[HN Gopher] What caused all the supply chain bottlenecks?
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What caused all the supply chain bottlenecks?
Author : CalChris
Score : 370 points
Date : 2021-10-28 18:45 UTC (4 hours ago)
(HTM) web link (twitter.com)
(TXT) w3m dump (twitter.com)
| spookthesunset wrote:
| Or maybe attempting to shut down large swaths of world economy
| for an indefinite amount of time wasn't such a good idea? In the
| timescale of months to years all business becomes "essential".
| Sure shut it down for "just two weeks" but a year or more?
|
| What did people think would happen?
| hoppyhoppy2 wrote:
| >What did people think would happen?
|
| We thought that if we _didn 't_ do that we'd run a very real
| risk of the entire healthcare system collapsing. We were trying
| to "flatten the curve" so that hospitals could deal with an
| ongoing roar instead of being hit with a massive explosion.
| celtain wrote:
| >We were trying to "flatten the curve"
|
| Not were, _are_.
|
| The entire lockdown/restriction/mask mandate set of policies
| has been based on managing hospital capacity. State and local
| governments are still using hospital capacity to decide when
| to lift or reimpose restrictions.
|
| The wave of explainers we got last year about flattening the
| curve were wrong about how long it would take, but the
| fundamental strategy and the reasoning behind it never
| actually changed.
| polote wrote:
| At least now we know that public health care experts cannot
| be trusted to make predictions
| Afforess wrote:
| The TX Winter Storm and Big Freeze did more damage to the TX
| economy than the shutdowns. Try again.
| hosteur wrote:
| That's not a good argument. 1: damage done by shutdowns is
| still going on so we don't even know the full cost. 2: the
| winter storm is not self inflicted. 3: I am not sure you are
| right that said winter storm did more damage. Would like a
| source though.
| erosenbe0 wrote:
| When analyzing the storm I'm not clear are we talking about
| the power grid alone or the normal organic effects of Texas
| just not operating well at those temperatures and pipes
| bursting, frost heave, exposure deaths, etc?
| JaimeThompson wrote:
| Gas producers not having themselves marked as critical
| infrastructure so ERCOT would not kill power to them and
| the failure of plants to winterize themselves are self-
| inflicted.
| numpad0 wrote:
| A lot of people alive and not dead
| silent_cal wrote:
| Sweden
| elsonrodriguez wrote:
| What about Sweden?
|
| https://ourworldindata.org/explorers/coronavirus-data-
| explor...
| silent_cal wrote:
| Compare it to UK: https://ourworldindata.org/covid-deaths
| rajin444 wrote:
| That's not a fair comparison. Most covid deaths are from
| those already past the average life expectancy. There's a
| very good chance they were going to die soon anyways. Not
| to mention you have to account for cancer patient +
| covid, etc.
|
| https://www.reuters.com/article/us-health-coronavirus-
| europe...
| MisterBastahrd wrote:
| It's completely fair. There's always a cause of death,
| and averages aren't indicative of individual cases. If an
| old person gets shot by a gun tomorrow, we don't chalk
| that up as "well, they had their time."
| [deleted]
| fullstop wrote:
| Their COVID death rate is 10x their neighbors, per capita.
| [1]
|
| 1. https://www.businessinsider.com/sweden-covid-no-
| lockdown-str...
| silent_cal wrote:
| No it isn't: https://ourworldindata.org/coronavirus/count
| ry/sweden?countr...
| fullstop wrote:
| I specifically said "death rate" and "per capita".
|
| Your source here is comparing two countries, one of which
| has 67 million people and the other which has 10 million
| and showing _totals_ and not _per capita_ , which is a
| worthless comparison.
|
| Additionally, I don't consider Great Britain a neighbor
| of Sweden.
| silent_cal wrote:
| https://ourworldindata.org/covid-deaths
|
| Compare cumulative for Sweden and UK. It's two countries
| away.
| fullstop wrote:
| Great. Now compare Sweden, Norway, and Finland.
|
| The UK is culturally different and not a neighbor.
| brian_cloutier wrote:
| This kind of comment is extremely unproductive.
|
| The idea of Sweden has no connection at all to the topic at
| hand. You are using the word "Sweden" to make an argument
| because you believe the connection between Sweden and
| conversations about lockdowns is so clear that the mere
| mention of the word is enough to bring the entire argument
| into someone else's mind.
|
| So, this demonstrates that you believe everybody reading
| this comment knows what you mean. Which in turn means you
| know your comment is adding nothing at all to the
| conversation.
|
| To belabor the point, if the connection between Sweden and
| lockdowns was an entirely convincing argument then
| everybody reading your comment would already agree with
| you, and there would be no reason for you to remind people
| of the connection with this comment. Since that doesn't
| appear to be true, you believe your peers need to be
| reminded of this argument, some elaboration on your part
| seems to be in order!
|
| Hacker News is a lovely community where you can learn from
| a large variety of people, each knowledgeable in their own
| particular domain. The more thoughtful and substantial we
| make our comments, the nicer a place it becomes for
| everybody else.
| [deleted]
| allturtles wrote:
| I really don't understand what you mean by this comment. The
| only swaths of the economy that I'm aware of that got shut down
| in the U.S. are things like bars, restaurants and movie
| theaters. These are not tightly connected to global supply
| chains, AFAIK, and if they were why would their shut down cause
| bottlenecks (it should lessen demand, not increase it)?
| ralph84 wrote:
| Tesla's California factory was shut down for 2 months.
| zamadatix wrote:
| Thinking about it from the perspective of someone who thinks
| the shutdowns were net good but reviewing the comment in good
| faith:
|
| Lessened demand in large sections of the economy can itself
| create shortages in the parts that take on the load or at
| least stress on the supply chain to redirect to those places
| now in extreme demand. Take restaurants for example, people
| didn't stop eating but vast swaths of food supply chains had
| to change pretty much overnight.
|
| Then there is also the problem of the demand of certain
| things being highly uncertain, like cars towards the
| beginning.
|
| Then there is the extreme induced demand on certain things
| like webcams, laptops, or other home electronics as everyone
| stays home. I'm sure that also isn't an easy overnight change
| to make and then swing back from since it was completely
| unplanned. I know the area I work immediately ran out of
| widgets based on orders of 10s of thousands instantly coming
| in and it has been backed up since that time to this day.
|
| Finally during the initial portion of the pandemic lots of
| factories, both in the US and China, were getting shut down.
| China seemingly longer. When restaurants and whatnot started
| to open back up was about the time you saw those shutdowns
| stop happening too. So on top of the above concerns for the
| supply chain lots of non bars and movie theatres were also
| affected by shutdowns, just perhaps not as long.
|
| May be more I'm missing but I don't think GP is an empty
| comment by any means.
| allturtles wrote:
| Much of the problem with understanding what GP means is
| that 'the shutdowns' is a very hazy term. Implicit in the
| comment seems to be the idea that there was some small set
| of authority figures who decided to shut down the global
| economy and if only they hadn't done that things would be
| better.
|
| e.g., The induced demand from work from home you mention I
| wouldn't count as part of any 'shutdown' at all. It has
| been largely driven organically by the decisions of
| individual firms and workers. My office was ordered to work
| from home by company HQ, not by any government authority,
| and at this point staying WFH is an individual voluntary
| choice. Does this count as part of the 'shutdown'?
| Certainly my sector of the economy (software development)
| was not shutdown, quite to the contrary.
| zamadatix wrote:
| I'm not sure the comment is implicit of who did the
| shutdowns but even taking it as so the widget orders by
| the 10s of thousands I referenced were mostly public
| school systems receiving mandates and associated COVID
| relief funding to compl,y not private enterprises.
| Particularly younger grades weren't normally assigned
| personal hardware and not every child had internet access
| at home. Though like you say the private sector remote
| work shift certainly happened too and exacerbated the
| ordering situation.
| pdabbadabba wrote:
| A fallacy that might be at work here is comparing the shutdowns
| that actually occurred with a counterfactual world where
| business activity remained essentially unchanged.
|
| We'll never know for sure, but I doubt that's the correct
| comparison. Even without government-mandated shutdowns, many
| areas--especially major urban cores--would still have
| experienced massive shocks as people voluntarily shifted to
| working from home, stopped going out to eat, etc. In other
| words, much of what the government did through law would likely
| have happened anyway out of fear and individuals exercising
| their common sense.
|
| Sure, it wouldn't have been exactly the same, but I think the
| counterfactual is much less rosy than you assume. And then
| there are the _benefits_ of the shutdown which helped to direct
| the drop in activity towards less essential parts of the
| economy and increased predictability, to say nothing of the
| benefits of reduced viral transmission.
| fullstop wrote:
| People working from home increased demand for microphones,
| web cameras, office chairs.
| fullstop wrote:
| Where I live the vast majority of people were deemed
| "essential" for the purposes of working and then not
| "essential" for the purposes of receiving the vaccine.
|
| The places which were closed were not producing things used in
| the supply chain.
| _Algernon_ wrote:
| Have you forgotten the state of Italy and New York (among
| others) at the start and middle of 2020? There were literal
| trucks full of dead bodies in the streets because they couldn't
| be buried fast enough.
|
| How do you envision the time between march 2020 and the point
| where herd immunity through vaccines / infection would have
| been sufficient would have gone without a lockdown?
|
| I'll take a lack of a few non-essential luxury goods for a year
| or two over a world where everywhere looked like that, any day
| of the week.
| rajin444 wrote:
| I'm not familiar with Italy, but NY was sending elderly
| patients back to nursing homes when they had covid.
|
| https://apnews.com/article/new-york-andrew-cuomo-us-news-
| cor...
| AnimalMuppet wrote:
| Which was insanely, criminally stupid, and absolutely
| contributed to a lot of deaths.
|
| But New York also has a subway system that (approximately)
| everyone uses to get around. That turned out to be a
| perfect spreading ground for a respiratory virus. If I
| understand correctly, that's a big part of why New York got
| hit so hard. You can't _just_ pin it on Cuomo 's criminal
| irresponsibility.
| fidesomnes wrote:
| this is how effective propaganda works
| aaron695 wrote:
| I like the way how he explains how I still have more _stuff_
| available to me during a fucking global pandemic than my parents
| ever had in normal times, let alone the grands but it 's still a
| troubling "supply chain bottleneck" that's about three letter
| acronyms something something.
|
| I think it's a good test run for a time of war, or ultra serious
| pandemics. And we did fucking well. Also a good thing to bring up
| the next time some trashy moron talks about how on Twitter they
| read about oversupply of food in the West and how it's bad.
| snowwrestler wrote:
| Mandating a lower-than-maximum container stacking height was
| itself a buffer, which is now being filled by temporarily
| stacking higher.
|
| The idea that we run without buffers in the supply chain is
| contradicted by his own big idea to use one of them.
|
| We don't have big warehouses full of inventory sitting around
| like we used to, true. But we do have the money we generated by
| running more efficient supply chains, and money is more flexible
| than outdated inventory.
|
| Edit to add: whether that money is sitting with founders,
| shareholders, or employees is largely irrelevant from a macro
| perspective.
| ARandumGuy wrote:
| Money doesn't do you much good if you can't actually spend it
| on anything. Getting rid of warehouses full of car parts to
| save some cash doesn't do a lot of good when no one can sell
| you car parts for any price.
|
| Buffers won't solve a long term shortage, but they can prevent
| a short term shortage from cascading. When the entire global
| economy is running with minimal buffers, then the effects of
| supply disruptions can last years, and that problem can't just
| go away by throwing money at it.
| dang wrote:
| Ongoing related thread:
|
| _An unexpected victory: container stacking at the port of Los
| Angeles_ - https://news.ycombinator.com/item?id=29026781
|
| The previous stack:
|
| _Long Beach has temporarily suspended container stacking
| limitations_ - https://news.ycombinator.com/item?id=28971226 -
| Oct 2021 (483 comments)
|
| _Flexport CEO on how to fix the US supply chain crisis_ -
| https://news.ycombinator.com/item?id=28957379 - Oct 2021 (265
| comments)
| sadfev wrote:
| Nothing it's just hysteria. There were some companies who made
| awful decision of canceling existing and future orders.
|
| The suppliers and wholesalers have moved on to different products
| and customers.
|
| Absolutely scummy companies like GM,Ford,VW and Stellantis are
| the culprits.
|
| Also it doesn't help the fact that California the most corrupt
| state in US history is fighting with the most corrupt dock
| workers Union in SF port.
|
| Corruption, inefficiency and stupidity are creating mass
| hysteria.
| jshen wrote:
| Absolutely shocked that a founder of a new company believes that
| founder led companies are the simplistic solution to our complex
| problems.
| rytill wrote:
| On one hand, people say what benefits the position they're in.
|
| On the other hand, people enter positions they believe will
| benefit them.
| dpierce9 wrote:
| The average lifespan of a company is 10 years.[0] The average
| lifespan of companies on the S&P is maybe a little more than
| twice that. Each year you have a 1/100 chance of seeing a hundred
| year flood. With a short lifespan the odds are decent that your
| company simply won't see one. The question is then: how good of
| an idea is it to spend to be robust to them? Of course it is
| viciously circular: planning to not be robust to white swans is
| probably why the lifespans are so short and shrinking.
|
| Tim Cook doesn't have voting control of Apple but it is sitting
| on a massive shock absorber made of cash earning insanely low
| rates of return. The idea that you need control of the board to
| be robust doesn't seem to be necessary. It is probably helpful
| but it isn't necessary.
|
| [0]
| https://www.sciencedaily.com/releases/2015/04/150401132856.h...
| jonnycomputer wrote:
| Market forces tend to reward efficiency rather than resilience
| through redundancy. But super-efficient systems can be fragile
| ones too. So dude has a point. But seems like a mistake to say
| that its the only relevant factor.
| 01100011 wrote:
| Isn't sort of foolish to expect companies to do anything but play
| by the rules of the game which are defined by their
| stakeholders(customers, partners, suppliers) and the government?
| You can rant all you want about things companies should do, but
| if they're rewarded or incentivized towards bad behavior then
| that's what you'll get.
|
| Companies may increase their buffers for a while, but the market
| will punish them and they'll move back towards their pre-covid
| behavior in short order. You can write all the blog posts you
| want about it, but without incentives and rules nothing changes.
| jollybean wrote:
| It's fallacious to suggest that 10% capacity everywhere would
| have abnegated the supply chain issues.
|
| That said, shipping in particular is problematic in how they
| externalize costs. They can get away with shenanigans because
| they use international loopholes etc..
|
| I say we need to dump this 'flagging in exotic country ABC' and
| require that any ship landing in country ABC has to abide by all
| the regulations of ABC.
| evilotto wrote:
| He's right to point out that the obsession with RoE is a big part
| of the problem.
|
| He's wrong to suggest that the billionaire class and founders
| will solve the problem if we only trust them and let them keep
| their money. Founders have just as much incentive to optimize the
| excess out of the system, they just call it "disruptive
| innovation" by which they mean tweaking how the system works so
| that they can squeeze out profit for themselves.
|
| I think economists call it rent-seeking.
| JPKab wrote:
| The obsession with RoE is really just a major form of
| efficiency. Having things sitting around unused is a huge
| reason that US car companies got their asses handed to them by
| Toyota and their TQM/LEAN system they developed.
|
| People writing articles like this forget that it's not just
| Wall Street, but competitors who created the huge pressures for
| adopting JIT inventory systems. There's also the consumer. Are
| you willing to spend the additional money required to buy a car
| from a company who wastes tons of $ on excess inventory?
| ghaff wrote:
| The Toyota system got a lot of attention in the DevOps world
| because basic principles such as empowering workers resonated
| with the movement. Reducing waste throughout the system
| doesn't get as much attention--given that computer software
| doesn't really have inventory as such (at least not
| literally)--but inventory/WIP reduction was an important
| motivation behind Toyota's system.
| makomk wrote:
| This. Also, the tweets complain about not having excess
| capacity due to the "obsession with return on investment",
| but that's really just an abstraction around the fact that
| extra capacity means using more limited real-world resources
| to supply people with the same amount of stuff - more land,
| more steel and concrete and construction labour and equipment
| to build the extra factory and shipping capacity that goes
| unused - which then can't be used for other things. The
| tweets frame it as though it's only finance types and
| investors that benefitted from this, but in reality everyone
| was better off in real, "what can I afford to buy with my
| money" terms due to it.
| acdha wrote:
| > Having things sitting around unused is a huge reason that
| US car companies got their asses handed to them by Toyota and
| their TQM/LEAN system they developed.
|
| It didn't help but I think that's more of a symptom of
| building shoddy products: part of why inventory backed up is
| that Detroit was producing cars which simply weren't as good.
| Toyota didn't have a shortage of demand, and neither did
| Saturn. If you make shoddy, poor-handling gas guzzlers, yes,
| you'll underperform on sales. That doesn't meant the only
| option is less inventory.
| JPKab wrote:
| There's an entire book (I've read it) about this called
| "The Machine That Changed The World" published in the early
| 90's. It goes into great depth as to the issues that were
| plaguing GM/Ford etc. The excess inventory was absolutely
| not driven by too little demand. It was simply inefficiency
| in the manufacturing process and inability to rapidly
| reconfigure the shop floor or reallocate labor towards
| bottlenecks.
|
| The book is a deep, academic examination of the roots of
| lean production, and is a must read for any engineer who
| wants to get the Agile cultists to shut up and go away. I'm
| a hardcore believer in the ACTUAL Agile philosophy, which
| is rooted in lean, and I despise the cult of clerics that
| have risen up around it and turned it into management
| consulting BS. That book helps to know real agile from
| consultant billing hours agile.
| ladyattis wrote:
| Yep, the capital owning class just doesn't care if their
| businesses go into shock because they already have their cash
| in hand. They'll never go back to pre-ROE days because they'd
| have to live with less money and worse less control. While they
| still have personal reserves in the billions they can decide
| the fate of their ventures but if say 20% of their current cash
| was on the balance sheets of corporations with boards that
| don't vote their way most of the time then they're forced in
| the medium to long term acceptance of their policies. This
| isn't an argument for a return to traditional corporate power
| because they bungled so many things (GM and the rest of Detroit
| got their rear ends handed to them by the Japanese and their
| application of JIT).
|
| Rather, it seems like to me the reliance of having a few owners
| or a few institutions with consolidated power in the form of
| money or assets is a recipe for disaster. If anything, it's
| time to disperse the wealth and responsibility of production to
| as many firms as reasonably as possible. I'd rather have 20
| smaller companies making the same thing than 3 big ones that
| supposedly make them cheaper due to scales of economy which imo
| is wrong and that most big firms are in diseconomy of said
| scales now (prices imo reflect this). Basically, we need to
| both economically and politically Switzerfy the economy (more
| dispersed institutions, less central control where reasonably
| possible).
| amelius wrote:
| > Yep, the capital owning class just doesn't care if their
| businesses go into shock because they already have their cash
| in hand.
|
| What if there was inflation?
| ajmurmann wrote:
| AND Ryan's point about taxing unrealized capital gains was
| that it forces founders to divest over time. Which one is
| it?
| nostrademons wrote:
| Inflation generally helps big business and its owners. They
| get to raise prices, and they usually get to raise prices
| more than the average firm does because they have little
| competition. You're seeing this now with record-high
| corporate earnings.
|
| As long as the capital-owning class is holding equity
| (stocks, real estate) they benefit from inflation.
| Spooky23 wrote:
| The endgame isn't going to a fix, it's defeat.
|
| Newer, smarter Asian companies will displace stupid old
| American ones, just as the Americans crushed the Europeans.
| mensetmanusman wrote:
| R&D in 20 small companies is less effective than in 3 big
| ones due to less diverse teams and more inefficient double
| spending, e.g. twenty $5M microscopes utilized at 15% versus
| three at 90%.
| bsder wrote:
| If _only_ we could overcome the negatives of the
| bureaucracy of a large company with a mere double-spend on
| equipment. It would be cheap at 10x that price.
|
| The whole point of the startup culture is that they can do
| things better than a large company.
|
| And, quite often, _they can_. But not always.
|
| A semiconductor plant, for example, is not a startup thing
| because the capital cost is _so_ gigantic.
|
| However, most fields are not that bad. Even bio equipment
| just isn't that expensive relative to the cost of the
| _people_ to use that equipment.
|
| The bigger problem, right now, is that _investors_ don 't
| want to fund anything which requires more than 18 months
| before flameout/unicorn. That blocks startups that have a
| 5+ year horizon.
| ethbr0 wrote:
| > _GM and the rest of Detroit got their rear ends handed to
| them by the Japanese and their application of JIT_
|
| GM and the rest of Detroit got their rear ends handed to them
| because they'd underinvested in fuel-efficient engine designs
| (the lost 70s) and grown lazy in reliability.
|
| Lean manufacturing may have allowed Japanese manufacturers to
| price more competitively and be more agile, but at the end of
| the day, they increased their sales because they made better
| cars.
| xyzzyz wrote:
| > Yep, the capital owning class just doesn't care if their
| businesses go into shock because they already have their cash
| in hand.
|
| Billionaires have relatively very little cash in hand. Their
| billions typically are in form of business equity, and so
| they very much care of the businesses go into shock.
| Swenrekcah wrote:
| Relatively little can apparently be $10B:
|
| " In 2014, for example, Oracle cofounder Larry Ellison
| disclosed he had used 250 million of his Oracle shares as
| collateral to secure a $9.7 billion personal line of
| credit."
|
| Source: https://www.businessinsider.com/american-
| billionaires-tax-av...
| tharkun__ wrote:
| I would not call that 'cash in hand'. I get why you see
| it that way but to compare it to the little guy:
|
| A credit card with a $5000 limit is not $5000 cash in
| hand. It's a 'line of credit' for $5000 and whether I
| actually have the cash to pay that back is a different
| story. I might actually have $0 cash in hand to pay that
| back and many people don't until their next paycheck
| arrives.
|
| Any guesses how far the Oracle share price (of ~$100) has
| to drop before the bank will actually use that collateral
| to get their cash?
| Swenrekcah wrote:
| It is true that it's not cash in the wallet but it's
| there available if you want it. It is in no way
| comparable to paycheck to paycheck living.
|
| This practice also comes with all sorts of tax benefits
| as well.
|
| If they really need to pay some of it back then the
| company might decide to buy back some shares.
|
| And realistically, like the old adage says: If you owe
| the bank $1M it owns you, if you owe the bank $1B you own
| the bank.
| lupire wrote:
| Billionaires have massive personal loans (compared to human
| needs, not compatrd do their owned equity) collateralized
| by their business equity.
| xyzzyz wrote:
| Yes, they are "massive" by normal people's standard, but
| they are usually minuscule relative to their equity
| holdings.
| Swenrekcah wrote:
| Which is kind of to the point, they have more money on
| hand than a small country's budget and even if they lose
| it all it almost doesn't make a dent in their net worth.
|
| In this situation it is almost reasonable to want a small
| crisis to shake out your upcoming competitors and buy
| some more land or other things of real value at a
| discount.
| xyzzyz wrote:
| > Which is kind of to the point, they have more money on
| hand than a small country's budget
|
| They don't, though, that's the entire point.
|
| > and even if they lose it all it almost doesn't make a
| dent in their net worth. > In this situation it is almost
| reasonable to want a small crisis to shake out your
| upcoming competitors and buy some more land or other
| things of real value at a discount.
|
| A small crisis will in fact not cause them to lose
| significant amount of cash, but will cause them to lose
| significant amount of their net worth. Nobody wants that.
| Swenrekcah wrote:
| Unless the billionaire in question is extremely vain,
| they should absolutely want some of their paper wealth to
| vanish temporarily since it is an opportunity to accrue
| more real value stuff at a discount for those that have
| large amounts of either cash or cash equivalents on hand.
| All of their paper wealth will appear again in the next
| upswing.
| legutierr wrote:
| https://en.wikipedia.org/wiki/Distributism
| gruez wrote:
| >Yep, the capital owning class just doesn't care if their
| businesses go into shock because they already have their cash
| in hand.
|
| You do realize when we talk about jeff bezos being a
| billionaire, it doesn't mean he has his billions in gold/cash
| in a vault somewhere? The overwhelming majority of his wealth
| is tied in various financial assets (eg. equities) that
| certainly do get affected when "businesses go into shock".
| Sure, he'll be in a much better position to weather such
| "shocks", but it's still in his best interest to ensure that
| the economy doesn't crash.
| xmprt wrote:
| Genuine question: 2020 feels like the biggest shock to the
| economy in a while yet it was one of the best years for
| most big businesses. If Jeff Bezos didn't feel the shock
| from 2020 then when will he feel the shock?
| gruez wrote:
| >2020 feels like the biggest shock to the economy in a
| while yet it was one of the best years for most big
| businesses.
|
| by what metric?
| leppr wrote:
| Stock market valuations
| munificent wrote:
| The millions of people who lost their jobs and had to
| rely on emergency cash payments from the government to
| pay for food and rent?
| gruez wrote:
| How does this have anything to do with the claim that it
| was "best years for most big businesses"? Do "most big
| businesses" do better when that happens?
| ironSkillet wrote:
| There were two quantified subjects in the quote you
| referenced - "biggest shock to economy" and "best years
| for most big businesses". My guess is he was replying
| about the first subject.
| DevKoala wrote:
| This shock benefitted the particular industry in which he
| invested. A different kind of shock such a total internet
| meltdown for anything but basic services, would render
| his wealth down to just a couple billion while other
| billionaires would win the top position.
| revolvingocelot wrote:
| >it's still in his best interest to ensure that the economy
| doesn't crash
|
| Technically, yeah! Functionally, though, if the Even
| Greater Depression arrived tomorrow? He'd still be the
| richest man alive, and probably even more powerful than he
| already is right now thanks to how Amazon and AWS would get
| to take over more failing social institutions.
|
| Sure, a falling tide lowers all boats, but Bezos will still
| comfortably afford his gigayacht. It's a setback for Bezos,
| and maybe he wants to avoid it in order to maximize profit
| and utility and whatever, but it's an existential threat to
| him in the same way spilling a glass of milk or losing a
| round in a video game are. Even extreme social unrest has
| been priced in, at however much a luxury bunker in New
| Zealand costs.
|
| Other people, when the Big Crash arrives, will -- in a
| totally economically rational way! -- commit suicide in
| order to ensure their spouses and children aren't
| bankrupted by their medical bills. Uh, in greater numbers
| than they already do. Many will starve, or at least go very
| hungry. In greater numbers, I mean. Should be a good time
| for the owner class to buy up all the housing stock for
| cheap, too.
|
| I don't think the owner class is worried about it. I think
| they actually might be excited.
| ethbr0 wrote:
| > _He 'd still be the richest man alive, and probably
| even more powerful than he already is right now thanks to
| how Amazon and AWS would get to take over more failing
| social institutions._
|
| Bezos isn't even the richest person alive today. That
| would be Musk.
|
| https://www.msn.com/en-us/money/companies/elon-musk-is-
| now-n...
| rpmisms wrote:
| Personally glad Elon holds that title. He has an explicit
| reason to have that much money, and a plan to use it.
| cto_of_antifa wrote:
| This guy probably thinks he'll be on the Mars rocket lmao
| darawk wrote:
| None of this is the point, though. The point is that
| Amazon wouldn't have achieved what it has if Bezos was
| forced to slowly divest control of his company over the
| last two decades.
|
| Bezos does not have his cash in hand, for the most part.
| To the extent that he _does_ have cash in hand, he has
| already paid taxes on that cash. To the extent that he
| has not paid taxes on his wealth, he is fully
| incentivized by the share price of AMZN.
| micromacrofoot wrote:
| I'm willing to bet he has more cash on hand than we will
| make in our entire lifetimes... what's the point of
| arguing how much it is? the point is that he has so much
| money that nothing really matters.
| darawk wrote:
| The point is exactly what I said in the rest of the
| comment. He has already paid taxes on the cash he has in
| hand. The only assets he has not paid taxes on are the
| shares in AMZN that he has not realized the gains on.
| wavefunction wrote:
| >The point is that Amazon wouldn't have achieved what it
| has
|
| Sounds good to me.
| xyzzyz wrote:
| Fortunately, you don't get to decide that. Contrary to
| popular sentiment on HN, Amazon is one of the most
| favorably perceived brand by Americans, ranked top 4 in
| 2020. When you go against Amazon, you go against
| something that Americans like more than Netflix.
| bangkoksbest wrote:
| > When you go against Amazon, you go against something
| that Americans like more than Netflix.
|
| That just gives more reason to go against, there's quite
| a few Western comforts that could use a bit more
| opposition, Amazon being one of them.
|
| You're making the case that it is virtuous to be aligned
| with popular sentiments on issues, which is a position
| that dissolves any ethical or political principles in the
| name of conformity.
| rsj_hn wrote:
| This is interesting:
|
| https://tenetpartners.com/top100/most-powerful-brands-
| list.h...
|
| Apple, Google, Amazon, Microsoft all in the top 10.
|
| Exxon way more popular than Netflix.
| throw0101a wrote:
| > _Bezos does not have his cash in hand, for the most
| part. To the extent that he does have cash in hand, he
| has already paid taxes on that cash._
|
| What a lot of high wealthy individuals are doing is using
| their portfolios as collateral against lines of credit.
| The LOCs give them cash to fund their lifestyle, and they
| don't have to liquidate their portfolios and take the
| capital gains charges (at least in the short-term).
|
| Someone can have _both_ holdings _and_ cash in this
| situation.
|
| This has been possible lately because rates are so low,
| so the interest doesn't cost borrowers that much.
| darawk wrote:
| > What a lot of high wealthy individuals are doing is
| using their portfolios as collateral against lines of
| credit. The LOCs give them cash to fund their lifestyle,
| and they don't have to liquidate their portfolios and
| take the capital gains charges (at least in the short-
| term).
|
| > Someone can have both holdings and cash in this
| situation.
|
| Ya, I understand this. This is exactly my point, though.
| If he's taken out loans against his shares, he is _even
| more_ incentivized by the value of those shares than if
| he had not done so.
|
| To the extent that he has pure (unencumbered) cash
| positions, he's paid taxes. To the extent that he has
| unrealized gains or loans against unrealized gains, he is
| incentivized by share price appreciation.
|
| This was in response to the a comment suggesting that
| because Bezos had already cashed out, he didn't care
| about the value of his shares anymore.
| rsj_hn wrote:
| Pretty sure many in the middle class do the exact same
| thing. That's the whole idea behind mortgages, auto
| loans, etc -- to fund consumption on credit and pay the
| interest with income.
| throw0101a wrote:
| For the middle-class, the closest would be a home equity
| line of credit (HELOC). Reverse mortgages are also a
| variant of this.
|
| Generally though, most 'middle-class loans' have an end
| date.
| [deleted]
| rsj_hn wrote:
| I think a lot of middle class people roll over their
| debt, too, no? Say buying a new car when the warranty
| expires on the old car. Or buying a new house every 10
| years (US average).
|
| But I don't feel like digging around SCF data, so this is
| just a hunch. Having said that, my hunch is that middle
| class households are much more indebted than wealthy
| households.
| doopy1 wrote:
| Don't they have to payback the loans at some point? And
| at that point do they not liquidate some assets to do so
| and pay taxes on that? (Serious question.)
| throw0101a wrote:
| > _Don 't they have to payback the loans at some point?_
|
| LOCs are often open-ended, so as long as they're at
| minimum paying the interest, the lender doesn't care.
| Presumably it will be cleared up eventually on death with
| the estate.
| andrekandre wrote:
| > Bezos does not have his cash in hand, for the most
| part.
|
| yes, but it works as collateral for whatever cash he may
| need/want, which means effectively the same thing in the
| end, no?
| gruez wrote:
| >He'd still be the richest man alive
|
| if you're measuring outcomes by relative income/wealth,
| then you can also argue that the "Even Greater
| Depression" wouldn't affect the average person either,
| because everyone would stay in the same place (on
| average).
|
| >probably even more powerful than he already is right now
| thanks to how Amazon and AWS would get to take over more
| failing social institutions.
|
| We just had a huge pandemic and recession. Did he take
| over "failing social institutions" did he "take over"?
|
| >It's a setback for Bezos, and maybe he wants to avoid it
| in order to maximize profit and utility and whatever, but
| it's an existential threat to him in the same way
| spilling a glass of milk or losing a round in a video
| game are. Even extreme social unrest has been priced in,
| at however much a bunker in New Zealand costs.
|
| Surely he'd prefer to be the leader of a global megacorp,
| travel anywhere in the world, partake in various space-
| related adventures, and not be trapped in a bunker?
| You're right he won't ever have to worry about his basic
| needs, but I wouldn't characterize it as "spilling a
| glass of milk or losing a round in a video game". I'd be
| pretty pissed if the US government somehow revoked by
| right to leave the country.
|
| >Other people, when the Big Crash arrives, will -- in a
| totally economically rational way! -- commit suicide in
| order to ensure their spouses and children aren't
| bankrupted by their medical bills. Uh, in greater numbers
| than they already do.
|
| I'm not sure why this is being brought up, other than for
| the shock value.
|
| >I mean. Should be a good time for the owner class to buy
| up all the housing stock for cheap, too.
|
| Similar to your fears about amazon taking over, this
| seems to be unsupported by the data. The great recession
| lasted from Q1 2008 to Q3 2009, according to the fed.
| However, this doesn't seem to correlate with institutions
| buying up houses?
|
| https://cdn.vox-
| cdn.com/uploads/chorus_asset/file/22647043/S...
| throw0101a wrote:
| > _The overwhelming majority of his wealth is tied in
| various financial assets (eg. equities)_
|
| When the DotCom Bubble burst AMZN's stock when down 90%:
|
| * https://www.cnbc.com/2018/12/18/dotcom-bubble-amazon-
| stock-l...
|
| He didn't seem to freak out then and kept chugging along.
|
| Short of the (zombie) apocalypse happening, I doubt it will
| ever drop that much again, and so I doubt Bezos would care
| about any kind of draw down that could realistically
| happen.
| theshadowknows wrote:
| That brings me to wonder...who has the most cash on hand at
| any given time and how much cash do they have? I'm really
| quite curious about that.
| krapp wrote:
| I have $9.00 and three Avenue C coupons in my wallet.
| MR4D wrote:
| > Switzerfy the economy
|
| Just off the top of my head, the Swiss:
|
| don't make airplanes (no Boeing, Embraer)
|
| don't make cars (no GM, Ford, Toyota, etc)
|
| have big consolidated banks (UBS & CS)
|
| have large trading firms (Glencore, Trafigura)
|
| etc....
|
| My point is not to nitpick (I actually agree with your post)
| , but to show that even in a tiny country like Switzerland
| (smaller than Chicago), it is _hard_ to do that.
| kbenson wrote:
| > He's wrong to suggest that the billionaire class and founders
|
| What? How did you get billionaire class and founders? He
| specifically says founder led companies and _family owned
| businesses_. Unless you reduce that group to the Waltons, how
| does family owned businesses equate to the billionaire class?
|
| "Only founder led companies and family owned businesses can
| stand up to the immense pressure from the dogmas of modern
| finance."[1]
|
| 1: https://twitter.com/typesfast/status/1453753942228160515
| paganel wrote:
| > I think economists call it rent-seeking.
|
| There was a book published a couple of years ago (before the
| pandemic) which was "demonstrating" (so to speak) that going
| back through history real financial/economic levelling at a
| reasonable scale only happened as a result of violent means
| (wars, revolutions etc).
|
| I think what those violent means do (among other, more nasty
| things like people getting killed) is that (in some cases) they
| obliterate the societal/institutional structures on which a
| specific rent-seeking system is based, which gives the majority
| of the people a chance to "level up" until a new rent-seeking
| system takes shape.
| marvin wrote:
| Probably "The Great Leveler: Violence and the History of
| Inequality from the Stone Age to the Twenty-First Century"
| jonny_eh wrote:
| > violent means (wars, revolutions etc).
|
| Also plagues/disease. Currently relevant.
| jason0597 wrote:
| This would be true if lockdowns didn't happen. As it is
| most of the wealth-owning class was told to shut themselves
| inside, isolate, then we got the vaccine and they manage to
| live on and keep their wealth. So not even plagues can save
| us anymore.
| kwertyoowiyop wrote:
| In the 80s and 90s it was called "unlocking value."
| gruez wrote:
| > Founders have just as much incentive to optimize the excess
| out of the system, they just call it "disruptive innovation" by
| which they mean tweaking how the system works so that they can
| squeeze out profit for themselves.
|
| >I think economists call it rent-seeking.
|
| Are you saying all "disruptive innovation" rent-seeking? Or
| only certain kinds? If a founder was able to "optimize the
| excess out of the system" by providing a better consumer-facing
| experience (eg. amazon), why shouldn't they be rewarded with
| profits? Is there any room for profits without being called a
| rent-seeker?
| TAForObvReasons wrote:
| There are genuine "disruptive innovations" that are not rent
| seeking, but by and large that is not what we've seen.
|
| Picking on Amazon for a moment, their original "innovation"
| was a sales and use tax dodge: based in Washington, they were
| able to sell books to California without having to charge the
| relevant sales tax upfront. That margin gave huge room to
| provide free shipping and other customer conveniences.
| Technically customers were supposed to pay a self-reported
| use tax but many did not.
|
| The relevant laws have changed since then, but the general
| point still stands. Does mere tax and legal arbitrage count
| as rent-seeking? Absolutely.
| gruez wrote:
| >Picking on Amazon for a moment, their original
| "innovation" was a sales and use tax dodge: based in
| Washington, they were able to sell books to California
| without having to charge the relevant sales tax upfront.
| That margin gave huge room to provide free shipping and
| other customer conveniences.
|
| Sales tax in california was 7.25%. While not having to
| charge tax was a competitive advantage, I'm skeptical that
| was the defining factor that led to amazon's success. This
| is further compounded by how prices work in the US (taxes
| are not included), so I doubt this even made a conscious
| difference to most people. Finally, the exemption isn't
| limited to e-commerce sites. According to wikipedia, it
| includes "companies doing mail order, online shopping, and
| home shopping by phone". Why did amazon dominate while
| sears languished?
| dragonwriter wrote:
| > Finally, the exemption isn't limited to e-commerce
| sites.
|
| It isn't really an exemption, anyway, it is a limitation
| under then-existing federal law on the power of states to
| impose taxes.
|
| > According to wikipedia, it includes "companies doing
| mail order, online shopping, and home shopping by phone".
|
| That's misleading.
|
| What it actually applied to, at the time, was companies
| without physical presence in the state into which the
| sale was being made. So companies that _exclusively_ did
| those things would be covered (except in the State they
| operated from, but they could operate in a no sales tax
| state), but companies that did them alongside physical
| operations would not, and before the web, those other
| models alone had so much less access to customers that
| the sales tax hack wasn 't worthwhile.
|
| > Why did amazon dominate while sears languished?
|
| Because while Sears _also_ had mail order business, it
| was a ubiquitous brick-and-mortar retailer, and thus was
| paying sales tax on its mail order sales, because they
| had retail everywhere.
| gruez wrote:
| 1. What changed with the internet? When amazon was
| started in the 90s, was the ubiquity of computer+internet
| access anywhere close to the ubiquity of the sears
| catalog?
|
| 2. I'm not really convinced that "the sales tax hack
| wasn't worthwhile". How expensive would it be to spin off
| your mail order division? Lawyers might be expensive, but
| 7.25% of your revenue is also a lot of money.
| caust1c wrote:
| Yeah, this guy has clearly read about the theory of constraints
| but his pivot into criticizing the wealth tax on the basis
| "founders will lose control of their company" is simply
| bullshit.
| bluetwo wrote:
| I don't think he is talking about tech founders. I think he is
| talking about mom and pop businesses of all types.
|
| Tech founders are a different breed.
| tmp538394722 wrote:
| What do you mean - How are they different?
| analognoise wrote:
| As they constantly and insufferably tell us.
|
| Whether we believe them is another matter entirely.
| jonny_eh wrote:
| Who aren't billionaires, so I don't know why he brought up
| criticisms of a proposed new tax scheme that only targets a
| few hundred people.
| JoshCole wrote:
| I think a lot of people just read emotional language and turn
| off their minds. So let's expand out what you said to make it a
| bit easier for others to reason about what you said.
|
| We're talking about founder owned companies owned by
| billionaires. So let's use an example of one: SpaceX. You're
| maligning "disruptive innovation" so let's expand out your
| claim with the specific example: an order of magnitude
| reduction in the cost of space flight and the introduction of
| competition in rural internet service.
|
| So you're saying enabling access to other planets and the moon
| while providing people in isolated areas with internet service
| is an example of squeezing out profits and you're saying that
| you think it is rent seeking. Rent seeking is defined as an
| economic concept that occurs when an entity seeks to gain added
| wealth without any reciprocal contribution of productivity.
| Typically, it revolves around government-funded social services
| and social service programs. We already had programs to access
| space. They were an order of magnitude more expensive. We
| already had programs to provide internet. They didn't serve
| well the subset of people that are in remote areas. So in both
| cases it just isn't the case that the company is doing rent
| seeking.
|
| In other words, you are completely wrong when we use a specific
| example.
|
| This applies to more specific examples. Lets use the specific
| example of Flexport. It is owned by a founder and you're
| replying to things posted by them so it's even less of a reach
| than before.
|
| They are introducing computers to an industry that has
| competitors from the 1400s era. These competitors sometimes
| have legacy processes built on physical paper and for some of
| them excel is an example of the use of cutting edge technology.
| You're saying that doing better than that for people using
| modern technology is an example of rent seeking.
| ren_engineer wrote:
| why blame the players rather than the game? It's the
| government's job to prioritize long term health of the nation
|
| Plenty of people warned about the hazards of allowing these
| companies to outsource everything, government did nothing.
| Mostly because they are bought off by lobbyists. This could
| have pretty easily been prevented by putting tariffs on key
| industries to keep manufacturing here or at least in North
| America
| Agathos wrote:
| The billionaires' tax he mentioned is dead anyway, so that part
| of the discussion is moot. It was floated a couple of days ago
| as a possible addition to the reconciliation bill, but it's not
| in the framework announced this morning.
| 015a wrote:
| I think his statement is that founder (and family) led
| businesses are the only businesses capable of building the
| shock absorbers necessary to weather hundred-year storms; not
| that they _always_ will. By comparison, committee-appointed
| CEOs rarely, if ever, will, because they cannot.
| tonyedgecombe wrote:
| I was always under the impression that family run businesses
| tended to have poorer quality management.
| The_Beta wrote:
| It's not that they cannot. They don't have an incentive to do
| it.
|
| If I'm being paid for my performance while I'm a CEO, why
| would I spend money today (and hurt my performance today) to
| fix a problem that MIGHT affect the company in 20 years
| ODILON_SATER wrote:
| It just that it is more likely that founders genuinely care
| about their baby, so they have more incentive to make the
| company more resilient to long term risks. I don't think
| this is an absurd claim. It's not that every founder is the
| same, there are founders who behave just like most CEOs.
| jonas21 wrote:
| No, they literally cannot. Because if they try to, they
| will be fired by the board for failing to perform and
| replaced with someone who will undo their work.
| tuatoru wrote:
| To align incentives, perhaps we should have a law
| specifying that executive stock options can only be
| exercised after a delay of 17 years or more.
| lupire wrote:
| The biggest business organizations in the world is one of the
| oldest: the Chinese Communist Party.
| bobdosherman wrote:
| If I estimate a model to predict an anomaly using data that
| never has any realized anomalies, how well will that model do
| out-of-sample? While framing this as a bad unrestricted ROE
| maximization problem is a nice simplification, it's not clear
| that having everyone move to a restricted ROE maximization
| subject to keeping assets large enough to insure against some
| unforecastable shock is welfare enhancing. That could be a lot
| of wasted insurance.
|
| I will give him credit for cleverly spinning this logic all
| into a pitch to kill the unrealized cap gains tax proposal!
| AussieWog93 wrote:
| > Founders have just as much incentive to optimize the excess
| out of the system ... tweaking how the system works so that
| they can squeeze out profit for themselves.
|
| So do workers, to be fair. The goal of workers in purchasing
| departments and HR isn't to make the business more efficient
| but to propagate a cushy lifestyle for themselves and their
| mates.
|
| To an extent, that same misalignment exists in all classes of
| worker, including engineers.
|
| SWEs are probably the worst at this; so many of the problems
| that we solve don't have anything to do with squeezing the most
| performance out of the hardware or reducing technical debt.
| Instead, a huge chunk of our time is spent on man-made bullshit
| that sysadmins don't solve properly because otherwise they'd be
| out of a job.
| simonh wrote:
| You have it backwards. Rents are revenue accrued due to the
| ownership of a resource, such as grants, subsidies, tax breaks
| and loaning or leasing an asset. Optimising out excesses is
| minimising the holding of assets, so it's directly antithetical
| to rent seeking strategies.
| thereddaikon wrote:
| Rent-seeking practices are not the same as a traditional Rent
| or Lease arrangement. They get the term because instead of
| buying a product that you know own and can do with as you
| wish, they still maintain control as if you were a renter.
|
| A topical example is consumer electronics companies designing
| devices to only last so long and actively suppressing the
| after market through DRM, difficult or dangerous to repair
| designs, restricting owner autonomy through software patents
| and IP law and other methods to ensure you must come back to
| them and purchase another one.
|
| Another more direct example is the slow conversion of all
| paid as a product software into subscription services. You
| can't buy the adobe suite anymore. You have to subscribe to
| it. Sooner or later you wont be able to buy your operating
| system either.
| simonh wrote:
| DRM is rent seeking through control of digital assets.
| Patents and IP law manipulation, yes also rent seeking
| based on ownership of IP assets. Software subscriptions
| again, no question, that's renting access to a software
| asset or service. These all meet the criteria I described.
|
| Designed obsolescence is arguable though. The customer
| could always buy elsewhere.
|
| Anyway tye case I was replying to is not rent seeking.
| Leaner businesses may be more fragile, but they are also
| more profitable and productive. It's just being paid to do
| work.
| SkittyDog wrote:
| In the terms "economic rent" and "rent seeking", the concept
| of rent is not specific to assets. Rent paid to landowners
| was the original inspiration for the terminology, but in
| actual usage it refers to any economic behavior that extracts
| value without creating new value.
|
| * https://en.m.wikipedia.org/wiki/Rent-seeking
|
| Notably, this usage does not include "providing liquidity",
| so most of what hedge funds and private equity do for a
| living is rent seeking, by definition.
|
| So the parent commenter's usage appears to be correct... If
| it's any consolation, I was under the same mistaken
| impression as you for a long time.
| simonh wrote:
| Liquidity is a service customers pay for. It's not clear to
| me that's unproductive work. More efficiently allocating
| capital can absolutely improve productivity.
|
| Some activities classed as renty can be economically
| beneficial. It's not all pure usury, but activities that
| seek to increase rent revenue without increasing the value
| provided are a problem and that's the 'rent seeking' part.
| I've no problem with fair value rents, but rents should be
| as low as the market can reasonably bear as excess rents
| are essentially a tax on production.
| SkittyDog wrote:
| I'm not arguing whether the definition is valid, just
| correcting the previous poster's misuse of some well-
| established economics jargon.
|
| Re: Liquidity... The fact that a service is immediately
| useful to somebody (and has a willing customer) does not
| prove that it's a net productive behavior for the
| society, as a whole. That's just how the field of
| economics defines it, and the practioners widely agree
| that "providing liquidity" falls into that category.
|
| Now, it sounds like you may be trying to defend the
| _morality_ of rent-seeking behavior... If that 's the
| case, I wish you good luck in your argument, with
| somebody besides me. I have no dog in that fight.
| vanattab wrote:
| Unless you consider liquidity to be valuable? No?
| SkittyDog wrote:
| It's not about whether something is immediately valuae to
| somebody... It's about whether the total net effect on
| society produces _new_ value, or if it 's just shifting
| value from someone to another. Per the overwhelming
| opinion of economists, providing liquidity is rent
| seeking, because the benefit it provides to one person is
| exactly offset by the value it takes away from someone
| else.
| newbie789 wrote:
| That part of the Twitter thread actually made me laugh out
| loud. In the middle of talking about how modern finance is
| messed up he has a kind of unprompted little aside about how
| "taxes are bad!!!"
|
| Dear lord the amount of smug "wE aRe ThE mOSt EfFicIEnt wAY Of
| AllOCaTinG CaPitAl" arguments from very wealthy founders that
| would prefer to become more wealthy is frankly ridiculous. I
| get it, you went to Stanford and they taught you some fancy
| words to trick people into giving you money instead of
| investing in public infrastructure and services.
| jonny_eh wrote:
| Especially since it's easy for founders of such large
| companies to sell their shares, but give themselves fewer
| shares with greater voting rights... thereby maintaining
| control while spreading the wealth.
| philwelch wrote:
| I'm not sure this is the case. The problem is that RoE is a
| metric that can be gamed for short term gains while incurring
| long term risks. This is more likely to be an issue with short
| term career-oriented leadership. Founders are more likely to
| have a concern for the long-term success of the business.
| Simply put, founders are not the people sacrificing their own
| companies' long term success in exchange for enhancing their
| personal careers.
|
| A lot of the JIT fashion came from Toyota, and yet Toyota
| doesn't seem to suffer from these issues as much as others. I
| don't think it's any coincidence that most of the senior
| executives of Toyota have all been at Toyota for longer than
| many of us have been alive, and that the company president is
| the grandson of the company founder.
| Invictus0 wrote:
| JIT works nicely in isolation--when everyone relies on it is
| when it starts to break down. It basically offloads the
| responsibility of forecasting your inventory needs to the
| supplier, who has absolutely no knowledge of your inventory
| needs.
| ajsnigrutin wrote:
| JIT works just fine with stuff that's simple to make or close
| by geographically. Car seat covers? Many textile firms around
| you? Sure, do it JIT... if one of them fails or gets wiped
| out by a tsunami, there are ten more than can take over the
| production.
|
| Computer chips? Made only in one company in china? Trying to
| get someone else to make them, means weeks or months of
| production line changes + waiting time + other customers...
| good luck. If they're far away (eg. china), and the transport
| system is fucked up, you're basically fucked up too. Even a
| huge company like toyota can't make a chip factory
| "overnight" anywhere.
| quartesixte wrote:
| Toyota has over the years adjusted how their JIT operates,
| and are now known to stockpile certain critical parts.
|
| This is pure speculation, but I also wonder if Japan's
| geography + slightly more diverse economic landscape (lots of
| small businesses that do nothing but make components) help
| make their JIT more resilient to shocks. With Osaka, Tokyo,
| and Nagoya all within an area less than the length of
| California, it's far easier to "in-time" material.
| nickff wrote:
| Toyota became significantly less JIT after the 2011
| earthquake and tsunami, which severely disrupted their
| supply chain. That said, JIT involves many useful lessons
| for organizations with higher inventory levels as well.
| Kye wrote:
| My understanding is this kind of alignment is essentially
| what makes Shenzen in China such a manufacturing
| powerhouse.
| tootie wrote:
| I was thinking this thread was basically explaining kanban
| darawk wrote:
| This is exactly right. It's about the term length of
| incentive alignment. Most founders have a long term
| reputational stake in the company they founded. Hired CEOs
| generally do not.
| phkahler wrote:
| >> He's wrong to suggest that the billionaire class and
| founders will solve the problem if we only trust them and let
| them keep their money.
|
| He didn't say they'd solve the problem. He said they're the
| only ones who can be resilient in hard times. OK I think he
| said the ARE resilient, I say "can be" because it's still a
| choice.
|
| "I think economists call it rent-seeking." That's what the
| incumbents are after, and so are a lot of the startups - at
| least the startups seeking round after round of investment. If
| they're not seeking rent, they're trying to set up
| infrastructure (manufacturing or cloud this-or-that) and
| collecting returns (rent) on that investment. Nobody talks
| about profit on goods sold, they talk about return on capital
| (or RoE) and that seems a lot more like rent.
| yalogin wrote:
| What? This turned from a supply chain to don't tax the rich post.
| I completely disagree with it. A good CEO will be able to do both
| look at the long term and deliver shareholder value. Yes, the
| growth could be slower but it is on the CEO to convince the board
| and investors that its a good thing. Either way, now that this
| issue is front and center, CEOs will not be blamed for planning
| ahead, so we can happily tax the rich? His logic not mine.
| hk1337 wrote:
| What's the deal with writing 20+ consecutive tweets instead of a
| blog post and tweeting the link to the blog post?
| stjohnswarts wrote:
| Blogs just aren't that popular anymore, so maybe he doesn't
| keep one and Twitter is his main outlet?
| dragonwriter wrote:
| On Twitter as everywhere else, approximately nobody clicks the
| link. But there's some chance they'll read through a chain of
| tweets.
| wvenable wrote:
| I clicked a link to get to this twitter feed monstrosity.
| t-writescode wrote:
| A large percentage of TypeFast's twitter followers won't.
| coolso wrote:
| It's hard to write 20 consecutive blog posts without seeming
| extremely pretentious. To the average Twitter user, massive
| Tweet chains means the person has something really important to
| say. The fact that they're getting around the max tweet size
| makes things very rebellious, adding to that counterculture
| feel you only get on Twitter.. Add in the blue checkmark next
| to the name and yeah, I guess you could say Twitter users are
| pretty cool for using Twitter.
| malfist wrote:
| Worse, 20+ tweets that don't provide any more nuance than the
| original tweet, so this literally could have been one tweet
| legitster wrote:
| No, no, no!
|
| Stockpiling is not a solution to a bottleneck!
|
| In the grand scheme of things, having a couple weeks of extra
| inventory on hand will not help you weather a 100 year storm. But
| it will increase waste - inventory that you have to throw away
| when there are defects or when they become obsolete.
|
| Imagine trying to predict the run on lumber, and the solution was
| to have kept a bunch of lumber sitting in yards rotting waiting
| for the off-chance that there was a sudden unexpected demand. The
| proposal that we should have been shipping over more of
| everything, building giant strategic stockpiles across the
| country of everything, and then tossing out 10-15% of everything
| from storage loss is bonkers.
|
| Just In Time manufacturing reduces waste and improves quality
| across the board. And stockpiling only hides your bottlenecks!
| bsder wrote:
| True, but what isn't on the table is _producing locally even if
| it doesn 't optimize to the penny_ instead of _shipping crap
| halfway around the world to save half a cent_.
|
| This has the advantage that you already have industries that
| have capacity that can scale up. You have people trained who
| can train others. You already have equipment and facilities to
| which you can add to to break a bottleneck.
|
| Basically, vertical integration at the country level.
|
| Of course, this is the CEO of a _shipping startup_ so that
| solution isn 't on his plate of possibilities.
| arendtio wrote:
| Even if you are right, what would be your solution?
|
| I mean, the problem is not that we lack transparency, but that
| we have run out of options to fight the bottlenecks. Having
| some stockpiles as buffers would be one options to fight the
| problem.
| urthor wrote:
| Is there even a better solution than to let the current
| supply chain issues play out?
|
| The status quo with supply chains and manufacturing is there
| for a reason, silicon in particular reflects its boom bust
| cycle as well as the _absurd_ costs of CapEx.
|
| I think people are reaching when they table the hypothesis
| that current supply chain issues are due to mistakes or
| mismanagement of some middle manager, in some corporation
| somewhere.
|
| Maybe, just maybe, the cost of having a bunch of spare
| infrastructure for a once in a lifetime rearrangement of the
| supply chain due to Covid isn't worthwhile?
| blhack wrote:
| He's not suggesting stockpiling, he's suggested increasing the
| amount of RAM in the system (to us a computer analogy).
| chrisan wrote:
| What exactly is the "RAM" if not inventory?
| zen_of_prog wrote:
| I think they do mean inventory, just not sitting around in
| a forgotten storage room. To try other computer analogies,
| it might be increasing the queue size or using a capacitor.
| dkokelley wrote:
| Production and logistics capacity. If you run a factory at
| 100% efficiency, anytime >100% throughput is necessary you
| get backlogged. If you have ~15% headroom as a GOAL, you
| can weather a shock without any downstream impact.
|
| In the case of the Port of LA shipping containers,
| optimizing lot storage so that you always have exactly
| enough space (100% efficiency) breaks down as soon as that
| space requirement jumps to 110%.
| Grakel wrote:
| Quite the opposite, the lumber industry has been selling
| greener and wetter wood year after year. If they would
| stockpile the quality would increase, and they could build a
| cushion to fluctuating demand.
| legitster wrote:
| Haha! Point taken.
| rsj_hn wrote:
| I've noticed this with musical instruments, and it sucks.
| This has been a chronic problem with Gibson guitars, but also
| even small scale luthiers are being hurt.
|
| https://www.guitarworld.com/features/adam-jones-i-told-
| gibso...
| efficax wrote:
| the wood in my house is over 100 years old and is still in good
| shape. Stored properly, wood lasts very long. but i get your
| overall point. A balance has to be struck between too much and
| too little inventory...
| modeless wrote:
| > In the grand scheme of things, having a couple weeks of extra
| inventory on hand will not help you weather a 100 year storm.
|
| That's not really what he's saying. It's not about a single
| company, it's about the whole economy. When every company is
| running JIT, a small temporary supply disruption anywhere can
| bubble and propagate through the whole chain, becoming a huge
| disaster. It's like a traffic jam; when a highway is running
| right at capacity it only takes one person hitting the brakes
| to turn the whole thing into a parking lot. Except it's worse
| than a linear highway because the economy has many backlinks
| where companies early in the chain rely on companies later in
| the chain, causing feedback loops. Whereas if there was slack
| in the system then the relatively small initial shock wouldn't
| propagate.
| legitster wrote:
| Supply chain issues were sooo much worse before JIT. Imagine
| one person taps the brakes, but every car weighs 100 tons.
|
| When companies kept huge inventories, most of it was not
| useful to solve the supply chain issues that came up and
| often made it harder to respond to demand shocks.
| dpierce9 wrote:
| The average lifespan of a company is 10 years.[0] The average
| lifespan of companies on the S&P is maybe a little more than
| twice that. Each year you have a 1/100 chance of seeing a hundred
| year flood. With a short lifespan the odds are decent that your
| company simply won't see one. The question is then: how good of
| an idea is it to spend to be robust to them? Of course it is
| viciously circular: planning to not be robust to white swans is
| probably why the lifespans are so short and shrinking.
|
| As for the turn to founder control, one counterexample is Tim
| Cook who doesn't have voting control of Apple but is sitting on a
| massive shock absorber made of cash earning insanely low rates of
| return. The idea that you need control of the board to be robust
| doesn't seem to be necessary. It is probably helpful, apple may
| be sui generis, but it isn't necessary.
|
| [0]
| https://www.sciencedaily.com/releases/2015/04/150401132856.h...
| rsj_hn wrote:
| This is like a Rorschach test. There is truly something for
| everyone. What caused all the supply chains
| bottlenecks? Hard Left: "It's the fault of
| *capitalism*!" Hard Right: "It's the fault of
| *unions*!" Soft Left: "Truckers don't have a
| living wage!" Soft Right: "We stopped producing
| because of lockdowns!" Greens: "It's *climate
| change* disrupting the economy!" Libertarians:
| "*Government mismanagement of ports!*" YIMBYs:
| "*Zoning laws don't allow stacking!*" De-
| regulators: "*AB 5 bans independent operator trucks!*"
| Taleb: "Globalization JIT is *too fragile*!"
| Krugman: "Republicans destroyed our infrastructure!"
| Montana: "Workers are staying home, collecting unemployment!"
| (h/t tamaharbor)
|
| Did I miss any explanation? I need to start collecting these.
|
| Full Disclosure: I have no idea what the causes of the port
| bottlenecks are, but it's a great launching pad for talking about
| all of these issues.
| tamaharbor wrote:
| Staying at home and collecting unemployment.
| rsj_hn wrote:
| Yes! I have _definitely_ heard that one, too. I will update
| the list.
| 1970-01-01 wrote:
| Alternate: https://threadreaderapp.com/thread/1453753924960219145
| rdiddly wrote:
| Thanks, I hate when people try to blog on Twitter.
| three14 wrote:
| Why would you expect a company that pays for buffers to be able
| to compete with a company that doesn't, even if the first company
| is owned by benevolent founders? Shouldn't the company that's cut
| inventory to a minimum be able to charge less than the
| competition, and drive the high-inventory competition out of
| business? I understand that not having inventory might create
| long-term problems, but how is the high-inventory company
| supposed to compete during the good times?
| KingMachiavelli wrote:
| How bad are the supply chain bottlenecks really? Compared to the
| amount of discussion on the matter they seem pretty minimal
| outside a couple sectors. I certainly don't see any lack of
| products being sold at grocery and big box stores. The only
| exception I see are some hot items like GPUs and game consoles
| but I don't they the supply chain itself is the constraint but
| rather the actual silicon.
|
| The only significant example I can think of is the car market. If
| you sold or didn't have a car pre-pandemic then getting one now
| is going to be expensive both new and used. Then again I have
| scene dozens of used cars sitting in parking lots (w/o license
| plates and with old car rental decals) so I'm starting to think
| there is some scalping going on in that market as well.
| andrewstuart wrote:
| Queue dynamics.
|
| Late entrants to a backed up queue take exponentially longer to
| service.
| president wrote:
| Is anyone honestly surprised? Seeking short term gains has been
| the story of the last decades.
| throwaway4good wrote:
| What it is the alternative to the current just-in-time regime?
|
| Warehouses filled with stuff to be sold. Overproduction. Stuff
| getting destroyed because it expires or cannot be sold for
| whatever reason.
|
| We may get there, hopefully only temporary, as a reaction to the
| current situation. For most companies, the amount paid to the
| factory in China or elsewhere, is only tiny fraction of the price
| the product is sold for.
|
| That is why companies now are double or even triple ordering.
| Most of that stuff will just ending up getting destroyed.
| jkingsbery wrote:
| For an alternate take, see
| https://www.nationalreview.com/2021/10/the-real-culprit-in-o...
| ...
|
| These posts raise some interesting points I hadn't thought about
| (I don't see any problem with Next-in accounting). But it seems
| that lack of inventory isn't the only problem, throughput at
| ports is also an issue, and the ports themselves are limited at
| what changes they can make to fix these issues, partly due to
| profits (no one will want to operate a huge port that's
| profitable 5% of the time), but also partly due to limits put on
| ports and shipping by the government.
| [deleted]
| alex_young wrote:
| E-commerce did it.
|
| We operated with little head room in a very very big system for a
| long time without these issues, and the major change was online
| shopping, which really took off during the pandemic.
|
| This worked, mostly because there was suddenly slack in the
| system to accommodate this changed purchasing pattern, caused by
| a slow-down in practically everything else.
|
| Now that the everything else is back online though, there is
| massive contention for space on ships etc, so retailers hoard
| more in warehouses, and that backs up into container yards, and
| then into the parking lot at the dock.
|
| Adding more capacity in the middle (stacking some containers)
| doesn't do anything to materially solve this problem.
|
| https://www.census.gov/retail/mrts/www/data/pdf/ec_current.p...
| WesolyKubeczek wrote:
| All nice and logical, and the stark lack of long-term planning is
| a huge part of the problem, but this:
|
| > Only founder led companies and family owned businesses can
| stand up to the immense pressure from the dogmas of modern
| finance.
|
| This observably does not compute. Unless those family owned
| businesses are the size of Samsung or comparable, they can rarely
| afford to invest so much in their prime, much less so now.
| Founder-led and family businesses seem to be the huge collateral
| damage in this clusterfuck. Or am I wrong? Are those businesses
| not hit with transportation growing expensive AF and energy
| shortages just as bad? Do they have enough lobbying power that
| their government simply will not let them drown one way or
| another?
| motohagiography wrote:
| It's a policy problem. Truth is hard to determine because the
| delays are the effect of upstream decisions. There were internet
| anecdotes about California port policy preventing drivers from
| picking up loads (allegedly the owner operator law changes that
| hit Uber also hit truck drivers as well), federal policy changes
| reducing the time drivers can spend at the ports and number of
| loads they can take each day, but it was hard to separate these
| from partisan criticisms, even if the problems seem to have
| appeared overnight. Covid was around all last year, and between
| the availability of vaccines and the number of cases in cities
| being in the low hundreds, it's not like people working on supply
| chains are suddenly home sick with it.
|
| It's getting more challenging to not interpret the destruction of
| independent business (such as owner operators of trucks, retail,
| restaurants and bars, and other policies) as an intentional soft-
| dekulakization of western economies, which is a necessary step in
| an old playbook. It would be helpful toward demonstrating a
| better explanation if there were some other economic factor that
| has appeared in the last year that was not just clumsy
| application of policy.
| [deleted]
| DevKoala wrote:
| > Only founder led companies and family owned businesses can
| stand up to the immense pressure from the dogmas of modern
| finance.
|
| > The proposed tax on unrealized capital gains will force
| founders to sell larger and larger pieces of their companies to
| pay the tax, until eventually they lose control of their
| businesses and turn them over to the Wall Street sharks to run
| their disastrous playbook.
|
| I agree with this argument. Love him or hate him, with a tax on
| unrealized capital gains someone such as Elon Musk would not have
| been able to drive Tesla to profits thus forcing the automotive
| industry towards EV's. Moreover, we would have fallen behind
| decades in the space race.
| dragonwriter wrote:
| > Love him or hate him, with a tax on capital gains someone
| such as Elon Musk would not have been able to drive Tesla to
| profits thus forcing the automotive industry towards EV's.
|
| Yes he would have. One, because there is a tax on capital
| gains, and he did; you probably mean an _unrealized_ capital
| gains tax, but... Two, it is quite possible (and explicitly a
| motivation of the proposed law, so impossible for any honest
| critic to overlook) to borrow against public tradable assets,
| and if they are gaining value fast enough that a 20% tax on
| unrealized gains would significantly erode your holdings you
| can do so at interest rates far below the value growth,
| essentially without limit (that 's how people fund lavish
| lifestyles without taxes on unrealized gains already), so he
| would be able to use that method to pay taxes without any
| dilution of ownership.
| DevKoala wrote:
| You think he would have doubled down on the risk? Perhaps,
| but I know it would have been another obstacle in the road
| for him. At what point does it stop being worth it for him? I
| do not like his social media antics, and hate to even bring
| him up as an example since I am tired of hearing of him.
| However, the guy works like a madman for goals that mainly
| benefit all of humanity to whom he owes nothing. History will
| look kindly on him and down on all of us that did so much to
| hold him back.
|
| Edit: thank you for pointing out I missed the "unrealized"
| bit.
| tome wrote:
| Ah, another chance to plug my article about why he was wrong
| about the bottleneck at the ports!
|
| https://news.ycombinator.com/item?id=28987281
| [deleted]
| flurie wrote:
| The buried lede is an assertion that a tax on unrealized capital
| gains will cause reduced private ownership of large companies,
| resulting in a reduced ability to handle 100-year flood events.
|
| Along the way, there are a bunch of other assertions that serve
| as prerequisites, like the idea that these companies can
| cultivate better employee loyalty and plan for longer horizons.
|
| How much do we know about how true that is, though? Do privately-
| owned companies disproportionately survive these sorts of events
| historically?
| ootsootsoots wrote:
| Behind every big corp is a well armed government and police
| apparatus
|
| Given how many Fortune 500 companies have died even in
| prosperous times since the list started, I'm gonna file this
| away as "manufacturing consent to maintain the status quo."
|
| Corporations are not literal machines or organisms. They're a
| social acquiescence given the reality of biological need at
| scale. The logistics are necessary; the behavior is necessary;
| the ownership angle is propaganda.
| jjoonathan wrote:
| Yeah, when they get public bailouts.
| AnimalMuppet wrote:
| Well, _publicly_ owned companies have, in the last 20+ years,
| been very _bad_ at keeping spare capacity around. Lots of
| "rationalizations" and "rightsizing" and so on have cut all the
| reserves.
|
| That said, this does read like someone with a personal axe to
| grind, leading to motivated reasoning.
| whatever1 wrote:
| "cause reduced private ownership of large companies, resulting
| in a reduced ability to handle 100-year flood events."
|
| How the market speculation on the value of a company can affect
| its resiliency ? If tomorrow everyone sold Apple stock for 1
| cent, why would Apple the company care ? Same revenue, same
| costs. Give me a break with the importance of the stock casino.
| FeepingCreature wrote:
| It would impact Apple's ability to raise money on the stock
| market tho.
| whatever1 wrote:
| Banks are in the business of giving loans and they pay
| professionals to evaluate the assets of borrowers.
|
| That is in contrast to me and everyone else who just gamble
| collectively.
| jollybean wrote:
| The assumption that stock prices don't matter, because
| company ABC doesn't necessarily depend on it 'for now' - is
| just wrong I'm afraid.
|
| If Apple crashed to 1 cent it would gut the entire market.
| Even just that crash alone, the amount of money wiped out,
| retiree savings etc., other companies would be valued lower
| and then the mass selloff would crush them as well.
|
| Apple may not need to 'raise money now' but it very well
| could in the future - and - every company is somewhat of a
| proxy for every other company.
|
| If there is no ROI, there is no investment, and there is no
| economy outside the government, it's that simple.
|
| Taxes on unrealized gains are a separate thing, and probably
| a bad idea - just contemplate that they would have to be
| paired with tax-sheilds on unrealized losses as well. Due to
| speculation, it would open up the door to all sorts of
| shenanigans.
|
| It's just a bad idea all around.
|
| Elon Musk is a 'paper zillionaire' that's very, very
| different than someone with a zillion in the bank.
|
| There are probably some very boring, old, already established
| ideas for increasing taxes on the ultra-wealthy that would
| probably work very well. Including getting rid of loopholes
| etc..
| whatever1 wrote:
| One of the two is true:
|
| 1) The market value of a company is true, aka the owners of
| this company must be taxed for the real value growth in
| their portfolio (since it constitutes income), even if they
| do not sell
|
| 2) It's a casino, a share is just a ticket that may worth
| nothing or a billion. In that case we don't need tax
| protections. The owners of the tickets must be taxed only
| when they cash out. The governments should actively
| disincentivize gambling into this and ensure the pensions
| of its citizens by funding public projects and enabling
| future growth.
|
| You cannot have it both ways.
| [deleted]
| [deleted]
| cbdumas wrote:
| All of this talk about supply chain issues are totally missing
| the point in my opinion. So many articles (and tweet chains I
| guess) have been written about supply chain issues, yet every one
| of them seems to ignore the elephant in the room which is demand
| for goods vs services. Over the course of the pandemic there was
| a staggering re-balancing of consumer spending [0] from services
| to goods, to which supply chains have not caught up.
|
| If the spending doesn't re-balance again as restrictions are
| lifted this is not a temporary supply chain issue caused by just-
| in-time methodology, it's just the new normal.
|
| [0]
| https://apps.bea.gov/iTable/iTable.cfm?ReqID=19&step=2#reqid...
| Azsy wrote:
| The RoE analysis is decent, but it wouldn't be HN if every now
| and then someone really wants to sell the idea that your average
| business owner and your average S&P 500 business are all in this
| together with taxes as their enemy.
|
| Taxes don't apply equally. Taxes are a good thing. Taxes can
| work.
| nso95 wrote:
| Was there a point in history where we could handle something as
| big as covid and without supply chain issues? Skeptical..
| kwertyoowiyop wrote:
| The interconnected supply chain is a headache right now, but on
| balance it's still a good thing for the world if it prevents some
| country from starting a global war.
| Mountain_Skies wrote:
| The global interconnected supply chain is a relatively recent
| phenomenon. It's far too early to make any claims about its
| ability to prevent physical war and so far seems to have
| created the necessity for fiscal and cyber war.
| Barrin92 wrote:
| It's true but just looking at supply chains or 'the economy'
| misses that this isn't just how we do business, our entire
| culture runs on fumes.
|
| People during the pandemic didn't just learn that their toilet
| paper is delivered just on time, people learned that's how their
| friends and family are organized. The amount of people who were
| basically alone during the last two years with no actual communal
| support if there even is still such a thing as a community at all
| was staggering.
|
| The founder of flexport thinking that giving founders more
| control isn't exactly surprising but misses the point that the
| problem he's talking about has already infiltrated just about
| everything.
| hprotagonist wrote:
| https://en.wikipedia.org/wiki/Beer_distribution_game
|
| after a very short period of time after a major disruption, there
| ceases to be a simple cause and the answer rapidly becomes "well,
| it's the gibbs phenomenon, it's gonna ring for a while now".
| mrkramer wrote:
| Long story short: Big spike in demand in a very short period of
| time.
| Mountain_Skies wrote:
| How big of a spike and a spike in what? Consider the size of
| the import market in its entirety and how much of a spike would
| be needed to disrupt it. Don't think more PPE is clogging up
| ports.
| intricatedetail wrote:
| In my country mostly legislation that taxes small business on
| revenue even over 50% effective rate and prevents from claiming
| legitimate business expenses. That wiped off thousands of HGV
| drivers working through their own small business. They got also
| smeared by the government as tax dodgers without showing any
| proof that this was ever the case. They of course blamed that on
| Brexit.
| rsj_hn wrote:
| That's interesting -- do you have a link for some background
| information?
| cmenge wrote:
| Hm, seems like a monocausal 'explanation' of a complex problem -
| or let's say a mere opinion with little background information.
|
| Given the 'hundred year crisis', I think we have fared relatively
| well from a purely economic point of view... So, yes, some
| problems may exist but I think we have witnessed a surprisingly
| resilient system, given how optimized everything is and how
| unprecedented the issue is.
|
| I don't know if a slight price increase in graphics cards is the
| key issue to worry about at this point.
|
| Keeping tons of spare capacity is neither economical nor
| environmentally friendly. Also, it would probably only shift the
| problem elsewhere.
| joe_the_user wrote:
| _Keeping tons of spare capacity is neither economical nor
| environmentally friendly. Also, it would probably only shift
| the problem elsewhere._
|
| * There some things that are people simply need for survival.
| At a certain point, having no spare capacity and cascading
| failures means people die. Lack of masks last arguably killed
| people last year.
|
| * It's quite possible to excess capacity and be good to the
| environment while present production is often terrible despite
| the lack of excess capacity.
|
| * Sure, a complete lack of excess capacity is economical. Which
| is the OP's point in different words. Robustness to failure has
| been traded for immediate returns.
| sammalloy wrote:
| > Lack of masks last arguably killed people last year
|
| I think that was the least of the problem. At the beginning
| of the pandemic in the US, hospitals, nursing homes, and many
| other companies would not allow their workers to bring in
| their own PPE. This continued for upwards of six months.
| Several outbreaks occurred in my area because management
| refused to allow their workers to use PPE. Fast food
| operators also had several outbreaks because they were not
| testing their employees temperatures until it was far too
| late.
|
| As late as April, we had dental offices across the country
| refusing to allow receptionists to wear masks. Same went for
| supermarkets and restaurants. Upwards of 30% of lives could
| have been saved if corporate and management hadn't setup
| major roadblocks for worker protections. One of the most
| common arguments I heard was, "we don't want the customer to
| see our people behind a mask". For companies, this wasn't a
| pandemic with real health risks, this was a front-facing
| visibility problem for the organization. These people should
| all lose their jobs for the suffering they caused.
| CamperBob2 wrote:
| _I think we have fared relatively well from a purely economic
| point of view._
|
| There's no reason to think this is over yet. We might just be
| getting started.
| WesolyKubeczek wrote:
| Just you wait until China pulls a Crimea on Taiwan.
|
| There go our semiconductors, this time for real.
| nebula8804 wrote:
| Well at least we will be going back to writing everything
| in C and squeezing everything out of our old legacy chips
| because what else can we do? Maybe the
| Intel/IBM/Globalfoundries fabs in the US can continue
| producing whatever last gen chips they are capable of.
| jollybean wrote:
| There's no reason to think that we are 'just getting
| started'.
|
| We know what the system looked like before, and post-
| pandemic, there's no reason to believe it wouldn't return to
| that state. Aside from some ongoing pandemic measures, by and
| large, we should see things mostly settle into the system
| that already works.
|
| It's just going to take some time to clear. In the meantime,
| most things are working well enough.
|
| Much of the inflation we are seeing is a function of 12 years
| of mass money printing and pandemic response, if it were not
| for that, the pricing issue wouldn't be so acute.
|
| If there is a 'new normal' it will due to monetary issues -
| the adjustments in supply chains I think will be incremental,
| with a few strategic changes i.e. TSMC in Austin etc..
| cmenge wrote:
| Agreed, good point. I should have said "we have been faring
| relatively well [so far]"
| ben_w wrote:
| If it was just one item, such as graphics cards, I wouldn't be
| particularly concerned. The problem is it's a bit of
| everything, a mere 11-ish years after the Great Recession,
| which was itself "supposed" to be a once-a-century economic
| catastrophe.
| rootusrootus wrote:
| To be fair, once a century refers to average, it is by no
| means a guarantee that it will be a century before the next
| crisis.
| kqr wrote:
| To be even more fair, there's absolutely no reason to think
| these types of events are independent; there's good reason
| to believe they're positively correlated. This means once
| one happens the chances of it happening again soon are
| greater than before it happened. (But if you're lucky and
| it doesn't happen again the chances decrease further,
| giving you an average of 100 years between them again.)
| ben_w wrote:
| I can believe a pandemic might cause a global economic
| catastrophe on par with the Great Depression or the Great
| Recession, but I my imagination isn't giving me any ideas
| how the latter might cause the former?
| breser wrote:
| By the economic catastrophe causing us to elect a
| president who dismantled a group that worked to monitor
| and respond to global health issues to prevent them from
| becoming a pandemic. I think it's hard to say if that
| group could have prevented Covid-19. Nor am I necessarily
| saying that the economic crises of 2008 caused us to
| elect Trump. But I think you could possibly find a path
| from one one to the other.
| tuatoru wrote:
| ... poverty causes a rise in consumption of bush meat,
| like bats in Wuhan[1] or primates in central Africa[2]?
|
| 1. https://en.wikipedia.org/wiki/Investigations_into_the_
| origin...
|
| 2. https://en.wikipedia.org/wiki/History_of_HIV/AIDS
| cmenge wrote:
| I was trying to be a bit dramatic there...
|
| Sure, it affects everything and given the complex
| interconnections and dependencies within production chains /
| networks, the cause-and-effect relationships are hard to
| understand and cause for concern. But given how complex and
| decentralized things are, I am still amazed we haven't seen
| worse effects (yet). I doubt that spare capacity in logistics
| alone would make a huge difference, because you'd also need
| spare parts, materials and manufacturing capacity, all of
| which are part of the same network.
| CityOfThrowaway wrote:
| First one thing, and then the next.
|
| The spiral is in its early innings right now. Hold on
| tight!
| kwertyoowiyop wrote:
| With shipping containers being sent back to Asia empty
| rather than taking an extra leg to mid-America to fill up
| on US farm products to sell in Asia, is the price of
| soybeans and corn in Asia going to spike soon?
| [deleted]
| joe_the_user wrote:
| _Given the 'hundred year crisis', I think we have fared
| relatively well from a purely economic point of view..._
|
| Covid was essentially "Sars II". If Sars1 had had the qualities
| needed to be a world wide epidemic, we'd be looking 10-100x the
| casualties. Sars1 happened a decade ago. Calling this a
| "hundred year crisis" seems wholly disingenuous. This event was
| forecast by quite a few people, the world was terribly
| unprepared and there's every reason to think the same factors
| that created this virus will create others much sooner than a
| hundred years from now.
| greendesk wrote:
| I have a tidbit on the following: >> we'd be looking 10-100x
| the casualties.
|
| Viruses conform to the distribution of deadliness-vs-
| reproduction rate. For Sars 1 to spread widely, it has to be
| less deadly. There are limits to how a virus can both be
| deadly and contagious.
|
| But just a tidbit on this statement.
| joe_the_user wrote:
| _Viruses conform to the distribution of deadliness-vs-
| reproduction rate._
|
| That's a fine rule of thumb but not something to literally
| bet your life on. When smallpox was introduced to North
| America, it wiped out a substantial percentage of the
| population of the continent (This [1] claims 90%, which
| might be much but it was a lot).
|
| [1]
| https://www.pbs.org/gunsgermssteel/variables/smallpox.html
| CamperBob2 wrote:
| _There are limits to how a virus can both be deadly and
| contagious._
|
| That leaves out the whole question of incubation time. The
| scary thing about COVID is that it gives you several days
| to a week or more to walk around spreading the infection
| before you even know you have it.
|
| That's why the reaction in the public health sector was so
| dramatic. It was the sort of thing that could have easily
| been much worse than it has turned out to be.
|
| And it's _still_ only one or two mutations away from living
| up to the worst-case fears: a seriously-deadly virus that
| spreads all over the world before anyone knows what 's
| happening. One that large sectors of the population have
| already been preconditioned to deprecate or ignore.
| makomk wrote:
| The original SARS didn't have the qualities needed to be a
| world-wide pandemic, though, and one of the big obstacles to
| that was that it was just too deadly. Not only do people who
| are so sick they have to be hospitalized not go out and
| socialize and spread the disease, all the hospitalizations
| and deaths gives a whole bunch of really obvious starting
| points for contact tracers - instead of only knowing about a
| tiny fraction of cases, most of them are highly visible and
| those people's contacts can be tracked down and isolated
| before they become infectious.
|
| Also, a lot of governments did take suitable precautions in
| case Covid was more like the original SARS early on and just
| got flak for it. This was particularly visible here in the
| UK, where Public Health England and the government had
| already planned for another SARS or MERS-like virus and
| introduced really aggressive testing and contact tracing
| early on in case this was it. They just got attacked in the
| press for not continuing that once it became clear this
| wasn't like SARS and it wouldn't work - and then once they
| gave in and reintroduced testing and contact tracing as a
| measure, they were attacked again because (predicatably) it
| wasn't that effective and the media fuelled endless badly-
| informed conspiracy theories about the testing and contact
| tracing program only existing to funnel money to their pals.
| rand49an wrote:
| The UK test and trace program cost PS37 billion, which was
| handed solely over to a company that has a long history of
| delivering projects poorly. By all good measures it wasn't
| effective in tracking COVID or preventing cases. In my
| opinion the government were rightly attacked over this
| issue.
| mfer wrote:
| > I don't know if a slight price increase in graphics cards is
| the key issue to worry about at this point.
|
| The price increase in graphics cards isn't related to this.
|
| GMs trouble selling cars because they don't have enough chips
| to finish off the cars is a problem related to the pandemic and
| planning like the posts on Twitter note. The lack of new cars
| available has driven up prices on used cars. This is all supply
| chain driven.
|
| > how unprecedented the issue is.
|
| How unprecedented is it? In the last 130 years there have been
| two world wars and two global pandemics.
|
| The US has now outsourced most of the production of goods to
| places in other countries. So, if something changes there (like
| the mask issues we had early in the pandemic) we have
| limitations here. And then there is the changes in posture of
| China where many of our things are manufactured. It wouldn't be
| unheard of, historically speaking, for that to impact
| businesses in the future.
| marcosdumay wrote:
| > In the last 130 years there have been two world wars and
| two global pandemics.
|
| Delays on intercontinental shipping and lack of availability
| of a few durable goods is a perfectly fine price to pay on
| that frequency. Optimizing to surviving a global pandemics
| without any problem would be ridiculous expensive.
|
| Yes, specifically on the subject of cars, the manufacturers
| seem to be accepting way more risk than what is sensible. But
| that's their decision to make. If they were just left to face
| the costs of their decisions, they would stop making bad ones
| quite quickly.
|
| (By the way, there were 2 flu pandemics similar or worse than
| this one on the last 100 years. That's one more than you are
| counting.)
| philwelch wrote:
| > In the last 130 years there have been two world wars and
| two global pandemics.
|
| I count 13 global pandemics:
| https://en.wikipedia.org/wiki/List_of_epidemics#Chronology
| gruez wrote:
| what's your methodology? The linked section includes stuff
| like the "2015-2016 Zika virus epidemic", which was
| "worldwide" but had a death toll of 53 people. Should that
| be considered a pandemic? If we go with the "Epidemics and
| pandemics with at least 1 million deaths" table, there's
| only 6 worldwide pandemics.
| philwelch wrote:
| If you're counting pandemics since 1891, I think any
| number between 6 and 13 is more defensible than the
| number 2.
|
| Let me count again, while leaving out relatively minor
| pandemics like Zika:
|
| * Fifth cholera pandemic
|
| * Third plague pandemic (multiple outbreaks are listed)
|
| * Sixth cholera pandemic
|
| * 1915 encephalitis lethargica pandemic
|
| * Spanish flu
|
| * 1957-58 "Asian flu"
|
| * Seventh cholera pandemic
|
| * 1968-70 "Hong Kong flu"
|
| * 1977 Russian flu
|
| * HIV/AIDS pandemic
|
| * 2009-10 swine flu
|
| * COVID-19
|
| That's 12 and doesn't count stuff like Zika, SARS, or
| MERS. It also doesn't count any of the Ebola epidemics.
|
| I don't know if cases or deaths are a good proxy for
| expected supply chain impact. SARS, for instance, had
| relatively few cases and deaths because it mostly broke
| out in well-functioning developed East Asian countries
| that were capable of responding to it effectively, but
| those same countries have outsized effects on global
| supply chains.
| xyzzyz wrote:
| There were many more global pandemics in last 130 years.
| There were multiple global flu pandemics that were within the
| same order of magnitude of severity as Covid-19, eg. the Hong
| Kong flu of 1968 killed more people than Covid-19 had on per-
| capita basis.
|
| It is not deadly global pandemics that are unprecedented,
| it's the lockdown response to them that is.
| legutierr wrote:
| > In the last 130 years there have been two world wars and
| two global pandemics.
|
| One rationale behind the push for global integration after
| WW2 and later on with China and the former Soviet Bloc was
| the idea that such integration would create incentives
| against a resurgence of war between great powers. It is
| precisely because another world war would be so disruptive in
| light of global economic integration that global integration
| was promoted and pursued in the first place by many policy
| makers--in order to make such wars less likely to occur.
|
| I suppose the thinking was that the obvious downside--that if
| a great-power war were to occur, the global economy would be
| in shambles--was irrelevant given that another world war
| would likely amount to Armageddon.
|
| In other words, preparing for the contingency of a world war
| is worse than useless, because the only viable path (both
| from a utilitarian and from a moral perspective) is to do
| what is most effective to prevent the occurrence of such a
| war (which pursuant to this line of thinking includes, of
| course, making significant investments in defense).
| shagie wrote:
| (tangent)
|
| > One rationale behind the push for global integration
| after WW2 and later on with China and the former Soviet
| Bloc was the idea that such integration would create
| incentives against a resurgence of war between great
| powers. It is precisely because another world war would be
| so disruptive in light of global economic integration that
| global integration was promoted and pursued in the first
| place by many policy makers--in order to make such wars
| less likely to occur.
|
| That's a topic explored a bit in The Interdependency Series
| by John Scalzi. I found it am amusing read (and actually
| liked Wil Wheaton as a narrator for it... though not
| everyone agrees on that point).
|
| The teaser for the first book of the series:
|
| > Our universe is ruled by physics, and faster-than-light
| travel is not possible - until the discovery of The Flow,
| an extradimensional field we can access at certain points
| in space-time that transports us to other worlds, around
| other stars.
|
| > Humanity flows away from Earth, into space, and in time
| forgets our home world and creates a new empire, the
| Interdependency, whose ethos requires that no one human
| outpost can survive without the others. It's a hedge
| against interstellar war - and a system of control for the
| rulers of the empire.
| jollybean wrote:
| The 'lack of chips' has nothing to do with US preparedness,
| it's entirely an overseas issue.
|
| China & Co. did a big over-correction during the start of the
| pandemic, and that put a lot of things into chaos.
|
| You now have chip speculators entering the foray, jacking up
| prices, not very helpful in letting the market clear.
|
| 10% padding in US operations I don't think would have made up
| for anything, the problems exist in shipping and on key/acute
| issues from the suppliers in Asia really.
|
| I don't think it's reasonable to imply 'We should build all
| the stuff here to avoid delays during 1 in 50 years
| pandemics'.
|
| I'm not blaming so much as pointing out that's where the
| underlying issues are.
|
| Of course exacerbated by other things.
|
| I think working out solutions to transportation, buyers
| paying for things like guarantees, plant and supply chain
| risk analysis etc. will become a thing now.
|
| CEOs will hire consultants and firms to measure the
| likelihood in supply chain failure and make ammends.
|
| I actually think we'll get adapt past most of this.
| cmenge wrote:
| > The US has now outsourced most of the production of goods
| to places in other countries.
|
| I think that is the point (or one of the points): it's not
| just logistics and spare capacity - it's a much more complex
| set of issues.
|
| This isn't something accounting practices or "less greed"
| would solve, as seems to be implied in the Twitter thread.
|
| Would you have voted for a party that spent $1b annually on
| mask manufacturing subsidies for masks nobody even bought?
| Who could have foreseen that demand spike?
| kilna wrote:
| > This isn't something accounting practices or "less greed"
| would solve
|
| Are you seriously trying to say that production being moved
| to China, et al. is _not_ because of greed generally, and
| ROE specifically?
| lotsofpulp wrote:
| It might have something to do with drastically lower
| labor prices and environmental laws.
|
| There is only so much discrepancy in prices that global
| markets will allow before buyers start rewarding the
| lower priced sellers for taking advantage of the
| arbitrage.
| caethan wrote:
| Plenty of people foresaw it. California spent ~$200m on
| building up a stockpile of PPE and other medical supplies
| back in 2006, before Brown cut funding for the program in
| 2011.
| AnimalMuppet wrote:
| Being right too early leaves room for the people who come
| after you to be wrong in a way that makes it useless that
| you were right.
| joe_the_user wrote:
| _Would you have voted for a party that spent $1b annually
| on mask manufacturing subsidies for masks nobody even
| bought?_
|
| I would have voted for a party with a program of "bring the
| manufacture of strategically crucial items back to the US
| and make it robust". This seems like it would even be
| Republican "bread and butter" and I don't see why either
| party had an issue with it.
| [deleted]
| JaimeThompson wrote:
| Use the stockpile to sell / provide such masks to the VA,
| Military, and other government organizations on a FIFO
| basis so the stock is never stale. For stock that can not
| be moved quickly enough donate it to other countries that
| may need it.
| whiddershins wrote:
| The pandemic didn't kick the machine, the lockdowns and other
| unprecedented interventions did.
|
| So this was a once ever event.
| rsj_hn wrote:
| But this was known, and why many people (such as myself)
| opposed lockdowns.
|
| It's stunning how much knowledge and wisdom has been lost
| about simple things like how to deal with plagues. This is
| not a new thing facing humanity.
| Consultant32452 wrote:
| In wealthy countries like the US it might be harder to get that
| new XBox you wanted. In the rest of the world there's hundreds
| of millions of people who are starving to death.
|
| https://www.pbs.org/newshour/show/pandemic-could-mean-260-mi...
| dzonga wrote:
| as someone originally from a 3rd world country. I can truly
| say never trust what the UN or any of those big NGO's say.
| It's propaganda pushing a narrative. what causes starvation
| in most poorer parts of the world are western induced climate
| change i.e draughts, floods etc. Then of course political
| instability
| tuatoru wrote:
| Indeed, rural people in less-developed countries are hardly
| connected to global trade at all.
| BurningFrog wrote:
| This is from 18 months ago saying covid "could mean" "up to
| 260 million" face a food crisis.
|
| I'm very confident the real numbers of starved people since
| then is vastly lower.
| rossdavidh wrote:
| Nassim Taleb calls this fragility vs. "antifragility". A system
| with frequent small shocks, gets information from those shocks
| about what to keep buffers of. A system without an absence of
| frequent, small shocks, keeps no reserves (like the bones of an
| astronaut in weightlessness too long becoming thinner, or the
| muscles of someone who does not work becoming smaller). Small
| shocks are information, and they tell a system what to bulk up
| on.
|
| Long periods of tranquility, leads to fragility. Which, for many
| reasons (climate change? war? pandemics? disruptive
| technologies?) is not a good preparation for the near future.
| IronWolve wrote:
| This is also why cyber security and infosec has been avoided,
| ceos don't want to spend the money, until something bad happens
| and they have no choice, and then its way more expensive to fix
| after the intrusion.
| lvl100 wrote:
| Current supply chain model is largely based on the likes of
| Walmart. They are also the company that pushed to manufacture
| goods in China. Walmart destroyed the rust belt. Walmart
| destroyed small businesses across the country.
|
| Walmart is the reason why US middle class got screwed. Walmart is
| the reason why we saw unabated rise in China. Walmart is boomer
| legacy.
| Dumblydorr wrote:
| Is Twitter the best place for such analyses? They're stream of
| consciousness sentences and paragraphs, not cohesive narrative
| essays.
| occamrazor wrote:
| For articulated analyses of complex phenomena a Twitter thread
| is completely inadequate. For simplistic explanations whose
| objective is to promote an opinion it is great, because it
| makes it easy to re-share morsels of the argument.
| dredmorbius wrote:
| When developing ideas, tootstorms offer some advantages.
|
| https://news.ycombinator.com/item?id=28970983
| tyrfing wrote:
| I think this misses a lot. I suppose it's because it has to
| support the pro-billionaire-founder conclusion.
|
| First: monetary policy. _This_ was half the shock, not just the
| pandemic - it was on a scale similar to World War II. In
| hindsight, you can say that the pandemic was a signal to increase
| production, but that 's a bit ridiculous. If vaccines took
| longer, if governments didn't spend more than WW2, we would be in
| a much different situation. Not to mention all the retail
| bankruptcies that happened anyway.
|
| Second: structural changes in the labor market. Huge numbers of
| Baby Boomer retirements [1], for example, which
| disproportionately affect the sorts of manufacturing and
| transport jobs that are relevant here.
|
| Third: operational effects. Lots of spare capacity can mean
| operating at normal rates after accounting for things like social
| distancing, quarantines, and government forced shutdowns.
| Examples include mass factory closures in Vietnam the last few
| months, huge outbreaks at meatpacking plants, forced quarantine
| of air crew, and Amazon employees waiting taking 20-60 minutes to
| pass screening before work.
|
| 1. https://research.stlouisfed.org/publications/economic-
| synops...
| chernevik wrote:
| Lean manufacturing isn't just about minimizing book inventory and
| cash tied in inventory. It helps keep production flexible and
| responsive, and helps identify bottlenecks and inefficiencies.
| And it reduces risk -- a car manufacturer holding several months
| of chips is going to lose that investment every time its chip
| stock gets obsoleted.
|
| I expect that increasing buffers of material work in progress to
| levels indifferent to the current mess would be very expensive,
| very risky and have all sorts of secondary effects.
| Trias11 wrote:
| Doesn't Let's Go Brandon's vaxx mandates contributing to the
| problem?
| Mikeb85 wrote:
| Really? Forced shutdowns -> things not being made -> not enough
| things...
|
| It's basic supply/demand. If demand stays the same but supply is
| interrupted, production needs to increase for the same amount of
| time just to satisfy the demand that went unfulfilled. If supply
| is interrupted and 'reopening' simply means going back to initial
| production, you'll always be playing catch up.
| callmeal wrote:
| It's not that simple. Modern (just-in-time) practices have
| created a situation where a single change in customer demand
| leads to widespread supply shocks. Take a look at the beer
| game[0] for a smaller version of real life.
|
| That's what happened here - lockdowns led to a single change in
| customer demand for a wide variety of goods both on the
| personal side(more people at home -> snacks, food, toiletpaper
| that would have been used up at work started being needed at
| home), and on the commercial side (no people in the office: no
| ongoing bulk papertowels/toiletpaper/vending machines/office
| supplies).
|
| [0] https://www.shmula.com/the-bullwhip-effect/310/
| Mikeb85 wrote:
| It's always more complicated. It's also always that simple.
|
| Consumer preferences changed slightly *because* of lockdowns
| in addition to supply changing drastically *because* of
| lockdowns.
|
| In our just-in-time supply chain system, interruptions of the
| magnitude we experienced aren't accounted for.
| pphysch wrote:
| There are plenty of things, they are just stuck on boats off
| California.
| [deleted]
| Mikeb85 wrote:
| There's a shortage of many things that aren't on boats off
| California as well.
| giantrobot wrote:
| The goods stuck on ships waiting to be unloaded don't help
| the overall situation. Containers sitting loaded on ships
| and ships waiting in an anchorage are containers and ships
| that can't pick up newly manufactured items elsewhere.
| patrickyeon wrote:
| > Only founder led companies and family owned businesses can
| stand up to the immense pressure from the dogmas of modern
| finance.
|
| How about worker-owned companies, co-operatives, and collectives?
| I totally agree the problem is that with the finance people
| steering the ship there's incentives to push up your short-term
| performance and collect bonuses and watch your publically-traded
| stock value go up. So don't go public; use the value an
| organization creates to pay the people in it, and invest in
| making it better for those people and the people you serve. The
| people who have say in the decisions are the ones who are most
| interested in having the organization continue to be healthy and
| a good place to work.
|
| There are other ways. We don't even need to imagine them, they've
| already happened. We just need to resist the siren song of the
| lottery ticket and instead try to create systems and
| organizations that we want to be a part of.
| WJW wrote:
| The fact that there are so few of these types of company around
| probably means that they have trouble surviving in a world
| where the competition is supported by modern finance.
| JumpCrisscross wrote:
| > _they have trouble surviving in a world where the
| competition is supported by modern finance_
|
| The problem with cooperatives is longevity. We have white-
| collar coops of sorts: partnerships. They tend to
| disintegrate after a generation or become quasi-corporations
| over time because immortal entities can make plans and
| promises on time scales that ones that grow old and change
| priorities and die can't.
| justinator wrote:
| Sorry, I don't trust this guy. It was _just explained_ how he
| uses social media to manipulate the story he tells.
|
| https://thezvi.wordpress.com/2021/10/28/an-unexpected-victor...
| BoiledCabbage wrote:
| Seriously, it's looking like he pretty quickly is looking to
| start an influence/propaganda channel.
|
| Following the exact same playbook. A bunch of easily agreeable
| "Rah, Rah bad Wall st. Short term over long term bad" to get
| everyone nodding, then an incredible leap to push his actual
| argument.
|
| This guy is falling very quickly from "interesting how he got
| that thread picked up everywhere", to "somethings fishy here".
|
| The logic presented is "The cause for the port slowdown is a
| future policy proposal I want people to oppose."
|
| Obviously he isn't literally saying that, but that's the logic
| path he walks the reader down.
| skinkestek wrote:
| What? If this is manipulation then I'm a manipulator as is
| every other parent (and teacher, and every customer service
| worth their salt) aren't we?
|
| Yep, we simplify. Yes, we tell stories. We don't lie. (No,
| teaching Newtonian mechanics without mentioning Relativity
| isn't a lie, and neither is simplifying the container
| explanations until even bureaucrats can understand it ;-)
|
| That said, having
|
| 1. seen the email that circulated with my customers ten years
| ago about how container ships transport goods from Asia to US
| and American air back
|
| 2. and having recently listened to "The Goal" by Eliyahu M.
| Goldratt
|
| I do wonder if this is really the best solution.
| pchristensen wrote:
| I've heard Ryan speak at a dozen or so company meetings. He's
| genuine, knowledgeable, and has a long term focus not just on
| Flexport but on the whole freight industry and the global
| economy.
|
| I'm not saying he's right about everything, but trusting his
| integrity and industry knowledge is a very safe first step.
| [deleted]
| _ph_ wrote:
| Does it invalidate the message, if you tell it well?
| 015a wrote:
| Are you really, actually sorry, or are you just saying that to
| soften your message? Isn't that manipulation?
| nostrademons wrote:
| This is communication 101. If you start internalizing that form
| of storytelling, you'll see it _everywhere_ - literally all of
| our public discourse has this structure, from the Build Back
| Better plan to "Immigrants are taking our jobs" to "Flatten
| the curve" to the right-wing school-board stuff to fluff pieces
| on local restaurants to top-ranked HN comments. It's so
| prevalent because it works - it taps into fundamental cognitive
| & emotional biases that humans hold, so the ideas that spread
| are the ones expressed in that form.
|
| If you want to be rational about this, judge the plan (and this
| one too) on its own merits rather than on the fact you're being
| manipulated. You're being manipulated - you are _always_ being
| manipulated, every time someone communicates with you, and you
| can 't escape that. It's good to understand how, but then your
| job is to tease out the rhetoric and understand the underlying
| proposal enough to judge it on its own merits.
| starky wrote:
| Exactly, I think the most succinctly way I've heard it put
| is, "Everything is Marketing"
| ryanmercer wrote:
| No.
|
| My industry (international freight) is hemorrhaging people left
| and right in "the great resignation", COVID outbreaks at ports
| and facilities have been shutting specific facilities down on and
| off for almost 2 years, cargo containers aren't moving from ocean
| ports because there aren't any chassis to be had, Suez canal,
| weather, etc. etc. , so on and so forth.
|
| Not "Return on Equity".
| flyinglizard wrote:
| That's just finger waving. The main cause is the madness of the
| situation where a deadly global pandemic causes the money supply
| to increase across all sectors. If you were a manufacturer in
| March 2020, the only responsible thing was to reduce operations
| to the bare minimum.
|
| Add lockdowns and changing, unpredictable consumption patterns
| (e.g buying more cars against all predictions because who wants
| public transport now?) and you get the perfect storm.
|
| You could hold a years worth of inventory and you'd still have a
| problem.
| erosenbe0 wrote:
| Correct. The Fed is holding huge amounts of assets artificially
| boosting stocks and both corporate and govt. investment,
| creating a housing bubble and wealth inequality as a tradeoff
| to keep unemployment low. Combined with the government
| 'stimulus.' School districts and municipalities with millions
| to spend for several years into the future.
|
| Why would we expect there to be a perfect equilibrium
| immediately?
| nojito wrote:
| This tweet storm is largely nonsense.
|
| For example:
|
| >The proper way to do accounting is _Next_ in First Out (NIFO).
| This means you price your goods against the cost of
| replenishment.
|
| NIFO isn't GAAP which is why it's largely pointless.
| ltbarcly3 wrote:
| Where are the bottlenecks? I see that things are in low supply
| and sold out, but when I look at specific things (say cpus or
| complete computers) I see increasing and record numbers of units
| delivered.
|
| Runaway inflation looks like a supply problem at first, as
| shelves are emptied by the huge amount of money in the economy
| chasing the goods available. The price increases are a supply
| side response to demand being higher than can be supply can keep
| up with.
|
| Please feel free to downvote this and insist that inflation is a
| myth as is usual on HN.
| nimbius wrote:
| I can speak from a trucking perspective. it was a cascade failure
| for professional drivers.
|
| when covid first hit, supply chains either had too much or too
| little almost instantly. Things like raw supplies based on JIT
| ordering either ground to a halt because demand died and so did
| the modelling, or because demand was too high for the computer
| model (think a bell curve.) low-boy trucks shipping things like
| construction equipment and preform concrete werent affected as
| governments in most cases stepped in with works projects to keep
| people employed, but trucks in the supply-side chain of things
| like toilet paper and frozen pizzas ran into trouble in almost
| the first few hours of the pandemic.
|
| It helps to keep in mind all these things in JIT are connected.
| they work like a slinky, and anything that holds up the line will
| only amplify problems later.
|
| frozen pizza is the best example. for example if things like bell
| peppers and onions could be delivered, but dough could not, then
| trucks for dough would idle in the yard until their yard-pay
| expired and they moved to the next job. yard-pay is the money you
| earn idling after X minutes in a lot waiting for a hookup, and it
| can be rather substantial. Anyhow, once dough can be shipped
| again, peppers cannot because the peppers have spent too much
| time in transit and now theres loss. pepper trucks then go
| offline for cleanup and you have too much dough and surprise, the
| onion trucks just automatically dropped you as a customer because
| you didnt meet a monthly required minimum.
|
| this doesnt even cover the hell of intermodal port shipping.
| containers full of perishables rot because cranes are frantically
| unloading COVID masks, and now those containers are offline for
| cleaning. containers full of COVID masks cant be unloaded because
| theres a backlog of Hydrogen Peroxide for a floor tile company in
| Sheboygan that went out of business eight minutes ago due to
| shipping constraints, and if its not unloaded and chilled the
| entire port will explode into flames. in the yard, eighty-one
| trucks have been on yard-time for nearly 3 hours and a third of
| the trucking companies paying that yard time will be bankrupt
| because of it by the end of the day, but they have no choice.
| Trucks and drivers that went unpaid for weeks are now just taking
| up lot space until someone figures out how to remove them and the
| city will likely have to foot the tow.
|
| Later in COVID as cities enacted mass casualty plans they
| basically absorbed any and all refrigerated 53' trailers they
| could find as a temporary morgue. now it doesnt matter how many
| pizzas you wanna sell, the toilet paper company has bought up all
| your transport market and the city just left you with no
| refrigerated trailers to use. Once cities are done, you generally
| scrap those trailers as they cant be used for food again.
|
| Finally, you have trucking firms that went belly-up during the
| shutdown for any number of reasons, including over-leveraged in
| JIT style software or a single customer. these truck drivers
| either left the job to do something else because professional
| driving is a pretty thankless gig, or retired because the average
| age of a professional driver is in the 50's. now that we need
| drivers we have no one to perform necessary training, so it
| doesnt matter how much cash we throw at highschool kids.
|
| yard conditions also play a role. factories that manufacture
| bacon might be running at 10% capacity due to covid infections,
| so trucks show up and idle because the past 3 logistics managers
| either died or went home sick and nobody in the front office
| knows what to do. these factories cant or wont shut down because
| theyre considered supply chain critical (s/bacon/disinfectant/),
| with "hero" workers and whatnot. shipping companies might also
| decide to drop you as a customer due to insufficient COVID
| precautions or an overwhelming amount of COVID infection.
| IronWolve wrote:
| >it was a cascade failure for professional drivers.
|
| California ports suffered from AB5 and EPA rules more than
| other states, and with California controlling like 40% of the
| containers, they shot themselves.
|
| Older trucks banned on roads and ports (CARB) and Owner
| Operator trucks (AB5) gig workers banned, they relocated their
| llc's outside california to keep their businesses running.
|
| The CA EPA/DOL CARB rules also expanded fire seasons, as older
| logging companies closed down due to the state not renewing
| licenses on trucks. Mom/pop companies couldn't afford to buy
| very expensive trucks, new engines, or licenses. Less companies
| logging = more fuel.
|
| CA just banned gas generators, as most construction sites use
| them power their tools. Work arounds will be people buying ford
| f150's with onboard generators as a quick work around, and most
| likely will raise costs even further.
| nebula8804 wrote:
| When the climate crisis begins to hit, this kind of a system
| will rapidly collapse the world economy way before climate
| change even starts to wipe humans out.
| erosenbe0 wrote:
| Hook NPR up with some people to interview and some B-roll crane
| and diesel noses. They have been discussing this and might
| appreciate.
| dredmorbius wrote:
| Rules and heuristics built for normal times and a specific set
| of expectations and constraints fail when those expectations
| and constraints are no longer valid.
|
| Odd, that.
|
| In my household, we started making our own pizza, from scratch
| (save canned / bottled Pizza sauce). Flour keeps and is shelf-
| stable. Most toppings survive refrigeration. Those best served
| fresh are bought as available, menu rotated as needed.
|
| If your supply chain can't guarantee delivery of complex sets
| of fresh time-sensitive product, drop constraints such that the
| product mix is less time-sensitive. Sourdough substituted for
| dry yeast, unavailable at any price.
|
| (This works well at the household level. It works less well at
| industrial-scale production where flexibility is greatly
| reduced.)
| matwood wrote:
| > Sheboygan that went out of business eight minutes ago due to
| shipping
|
| Even before covid I used to read about consumer companies that
| have a shipping problem right before Christmas and go out of
| business. So I can believe that shipping problems on a scale
| this large will take time to fix. Thank you for your comment.
| tester756 wrote:
| Why is Flexport lately popular on HN?
| tgb wrote:
| Is "NIFO" really the right way to do accounting? If you sell the
| government one aircraft carrier, the cost of producing a second
| one will be much lower, so NIFO doesn't seem to fit there.
| chernevik wrote:
| I suppose it depends on what we're talking about, but probably
| not. LIFO and FIFO are book accounting concepts, and business
| decisions aren't (shouldn't be) based on book.
|
| For example, almost every successful company is valued at some
| multiple of book equity, because book equity doesn't (and
| shouldn't, and can't) incorporate any notion of growth. Tesla's
| book value per share is something like $27/share, which
| reflects the cars it has sold and the ones in process. It
| trades at $1077, which reflects hopes for cars that it will
| sell.
|
| LIFO and FIFO are just book accounting methods for tracking
| costs of production. They tell financial statement readers how
| management puts the cost of unit production into inventory
| values on the balance sheet, and how inventory values are
| translated into Cost Of Goods Sold on the income statement.
| They really aren't the right basis for business decisions like
| pricing or production.
|
| I don't know what he means by "companies now use FIFO or LIFO
| accounting" as if this is some innovation. These have been the
| _only_ choices under GAAP for . . . a century? Longer? Letting
| companies use Next In First Out for financial statements would
| be inviting management to manipulate its balance sheet and
| earnings through its cost assumptions. Of course a company will
| use up-to-date cost information for pricing decisions, but
| they've always done that.
|
| Accounting is really a language of its own. It provides a lot
| of useful information, but you have to know how to use it and
| what to use it for.
| philwelch wrote:
| I think NIFO applies only to variable costs. Fixed costs are
| fundamentally different.
|
| Also, low-volume items like aircraft carriers are probably a
| bad example. Aircraft carriers are ordered and built in small,
| specific quantities; I think it makes more sense to account for
| building a single aircraft carrier as a construction project
| rather than as a unit of mass production. Almost like you were
| building a small airport, thousands of units of housing, and a
| nuclear power plant.
| notatoad wrote:
| typically when you're selling aircraft carriers, you're selling
| it before you build it - the customer is paying you to make it,
| not paying you for the one you've already made. so the neither
| the economics or the accounting work the same way as acting as
| middleman for retail goods.
| josh_today wrote:
| Covid gave governments in free markets the ability to control
| capitalism.
|
| The outcome is a less efficient supply chain.
|
| Very simple.
| wonderwonder wrote:
| What I am curious about is if the unrealized gains tax will lead
| to more and more company boards being run by massive retirement /
| hedge funds such as black rock. All these companies will then be
| essentially forced to the ROE / share price over all model as all
| the BlackRock's of the world care about is share value because
| that's what their customers want from them. When that scenario is
| combined with a massive economic shock, what happens?
| 55873445216111 wrote:
| Must also take into account that many industrial processes are
| not easily restartable. Even if only shut down for 1 day or 1
| week, it can take multiples of that length of time to ramp back
| up to 100% output rate. Complex factories do not switch on and
| off like a lightswitch.
| onion2k wrote:
| My dad worked on some testing software for a float glass
| factory back in the 1980s. Float glass is a process where a
| factory makes a continuous sheet of glass that floats on a
| river of molten tin, about 3 meters wide, 24 hours a day. It
| never stops. If it does then the glass cools down and
| solidifies inside the machinery, and the factory needs to be
| practically scrapped and rebuilt. I imagine that's the worst
| case scenario, but many large scale manufacturing businesses
| are likely to have similar processes that can't be stopped
| easily, and that cost a fortune to restart.
| chiefalchemist wrote:
| What comes to mind is The Big Short. That is, following the herd
| - to the point of negligence - is an advantage, until it's not.
| Where and when did Wall Street and Finance get the reputation as
| geniuses? What's so genius about rubber stamping herd mentality
| ideas?
|
| That aside, have there been any winners? Companies or industries
| that were less RoE driven? Or does the economy completely lack
| "bio" diversity?
| a-dub wrote:
| _opening titles and music_
|
| q: what caused all the supply chain bottlenecks?
|
| a: the pandemic.
|
| _cue outro_
|
| next week:
|
| _opening titles and music_
|
| q: should we have done anything differently?
|
| a: probably not. that would be really expensive and pandemics are
| pretty rare.
|
| _cue outro_
| CalChris wrote:
| The pandemic may be the _proximate cause_. But Petersen is saying
| the _sufficient cause_ is Modern finance with its
| obsession with "Return on Equity."
|
| With a more robust economic system not so beholden to return on
| equity, this may not have happened even given the pandemic.
| Without such a robust system, other proximate triggers can cause
| similar effects.
| advael wrote:
| I make my living predicated on the assumption that digital
| optimizers over loss functions have practical value, but seeing a
| pretty terrifying meta-pattern where defining and then
| subsequently obsessively optimizing and inevitably gaming metrics
| will burn away basically all of the useful parts of most human
| institutions, as we see in nearly every kind of business as noted
| here, as well as government endeavors like education, I'm pretty
| close to genuinely believing that quantifying success and trying
| to optimize over a metric is something human institution should
| literally never do, which is a weird place to be
| maxerickson wrote:
| Large businesses had a great pandemic, so it doesn't kick off to
| a real strong start.
| xondono wrote:
| While I agree that a lot of companies have been screwing up the
| supply chains and their providers ( _cough_ automotive _cough_ ),
| maybe we should _not_ build extra widgets just to support events
| that happen 1 out of every 100 years.
|
| Not every system is a critical system, not all systems require
| spare capacity.
| Johnny555 wrote:
| _Maybe we should not build extra widgets just to support events
| that happen 1 out of every 100 years._
|
| Except the COVID pandemic is probably not a 1 in 100 year
| event, the last SARS epidemic was less than 20 years ago (and
| fortunately was not as disruptive as the current one). I
| wouldn't be surprised if the next one is within a decade. And
| we've done little to prepare for it.
| joe_the_user wrote:
| I believe the claim is completely defensible and ultimately
| correct.
|
| A) This was a multi-factoral event certainly but all of these
| other factor are "immediate causes" which can themselves be
| traced to absolute maximum return on equity as a more final
| cause.
|
| B) No doubt "hard to restart" process are were involved. But the
| world relies on single-source, hard to restart, large scale
| production of many things today because these produce the highest
| returns for those who invest in them and the lowest prices for
| those who buy from them. And both kinds of actors have been
| willing to just stop producing rather than doing something that
| might be costly to keep production going (and they decided they
| didn't want backup before this for the same reason).
|
| C) Supply lines that stretch around world exist as a combination
| of economies of scale and "labor market arbitrage" and both these
| are driven by return, even though "labor market arbitrage"
| doesn't increase efficiency or robustness.
|
| D) Chip manufactures put money into "up-date" chip processes,
| notably leaving the sorts of chips actually used in cars woah
| fully under-invested and generally many sorts of lack of
| robustness can be traced down to money flowing only to the
| normally profitable. Shutting down production isn't necessarily
| that bad for a company - they don't wages and they can start back
| up once things stabilize. It's much less disastrous than making a
| bunch of stuff and not being able to sell it. Clearly, that
| thinking is guiding a lot of decisions.
| dragontamer wrote:
| Anyone who has played Factorio knows that "just in time" is far
| superior to actually holding reserves. If you buffer things up,
| you don't know where the problems in your production are.
|
| People are saying "why didn't we buffer up more" ? Well, there we
| go. Play Factorio. You'll see just how bad buffers are in a
| simulated factory.
| marginalia_nu wrote:
| Well at the same time, Factorio teaches you that you need
| _some_ buffers to build a fault tolerant factory.
|
| Factorio often has implicit buffers through its belts (or bot
| network). If you build an inserter-only factory you'll become
| painfully aware how important they are to to the smooth
| operation of the factory. Otherwise it's very easy to get
| rolling waves of cascading backpressure, where the entire
| factory is only able to produce at good efficiency as long as
| you have fully saturated input as well as complete consumption
| of every product you produce.
| dragontamer wrote:
| That's a throughput problem. Inserters have 1/20th the
| throughput of a belt. When you go truly just in time _WITH_
| good throughput (aka: Logistic Bots), its so effective that a
| huge subset of the community thinks that its cheating.
|
| Leaving 1000 items on a belt (aka: a belt of length 70) is
| just less effective than bots flying to fetch an item _just_
| when you need it. The buffer is counter-productive.
|
| -------
|
| The only time you want to "buffer" in Factorio is to provide
| 12-items to stack inserters, to maximize UPS (updates per
| second). If your stack inserters are moving 12-items every
| swing, that's using less CPU power than if they're moving 6
| or 5 items per swing.
|
| And as we all know: the expert's biggest problem in Factorio
| is when you've built such a large factory that your own CPU
| starts to slow down (aka: UPS problems). So buffers of size
| 50 come to the rescue (the smallest buffer available, and
| just enough to take advantage of 12-item stack inserters).
| marginalia_nu wrote:
| Bots still buffer items. Bot based factories produce when
| those buffers are low, not strictly when items are needed.
|
| A true on-demand factory would take ages to produce
| anything, it would basically not be much faster than
| handcrafting because the iron plates wouldn't start being
| created until the pipe is needed, and the pipe wouldn't be
| needed until the steam engine is needed. But it's much
| slower to make iron plates than pipes, and much slower to
| make 10 pipes than make a steam engine. Which is why you
| absolutely need those buffers.
| dragontamer wrote:
| Just in time doesn't mean "buffer free". It means
| eliminating unnecessary buffers.
|
| When Ford ran out of chips
| (https://www.cnbc.com/2021/03/31/ford-slashes-vehicle-
| product...) because of its "just-in-time" process, Ford
| was able to give 2-months of notice before shutting down
| one of its lines.
|
| That means that Ford had a 2-month buffer __in
| practice__.
|
| ----------
|
| When you go bot-based, you have full control over the
| size of your buffers at all steps of your Factorio
| design. At that point, you realize that smaller buffers
| are more efficient, and that larger-buffers don't do
| anything.
|
| Ex: if you achieve maximum throughput with buffer-size
| 20, you leave it at 20-sized buffers. There's no reason
| to buffer-up 1000x items when 20-sized buffers work out
| fine.
|
| ---------
|
| Belts force you to buffer everywhere... and
| proportionally to the size of the belt. A long belt 1000
| tiles long would force you to buffer up 7000 (one side)
| or 14,000 items (double-sided). The size of these buffers
| are grossly larger than what anyone needs.
|
| The key buffer size is usually 12 (the stack-inserter's
| grab size). Maybe 24 or 36 so that you have enough
| buffering to handle 2 or 3 swings of the stack inserter
| in case those items don't arrive on time (bots "seemingly
| randomly" run out of power, from the perspective of that
| assembly machine)... but anything more than that is
| redundant. Buffer size 50 (minimum size allowed on
| chests) are used in practice.
| zelias wrote:
| this only works if you can successfully keep the biters out
| dragontamer wrote:
| It only takes like 2 hits for a biter to destroy your chests
| (aka: buffers) and everything inside of them.
|
| If anything, buffer-free is more resilient than buffers when
| we think of the biter attacks. But this is a "gamey" aspect
| of the game. Not really representative of real life. (Its not
| like the items inside of a real-life warehouse just disappear
| into /dev/null under random circumstances)
| dpcx wrote:
| I haven't played Factorio, so maybe I'm missing something...
| but if you don't have buffers and suddenly whatever that
| produces something essentially goes away, what happens to all
| your just in time pieces? Seems pretty certain that they'll all
| end up idle.
| dragontamer wrote:
| Yes. Iron mines run out in Factorio. That then causes the
| player to search for new sources of iron to fix your supply
| chain issue.
|
| -----------
|
| In contrast, if you buffered up... you end up running out of
| Iron 10 hours ago. Then your buffers deplete and you're back
| in the same position, except you've built out your supply
| chain to be even more fragile than before (because you had an
| additional 10 hours of expansion).
| bhelkey wrote:
| > People are saying "why didn't we buffer up more" ? Well,
| there we go. Play Factorio. You'll see just how bad buffers are
| in a simulated factory.
|
| A shortage in real life causes critical issues for real people.
| A shortage in Factorio does not.
| dragontamer wrote:
| > A shortage in real life causes critical issues for real
| people. A shortage in Factorio does not.
|
| An iron shortage in Factorio causes my iron plates to run
| out. My iron plates feed the steel furnaces. The steel
| furnaces build ammo. My ammo is automatically belted to my
| defensive garrisons. Then the bugs completely wipe out my
| base, because I was out of ammo.
|
| Going backwards: Understanding why I'm out of ammo requires
| me to understand why I'm out of steel, which requires me to
| understand why I'm out of iron, which requires me to walk
| over to the mines and realize the mine is out.
|
| ----
|
| Now lets see what happens with buffers.
|
| Understanding why I'm out of ammo: wait, I'm not out of ammo.
| I've got thousands of ammo buffered up right now. As such, I
| don't fix the problem for 2 or 3 hours.
|
| 2 or 3 hours later: my ammo runs out. I then begin the
| process of figuring out that I'm out of iron. When you have
| buffers, its hard to tell where your bottlenecks are: buffers
| make it _seem_ like you have plenty of supply, when in
| reality, the iron mine ran out a long time ago.
|
| ------
|
| Now look at real life. The same thing happens. Toyota had a
| large buffer of critical chips so that it could feed its
| factory for months after the chip shortage started
| (https://www.reuters.com/article/us-japan-fukushima-
| anniversa...).
|
| Oh right. Lol, guess what? Woops, Toyota has run out of chips
| (https://www.nytimes.com/2021/09/10/business/toyota-
| productio...)
| ankeshk wrote:
| I've not played Factorio but love your argument. Very
| thought provoking.
|
| What happens if something in the middle breaks and you
| don't have a buffer? What happens if there is no iron
| shortage but the steel furnace blows up? Aren't buffers
| important in such situations?
| bhelkey wrote:
| > Now lets see what happens with buffers.
|
| > Understanding why I'm out of ammo: wait, I'm not out of
| ammo. I've got thousands of ammo buffered up right now. As
| such, I don't fix the problem for 2 or 3 hours.
|
| We don't live in a centrally planned (by a single person)
| economy where companies are run by simple automation.
|
| Companies are run by people. These people notice when their
| suppliers are disrupted. They notice when they can't refill
| their buffers even before the buffers run out. And
| suppliers of raw materials certainly notice raw material
| shortages.
|
| We didn't find out about the chip shortage from the article
| you linked when Toyota's buffer of chips ran out.
| rytill wrote:
| Do you have an actual refutation though? Why does buffering
| perform better in real-world factories than the simulated
| ones in Factorio?
| bhelkey wrote:
| The cost of some shortages is measured in lives. With such
| shortages, preventing the shortage is better than
| mitigating the shortage. Mitigating the shortage is in turn
| better than not mitigating the shortage.
|
| A buffer gives us time. That time can be used to save
| lives.
|
| A buffer absorbs a short term disruption in a supplier
| which prevents the shortage. A buffer gives time to look
| for another supplier in a long term disruption. A buffer
| delays a shortage when no other supplier is feasible.
| Spivak wrote:
| While this answers the question of why we couldn't respond to the
| bottlenecks, I guess I'm still missing the piece of what caused
| them in the first place. Like sure, "this silly little global
| pandemic thing" but it's not really an enlightening answer
| without more detail as to what the pandemic caused that shocked
| the system.
| rdiddly wrote:
| Since a bottleneck implies a vessel with fluid passing through,
| I'll stay with that analogy. There's actually no bottleneck;
| the pipe is basically the same size as ever. (Actually just
| slightly smaller because of capacity that was destroyed, rather
| than taken temporarily offline, during the slowdown.[0]) But
| the pipe in the first place was only _exactly_ as big as it
| needed to be, because of the "maximizing ROE" stuff he
| mentions early in the thread. So when the fluid volume suddenly
| expands (slingshot effect following the slowdown), the whole
| system becomes a bottleneck.
|
| [0] Capacity destruction: "Nobody's buying our stuff, we can't
| afford to keep this one ship/plant/facility/machine running
| anymore or we'll go out of business." But since every other
| player in their industry who might've bought it is in the same
| boat, maybe they're forced to sell to a scrapper, who promptly
| disassembles the ship/plant/facility/machine. I got my house
| this way. It was a rental property owned by a company that
| could no longer afford to keep it, so I bought it, took it off
| the rental market, and thereby slightly reduced rental capacity
| in this town. Compare this to an airline temporarily parking a
| slew of their planes in a densely-packed parking pattern at an
| un-busy airfield near a nice runway.
| thedogeye wrote:
| People were locked down so they stopped spending money on
| services (hotels, restaurants, travel, massage, etc) and
| instead bought more goods. This happened at the same time
| governments printed trillions and pumped it into the hands of
| consumers and businesses. The result was a 20% surge in
| container volumes, which our supply chain infra just wasn't
| ready for.
| wccrawford wrote:
| As well as rolling labor blackouts as factories had to shut
| down (repeatedly) because people got sick and they couldn't
| risk _everyone_ getting sick. And distribution centers. And
| retail. Etc etc.
| jes wrote:
| Have you seen the YouTube video where a waterwheel [1]
| demonstrates predictable behavior under one set of conditions,
| but with a small change, the system moves into chaotic
| behavior?
|
| I figure the supply chain is like that. Under certain
| conditions, JIT is fine. Given sufficient disruptions, the
| system descends into chaos. Note that we have humans in the
| loop, too, so expect non-linearities.
|
| I could be wrong. Corrections are welcome.
|
| [1] https://youtu.be/Lx8gMBJBlP8
| [deleted]
| nostrademons wrote:
| It was predicted by a lot of people with experience in supply
| chain management or business.
|
| https://en.wikipedia.org/wiki/Bullwhip_effect
|
| Basically - complex systems behave in complex ways. When you
| have a small shift in consumer demand, it gets amplified up the
| supply chain, such that you need potentially big shifts in the
| production of intermediate components. We had a big shift in
| consumer demand. The supply chain basically can't cope, and so
| we get chaotic behavior until consumer demand normalizes and
| revised sales forecasts get propagated up the supply chain.
| mindslight wrote:
| In normal times, people mostly shrug off biological transfer
| with other people. Maybe you avoid the odd symptomatic person
| who comes to work anyway, but you don't act as if everyone else
| is trying to get you sick. This allows for close working
| conditions, less sanitary practices, etc. The pandemic
| invalidated this assumption, requiring workers to become less
| efficient in response. This is the fundamental dynamic - the
| secondary effects of denial/overcompensation created additional
| problems.
|
| It also didn't help that everyone was expecting an economic
| slowdown, and then the government gave trillions of dollars to
| corporations to juice the stonk market. The resulting price
| signals induced a ton of aggregate demand for production
| capacity that simply wasn't there.
| zelon88 wrote:
| I worked at a company who made products on contract, but the
| contract stipulated the vendor we had to use to get the raw
| materials. The raw materials were just aluminum castings, but
| they were a custom shape specifically for this customer of ours.
| They could only be used for this one product.
|
| I noticed that the inventory levels of our vendor were dropping,
| but we weren't buying. Meaning our customer was ordering the same
| product from a competitor.
|
| I proposed that we spend the money to buy the rest of the
| material at the vendor. Basically denying our competitor the
| materials and forcing either them to come to us or the customer
| dropping the order and reordering through us. This would have
| been a risk because that's about a year supply of proprietary
| castings that we can't use for anything else, but I really
| thought it was a worthwhile opportunity. But it went against lean
| principles so we didn't do it.
|
| Fast forward 6 months and our competitor basically did the same
| thing to us.
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