Dangerous Complexity — Supply-Chain Breakdown Edition

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In 2019, before the pandemic insanity, I wrote a blog, “Dangerous Complexity: What To Do About the Complex Problem of Complexity,” which explored various systems where human operators were unable to correctly diagnose a problem leading to disaster. 

In each case a small glitch led to a spiral out of control.  The problem being our capacity, as finite creatures, to sift through all of the alarm bells going off and come to the right answer before the clock runs out.

As I write, countless container ships loiter offshore and waiting to be unloaded.  It is a logistics nightmare directly the result of lockdown mandates.  It is something I had warned about way back when governors were arbitrarily declaring livelihoods to be “essential” or “nonessential” and playing out currently as the slow motion trainwreck of predictable consequences.  

To those seeing conspiracy in this, I would suggest Hanlon’s razor: “Never attribute to malice that which is adequately explained by stupidity.”

This is what you get when you elect lawyers, with the most political experience, rather than those who understand the basics of business, trade, and supply-chains.  Many who hold office, like their constituents, are economic illiterates and can only see what is right in front of their face.  

As a TWIC card holder with a long time interest in economics and logistics, I do feel qualified to explain.  We have been heading this way for a for decades.  The economy has become extremely complex and also increasingly in fragile.

How did we get here?

From Locally Produced To Corporate Globalism

There was a time when most things were produced for local consumption.  For most of human history transportation had been very slow and costly.  Sure, there was the silk road and the spice trade between the continents.  But it was simply impractical, and unnecessary, to ship things long distances. Food was grown close enough to market that it could be brought by horse and cart.  Towns had their own millers, tailors and blacksmiths.

Comparatively to modern times, this was very inefficient.  In the 1800s one farmer could only feed three to five people and 90% of population lived on a farm.  Today one farmer can feed 128 people and only around 1% live on a farm.  This is due, in large part, to the internal combustion engine, as well as advancements in agricultural science, and also the ability (with refrigeration) to move vast amounts of fresh produce to far away markets.  Meat can be trucked from Texas slaughterhouses to New York City grocery shelves in a matter of hours.

But the bigger revolution has been the imperishable items, the gadgets that require labor intensive manufacturing processes, and generally are produced by the lowest bidder.  This is mostly for our benefit.  If an iPhone might cost $2000 if it was produced in the United States and thus outsourcing production means that more people can afford to buy this technological wonder.  Of course Apple and big corporations are the biggest beneficiaries of this global trade paradigm, still the consumer does get a lower prices.

Slowly, but surely, due to the advantages of economies of scale, small local mom and pop businesses are bought out by ever more expansive corporate conglomerates.  Like that old abandoned dairy farm I used to see, from the interstate highway, on the outskirts of Richmond or in upstate NY. Once thriving farms, within miles of the market, are simply unable to compete with those bigger (and oftentimes further away) producers.

Our Very Fragile “Just-In-Time” Supply-chain

Manufacturing our complex technology takes a large variety of materials and components, these are sourced through a tangled web of suppliers.  If parts don’t come in from Taiwan, then automobile factories in Michigan sit idle.  And you don’t just go out and build a semiconductor industry overnight.  Even if it were possible, the raw materials would need to come from somewhere.   All it takes is couple links in the chain to be broken, even just one, and whole swaths of the economy will grind to a halt.  

In the past there were droughts and famines, countless people died of starvation due to changes in climate.  But then the problem was often local, like the potato blight that hit Ireland hard from 1845 to 1852, and contained.  The overall system was robust because it was decentralized and full of redundancies.  There were places to flee to, like the United States, where there was a chance.

But that’s not the case anymore.  Not only are supply lines stretched very thin and delicate, with many moving parts, we also have the ‘just-in-time” manufacturing concept where inventories are kept low as a cost saving measure.  Inventory is a big business expense and “lean manufacturing” has been the rage for this reason. The end result being there is no extra capacity in the system.  

Ports lack the additional capacity and should never have been shutdown.  A minor disruption of an already overtaxed system will very quickly lead to major backlogs and a cascade of failures down the line.  It’s not only unloading the ships, but finding space for containers, having the rail cars and chassis to put them on.  There was already a shortage of CDL drivers before this started and there is no fast or easy way to fix the situation.

We Need Local Production and Built-in Resilience

We are seeing the weakness of the current economic paradigm in full display and it will likely get worse before it gets better.  I would expect slim pickings when it comes to the Christmas season.  No, it is not likely that we’ll run out of food or fuel here in the United States.  We do produce those things locally and therefore have some security in that regard.  However, that doesn’t mean there will be no pain.  Prices are likely to continue to rise.

It is a good time to reflect on where we’re headed.  Do we really want to continue to outsource our blue collar jobs to countries that do not follow our environmental standards or labor laws?  If climate change is an issue, why not use tariffs to bias the market in favor of domestic and local production?  Sure, it makes sense for big corporations and their bottom lines to chase cheap labor overseas, but does it serve national security or the betterment of Americans who aren’t privileged with college degrees?

Efficiency is a good thing.  It is of some benefit for us to have access to the lower priced labor in the developing world.  But then this is not coming at a cost.  It may relatively inexpensive to ship things around the globe in some regards, it certainly has made big corporations very powerful (with a lobbying and propaganda arm to match), yet it does come at an environmental cost and has also left the whole economic system vulnerable to collapse.

It is totally wrongheaded to increase taxes on domestic manufacturing and then remove tariffs on imported goods.  Sure, this might slow economic growth and possibly even lead to a small recession.  But real leadership is about seeing a little further down the road, and being prepared, rather than always doing what is politically expedient.  We need a new crop of elected leaders who are locally, and not globally, oriented.  

Rudolf Diesel: Thoughts about Idealism, Despair, Progress, Politics and Hope

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Diesel powers the world economy.  I never considered the extent to which that is true until watching a documentary (click here to view it) about this type of internal combustion engine.  It is named after the inventor, a French-German mechanical engineer, Rudolf Diesel, and is the reason why global trade is possible to the extent it is.

Early Diesel design, circa 1897

In considering the story of Diesel, his brilliant invention and the results, I could not help but see the pattern all too common with innovators.  Diesel’s life turned tragic, he was found floating in the North Sea, dead of an apparent suicide, and likely a result of his despair over the unintended consequences of his own design.

According to biographical accounts, Diesel was a utopian idealist who had hopes that his invention would be a catalyst for social change, free the common man and break corporate monopolies.  Unfortunately, while a revolution for transportation, Diesel power did not achieve the lofty social vision. 

Worse, the Diesel engine found use as a part in an efficient killing machine, the German U-boat, and this no doubt grieved the pacifist inventor.

Here are some observations…

#1) What is intended for good can often be used for evil.

Diesel had never intended his invention be used as a means of terrorizing North Atlantic shipping lanes.  And, likewise, many scientists and inventors had regrets related to their greatest contribution to the world.

German U-boat, the original stealth weapon 

There are lists from K-cups to A-bombs online and many others.  For example, Henry Ford seemed to dislike the vast social changes and consumerist mindset made possible by his manufacturing revolution that helped automobiles become a fixture of American life.  Even this media, the internet, once thought to be the beginnings of an information age, has become a cesspool of pornography and ill-founded claims.

I worry about this as a blogger.  Once my thoughts are out there they cannot be contained again.  Will someone pick up my words and run with them in a direction I never intended?  It is a potential outcome that could scare a sensitive soul into silence and is at least a reason for me to be prayerful in what I post here.

I believe there are many people who do not thoroughly think through the potential unintended consequences of the ideas they promote.  There are many government programs and social movements intended for good that might actually be creating more problems than the one that they were intended to solve.

Which takes me to a second point…

#2) Yesterday’s revolution is today’s loathed source of inequality and evil.

It is ironic that the invention that did actually outcompete coal for market supremacy is now enemy #1 for many.  The internal combustion engine won in the marketplace because it was by far the cheapest most efficient means to power transportation and still remains. 

Given there are no steam powered cars, tractors, trains and ships anymore, it is clear that internal combustion is the best bang for the buck and remains to be rivaled.  Diesel powered locomotives and ocean going container ships are extremely powerful while being very economical.    

109,000-horsepower Wärtsilä-Sulzer RTA96-C

Diesel power still outperforms hybrid technology—A loaded Diesel powered class 8 truck is more efficient pound for pound than a Prius.

Think about it: It takes one gallon of fuel to move an 80,000lb truck five to seven miles.  A 2016 Prius, by comparison, carries a weight of around 4000lbs can go anywhere from 50 to 58 miles on a gallon of fuel.  It may seem the Toyota is greener until you consider that it is moving twenty times less weight.  Twenty Prius cars combined together, after dividing their individual consumption by twenty, would consume 2.5 to 2.9 gallons of fuel.  Now, obviously, combining Diesel and hybrid technology on the scale of class 8 truck would undoubtedly yield even greater results if fuel economy were the only concern, but the point remains that Diesel power is extremely efficient and effective—and only more so the larger the application.

So what’s the problem?

Well, the current popular perception is that the petroleum industry “big oil” is the enemy and conspires to hold back technology that would dramatically increase efficiency.  Worse than that, we are told that petroleum power is a source of global climate change and a threat to the global ecology.  Poor Diesel would be driven even further into despair if half this is true.  We fight over oil.

 #3) Progressive aims of our time are at odds with each other or self-contradictory.

Globalism, higher standard of living for more people and environmentalist ‘green’ movements are at odds with each other.  Pushing one direction will almost invariably come at the cost of the others. 

Progressive politicians may tout an idea of a ‘green economy’ as a jobs creator, but the reality has been that wind and solar energy can only remain competitive through heavy use of government subsidies.  Beyond that, even with the help, domestic ‘green’ manufacturing is unsustainable against foreign competition.  At best we will merely replace jobs lost by the heavy regulations placed on fossil fuels and raise costs of living across the board.

Furthermore, it was the progressive policies of the past century that have created the current conditions.  Government policies like the Rural Electrification Act, the Interstate highway system and trade agreements have actually moved us away from a more sustainable less polluting lifestyle.  Our cheap and easy movement from place to place has harmed community and local markets.

Rural Electrification Act propaganda poster.

It is hard to know how the current landscape would look had the progressives of yesterday had not literally paved the way for suburban sprawl, the trucking industry (that currently employs me) and driven us to embrace a coal powered grid.  But I do suspect more of our food would be locally grown, more of our products locally produced and solar energy far more the norm in places utilities would be to costly to maintain unless mandated by law.

In final analysis things might not be as dismal as they seem.

It is easy to focus on the negative without considering the good.  The means of today are likely as unsustainable as the means of yesterday and therefore the progress of the past century might not be the end of us after all.  The only consistent reality in the past two centuries has been that markets constantly change.

Canal boats an all the infrastructure to support them were soon replaced by steam power and railroads.  In Pennsylvania the lumber industry rose in prominence before a rapid decline after the states wooded mountains were reduced to stubble.  The coal industry once put food on the table for boat loads of immigrants before cheap efficient oil and a multitude other factors conspired against it.

Bay State Mills, Lawrence, built 1845.

Manufacturing, from the once mighty water powered textile mills of the New England states to the formerly unstoppable domestic steel industry, has also migrated following cheaper labor and energy.  Each time promoting deep consternation and fear.  But so far the Luddites have yet to have the last laugh and a new balance is eventually found that usually benefits everyone.

Certainly the overconfidence and optimism about today’s new solution may become the big disappointment of tomorrow.  Yet, do we really wish to go back to a time when a transatlantic voyage was only something a religious zealot or crazy Viking explorer would do?  Would we really rather spend most of our time scrounging for just enough to eat as to avoid the possibility of mechanized warfare?

Nobody knows for certain why Diesel died... 

However, what is certain is that his invention changed the world and provided a means for interstate commerce and global trade that never existed before.  The pacifying effect of global trade, economic benefits of an expanded market place and inexpensive power are largely unappreciated.  But we probably do have Diesel to thank for helping create the long peace and prosperity of our time.

Maersk, Triple-E design, Diesel powered, container ship

In an age of information overload, where we know about beheadings in the Middle East before the people the next town over would have heard a century ago, it is difficult for our finite minds to contextualize and easy to become overwhelmed.  This, with an accompanying loss of faith, could be why middle-aged American white males are committing suicide (supposedly the most privileged in the world) and at an alarmingly increasing rate. 

Diesel’s pessimism about the future in retrospect seems to have been premature and his nightmarish perception of reality overstated.  In like manner many of our modern fears and despair inducing thoughts about the future could be negativity bias and nothing more.  Every generation seems to believe that the world is falling apart and still here we are.

Whatever the case, ignore the fear-mongering propaganda of the punditry and politicians.  Embrace temperance, a spiritual quality developed through faith, over mindless reaction and fearful impulse.  Trust God to secure the future, we can only live one day at a time and never ever lose hope!  If you are depressed about events in the world today, I invite you to see the higher perspective:

“Therefore we do not lose heart. Though outwardly we are wasting away, yet inwardly we are being renewed day by day. For our light and momentary troubles are achieving for us an eternal glory that far outweighs them all. So we fix our eyes not on what is seen, but on what is unseen, since what is seen is temporary, but what is unseen is eternal.” (2 Corinthians 4:16-18)

Perhaps the greater of two evils will be elected come November and drive the nation to complete ruin.  

Who knows besides God?

We may all die tomorrow, we will all die eventually, our work blown away in the wind of time and forgotten.  Everything comes to pass, nothing will remain as we know it today, but there is hope beyond all hope found in an eternal perspective.  So look up, because the sun is still shining and the future remains bright!

Do you see the light and feel the warmth of hope eternal?

If not, my prayer is for the blind to see…