the comparables (e.g. view, street location) adjusted for an appropriate manner? A Zestimate doesn’t allow for those questions to be asked. That is because you don’t know what data the Zestimate was based on; nor do you know how adjustments were made. So what help is that in a starting point? You just have a black box with a number on its output screen. Good luck with that conversation.
Now, Bob Hunt, the author is a director of the California Association of Realtors and author of the book, Real Estate the Ethical Way. So, you know, I think he brings up some good points and at the very least as good as these evaluation sites like Trulia, Zillow, and the rest of them are, considering that the remote and they don’t see the property, it really is pretty amazing that they can do what they do, but for us to evaluate something, they should disclose the data that is being used and they should disclose how it is factored in, how it’s weighted in to that valuation and that is in an incredibly good point. So, I couldn’t agree more.
So, it’s an amazing time to be alive, I always say that. Couple of technology things, Ray Kurzweil, I’m really enjoying his book, The Singularity is Near. It’s fascinating and he talks about how in just 5 years, in 2020, a $1,000 computer, if I get this right, okay, because he’s made several kind of complex predictions, but basically in 5 years a $1,000 computer will almost be equal to the power of one human brain. That’s only 5 years away.
We’ll see if that comes true, but he also talks about how in 10 and 15 years, the $1,000 computer, always the same price, I’m sure he’s adjusting that for inflation in his example, will be equal to an entire village of people’s brains. So, the exponential explosion in technology is going to benefit us all in so many ways, but it’s not all good, because one thing that really brothers me and concerns me are these drones. As cool as they are, I’m not talking about military drones, which by the way another one of my predictions is coming true. Yes, that is, the US is allowing the sale of armed drones to other countries.
Now, this in my opinion is not good news, okay, but remember, I predicted a long, long time ago the 6 ways the US would get out of the mess it is in and the mess is referring to the debt and one of the debts is to have a garage sale. You know, selling fighter jets to Libya years ago, I mean, insanity, of course, okay, that was up. Selling the ports to Dubai, that was up for discussion, fortunately that one didn’t happen. Now, we are going to allow the sale of military drones to other countries and I bet these country will be not necessarily just our allies. See, I wouldn’t mind if, you know, we sell them to Australia, New Zealand, England, Germany, you know, other European countries, but I bet you a lot of these countries will be marginal, because this is a slippery slope. So, we shall see where that goes, but that’s part of the whole garage sale issue.
I wasn’t talking about those kind of drones when I mentioned it, I’m talking about small commercial and recreational drones. You know, the ones you and I can buy, right. There is a new website, you gotta just this out, I just thought it was really ingenious. It’s called NoFlyZone.org where you can put in your property address. They say participating drones and drone pilots will not fly over your property and invade your privacy. So, this is obviously a huge double edge sword and we’ll see where it goes, but you know, at least there’s a website. It’s kind of like the do not call list, which I think is DoNotCall.gov or something like that, right. You can be on the do not call list. That’s interesting.
Now, granted, of course, the line of sight is so big that flying over your property may not even really matter, because the drone could be over the property next door and its camera could see everything going on in your property. It doesn’t have to be directly over your property, right. So, you know, anyway, it’s something kind of interesting and in other news technology wise, you can up your game, you’ll be happy to know, if you take selfies; if you like to take a selfie of yourself occasionally, you can now up your game, because you can take a selfie and there’s a new program that will create a 3D statue of you from your selfie. It’s an amazing time to be alive.
Okay, be sure to get the last few remaining copies of our physical Meet the Masters home study course. Go to JasonHartman.com. I bet you when I get back home, we’re going to be completely out of those. I’m going to have to ship them off with tender loving care and they’re going to be gone. So, for a $197, deeply discounted, remember the digital product, where you don’t get a physical product, is $500. This is only $197, okay. This is backwards. The physical product is never cheaper than the digital product, but it is because we just want to blow these out and get rid of the last remaining ones.
So, take advantage of that. I appreciate you reviewing the show, telling your friends about the show. Please make sure you’re subscribing so you don’t miss any episodes and we’d totally appreciate your review on iTunes, Stitcher Radio, SoundCloud, where ever you’re listening. There’s so much to talk about. I want to talk about private lending, I want to talk about some management stuff on upcoming episodes. I wanna talk about fake podcasters, I’ve got some interesting news there for ya, which I’ll think you will want to know about if you’re listening to different podcasts and so forth. There’s some great stuff coming up, but in the interest of time, we’ve got to get to our guest. So Dr. David Goldberg, let’s listen in. Here he comes.
It’s my pleasure to welcome Dr. David E. Goldberg to the show. He is emeritus professor of engineering at the university of Illinois and he’s the author of several books starting way back in, I believe, 1989. Just a couple of titles here for you, one we’re going to talk about is A Whole New Engineer; The Coming Revolution in Engineering Education, The Entrepreneurial Engineer and The Design of Innovation: Lessons from and for Competent Genetic Algorithms. This is interesting stuff, folks. So, even if those titles don’t sound super interesting or maybe they sound nerdy, stick with us, because you’re going to like what Dave has to say. Dave, welcome, how are you?
Dr. David E. Goldberg:
I’m great, Jason. It’s really good to be with you.
Jason:
Well, the pleasure is all mine. I had to say that for our non-engineer listeners of which I am one, I guess. So, you know, I don’t know what we should talk about first. We kinda got two broad topics I really want to cover in this interview and I really kind of want to talk about your renown research and expertise in the field of AI or Artificial Intelligence. So may people now are talking about the singularity. Maybe for those who don’t know you can start off by explaining what that is.
David:
Yeah, so there’s this idea that technology is accelerating so rapidly that we’re going to come to a point where it overwhelms us and perhaps takes over from us and that’s the singularity and whether or not we believe in that it’s pretty clear that technology is accelerating and becoming ever more important in our lives. So, people who know my recent work on engineering education reform may not know this background that you alluded to in doing Artificial Intelligence. I’m a trained civil engineering that migrated in computer science and as part of my dissertation work to do some work on something called generic algorithms or evolutionary computation.
You can give a really simple cocktail party of it. It’s the idea of using Darwinian survival of the fittest on the one hand and ideas from genetics like the idea of having a chromosome and the idea of using mutations and cross-over recombinant DNA, if you will, and you take those two things, throw them into a computer, so instead of designing by hand a jet engine, you would create a chromosome that represents different jet engines and mom jet engine and dad engine would get together and have baby jet engine and overtime you would evolve generations of more efficient jet engines and this isn’t science fiction. This is something that has been used by General Electric to evolve jet engines or companies in Japan have evolve production schedules for steel plants and even people have used genetic algorithms to evolve music and art. So, it’s very cool stuff.
Jason:
That is fascinating. Is this considered singularities? Is this bio-engineering? I mean, I’m quite fascinate by the idea of 3D printing of kidneys or whatever else we might need.
David:
So, generic algorithms can be separated from biological applications, so you’re using the idea of genes to create an artificial genetics that helps you to evolve the solution to whatever problem. So, of course, you can turn on biological problems and use genetic algorithms to evolve solutions to the design of all kinds of thing. If you think about things like nanotechnology, for example. Nanotechnology and biotechnology for that matter you’ve got perhaps 1,000 or 10,000 or millions of decisions to make in designing an artificial kidney; to use the example you’re talking about; to do that by hand is impractical, but nature has been doing this for 3.5-4 billion years in this way, so we use nature’s algorithms of choice for evolving and solving hard problems and voila you end up with pretty good solutions and not in billions of years. We’re doing this on computers, we’re doing it real fast, we can do it efficiently. So, some of the work I did was instrumental in helping us understand how quickly we can evolve to solutions to how complex to a problem.
Jason:
How much of this can we do now? I mean, we’re growing ears and body parts in labs, right? When do you call it cloning? When do you call it engineering? I don’t know. There’s this blurry line I don’t exactly understand what to call things anymore. I guess that we means we’re approaching the singularity right?
David:
Well, I’m not sure about that, but I think you can, you know, so when you’re a scientist or an engineer and you’re involved in these kinds of projects..when you’re the outside looking in things look a bit magical and a bit mysterious when you’re on the inside using these algorithms, you know they work for good reasons and these designs come out and you test them and if they function according to plan, they’re doing something good. So, when you’re in the middle of it, you can sign causality or you know why things are working for the most part so it’s not some of the hype around not knowing as is may be a bit overblown.
Jason:
Really, this is just incredibly fascinating stuff. Can you speak at all, this is probably not your area, but I thought I’d ask, you know, what this stuff means to us, what it means to the economy, what it means to the society as a whole, and then I want to ask you about the education side, which is fascinating too.
David:
I think you started off right in saying it’s not my area. When we look back on prognostication in eras that were much more slower moving than ours. That kind of prediction was almost always wrong in profound kinds of ways. That’s one of the things that’s so interesting about human creativity. Now with these kinds of tools and these kinds of leverage that we have, it’s perhaps even more difficult to predict what these things mean to us, but it seems to me that these innovations get baked in to systems in ways that we’re not even aware.
To a certain extent, some of these advances and machine learning and artificial intelligence are already being baked into IT systems that we use on a daily basis and more of that is coming and as you say there are these nano/bio kinds of technological designs that are intractable without using tools like this. So, things like this are either here or on the way and they, I think, they will continue to provide opportunity and there’s also a negative and there’s a potential for doing harm. So there are ethical questions to the degree in which we use these technologies and we know what they’re producing and the side effects that we’re producing and the extent to which those are predictable or not. So, there are very real questions about sustainability and growth and the ethics of using these kinds of technologies and there are no simple answer.
There are no answers like putting your hand up against history and saying stop. That doesn’t work very well and, on the other hand, fully laissez-faire and unregulated of trails of say various kinds of genetics outputs could be very dangerous of us. So, in many ways that could be why we need to boarded the education of scientists of engineers in the century.
Jason:
Yeah, absolutely. Well, one of the areas where I think this has just fascinating, wide-ranging impact is in the field that is…It just seems like it’s booming right now and that’s the area of longevity sciences. We might be on the verge of just cracking the immortality code. I don’t mean immortality in the pure sense, that might be, you know, maybe…it might never happen, but certainly some major, major advances in the field longevity are seemingly pretty close. I study this stuff and I find it fascinating. Think about what it means to the economy. Think about what that means to the social security system. The retirement age. The sustainability. You know, I always like to give environmentalists a hard time when they’re giving everybody else what they should do, but the fact is everybody alive and that they are alive, they’re consuming resources and, you know, Malthusian idea that people are just not a resource they’re a cost only, but people solve a lot of these problems. They do create. So, we’ll see where that balance goes, but just in the area of longevity alone, wow.
David:
I couldn’t. So, I agree. There is a sense sometimes if you listen to people who are speaking strictly from an environmental sustainability perspective that everything is a cost and everything is a resource. It tends to ignore the innervation capability of human beings. I think I agree with you that it’s a huge mistake and it’s one of the ways in which predictions are wrong. Predictions can either overshoot and undershoot and there is often times a tendency to over predict harm. I mean, when was the last time you saw an optimistic science fiction movie where the future looked more interesting and bright than the future that we have and yet, in many ways, if you look back into the 40’s or 50’s and project forward, those were the lives we’re living right now and there are brighter and things are more optimistic than people projected back then.
Jason:
Yeah, they certainly are. Very interesting. Well, what’s going on in the field of engineering education with the exception of many stars in engineering mostly in Silicon Valley, I guess. You hear about the people that got into a start up and made it big and so forth. It doesn’t seem like engineers are very well paid on the whole and I think that’s kind of unfair because everything we look around, everything we use all day is the result of some brilliant engineer. There’s this funny commercial, I wish I could remember what it was for. You’re probably know what I’m going to refer to where it had these rockstars and all the women were tearing their shirts off and then it had the Indian engineer guy that invented USB and it flipped the world around. They should be tearing his shirts off. This is something we use everyday, right? You know, it’s just kind of funny our culture doesn’t seem to allocate the recognition and maybe the pay correctly. Your thoughts?
David:
Well, there is an ebb flow in history to how engineers are viewed. If you go back into the time machine into the 1800s, there’s this period where engineers were rockstars and, I mean, we talk about electric engineers and computer scientists now, but think about the late 1800’s, Maxwell equations have just come out so people are predicting and some of the first results on magnetics and electromagnetics or radio just come out and so there were all kinds of companies started and engineers were really stars and not just electrical engineer, civil engineer has built bridges and buildings and ships were built of enormous unprecedented size.
So, there were this sense of emergence large technology and large scale business, which engineers were at the center of. There’s this terrific history of large scale business in the United States. The visible hand by Alfred Chandler and he talks about, well, who invented modern business enterprise and it was the civil engineers who started the rail roads, because they were the first people to work across vast distances and they needed a difference kind of organizational structure, so they made up modern business enterprise. There was a sense of excitement back then, which then got squelched in World War one and two and there’s phrase that philosopher Steven Goldman, he says, engineers became socially captive in World War one and two. I think that’s a good description.
So, these very large vertical integrated return to scale kinds of companies were built and engineers were working bees in those companies and that continued and was really sort of reached its apex just post World War two and the Cold War. So, what you’re alluding to in Silicon Valley is a phenomenon between the end of World War two and what has happened now. I called them the three missed revolutions. We had the quality revolution where statistical quality control when Japan came back and the Japanese beat us around the ears with it, the entrepreneurial revolution of various garages in Silicon Valley, and the IT revolution from the microchip to the personal computer to the internet.
So, here we are in the opening moments of the 21st century and we live in this really different place that where once after World War two, we wanted obedient engineers to shut up and sit down and do what they were told and now we want the next Steve Jobs who wasn’t an engineer, but we want our engineers be that guy or that gal whose starts the next great tech company and many of our young people, the students, going into engineering have those aspiration, because they see these role models out there.
Jason:
So, why is engineering education so important to our economy?
David:
Well, so again, there are roughly 2 million or so in the US who call themselves engineers. There are about 4 million or so that are in mathematical and computer science. I mean, it’s a pretty big part of the work force, but if you stand back from it and say, look, we’re on this planet. We’ve got 7 billion people on this planet and more coming. If you just do a fundamental analysis of the situation and say, alright, well, what would happen if we did like some people would have us do and turn off the technology. Where would be? It’s hard to know exactly, but if you dial back to the days when there was only crude technology like agriculture, if you go back before crude agriculture.
Say, dial back 7,000-8,000 years or so, what do you got? You’ve got about 100 million people on the planet. So, roughly speaking to 6.9 billion of us owe our existence to the technology that’s been developed since agriculture. So, turning off technology isn’t an option. Keeping it going and having it function well and better and serve us better as human beings is even more important than ever. So, in that very fundamental sense, having the next generation of engineers be chosen from amongst our best and brightest is really important.
Jason:
It certainly is. So, I’ve always thought that engineering was a very, very important career choice. I appreciate engineers like crazy and you look at it compared to the, you know, how they’re getting sucked away into the game of Wall Street in that, what was that movie called, Margin or..I can’t remember the name of the movie, but it was a couple of years ago and the founder of this huge brokerage firm depicted in the movie as probably Lehman Brothers, they were probably predicting; I’m not sure; comes in at midnight asking this young kid, you know, who was a quant who just figured out this whole situation they had that no body else saw in the company managing the risk and the billion head of the company says, so, you know, what’s your background kid? And he says, I have a PhD in blah, blah, blah, he says, basically what that means is I’m a rocket scientists. He says, well, what you’re doing here? And he says, well, Wall Street pays a lot better than engineering. I think that’s a sad commentary. I really do.
David:
If you talk to the kids today, the students today, the motivations aren’t entirely financial, but if you factor in the fact that engineering is itself fairly uninviting and there’s this possibly of a larger paycheck, it’s hard to fault people. It’s not just an American problem. One of the interesting things we found out in researching the book and I had the pleasure in working on engineering education change in Singapore. We often think of Asia, okay, if we don’t generate enough engineers in America, well, at least we can always turn to China and India and they’ll give us the millions of engineers that we need, but even in Singapore is a the canary in the Asian coal mind for engineers.
I was working at the National University of Singapore and one of the things the engineering dean told me was that it used to be that engineering was the number one choice of young people accepted at NUS. That’s what where you went and many of the people in government were engineers, many of the people in the top jobs were engineers. Engineering was respected, but they too have fallen on this kind of sense that almost anything, but an engineer. It seems as though when countries become sufficiently affluent, kids wanna do something other than become engineers. So, one of the things that…
Jason:
The distinction though, the Wall Street example I gave is that, you know, the financial in engineers and the financial innovators on Wall Street are really just leaches on the economy in almost every case in my humble opinion, disagree with me if you like, but all they’re doing is find ways to move things around and relabel things and, you know, cut things up and make derivatives out of them. They don’t actually create anything anymore. Okay, granted, companies need capital to grow and thrive, and so forth. So, conception ally, I don’t have a disagreement with the idea of capital formation of the stock market, of course, but it has just become such a corrupt…as I always say, the modern version of organized crime. You know.
David:
I would agree there are excess. I guess I’d disagree to the extent that all of that activity, you know, so efficiently and capital is important and I personally know hedge fund managers and people who work with business to help restructure them more efficient so…
Jason:
Yeah, I get it. I have investment banker friends too and hedge fund friends too, but the real value creation is when you create something new out of thin air and it changes everybody’s life. That’s like actual value. Of course you need capital to do that many times, so I get it. There’s a middle ground.
David:
I think if you go back..So, again, if you go back in our time machine to the invention of securities back with the Dutch example and I think the early trading companies. So, the whole capitalism is a fair early invention and remarkably..It’s actually remarkable how little we teach about capitalism and its history and many of the objections to capitalism are objections that were held back in the 1500 and 1600s when it was first emerging and we seem to be in the same argument over the course of centuries, but..
Jason:
I am a complete capitalist. So, don’t worry about that.
David:
Those things be it the idea of the invention of shares and selling shares and having markets and the efficiently that brought to capital and the way that allowed business to scale was the kind of innovation that you were talking about.
Jason:
Okay, we don’t need to debate that one, but I get it. Okay, so I want you to give out your website and then ask you for some closing thoughts.
David:
The website for our work on changing engineering education is www.bigbeacon.org and there’s a movement to transform engineering education to help bring about engineers that can face..we’ve been talking about the ways which our times have changed and how do we education..how do we unleash the courageous engineers we need for this century is what the Big Beacon is all about and the book is called A Whole New Engineer.
Jason:
I hope that has an impact on things and we see a lot more people getting into the field, because, as I mentioned, I think it’s just incredibly important. So, yeah, good stuff. So, any closing thoughts? Anything I didn’t ask you, you didn’t happen to say, you know, just to wrap it all up for our audience?
David:
I think, in terms of the key, and one of the big surprises in what we found in working on education today was the sense that of empowerment that we give students and it really comes from three things. Trusted students; when students are trusted by faculty or other students, they end up finding the courage to take an initiative, which leads to real learning and that’s the emotional equation that lends to the kind of learning that we need in this century and that’s a message that doesn’t apply to engineers. It applies to all kinds of entrepreneurial thinking, it applies to kinds of opportunities that we face in this century. So, that equation from trust to courage to initiative seems to be the kind of unleashing reaction that we are missing in education generally and we need to get into it.
Jason:
Good, good stuff. Well, Dave, thank you so much for joining us today and talking about some of these issues and I always say, it is an amazing time to be alive. I think the next 5, certainly the next 10 years, it’s going to blow our minds, quite literally. We’re going to have amazing stuff coming down the pike. It’s really exciting, it really is.
David:
I couldn’t agree more. Thanks Jason for having me on the show.
Jason:
Everybody, that’s David E. Goldberg, an emeritus professor of engineering at the university of Illinois and the author of the several books that we mentioned.
