Intel Chief Economist | Paul Thomas

About Paul Thomas

Paul Thomas is chief economist and manager of market sizing and forecasting at Intel Corporation in Santa Clara, Calif. He joined Intel in December, 2004, after working at Continental Airlines in Houston, Texas, from 1997 to 2004 and as chief economist from 2001 to 2004. Paul was senior economist at Douglas Aircraft Company in Long Beach, Calif., from 1988 to 1997. Prior to that, he served on the economics faculties of Lake Forest College in Lake Forest, Ill., and of Purdue University in West Lafayette, Ind.

Paul holds a Ph.D. in business economics from the Olin School of Business at Washington University in St. Louis, Mo. He holds an M.S. in social science and a B.S. in biology from the California Institute of Technology in Pasadena, Calif. Paul was a National Science Foundation Fellow in Economics. He also served as a Research Fellow in Economics Studies at the Brookings Institution in Washington, D.C.

Paul and his wife, Kim, who is also an economist, live in San Jose, Calif. Paul is a member of the National Business Economics Issue Council, the Conference of Business Economists, the Harvard Industrial Economics Group and the European Council of Economists. Paul has served on an AEA advisory committee for the US Census Bureau and on an NSF advisory committee for research on Census data. He currently serves on the Board of Directors of the Global Interdependence Center.

Paul has published papers on regulation of scientific research, on social choice and organizational theory, and on the airline industry. He has given recent presentations on the PC and semiconductor industries, the recession of 2008-2009, international trade, economic geography and the role of ICT in productivity growth. His current research interests include the PC industry, economic geography and economic growth.

 

Interview Transcript:

Alan
Welcome back. I’m here today with Paul Thomas. He’s the chief economist at Intel. Paul, welcome to today’s show.

Paul
Thank you glad to be here.

Alan
So Paul, can you outline your background? How did you get to where you are today?

Paul
I think I mostly did it backwards. I was a biology undergrad at Caltech, and had always loved politics, and American history, but couldn’t imagine doing it professionally. And took a fantastic course in my junior year. And one of the things I found in the history it was in American history of American politics course, is there were economists and political scientists who were at the course this is typical of Caltech, faculty members will show up for courses sometimes just to listen to their colleagues. And the arguments about economic methods that took place were eye opening. So in my senior year, I decided I wanted to be an economist, instead of a biologist, and started using my optional hours just to catch up, I hadn’t even had a single undergrad economics class. And, and I’ve been, I can’t say I was self taught, because I’ve been taught at the graduate level, but I’m self taught at the principles and, and somewhat at the intermediate level.

Alan
So when your your senior year, and then then you went on to do post grad,

Paul
I went on to have a long and varied career as a grad student, which isn’t the way you’re supposed to do it. And eventually got my PhD from Washington University School of Business, in business economics. And by that time, I’d already taught at Purdue, and the Krannert School of Management, and decided that I should move into business. And so since then, I’ve had corporate jobs that I’ve loved.

Alan
How is it being an economist in today’s world?

Paul
Well, you know, everyone wants to talk to economists, everyone wants to tell us how we’re all wet. And you know, all the great jokes about economists, which we are we earn, I think we deserve. But it’s fun. And one thing is, I can’t remember ever not having people come up to me when they find me an economist and asked me if it’s time to refinance their house, that’s never changed.

Alan
So now currently, you’re serving as the chief economist at Intel. And, you know, I imagine that, that that in itself would have some unique opportunities with Intel. But what exactly does it chief economists do?

Paul
So so far, as I’m able to figure out from the history of Intel, and the company only goes back to 1968, that’s when it was founded. The first person to have this title, maybe the last person to have this title, let’s say. And so I’ve defined the position myself, I was hired to be a manager of a forecasting group. I had already at the time, I was chief economist at Continental Airlines. And that’s probably all I knew how to do. So when I showed up at Intel, after about a year, one of the executives contacted me and said, You’re really the chief economist, aren’t you? And I said, Yes, I have limited capabilities. That’s all I can do. And so since then, it’s beneficial. I have a terrific group that works under me, that includes about 20. People, about a third are would describe themselves as economists, they’ve got the advanced degrees, and they’ve got the dedication to the field. And the other two thirds are fantastic business analysts, managers, someone who runs the terrific intra net service for the company in terms of providing competitive intelligence, and every kind of information you can imagine. So we have a really great service. And he reports to me. That’s called Emma. And it deserves the name of a person, it’s such an omnipresent part of the doing work at the company. So it I think I just tried to lead the group, and to figuring out how best to advise the company about where the trends are going. We’re very numerical, we will give you, you know, to the unit, tell how many PCs we think of a particular kind are going to be purchased in a part of the world. And we’ll probably be lucky if we’re within 10% of the right answer, you know, but the numbers have their own precision. And that’s another thing we try to provide common sense along with our numbers.

Alan
In this world is ever changing, but it seems like in the past was that, you know, what drove the economy is basically financing other people’s money and other people’s time. But this economy seems to be driven more with technology.

Paul
Right? I mean, there was a time when the US depended heavily on manufacturing. And high tech manufacturing is one of the strong, not only holdouts, but, you know, people talk about the revival of manufacturing and it’s especially obvious and Not very high tech areas.

Alan
Paul, we’re running up against a break. When we come back, I want to talk about the current state of the economy. And what we should be looking for out there and their forecasting models it. You know, I guess, you know, when we look at things a change on a daily basis, but But I look forward to hearing back on your thoughts on that. We’ll be right back after these messages.

Alan
Welcome back. I’m here today with Paul Thomas. He’s the chief economist at Intel, right here in the Silicon Valley. And, Paul, what is the current state of the economy?

Paul
Well, I have a really silly, quick answer I give people when they asked me in the elevator, I say it’s been better. There’s, there’s a lot of uncertainty about where we’re going. You know, the president of the New York Fed, President Dudley gave a talk at a named National Association for Business Economics conference last year, in which he pointed out that the economy is not doing very well, it’s not growing very fast the way you would expect it to after a serious recession. And not only that, but people keep over forecasting the economy. So two things are going on, things are not going they’re not able to get a really strong sustained growth momentum. And our models aren’t really telling us very much about why so people continue to predict something better than has actually happened so far. So I think everyone who’s doing these math and computer models is probably scratching their heads and saying it’s hard. And one of the things that we learned from some other scholars, Rogoff and Reinhart in their book, this time is different is that when, when you have a financial panic, and that’s part of your recession, think back to the scary headlines in 2008. That was definitely part of the very bad recession, we went through, that it’s hard. Humpty Dumpty falls off the wall, it’s very hard to put Humpty Dumpty together again. So, recoveries can take a long time, be frustrated, very frustrating after a financial panic and just look at Japan as the main example of that. What people used to call their last decade is in its 22nd year, right now.

Alan
I’ve heard Japan often cited is, you know, they should be a benchmark for what the US is about to go through with, you know, their their banking system, the amount of debt. Do you subscribe to that feeling?

Paul
No, there really is something to the idea of Japanese exceptionalism. There’s some there’s some things that Japan has their strengths and weaknesses that the US doesn’t have. Our population is still growing. Their population is decreasing in size, that we have immigration, which is sometimes controversial, but it’s undeniable, there’s immigration. Japan doesn’t allow much immigration and being an island nation, it’s not that hard for them to restrict immigration. So they have an aging population aging much faster than ours. You know, we felt there was a time, we probably felt somewhat inadequate when we compared our personal savings rate, which was in single digits. And sometimes people thought close to zero to the Japanese rate, which you remember, used to be 2030 40%. But their rate is about the same as ours now, because people are in that phase of their life. They’re retiring, you engage in, you know, as economists like to call it dis savings at that point. And so they’re one of the things that people are worried about with Japan is they finance their own government deficit, and primarily through their citizens engaging in various kinds of treasury purchases, Japanese Treasury purchases, but with the low savings rate, they may have to go to the outside world to do that. And we haven’t as all of us as potential investors. We haven’t thought very much about investing in Japanese government bonds, they’re in various portfolios, but they’re not big. And there are some people Jim Smith is one of them and independent economist on the East Coast, who believes they’re gonna have a very tough time when they have to start paying market, non domestic market rates to raise money. So I think Japan has its own problems. Let’s just acknowledge that they have their own very aggressive program right now which people are calling, I’ll be nomics to try to get out of the doldrums that they’re stuck in. Some people think that that’s going to take them to ruin fast stir. And other people think that they’re actually going to generate animal spirits and get better growth.

Alan
I’m visiting here today with Paul Thomas. He’s the chief economist at Intel. And we’ve been talking about the current state of the economy. Paul, we need to take a quick break. And when we get back, I want to talk about the baby boomer generation and how the retirement is forecasted to affect our economy. Thank you. We’ll be right back after these messages.

Alan
Welcome back. I’m here today with Paul Thomas. He is the chief economist at Intel. And we’ve been visiting them the current state of the economy, the economic growth. And while I want to want to turn the page here now and talk about the baby boomer generation, and how how they’re currently affecting the economy, I heard I read a study written by Deloitte a few years back saying that in 2010 80% of the American workforce will be retiring within the next 10 to 15 years. And representing that the baby boomers as they accident, they were gonna leave these huge gaps that they couldn’t be filled in. And so, you know, when we look at what you’re doing it Intel in forecasting growth, how do you feel the baby boomer the aging population there will affect our economy as a whole?

Paul
Okay. Well, those are two really good questions, because there’s a question of what we at Intel, how we anticipate that’s going to affect, let’s say, the markets and the opportunities? So let me sort of in the other question is sort of what happens to the general economy with an aging population starting to retire. And we have the Baby Boomers just now reaching Social Security eligibility, and therefore, we were getting a lot of monthly retirements. And that will continue is a huge generation. Sometimes people think of it as being essentially standing out. And relative to the generation before and the generation after. And one of the surprising numbers that I’ve heard at conferences, is that the following generation is actually larger, which is surprising because we know that the baby boomers had fewer kids than their parents did. So you would think you wouldn’t get such a large population again. But there was a tremendous amount of immigration in the US that occurred, for example, in the 1990s. Fairly people came in families came in with fairly young kids helping to keep the average demographic younger. They came in from countries that tended to have higher birth rates, and at least for the first 10 to 20 years, they continued their, their birth rates are somewhere between the typical American growth rate and the growth rate in their countries, let’s say if it’s Latin America, what I’ve heard is they’re very rapidly their birth rate is falling closer to the birth rate of Americans, the recession may have had something to do with that. Recessions always slow down birth rates. But they still for a number of years are going to give us greater population growth. From that makes that generation fairly large, which now from an economists point of view, a micro economists point of view, that’s my point of view, immigration is a great thing. And population growth is great. Now, if you you can worry about straining the resources, and people definitely worry about the effect on the budget. But from what I’ve seen in the literature, I believe that immigration, immigration pays back in large ways. You end up with a much younger population, a more dynamic population. And let’s get back to the technology for a moment. You also it’s young people who push the new technology, you know, people my age are complaining, I don’t like to type on this. I accidentally touched the GPS and it’s now it’s not telling me where I want to go. And we were very comfortable with technology that made our parents uncomfortable. I mean, how many of us have had to teach our, our parents how not to screw up the TV with the remote controls with the five remote controls that sit in front of most media centers. But we’re going to need help in not screwing up all of the computers and devices and tablets and smartphones. So you need young people to push you in technology. The US is essentially within the US people have babies that just the replacement rates our population and stays more or less constant. Immigration keeps us growing. And I know this is controversial, but I believe that that’s good, very good for the economy.

Alan
You know, it’s interesting as as technology gets better and better, this role becomes a lot smaller. And I imagine that working at Intel, you you’re doing your forecast and you’re not limited just to what’s happening here in the US. Fact, I kind of laugh because when I, when I buy a computer at Dell, they asked me to check a box and I will not export this unit. outside the US I’m like, but the unit was made it in other country.

Paul
Well, there are some export controls so that so that the computers don’t go to unfriendly countries, okay, there definitely are export controls for that. But when Intel and other large companies and technology look at the world opportunity, the US can be the single best market, the China market is usually larger, it may not be in dollar terms quite as rich, a potential. But in Unit terms, it is now and China, people in China, China’s got four times the population than we do. So it’s only natural if their income, which currently is about 1/8, our income as their income catches up, they’re going to become a better and better market. But Intel does not sell primarily to US consumers and businesses that may be our single best market, with China perhaps being vying perhaps to be the other single best market and Western Europe as a whole being a terrific market. But we’re definitely when I when I fill out surveys and people ask me, What do I think is going to happen in the economy? I’m usually thinking about the world economy, not just the US economy.

Alan
Their future, or their future economic events that we should be watching or trends that are in place.

Paul
A really good question. So I can let me mention a few trouble. troublesome things that we’re all worried about, I think, the idea of, of unfunded entitlements or unfunded liabilities. So we rewarded politicians and I say we, the average voter, maybe not every person for finding a way to put problems off rather than solving them. And so we’ve promised that Social Security benefits won’t be cut, that Medicare benefits will be generous. And we’ve also promised that people won’t face high taxes. And at some point, that’s where the burden of having an aging population becomes a problem. These people as the baby boomers retire, they, they may have expectations, they certainly are told that they have certain entitlements. And as 20 years from now, we don’t want all of the people in the prime working age, let’s say 25 to 65, spending all their time supporting people older than them. That’s not fair. And we have to deal with that issue. One program that seems to be out of control right now is the social security disability programs. So there was an excellent series of radio shows on Planet money. You know, I don’t know if you’re a fan of finding money. It’s a lot of fun to listen to. And you have a lot of people who seem to be falling into disability as a transition between losing their job and retiring. And there, it’s and people sort of aspire to stay on the disability program until they’re eligible for Social Security. Obviously, we need to confront this issue is very expensive. It’s not what disability was intended to do.

Alan
I’ve been visiting today with Paul Thomas. He’s a chief economist at Intel. And Paul, we’re up against a break. I’d like to thank you for being on today’s show.

Paul
Thank you very much. This was a lot of fun.

Alan
We’ll be right back after these messages.

We hope you enjoyed this interview; “Intel Chief Economist | Paul Thomas”.

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This transcript was generated by software and may not accurately reflect exactly what was said.

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